In brief - Insured fails in bid to appeal District Court's judgment
The recent NSW Court of Appeal decision in Sudesh Sharma v Insurance Australia Limited t/as NRMA Insurance
is a reminder that parties who wish for courts to draw a Jones v Dunkel
inference, should ensure that they plead and/or particularise their case in such a way that the missing witness would clearly have been expected to be called to address an issue. It also shows that courts will apply the duty of utmost good faith reasonably.
This decision was on appeal from the District Court of New South Wales. The appellant (Sharma) appealed on a number of bases, including that the primary judge erred in not drawing a Jones v Dunkel
(1959) 101 CLR 298 inference as the respondent (NRMA) failed to call a witness: the building assessor who had initially assessed the insurance claim. Sharma also submitted that NRMA had breached its duty of utmost good faith in failing to provide its decision on indemnity within a reasonable time.
Sharma seeks costs for damaged carport and damages for personal injuries following declinature of insurance claim
Sharma was the owner of an investment property at Lurnea which was subject to a residency tenancy agreement. NRMA insured the property under a combined Home Building and Home Contents Insurance Policy.
In late 2009, the carport of the property suffered storm damage. On 28 December 2009, Sharma attended the property to inspect the damage and on the following day lodged a claim under the policy. The claim was that the carport "has fallen damaging fascia boards, guttering, post and a billiard table due to wind and storm".
On 30 December 2009, NRMA instructed a building assessor, Mr Reid of Johns Lyng Group Pty Ltd, to attend the property and complete an assessment. On 12 January 2010, Mr Meredith, an NRMA assessor, also attended the property to view the carport and associated damage. In his assessment report, Mr Meredith concluded that the damaged structure was not "built to standard". He also noted that he had told Sharma that NRMA did not "pay for structures that are not built to standard".
On 14 January 2010, Sharma fell from a ladder while attempting to repair the damaged carport. As a result of the fall, Sharma suffered significant injuries to his hands and wrists.
On 18 January 2010, NRMA wrote to Sharma declining indemnity in respect of Sharma's claim for loss and damage to the carport. NRMA stated that the damage was as a result of wear and tear or faulty workmanship, neither of which were covered, as opposed to storm damage as alleged (declinature).
Sharma complained to the Financial Ombudsman Service (FOS) about the declinature. Whether as a consequence of a negotiated settlement or otherwise, NRMA paid to Sharma $11,000 for property damage caused by the storm. Sharma was not satisfied with the result and commenced proceedings in the District Court seeking $18,800 from NRMA for costs of repairing the property damage, as well as damages for personal injuries sustained in the fall.
Primary Judge rejects Sharma's claim for injury, loss and damage
Sharma, self-represented at the time, claimed that he suffered injury, loss and damage as a consequence of the declinature. He faced a problem on timing in circumstances where the fall (on 14 January) pre-dated the declinature received on 18 January 2010.
The District Court relevantly held that:
- Sharma did not suffer any injury to his wrists in the fall from the ladder
- breach did not occur until after the declinature at the earliest, i.e. after Sharma's fall from the ladder (the Court rejecting Sharma's evidence in cross-examination that the builder told him the claim would be denied)
- a Jones v Dunkel submission about NRMA's failure to call the builder was rejected as there was nothing in the affidavit evidence to put NRMA on notice that the builder should have been called
- NRMA responded reasonably promptly and advised Sharma of the reasons for its decision
Court of Appeal rejects all of Sharma's grounds for appeal
At the appeal, Sharma brought an application to tender further medical evidence. The Court held that "special grounds" could not be established and that the application be rejected.
Sharma submitted 11 grounds for appeal which were all considered and ultimately rejected. Of note were grounds seven and eight.
Court finds drawing adverse inference not available and would not have made a difference
Ground 7: The primary judge made an error in not drawing a Jones v Dunkel inference as a consequence of NRMA's failure to call Mr Reid, the original assessor, to give evidence. Sharma alleged that NRMA's failure to call Mr Reid was because his evidence would not have assisted NRMA's case.
Sharma's submission failed on the basis that Sharma only realised that Mr Reid could be a potential witness during his own oral evidence. Sharma had not pleaded or particularised his conversations with Mr Reid in his Statement of Claim. The alleged conversation was not referred to in Sharma's affidavits and on three occasions before the trial judge, he accepted he was still awaiting a decision on cover at the time the accident occurred.
The Court found it was not a case in which it could be expected that Mr Reid would be called in the absence of any relevant pleading or particulars of the alleged conversation with him. The Court found that Sharma had not proven his case and the drawing of an adverse inference against NRMA for not calling the builder could not have made any material difference to the outcome of the case.
Court upholds finding that NRMA acted in good faith and determined indemnity claim within reasonable time
Ground 8: There was an error by the primary judge in finding that there was no breach of duty of utmost good faith.
The Court found that an insurer's duty of utmost good faith is not limited to acting honestly. The Court considered the decision of Gleeson CJ and Crennan J in CGU Insurance Limited v AMP Financial Planning Pty Ltd  HCA 36
in which it was held that an insurer's duty of utmost good faith extended to providing a timely response to a claim for indemnity. In order for an insurer to comply with the duty, the insured must also make full disclosure to an insurer.
The judges accepted that NRMA was obliged to determine Sharma's claim for indemnity in a timely manner and without due delay. It was held that the primary judge made no error in finding that NRMA acted in good faith and determined the claim for indemnity within a reasonable time. The claim was made on 29 December 2009, the date of the fall occurred on 14 January 2010, and the date of notification followed on 18 January 2010. It was held that NRMA had acted within a reasonable timeframe when considering the public holidays and the rate at which information was provided to NRMA by Sharma; indeed, that it worked assiduously to put itself in a position to make a decision about cover under the policy.
Lessons on Jones v Dunkel inference and duty of good faith
This case reminds us of the ongoing significance of Jones v Dunkel
in determining what witnesses are required to be called in support of a case. However, it also reveals that the adverse inference will not be drawn lightly against a party. The discretion to do so will only be exercised when the court finds that the party calling for the inference to be drawn has pleaded and/or particularised their case in such a way that the missing witness would clearly have been expected to be called to address an issue.
While the duty of good faith is broader than requiring a party to act honestly, it is also to be applied reasonably. In this case, NRMA's declinature was issued within 20 days of the date of the claim. The Court upheld this response time as reasonable.
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