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Court of Appeal of New Zealand |
Last Updated: 18 January 2012
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CA522/2010
[2011] NZCA 266 |
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BETWEEN AMI INSURANCE LIMITED
Appellant |
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AND P R DEVCICH & ORS AS TRUSTEES OF THE PAUL DEVCICH FAMILY TRUST AND
J J DEVCICH & ORS AS TRUSTEES OF THE JANICE DEVCICH
FAMILY TRUST
First Respondents |
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AND P R DEVCICH AND J J DEVCICH
Second Respondents |
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Hearing: 3 March 2011
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Court: Glazebrook, Allan and Simon France JJ
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Appearances: G H Nation and J W A Johnson for Appellant
P J Dale for Respondents |
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Judgment: 14 June 2011 at 11.00 am
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JUDGMENT OF THE COURT
_________________________________________________________________
REASONS OF THE COURT
(Given by Allan J)
Table of Contents
Para No
Introduction [1]
The competing
arguments [10]
Standard of
proof [13]
High Court
factual findings [16]
Not
random vandalism [17]
Motive [19]
Mr Devcich’s
movements on 24 April [27]
Mr Devcich’s
demeanour on 24 April [34]
The petrol purchase of 19
April [39]
The open home
on 25 April [44]
How many
hedges? [46]
Mr Devcich’s
personality [47]
The
dispute between Mr Devcich and his neighbours [51]
Means of entry [73]
The knife on the
bench [82]
The
Judge’s ultimate conclusions [84]
Discussion [90]
Result [107]
Introduction
[1] A little before 8 am on the morning of Friday 24 April 2009, Mr Paul Devcich left his home at 2/14 Coronation Road, Epsom, in order to travel to his place of work in central Auckland. Minutes later, a neighbour saw smoke and flames emanating from the northern side of Mr Devcich’s house, in the area of the lounge. The fire service was called. The fire was controlled and then extinguished relatively quickly, but there was extensive fire damage to the lounge and smoke, heat and water damage elsewhere.
[2] The fire service commenced an immediate investigation into the likely cause of the fire. Fire service personnel called the police when it became plain that the fire had been deliberately lit.
[3] Having been alerted by a neighbour, Mr Devcich returned to his house from the city. He contacted his insurers, AMI Insurance Limited (AMI), which sent representatives and investigators to the scene. After the fire service had extinguished the fire and completed its own investigations, AMI took control of the property and secured it while further investigations were carried out.
[4] The residence was uninhabitable following the fire. Mr Devcich and his family moved to a hotel.
[5] During the week after the fire, burglars entered the house and stole property having a total value of $19,850. Mr Devcich discovered the burglary on 2 May 2009 when he went to the property to pick up some belongings.
[6] The house was owned equally by the trustees of family trusts established by Mr Devcich and his wife Janice. They held a policy of insurance with AMI, under which they were entitled to be indemnified in the event of a fire. A separate contents policy, effected by Mr and Mrs Devcich personally, afforded cover for the value of the property subsequently stolen from the house.
[7] The police and AMI interviewed Mr Devcich at length on more than one occasion. It is not in dispute that the fire was deliberately started, nor that the perpetrator was guilty of arson. Mr Devcich came under immediate suspicion. Ultimately, the police decided not to prosecute him, but AMI declined claims under both policies. AMI concluded that Mr Devcich himself had deliberately lit the fire. The separate claim relating to the stolen property was also declined on the basis that the contents policy had already become void by the time the burglary occurred, by reason of the allegedly fraudulent claim made under the fire policy.
[8] The respective policy holders took proceedings in the High Court seeking judgment for their losses. The proceeding went to trial in May–June 2010. In a judgment delivered on 20 July 2010, Lang J held in favour of the plaintiffs on the issue of liability in respect of each claim.[1] Counterclaims by AMI for their investigation costs were dismissed. Quantum was left over for further consideration, there having been insufficient time during the hearing to deal with that aspect of the claims.
[9] AMI now appeals against the High Court judgment. It seeks to have the respondents’ claims dismissed and judgment entered on its counterclaims.
The competing arguments
[10] Lang J’s judgment is lengthy and detailed. He made a number of factual findings, many of them adverse to the respondents. But at the end of an exhaustive analysis, he held that AMI had not established its claim to the required standard, that the evidence left him in a state of “genuine uncertainty”, and that he was not “sufficiently sure” that Mr Devcich started the fire to decide the case in AMI’s favour.
[11] Mr Nation for the appellant argues that, in the light of the Judge’s factual findings, he had no option but to find for AMI, having regard to the applicable standard of proof. Although querying certain of the Judge’s factual conclusions, Mr Dale for the respondents, generally supports the judgment and argues that, on the evidence, the trial Judge was well entitled to give judgment on liability for the respondents.
[12] Accordingly, on appeal, we are not invited to revisit the Judge’s factual findings. Rather, we are asked by the appellant to conclude that, in the light of those findings, Lang J was wrong to find that the respondents had made out their claim for relief. In other words, the appellant’s case is that there is an inconsistency between the factual findings and the outcome, which this Court ought to correct on appeal.
Standard of proof
[13] Of central importance to the outcome, both in the High Court and on this appeal, is the correct identification of the applicable standard of proof. Lang J dealt with questions of onus and standard of proof in the following way:
[11] AMI accepts that it bears the onus of establishing that Mr Devcich lit the fire. That is a reasonably heavy onus, because it requires AMI to establish that Mr Devcich has been guilty of conduct that is criminal in nature because he has committed the crime of arson. AMI’s stance also necessarily involves allegations of fraudulent conduct on the part of Mr Devcich. If AMI’s allegations are true, Mr Devcich has deliberately instigated a fraudulent insurance claim and he has committed perjury when giving evidence in support of that claim at trial.
[12] These factors affect the standard of proof that is required in the present case. Although the standard is not as high as the criminal standard, namely proof beyond reasonable doubt, it is not far removed from it: Blanshard v The National Mutual Life Association of Australasia Limited HC Auckland CIV 2001-404-1961, 23 September 2003 Harrison J at [51] and [52]. AMI is therefore required to adduce “clear and convincing evidence” that its allegations are correct: Back v National Insurance Co of New Zealand Limited [1996] 3 NZLR 363 per Hammond J at 370–371 and Going v Farmers’ Mutual Insurance Association HC Whangarei CP 17/99, 17 February 2003 O’Regan J at [63] and [64].
[14] This suggests that, by reason of the nature of the allegations in the present case, the standard of proof required, while falling short of the criminal standard, is nevertheless more exacting than the ordinary balance of probabilities test in civil cases. The reference to Blanshard in particular is not especially helpful. It is well established that there is no intermediate standard of proof between the criminal and civil standards: see the unanimous decision to that effect of the Supreme Court in Z v Dental Complaints Assessment Committee.[2] That is not to say that the Court may not have regard to the seriousness of the allegations in a given case in applying the ordinary civil standard of proof. That was made clear in Z v Dental Complaints by McGrath J, writing also for Blanchard and Tipping JJ:
[102] The civil standard has been flexibly applied in civil proceedings no matter how serious the conduct that is alleged.[3] In New Zealand it has been emphasised that no intermediate standard of proof exists, between the criminal and civil standards, for application in certain types of civil case.[4] Balance of probabilities still simply means more probable than not. Allowing the civil standard to be applied flexibly has not meant that the degree of probability required to meet this standard changes in serious cases. Rather, the civil standard is flexibly applied because it accommodates serious allegations through the natural tendency to require stronger evidence before being satisfied to the balance of probabilities standard.
[15] Had that approach been adopted in the High Court, Mr Nation argues, Lang J was bound to find in favour of AMI. For his part, Mr Dale argues that the Judge was correct, having regard to his entitlement to require strong evidence before being satisfied to the balance of probabilities standard.
High Court factual findings
[16] Because there is no significant challenge to the factual conclusions reached by Lang J, it is unnecessary to subject his conclusions to minute scrutiny, but it is necessary that we review them in order to determine whether, as Mr Nation submits, his findings ought to have led inexorably to judgment in AMI’s favour. For convenience we adopt the order in which Lang J addressed factual issues.
Not random vandalism
[17] Lang J accepted that the circumstances of the fire were such as to justify a finding that this was not a random act of vandalism. The Devcich residence was surrounded by neighbours and the fire occurred at a time when people in the neighbourhood were likely to be out and about on their way to work. So a random intruder stood a high chance of being detected. Moreover, the perpetrator had to know that the house was unoccupied, once Mr Devcich had left the property to go to work (the property was in fact unoccupied; Mr Devcich’s wife and daughter were in Australia and his son lived elsewhere).
[18] Lang J held that it was inherently unlikely that the fire was the spontaneous act of a stranger who was intent only on vandalising property for the sake of it. Rather, the probability was that it was the act of a person who had deliberately embarked upon a pre-planned course of conduct for a particular reason. Accordingly, if Mr Devcich did not light the fire, then the perpetrator would have been someone who had a particular reason to cause him or his family harm.
Motive
[19] Lang J concluded that Mr Devcich had a motive for setting fire to his own house. Several overlapping findings led him to that conclusion. The property, plaster clad and modern in appearance, had high moisture readings and one specific leak had already been identified. Potentially, it was a leaky home. The Judge found that that would be the perception of likely buyers. Repairs would be time consuming and costly. Mr Devcich had made certain inquiries about likely cost, and was aware that repairs could take some months, and would cost him some hundreds of thousands of dollars.
[20] In 2007, Mr and Mrs Devcich had endeavoured to avoid their predicament by attempting to sell the property, after spending about $50,000 to upgrade it. They were unable to attract a buyer, and the property was taken off the market after a short period. In November 2008, it was again placed on the market, the agents being instructed to disclose to interested purchasers the fact that the house had moisture issues. Despite further advertising and the holding of several open homes, no firm offers had been received by April 2009. This was partly because the Auckland housing market was in a depressed state, and partly because there were leaky home issues.
[21] One possible purchaser couple had shown interest, but had not submitted any offer by 24 April 2009. A property developer had also expressed interest, but his suggested price was well below what Mr Devcich would accept.
[22] Although AMI had argued in the High Court that Mr Devcich was in financial difficulty and unable to meet the cost of repairs to the house, Lang J found that he did have the ability to fund the necessary remedial work. He was in receipt of a fluctuating, but nevertheless substantial, income from his business as a business broker, and had access to substantial finance facilities. However, Lang J also held that Mr Devcich wanted to avoid the expense and distraction that the repairs would inevitably create, and so was likely to have regarded remedial work as an option of last resort. But in order to sell the property in its existing condition, Mr Devcich would need to drop his asking price substantially. Lang J considered that Mr Devcich would not have been prepared to accept a very low offer, given his rejection of an earlier expression of interest by a property developer at a much reduced price.
[23] Another alternative would have been for Mr and Mrs Devcich to move out of the property for a period and to rent it, but that would simply postpone the need to solve the problem.
[24] The Judge also found that Mr Devcich was under considerable pressure from his wife to move out. She did not like the house and it did not meet her needs. The sale process added to the pressure on her, and in consequence upon her husband. Lang J concluded that Mr Devcich knew that something had to be done, and that he could not continue to live in the house for much longer.
[25] Mr Devcich also had problems with his neighbours which we discuss below. Those problems provided a further reason for him to bring matters to a head.
[26] Lang J concluded that Mr Devcich did indeed have a motive for setting fire to the house. AMI would assume financial responsibility for repairing it. If there was sufficient damage those repairs would remedy the weathertightness defects and so restore to the owners a home without the problems which served to depress its value. In the meantime, the Devcichs would live elsewhere at the expense of the insurance company, so removing Mrs Devcich from an environment for which she did not care, and Mr Devcich from neighbours with whom he was at odds.
Mr Devcich’s movements on 24 April
[27] It is common ground that the fire was deliberately lit, that an accelerant (probably petrol) was used, and that the fire started in the lounge, probably by reason of a lit taper having been placed in the vicinity of a petrol soaked sofa. There is an element of agreement among the experts that ignition is likely to have occurred at about 8.05 am. Fire service records indicate that a call from a neighbour was made at 8.20 am, and that the first fire appliance arrived at 8.25 am.
[28] These timings are important because Mr Devcich’s evidence, supported by retail receipts, is that he was conducting business in Manukau Road, some distance away, prior to 8 am. When interviewed by Detective Ekins on 24 April 2009, Mr Devcich said that he had left home at about 7.40 am, and had driven to the Epsom Library in Manukau Road, where he dropped off some magazines. From there, he travelled on to the Mobil petrol station in Manukau Road, where he filled up his car with petrol. A receipt for that transaction discloses that he paid for the petrol at 7.57 am. Following that, he went to the dry cleaners adjacent to the service station where he dropped off a suit to be cleaned. The receipt for that transaction shows it was timed at 8.10 am. From there he travelled to the city.
[29] Lang J noted an obvious problem in reconciling the times recorded on the two receipts. The apparent gap of 13 minutes between the two transactions was surprising, because on Mr Devcich’s version of events the two transactions ought to have occurred within minutes of each other, the dry cleaners being next door to the petrol station. Lang J thought the answer might lie in the inaccuracy of one or both of the machines which printed the receipts. But the Judge concluded that Mr Devcich must have been in the vicinity of both the service station and the dry cleaners shortly before 8 am at the latest. That being so, he considered Mr Devcich must have left home at about 7.50 am, some 15 minutes prior to the likely ignition time.
[30] AMI suggested Mr Devcich must have lit the fire using a delayed timing device, instructions for such devices being readily available on the internet. An example mentioned by the Judge involves the taping of matches near the bottom of a joss stick or cigarette, the smouldering joss stick or cigarette ultimately igniting the matches and then the petrol when the flame reaches the matches.
[31] Another alternative was the possibility of the involvement of an assistant. Lang J discounted that, and noted also that there was no evidence of the use of a delayed timing device, albeit that any such item was likely to have been destroyed in the conflagration. Perhaps more importantly, Lang J considered that it was unlikely that Mr Devcich would have used a timing device, because there was a realistic possibility that it would not work properly. If there was a malfunction, Mr Devcich would be left in the situation of having to explain to his wife how large quantities of petrol came to be poured over the floor of the lounge.
[32] Accordingly, Lang J held there was an apparent timing problem for AMI, in that Mr Devcich appeared to have left the house some minutes prior to ignition. We note that one expert witness, Mr Noble, who gave evidence for AMI, believed that the ignition time was significantly earlier than 8.05 am, but other witnesses were largely agreed, and Lang J discounted Mr Noble’s evidence on that point.
[33] We will return to the timing aspect when we deal with the Judge’s findings about the progress of the fire itself.
Mr Devcich’s demeanour on 24 April
[34] Following his visit to the dry cleaners, Mr Devcich made his way by car into central Auckland. In doing so, he found himself driving towards his old office, rather than towards the office into which he had recently moved. That suggests an element of distraction on his part. He also said in evidence that whilst driving to work he was nearly involved in an accident. Mr Devcich said that the driver of another vehicle had driven through a red light and narrowly missed colliding with his car.
[35] Mr Devcich’s own evidence was that the incident had shaken him. When he got to work he did not go into his office to clear his e-mails as he normally did. Rather, he told his business partner, Mr Newport, about the near miss and said that he needed a whisky. At the time, Mr Devcich was not drinking alcohol, and so that was something of an odd comment. Mr Newport suggested that they settle for a cup of coffee at a nearby cafe. A few minutes later Mr Devcich received a telephone call from his neighbour, advising him of the fire.
[36] The case for AMI, as presented to Lang J, was that this alleged sequence of events was to some extent concocted by Mr Devcich in order to explain his distracted and unsettled demeanour when he arrived at his office. Counsel for AMI submitted to Lang J that there were obvious reasons why Mr Devcich would be on edge at the time. He was anticipating news of the fire. Moreover, on the AMI theory of the case, Mr Devcich had used a timing device to ignite the fire and would have been uncertain as to whether it had functioned properly. AMI contended before Lang J that evidence about the near miss and about driving in the wrong direction were devices used by Mr Devcich to explain his unusual behaviour.
[37] Lang J found it remarkable that Mr Devcich had never been able to provide any details about the circumstances surrounding the near miss at an intersection. He was unable to identify where the incident occurred, nor was he able to give any description of the other vehicle. That was at odds with Lang J’s overall conclusion that Mr Devcich was an intelligent man who remembered even the smallest of details. The Judge found that there was some support for the AMI submission that Mr Devcich’s story about the near miss and the driving to the wrong office was concocted. He considered that it was likely that Mr Devcich had devised these occurrences in order to explain his nervousness before receiving the anticipated news about the fire. As might be expected, Lang J considered that finding to impact adversely upon Mr Devcich’s overall credibility.
[38] AMI was also critical of several aspects of Mr Devcich’s behaviour when he returned to the house after the fire. For example, he asked whether he could remove his golf clubs from the garage of the address. At the outset he asked how much the house would cost to repair, and he immediately blamed his neighbours for starting the fire. Lang J discounted the first two matters as being of no probative significance, and considered that the third was readily explicable in view of Mr Devcich’s ongoing dispute with his neighbours. He therefore put to one side any suggestion that Mr Devcich’s demeanour at the scene was of any significant relevance.
The petrol purchase of 19 April
[39] An issue of central importance at the trial was the use of an accelerant. The remains of a red plastic petrol container were found lying in the debris on the floor of the lounge. Mr Devcich said that he had purchased five litres of petrol on the weekend before the fire. The petrol was in a standard red plastic jerry can or container. Mr Devcich produced a receipt for that purchase. He had bought the petrol, he said, because he planned to hire a hedge trimmer on 25 April (the day after the fire) in order to carry out maintenance work intended to make the property more presentable to prospective purchasers. The red plastic container was stored on a shelf in the garage attached to the house where it was visible from outside the garage through a window. After the fire, the container was found to be missing. It is a proper inference that the person who started the fire used the petrol in the container as an accelerant, and that the remains of the red plastic container found in the lounge were what was left of the container in which Mr Devcich had earlier stored the petrol.
[40] The case for AMI was that Mr Devcich purchased the petrol for the express purpose of using it to light the fire, and not, as he claimed, to enable him to cut his hedge with a hedge trimmer. AMI’s case was that Mr Devcich had carefully planned the purchase, knowing that he would need to be able to give an innocent explanation for it. There was no petrol driven machinery on his property, and he therefore needed to explain the presence of petrol in his garage at the time of the fire.
[41] Lang J had some considerable difficulty with Mr Devcich’s explanation. First, he found it to be surprising that Mr Devcich would purchase petrol so far in advance of the hire of the hedge trimmer, because he would be required to travel to the hire centre in order to hire it the following weekend in any event. It would be expected that he would leave it to the next weekend to purchase the fuel as well.
[42] Second, the Judge identified problems with Mr Devcich’s explanation of his reasons for purchasing petrol, rather than a two-stroke mix which was needed for a hedge trimmer. The petrol he purchased would need to be mixed with oil in order to produce a two-stroke mix. The Judge found Mr Devcich’s explanation that he chose not to purchase the ready-mixed fuel by reason of an argument that had developed some months earlier with the hiring centre, to be of doubtful validity. Mr Devcich’s account was that he had previously been overcharged when returning unused fuel (or fuel purchased by him by way of replacement) to the hiring centre, and wanted to avoid a recurrence of that. Lang J considered that Mr Devcich was not the type of person who would have permitted himself to be overcharged in that way.
[43] The Judge held Mr Devcich’s evidence about the purchase of the petrol to be unsatisfactory and as further weakening his credibility.
The open home on 25 April
[44] Mr Devcich’s evidence was that he planned to cut his hedges on 25 April, the day following the fire. Having organised a game of golf for the morning, he intended to cut the hedges (or possibly just one hedge as is discussed below) in the afternoon. However, the real estate agent with whom he had been working, Mr O’Connor, gave evidence that there had been an open home scheduled for 25 April, and that following the fire Mr Devcich had telephoned him to cancel it.
[45] As to that, Mr Devcich said he had simply mistaken the open home date when he telephoned Mr O’Connor after the fire. He had thought that it was on 25 April, whereas it was in fact a week later. Mr Devcich also told Lang J in evidence that Mr O’Connor’s earlier evidence about an open home on 25 April was erroneous, and that Mr O’Connor (who had been called by AMI) now wished to give contrary evidence. Lang J declined to hear further evidence and considered Mr Devcich’s evidence about a discussion with Mr O’Connor (in which the latter indicated a wish to recant) as being entitled to “very little weight”. Lang J concluded that an open home was planned for 25 April, and that it did not proceed because of the fire. That in turn cast doubt on Mr Devcich’s claim that he had purchased the petrol in order to cut hedges on 25 April, at the very time when an open home was planned.
How many hedges?
[46] An issue arose at the trial as to how many hedges Mr Devcich planned to trim. At trial he said he had planned to cut all of the hedges on his property. Earlier, he seemed to have indicated that his intention was to cut only one particular hedge. The issue was of importance because the quantity of petrol purchased by him was far greater than was needed to cut a single hedge. However, Lang J held that there was evidence both ways, and he placed no weight on AMI’s criticism of Mr Devcich on that score.
Mr Devcich’s personality
[47] The trial Judge had the opportunity to observe Mr Devcich being cross-examined for a considerable time. He also watched videotapes of his interviews with the police for extended periods on two separate occasions. He has also read the transcript of a lengthy interview conducted by AMI’s investigators with Mr Devcich on 6 May 2009, and various letters that Mr Devcich wrote to his neighbours in the course of a dispute with them. There was also a body of evidence from other witnesses who had dealt with Mr Devcich over time.
[48] Lang J reached certain conclusions about Mr Devcich’s personality and attributes. They were plainly of key significance to the Judge’s overall assessment of the case before him, and for that reason we reproduce the Judge’s findings below:
[87] There can be no doubt that Mr Devcich is an intelligent man. All of the evidence points to that conclusion. Similarly, there can be no doubt that he is extremely resolute, and would be a formidable and determined adversary. The matters that I shall shortly discuss in relation to the way that he has dealt with his neighbours are testament to that.
[88] If confirmation of Mr Devcich’s tenacity is required, the second occasion upon which he was interviewed by the police provides it. That interview occurred on 14 July 2009, and was conducted by Detective Constable Anstey of the Avondale Criminal Investigation Unit. It is no exaggeration to say that Mr Devcich battered the detective into submission during that interview. Detective Anstey said that he went into the interview firmly believing that Mr Devcich had set fire to the house. By the end of the interview, however, he was left in considerable doubt regarding that issue. He concluded that the evidence against Mr Devcich was insufficient to meet the criminal standard of proof beyond reasonable doubt. For that reason he told Mr Devcich that the police would not be taking the matter further.
[89] Mr Devcich’s performance under cross-examination also confirms that he has little difficulty in handling situations involving quite intense pressure.
[90] I am also satisfied that Mr Devcich is an extremely careful and methodical person who is in many ways a creature of routine. The way in which he manages virtually every aspect of his business and personal life demonstrates that fact. The description that he gave of his morning and evening routines paints the picture of a man whose daily activities hardly vary. His recreation appears to be organised in the same way, with games of golf being played every Saturday morning at the same time.
[91] His business life is similarly organised. By way of example, he manages his finances by crediting all his income from his business to his finance facility. This means that he pays the minimum amount of interest on the facility. He then draws against that facility only when necessary. This might occur when he is required to pay his tax or, presumably, when he has to pay his credit card bills. All of his expenditure is conducted through use of a credit card so that, so far as possible, all expenditure goes through his business and a record is kept of it.
[92] Overall, Mr Devcich presents as a man who is highly organised and leaves little to chance so far as both his personal and business lives are concerned.
[93] He is also, however, extremely “black and white” in his outlook. He has firm views about things and does not brook any argument when he believes that he is in the right. Again, the way in which he dealt with his neighbours provides a clear example of that.
[94] My overall assessment of Mr Devcich’s personality is that he is a person who was capable of deciding that the destruction of his house by fire would provide an answer to his problems both with his neighbours and with the high moisture readings in his house. I also accept that he possessed the ability to carefully devise a plan that would leave little to chance. He would also be sufficiently determined and resolute to go through with the plan and not to buckle under the pressure of the subsequent investigation.
[95] In assessing the weight to be given to this factor I need to bear in mind, however, the fact that Mr Devcich is not the only person who possesses these characteristics. In most contexts they will be regarded as being desirable because they are likely to ensure success at both a business and personal level. No doubt for that very reason, many people in all walks of life aspire to possess them.
[96] I also need to recognise that, if this factor is given undue weight, it can be used to provide the answer to any weakness in AMI’s case. That could operate to produce an unjust result.
[49] In short, the Judge found that Mr Devcich was capable of taking the decision to set fire to his house, of devising the necessary plan, and of carrying through with the plan and the resulting investigation. But as the Judge carefully observed, that finding could not of itself be determinative and in particular, could not be deployed to paper over weaknesses in AMI’s case.
[50] But it did mean that Mr Devcich could not be excluded as the perpetrator by reason of his personality or attributes.
The dispute between Mr Devcich and his neighbours
[51] We turn now from Mr Devcich’s alleged role in the fire, to the Judge’s findings about the relationship between Mr Devcich and his neighbours, and the respondents’ contention that it was the neighbours who were responsible for the fire.
[52] The Devcich house is situated at the end of an L shaped driveway leading off Coronation Road. The property is cross-leased with an adjacent property owned by an elderly lady, Mrs Senk. The parties share vehicular access over part of the driveway. In recent years Mrs Senk created two self-contained flats within her house and sublet these to tenants. Over time, difficulties arose over parking arrangements, and more recently, over domestic incidents involving Mrs Senk’s tenants. The problems go back as far as September 2003.
[53] By January 2009, difficulties between Mr Devcich, Mrs Senk and her tenants had reached the point at which Mr Devcich began keeping a log of all of the incidents involving his neighbours. In succeeding months a series of letters passed between Mr Devcich and Mrs Senk. They became increasingly hostile in tone. Mr Devcich took the view that the flats in Mrs Senk’s house were illegal because they provided independent cooking facilities. For her part there was at least one incident in which Mrs Senk told a potential purchaser visiting Mr Devcich’s house that the property was a leaky home. Mrs Senk, through her daughter, served a trespass notice on both Mr and Mrs Devcich.
[54] The Auckland City Council’s building incident officer visited Mrs Senk’s property on several occasions, the last of them on 15 April 2009. The Council confirmed that Mrs Senk was in breach of the district plan by having additional cooking facilities in the flats, but also advised Mr Devcich that the breach had been remedied by the removal of the cooking facilities. Mr Devcich also disapproved of the tenants, Mr A and Mr R. He considered that drug-related activities were taking place in the flats (in the High Court suppression orders were made in respect of the identity of each of the tenants – we will continue those orders).
[55] Mr Devcich does not suggest that Mrs Senk or her daughter were responsible for setting fire to his property. He blames the tenants. He says they had an obvious motive to cause trouble because Mr Devcich was the person who was determined to have them evicted from Mrs Senk’s house.
[56] Mr Devcich argues that Mr A and Mr R were at Mrs Senk’s house on the morning of the fire. They would have heard him leave for work and they would also have known that there had been nobody in his house over the past few days. His suggestion was that it would have been a simple matter for one or both of the tenants to walk down the driveway to the house, see the container of petrol sitting on the shelf in the garage, break into the property, light the fire and walk back to Mrs Senk’s house, all in a matter of minutes. Mr Devcich maintains that none of that activity would have been observed by any of the other neighbours.
[57] He is highly critical of both AMI and the police, because he considers that neither organisation took his claims about Mr A and Mr R seriously, with the result that no proper interviews were conducted. They were not contacted until just prior to the trial.
[58] Lang J considered first the position of Mr A. He is 48 years of age, and has some previous convictions, but none that are particularly material for present purposes. He rented two of the upstairs rooms in Mrs Senk’s house for about eight months prior to the fire. Subsequently he sublet a lounge area to Mr R, who had been there for several months. Mr A was an engineer who at the time of the fire had been working in his own business, but keeping irregular hours. Mr R was employed on a full time basis as a painter.
[59] Mr A said he was woken by Mr R after the fire appliances had arrived and he had gone downstairs to see what was going on. He acknowledged that on the morning of the fire, having approached Mr Devcich’s house, he made what might have been taken to have been cheeky comments to certain persons, including Mr Devcich. He acknowledged that Mr R had earlier said something similar, and agreed that Mr R could be regarded as something of a “hot head”.
[60] Mr A was aware of the difficulties between Mr Devcich and Mrs Senk over parking and the legality of the flatting arrangements. He was, however, not particularly concerned about the possibility that he may need to be evicted. He denied any involvement in the fire.
[61] Lang J paid particular attention to three aspects of Mr A’s evidence. A week or two prior to the fire, Mr A said that Mr Devcich had told him that he and his wife were moving into an apartment in town, and that he had seen a number of vehicles which seemed to be involved in the moving of possessions. But Mr Devcich denied that he and his wife had made arrangements to move out of the Coronation Road house, and there was no evidence that they had done so. It is possible that the arrangements were those of their daughter, who did move out of the house at Easter time in 2009. We observe that there may be some relevance in the fact that Mr A seems to have been under the impression that the house was to be vacated.
[62] The second point referred to by Lang J concerned Mr A’s belief that he had been told by Mrs Senk’s daughter that Mr Devcich was accusing Mrs Senk of starting the fire. The Judge found that Mr A was clearly mistaken on that point.
[63] A third point was regarded by the Judge as of greater significance. Mr A and a visitor, described as a large man, visited Mr Devcich not long before the fire for the purpose of endeavouring to persuade Mr Devcich that he should discontinue his feud with his neighbours in the interests of his own health. It seems that the visitor spoke to Mr Devcich on the latter’s doorstep, with Mr A standing some distance away on the drive.
[64] Lang J considered that that incident had sinister overtones, and that the purpose of the visit was to intimidate Mr Devcich.
[65] We turn to Mr R. His identity was discovered only during the course of the trial. Despite that, he was summoned to give evidence on behalf of AMI later in the trial. He is 39 years of age and said he had been living with Mr A for about six months at the time of the fire. He confirmed that he slept in the lounge area of the upstairs flat that Mr A rented from Mrs Senk. He said he woke up to the smell of smoke on the morning of the fire, and that when he rose, he saw smoke “like mist” in the hallway of his flat. He could see more smoke down the driveway in the direction of the respondent’s house. He ran downstairs onto the driveway, saw that the house was ablaze, and began calling out because he was concerned that somebody might be inside. Having received no response, he ran inside and woke Mr A. At that stage the first fire appliance arrived. He said that he and Mr A then went downstairs to observe what was happening.
[66] After control was gained over the fire, he and Mr A went back upstairs to get ready for work. He too was aware of the dispute between Mrs Senk and Mr Devcich over parking issues. He was, however, not aware that Mr Devcich had taken steps to have Mr A and Mr R evicted. He had never discussed that issue with either Mr A or Mrs Senk. Had he known of that prospect he would not have been unduly worried because he was in the process of moving out of Mrs Senk’s address in any event. He regarded issues involving Mrs Senk as being a matter for Mr A.
[67] He accepted that he had been fined $500 for possession of methamphetamine about six years ago but denied that he was addicted to drugs, or that he and/or Mr A had been involved in drug-related activities while in Mrs Senk’s house. He rejected any suggestion that he played any part in setting fire to Mr Devcich’s property.
[68] Mr R’s evidence was strongly challenged by counsel for the respondents. It was put to him that it was unlikely that he would have been able to smell any smoke in the hallway of his flat, given that the wind appeared to have been blowing the smoke away from the flat. But the Judge considered that once the windows of Mr Devcich’s lounge had blown out, significant quantities of smoke escaped from the lounge, and that at least some of that smoke would have found its way into the upstairs flat occupied by Mr A and Mr R.
[69] There was also an issue about the colour of the smoke as described by Mr R, but Lang J understandably discounted that issue on the basis that it was a detail that Mr R might not necessarily have recalled accurately after some 14 months. Moreover, the circumstances of being woken and then of being concerned that people might still be inside the burning house, were such as to place the colour of the smoke on the periphery of Mr R’s consciousness, Lang J held.
[70] Having considered all of the evidence, his Honour concluded that the dispute between Mr Devcich and his neighbours was unlikely to have been sufficiently serious from the perspective of either Mr A or Mr R as to cause them to decide to set fire to Mr Devcich’s house. The Judge reached that conclusion for several reasons. First, the dispute was principally between Mr Devcich on the one hand and Mrs Senk or her daughter on the other. Second, disputes over car parking would not have been sufficient to have led either Mr A or Mr R to that course of action. In particular, the visit by Mr A and his friend to Mr Devcich, although carrying sinister overtones, was of a much less serious order than the burning down of a neighbour’s house. Importantly, the Judge concluded that the prospect of Mr A and Mr R being evicted from the flat was not a matter of major significance for them. When they gave their evidence there was no hint that either man harboured hostility towards Mr Devcich of such intensity that it would give rise to a desire to burn his house down.
[71] Lang J carefully reminded himself, however, that the demeanour of the witnesses at trial might not accurately represent their position as at 24 April 2009, and that a cautious approach needed to be taken to the assessment of the weight to be given to their evidence at trial.
[72] The Judge accepted that there were circumstances which placed Mr A and Mr R in a position of conflict with Mr Devcich, but held that the evidence as to their motives did not strongly support an argument that either of them had been responsible for the fire.
Means of entry
[73] Only when the plaintiffs’ briefs of evidence were served did AMI become aware that there were signs of forced entry into the house. The case for Mr Devcich, supported by an expert witness, Dr Lavendar, was that the house offered three possible points of entry for an intruder. First, he could have entered the house through an open window behind the large television set in the lounge; second, he could have climbed up a drainpipe and entered one of the open windows in the master bedroom on the first floor; third, he could have forced open one of the windows in the family room adjoining the lounge.
[74] Upon analysis, Lang J considered that the evidence did not suggest that the window behind the television set in the lounge had been left open. Rather, it was highly likely that it remained closed until the person who lit the fire opened it in order to provide the fire with a source of ventilation.
[75] Moreover, although it would have been physically possible for an intruder to climb through the window and negotiate his way around the television set, it would have been difficult to do so. The Judge concluded that it was unlikely that the window in the lounge provided a point of entry to the house.
[76] The second point of entry involved the perpetrator scaling the drainpipe fixed to the eastern side of the house, and then walking around on the roof to the master bedroom where access could be gained through an open window on the western side of the house.
[77] Lang J considered that to have been a highly unlikely point of entry. The perpetrator would have been very much exposed to occupants of neighbouring properties on three sides of the house during the time that it took him to walk to the open window, so the risk of being observed was significant. Moreover, there would have been considerable danger to life and limb, the drainpipe being high, with a corresponding risk that the intruder might slip and fall a substantial distance onto the hard surface of the rear yard.
[78] The third alternative concerned the window in the family room. Tool marks had been found on the frame of a window in the family room adjacent to the lounge. The transom of that window was also bent. The damage was first discovered by Mr Devcich when he made his own inspection of the windows in the house, after AMI had declined the respondents’ claims. Dr Lavendar, the respondents’ expert, gave detailed evidence at trial of the extent of the damage, and said it was such that he believed the attempt to open the window had been successful.
[79] AMI’s expert, Mr Noble, had not noticed the damage when he inspected the house immediately after the fire. By the time he received Dr Lavendar’s brief, the window frame had been removed from the house and was being stored at a demolition yard. Mr Noble therefore arranged to purchase the window frame, which he re-inspected. He agreed that the window and latch are damaged in the way described by Dr Lavendar, but he points out that there is no way of knowing when the damage occurred, and said also that, had the attempt to open the window been successful, he would have expected a greater degree of damage than is evident.
[80] The Judge preferred Dr Lavendar’s evidence, finding that the damage had occurred when the window was being forced open, necessarily before the time of the fire. He took into account also photographs taken immediately after the fire which depict the window in the family room and show it was slightly ajar at the time, with the latch raised.
[81] Mr Devcich gave evidence to the effect that the window was closed and latched when he went to work on the morning of the fire. The Judge accepted that evidence. AMI contended that the window must have been opened by fire service personnel who attended the scene. But the Judge, noting that AMI had not called any evidence that shed light on the issue of whether or not a fireman had opened the window, decided it was not now possible to be confident that fire service personnel opened the window after the fire. Lang J concluded that he could not disregard the possibility that the window was opened by force on the day of the fire and that an intruder gained entry to the house through it.
The knife on the bench
[82] On 2 May 2009, about a week after the fire, Mr Devcich found a knife he did not recognise sitting on the kitchen bench. Initially he believed it to have been a putty knife because a substance similar to putty was stuck to the handle of the knife. Given Mr R’s occupation as a painter and plasterer, Mr Devcich thought the discovery of the knife may have been significant.
[83] However, Lang J, having considered evidence about the positioning of the knife (including some evidence that Mr Noble had used a kitchen knife during his inspection on 27 April 2009), viewed the evidence about the knife as confused. Accordingly, he did not accept that the presence of the knife on the kitchen bench supported Mr Devcich’s theory that the fire was caused by an intruder.
The Judge’s ultimate conclusions
[84] Lang J held that both parties could point to persuasive aspects of the evidence, but he considered that considerable suspicion continued to attach to Mr Devcich. He accepted that Mr Devcich had a motive for setting fire to his house, and that he had the ability to devise a careful plan and the determination to carry it out. Moreover, the dispute with his neighbours gave him a ready target to blame once the fire was discovered. There was evidence that when Mr Devcich returned to his house on 24 April, after the fire, he immediately ascribed blame to Mr A and Mr R.
[85] Lang J held further that Mr Devcich’s actions upon arriving at his office gave rise to suspicion. Further, his credibility as a witness was significantly weakened by his implausible explanation regarding his reasons for purchasing the petrol and by his evidence about his intention to cut a hedge, or hedges, on 25 April, when an open home had been scheduled for the middle of that day.
[86] The Judge also accepted that the argument that Mr A or Mr R may have been responsible for starting the fire was not strong. Against that, however, the Judge weighed certain countervailing considerations. There was an obvious issue about timing, given that Mr Devcich had left his property approximately 15 minutes before the fire ignited. Accordingly, he must have started the fire using a timing device or the assistance of a third party. There was no evidence to support either of those theories. However, the Judge concluded that the timing issue may not of itself have been sufficient to cast doubt upon AMI’s argument.
[87] Lang J then turned to the position of Mr R and Mr A. He considered, as he had noted earlier, that neither had a strong motive for starting the fire, despite the dispute between Mr Devcich and his neighbours. But they would have known when Mr Devcich left the property that morning, and it is likely that they would have known there was nobody else living at the address at the time. Finally, he considered that they had the ability and opportunity to start the fire without being observed by anyone else.
[88] At that point the Judge considered the possibility that either Mr R or Mr A may have been the perpetrator, even combined with the difficulties over timing, “may not have been sufficient to defeat AMI’s claim that Mr Devcich was the person who lit the fire”. For the Judge, the key evidence was that relating to the damage to the window in the family room. As to that he said:[5]
The problem for AMI arises when the damage to the window in the family room and the possibility that it may have been left open after the fire are added to the mix. Once that is done, I cannot disregard the possibility that an intruder gained access to the house through that window and lit the fire using the fuel that was visible on the shelf in the garage.
[89] Having made that finding, Lang J moved immediately to his ultimate determination which he recorded in this way:[6]
These factors persuade me that AMI has not established its claim to the required standard. I reach that conclusion because, taken as a whole, the evidence leaves me in a state of genuine uncertainty. I am not sufficiently sure that Mr Devcich started the fire to decide the case in AMI’s favour. For that reason I have concluded that the plaintiffs are entitled to be indemnified by AMI under their insurance policies.
Discussion
[90] Lang J considered that, realistically, the fire must have been lit either by Mr Devcich or by Mr R and/or Mr A. The possibility that an opportunistic, random intruder may have set fire to the dwelling was inherently unlikely.[7] Neither counsel challenges that finding. We agree that there could be only the remotest possibility that an unidentified intruder (without any known motive), might have gained entry to the house, located the petrol, set the fire, and made an escape without detection, all within a matter of minutes of Mr Devcich’s departure from the house.
[91] The Judge properly found in our view that “considerable suspicion” attached to Mr Devcich, who had a motive for setting fire to his house, the ability to devise and carry through a planned arson exercise, and neighbours who were readily available as alternative suspects. We consider also that the Judge was justified to express reservations about the plausibility of certain of Mr Devcich’s explanations. It is difficult to understand why he should have purchased five litres of petrol a week before the fire, when he had no petrol driven machinery on his property, and in any event, would need to travel to the hire centre to hire the hedge trimmer which used a two-stroke mix, and not petrol.
[92] Like the Judge, we also entertain concerns about Mr Devcich’s claimed intention to trim the hedges on a day which had been set aside for an open home, and we agree with his important finding to the effect that Mr Devcich’s evidence about the driving incident was likely to have been devised by him to explain his nervousness, in the context of anticipated news of the fire. A point not emphasised by the Judge, but which we consider to be of some relevance, was the fact that the fire occurred during a brief period when Mr Devcich’s wife and daughter were in Australia, and so temporarily out of the picture.
[93] A countervailing factor was, of course, Mr Devcich’s acknowledged absence from the house at the time of the fire. The Judge found that some 15 minutes elapsed between Mr Devcich’s likely time of departure from the house and the time of ignition. However, there was evidence that ignition could be delayed by means of the use of a device such as a taper and that instructions for such devices were readily available on the internet.
[94] Although he noted that there was absolutely no evidence that any such delayed ignition technique had been adopted, Lang J referred to expert evidence to the effect that any taper or similar device would have been consumed during the course of the conflagration. Accordingly, the absence of evidence of a taper or other device could not be determinative, as the Judge acknowledged.
[95] A further countervailing factor was the risk that if a taper did not work, Mr Devcich would have been left to explain to his wife the circumstances in which the lounge had been doused in petrol. But in our view the Judge was right to conclude that the timing issue, of itself, could not rebut the appellant’s argument that it was Mr Devcich who set the fire.
[96] Logically, the only other suspects were Mr R and Mr A. Both gave evidence. Lang J concluded that the dispute between them and Mr Devcich was unlikely to have caused them to set fire to the house. As we have noted above,[8] they were on the fringes only of the argument between Mr Devcich and Mrs Senk and her daughter. The disputes over car parking were relatively minor in character, and neither Mr A nor Mr R was particularly concerned at the prospect of being evicted from the flat. Moreover, and importantly, Lang J detected nothing as Mr R and Mr A gave their evidence to suggest that they harboured such hostility towards Mr Devcich as might have led either of them to commit arson.
[97] The Judge concluded that neither the timing issues associated with Mr Devcich’s alleged role, nor the possibility that the neighbours were the arsonists, were necessarily sufficient to defeat the appellant’s claim that Mr Devcich lit the fire. We agree.
[98] The evidence that did swing the balance in Lang J’s judgment was that related to the damage to the window in the family room. The Judge found that the damage had occurred when the window was being forced open at some point prior to the fire, and considered that he could not disregard the possibility that an intruder, having gained access to the house through that window, then lit the fire using the fuel visible on the shelf in the garage. Although he does not expressly say so, it must be assumed that the intruder to whom the Judge referred was Mr A or Mr R, or both.
[99] We make two points about this finding. First, the Judge regarded the issue as of sufficient probative importance to determine the outcome of the proceeding. In other words, it supported the argument that Mr A and/or Mr R were the perpetrators to such a degree as to carry the day for Mr Devcich, despite the Judge’s earlier conclusion that the case against Mr A or Mr R was “not strong”.
[100] We are unable to agree that the evidence concerning the open and damaged window was particularly compelling. The damage was not discovered until some time after the fire. The appellant was not aware of it until briefs of evidence were exchanged. The Judge accepted that the evidence was equivocal, in that it left open the “possibility” that an intruder had gained access to the house through the window on the morning of the fire. While we accept that the evidence about the window was plainly relevant and the Judge was entitled to take it into account, we are unable to accept that it was capable of converting a contention ascribing blame to Mr A and/or Mr R that was “not strong” into an argument that was sufficient to defeat the appellant’s claim.
[101] This brings us to our second point. It is inherently unlikely in our opinion that either Mr R or Mr A would have been able, in the short time available, to set the fire. It would have been necessary for them to spring into action as soon as Mr Devcich drove away, and to have gained entry by damaging or breaking the locking mechanism on the window. There is no evidence as to how long that might have taken. They would then have had to have made their way to the garage, in order to obtain the petrol can (and there is nothing to suggest that they would have been aware in advance that there was anything in the can). Further time would have been required to douse the lounge with petrol and to set it alight before the perpetrators made their escape. All of this would need to be accomplished between Mr Devcich’s departure and the ignition time – realistically a period of little more than 10 minutes.
[102] If the neighbours were the arsonists, there is no evidence that they had a particular need to set the fire immediately on Mr Devcich’s departure. They would have known that he worked in the city, and given the Judge’s finding that he was a man of orderly habits, that he was likely to have been absent from the house for the duration of the working day. In other words, if they were indeed the perpetrators, there was no need for them to have set the fire so soon after Mr Devcich’s departure.
[103] In finding for the respondents, Lang J said that the evidence as a whole had left him in a state of genuine uncertainty, and that he was not sufficiently sure that Mr Devcich started the fire, to decide the case in the appellant’s favour.[9] But his analysis demonstrates that it was only the evidence about the damaged window that took him from finding in the appellant’s favour, to that state of uncertainty.
[104] We consider the evidence about the window to be no more than equivocal, and when set against the evidence marshalled by the appellant, incapable of affecting the outcome.
[105] The burden of proof lay upon the appellant to establish its case on the balance of probabilities, to be assessed in the light of the seriousness of the allegations made against Mr Devcich. Although at the conclusion of his judgment Lang J did not expressly return to the standard of proof, his reference to being insufficiently “sure” that Mr Devcich started the fire is capable of suggesting that the Judge had in mind the more onerous standard of proof articulated in Blanshard which Lang J regarded as imposing a standard “not as high as the criminal standard, namely proof beyond reasonable doubt, [but] not far removed from it”.[10] If that was the Judge’s approach, it imposed too high a standard for AMI to meet.[11]
[106] Applying the civil standard of proof in the light of the seriousness of the allegations in this case, we consider that the Judge’s factual findings ought inexorably to have led him to the conclusion that the appellant had made out its case against the respondents. The facts found by the Judge strongly suggest that Mr Devcich was responsible for setting the fire. The countervailing circumstances pointing to Mr A and/or Mr R are very weak. There being no other perpetrator candidates, we consider AMI to have established its case.
Result
[107] For the foregoing reasons the appeal succeeds. The judgment of Lang J is set aside. We substitute judgment for the appellant in respect of both claims advanced by the respondents in the High Court.
[108] The appellant, alleging deceit, sought judgment in the High Court by way of counterclaim for the amount of its initial investigation costs. The respondents concede that the appellant is entitled to succeed on its counterclaim if successful on the appeal. We accordingly give judgment on that counterclaim in favour of the appellant. Quantum issues are remitted to the High Court for determination.
[109] The respondents must pay the appellant costs for a standard appeal on a band A basis and usual disbursements.
[110] The respondents are to repay to the appellant the sum of $160,663.27, paid by way of costs and disbursements in the High Court proceedings on 22 October 2010, together with interest (at 8.4 per cent, in accordance with s 87(3) of the Judicature Act 1908) from that date to the date of repayment, pursuant to r 54(2) of the Court of Appeal (Civil) Rules 2005.
[111] The appellant has indicated that it will seek indemnity, or in the alternative, increased costs in the High Court. Questions as to costs in the High Court are to be determined in light of this judgment by the High Court, in the event that the parties are unable to agree.
Solicitors:
Wynn Williams & Co, Christchurch for
Appellant
Jones Fee, Auckland for Respondents
[1] Devcich v AMI
Insurance Ltd HC Auckland CIV-2009-404-5567, 20 July
2010.
[2] Z v
Dental Complaints Assessment Committee [2008] NZSC 55, [2009] 1 NZLR 1.
[3] Re
Dellow’s Will Trusts [1964] 1 WLR 451 (Ch), where an allegation of
felonious killing was held proved on the balance of
probabilities.
[4]
Managh v Wallington [1998] 3 NZLR 546 (CA) at
550.
[5] At
[234].
[6] At
[235].
[7] At
[21].
[8] At [70]
above.
[9] At
[235].
[10] At
[12].
[11] See
discussion at [13]–[15] above.
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