Stemson v AMP General Insurance (NZ) Ltd

JurisdictionUK Non-devolved
JudgeLord Hope of Craighead,Lord Mance
Judgment Date21 June 2006
Neutral Citation[2006] UKPC 30
Docket NumberAppeal No 52 of 2004
CourtPrivy Council
Date21 June 2006
Michael David Stemson
Appellant
and
AMP General Insurance (NZ) Ltd
Respondent

[2006] UKPC 30

Present at the hearing:-

Lord Nicholls of Birkenhead

Lord Hope of Craighead

Lord Scott of Foscote

Baroness Hale of Richmond

Lord Mance

Appeal No 52 of 2004

Privy Council

[Delivered by Lord Hope of Craighead]

1

The appellant, Michael Stemson, is the owner of an historic villa in the township of Coromandel known as Firlawn House. On 12 May 1992 the building was partially destroyed by fire. At the time of the fire it was insured with the respondent, AMP General Insurance (NZ) Ltd ("AMP"). The appellant made a claim on the policy. Having investigated the incident AMP accepted that fire damage was within the policy. But it declined liability to indemnify him. AMP took the view that the fire had been started deliberately, and that it was the appellant himself who lit the fire.

2

On 11 May 1998 the appellant commenced proceedings against AMP in which he claimed $295,000 for reinstatement of the property, together with damages for consequential loss and exemplary damages. AMP maintained its declinature of liability. It did so on two grounds. Its primary defence was that the appellant set the fire himself. As a secondary defence it alleged that the appellant had made a false statement in the course of the investigation which entitled it to avoid the claim.

3

On 24 April 2002, after a trial lasting 18 days, Hammond J held that AMP was entitled to avoid liability under the policy. He upheld its defence on both grounds. He was satisfied that the appellant set the fire at Firlawn House himself. He also held that the appellant had made a false statement in the context of the investigation which provided AMP with a separate ground for avoiding liability. On 18 March 2003 the Court of Appeal (Tipping, Salmon and Doogue JJ) dismissed the appellant's appeal against Hammond J's judgment. The reasons for its decision were set out in a judgment of the court delivered by Tipping J. He said that it was common ground, as it had been at the trial, that the fire was arson. So the appeal was confined to the issue whether the appellant was the arsonist. Having reviewed the decision of the trial judge, the court was not persuaded that he erred in fact in concluding that the appellant was responsible for the fire. The appellant sought leave to appeal against the Court of Appeal's judgment to their Lordships' Board. On 23 June 2004 he was granted final leave to appeal.

4

A separate judgment has been prepared by Lord Mance on the question whether AMP was entitled to avoid liability because the appellant said falsely in a written statement to AMP's insurance investigator, Mr Byrne, that he had never intended to sell Firlawn or even consider putting it on the market. Their Lordships conclude, for the reasons he gives, that Hammond J was right to hold that this provided a separate ground which entitled AMP to avoid liability under the policy. In this judgment they propose to deal with the primary question at the trial and the only question which was argued in the Court of Appeal. This is whether Hammond J was entitled to conclude that it was the appellant himself who set the fire to the premises.

5

Mr Witten-Hannah presented the appeal on the appellant's behalf. He had not appeared in either of the courts below, and he told the Board that he had been briefed only after the issues had been settled and the appellant's written case had been drafted. He acknowledged at the outset that the appeal was directed to the factual findings of the trial judge which had been upheld by the Court of Appeal and not to any error of law. He also acknowledged that it is the Board's practice not to embark on a third trial on issues of fact. He sought to address this difficulty in preliminary submissions which he had prepared in writing and in oral argument. Their Lordships are grateful to him for the clarity of these submissions and for the careful and attractive way in which he developed them.

The issue at the trial

6

There is no doubt that the issue which was before Hammond J at the trial was simply one of fact. As he explained in para 4 of his judgment, it was common ground that if the appellant was implicated in the arson AMP was entitled on that account to decline the claim. The central issue therefore was whether it was the appellant who set fire to the premises. In para 9 the trial judge emphasised that the case was entirely a factual one. There was no dispute about the law. AMP accepted that the onus was on it to prove the appellant's implication in the fire, and that it had to do so to a very high standard. AMP's case was that the appellant drove to Auckland on the evening of 11 May 1992 leaving Simon Laing, who was living at Firlawn, in charge of the property. Later that evening he returned to Coromandel. He went to the rear of the house, where he threw a Molotov cocktail into the bedroom. He then went to the front of the house, where he threw another Molotov cocktail into the lounge. Having set the fire he drove immediately back to Auckland.

7

Direct evidence in support of AMP's case came from Mr Laing, who was in the house when the fire broke out. He said that during the period prior to the fire the appellant offered him $50,000 to burn the house down, and that he had also asked him how to make a Molotov cocktail. In the early hours of 12 May 1992 he was wakened by a Molotov cocktail crashing through his bedroom window which exploded on the floor near the foot of his bed. He ran outside as the curtains caught fire, called the emergency services and then ran back into the house twice to get an air pistol which he had in his bed and to save the TV. He did not see who started the fire nor did any other eyewitness. But there was a substantial amount of circumstantial evidence indicating that the appellant had a motive for wanting to set fire to the house. There was also evidence that he had the means to do so, as various pieces of equipment which could have been used for making Molotov cocktails were found in his car after the incident. There was also evidence that the appellant said things to various people which indicated that he was responsible for the fire. The fire damage was the subject of a report by a forensic scientist, Miss Boyd. She found traces of petrol in a bottle which had been found under a sofa in the lounge after the fire and in a sample of wood from beneath the sofa.

8

The appellant had previously operated a restaurant and bar at Firlawn in partnership with Libby Daniels. In June 1991 he bought out her interest under an agreement which gave her a pre-emptive right in the event of his selling or transferring his interest in Firlawn. But he was a poor manager, the business was running at a loss and the condition of the property was deteriorating. The judge found that by the week of the fire the appellant's financial situation had reached such a stage that it was desperate. He also found that the appellant had developed an obsession that Libby Daniels or her mother Barbara Doyle wanted to get Firlawn back from him. He originally blamed the fire on the Doyle family. But after all the evidence had been led his counsel said that his case was that the fire was started by Mr Laing in the front room and that he then poured petrol in the rear bedroom and lit a match there which caused another fire and an explosion.

9

At the heart of the trial judge's decision on the central issue of fact was the view that he formed about the credibility of various witnesses. There were a number of witnesses whose credibility, for a variety of reasons, was under challenge. They included Mr Johannes Stol who said that he had seen the appellant set fire to his Model A motor car at Firlawn on 27 April 1992, Mr Savage who owned a nearby hotel who said that he woke up on smelling smoke, went to the house out of concern for the occupants and saw the bedroom window exploding out as he stood beside it, and Mr Derek King who made a statutory declaration in which he said that the appellant said things to him which indicated that he was responsible for the fire which in a later affidavit he sought to resile from. But the issue of credibility was especially important in the case of the appellant and Mr Laing.

10

Mr Laing had been an alcoholic and had a number of criminal convictions. These included convictions for offences of dishonesty, drug offences and other petty disorder offences. The trial judge said that he paid particular regard to the way Mr Laing gave evidence in court in view of his record. Having considered his demeanour in court, and the extent to which his evidence was corroborated by other witnesses, he accepted his evidence. He noted that when Mr Laing left the house as it was on fire he was observed by other witnesses to be traumatised by his experience. This was the case too in regard to his behaviour in court. He broke down as he was explaining what had happened to him. The trial judge was satisfied that his reaction in court was not contrived. In his opinion it was quite inconsistent with his having started the fire.

11

As for the appellant, he too had a criminal record. He had a conviction for theft which was under a false name. He had admitted the conviction to Mr Byrne but not the false name. He tried repeatedly to evade this aspect of the conviction when giving evidence. In various other respects the trial judge regarded his evidence as evasive and contradictory. His conclusion was that the appellant was manipulative, and he regarded his evidence as totally unreliable. In his concluding remarks in para 182 the judge said that he was satisfied that the appellant lit the fire at Firlawn himself. He had a motive, possibly from spite but certainly financial, to bring this about. He had the knowledge, the means and the opportunity to do so....

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