Stemson v. AMP General Insurance (NZ)

Home ] Up ]

Stemson v AMP General Insurance (NZ) Ltd
Privy Council: Lords Nicholls, Hope, Scott, Mance and Baroness Hale: [2006] UKPC 30: 21 June 2006

The Privy Council upheld the decisions of the New Zealand Court of Appeal and the trial judge - that the Appellant-Insured had probably committed arson against the property insured - because the concurrent findings of fact (where the Court of Appeal endorsed the trial judge’s findings of fact) in the courts below could not clearly be demonstrated to be erroneous before the Privy Council.
– The Privy Council endorsed the opinion of Mance LJ (as he then was) in Agapitos v Agnew (No.1) (The "Aegeon") [2006] QB 556 regarding the statements of legal principle regarding the use of fraudulent devices to promote a claim.

DMC Category Rating: Confirmed

Case Note contributed by Jim Leighton, BSc (Hons) (University of Plymouth), LLM (Maritime Law) (University of Southampton) and Claims Consultant

AMP insured the home of Mr Stemson. When the house was partially burnt down AMP accepted that the policy covered loss by fire but declined to indemnify Mr Stemson because they took the view that he had deliberately started the fire. Mr Stemson was later found to be lying (as he admitted) about his intent and attempts to sell the house before the loss by fire, due to his worsening financial position – the truth coming out before the dispute went to trial. AMP then alleged that they were also entitled to avoid the policy on the basis of the false statement given to them by Mr Stemson when their claims assessor was investigating the loss.

The trial judge found in favour of AMP on both grounds. The New Zealand Court of Appeal upheld the trial judge’s findings of fact. The findings of fact were appealed to the Privy Council ("the Board"), the opinion of the Board being given by Lord Hope. But, unusually, a concurring judgment was also given by Lord Mance considering the trial judge’s decision that AMP were also entitled to avoid the policy due to the use of fraudulent means and devices by Mr Stemson when making his claim on the policy.

Factual Appeal
The Board accepted the concession of Mr Stemson that "a court of last resort ought not to disturb a concurrent finding of fact by courts below unless it can be clearly demonstrated that the finding was erroneous". This was the practice of the Board (see Allen v Quebec Warehouse Co (1886) 12 App Cas 101, 104) and a similar test was applied in the House of Lords (see The Owners of the P Caland and Freight v Glamorgan Steamship Ltd [1893] AC 207, 215).

Mr Stemson claimed that (1) there were clearly erroneous findings because the trial judge had incorrectly analysed the evidence (holding that expert evidence was entirely consistent with evidence given by an eyewitness, which contradicted some of the evidence considered) so that the judge may have concluded that the required high standard of proof was not reached in determining the cause of the fire, and (2) that the New Zealand Court of Appeal had wrongly refused to consider the evidence for determining who was responsible for causing the second fire (one fire starting in the bedroom, a second starting in the lounge) so that there were no concurrent findings.

In applying the test, the Board came to the conclusion that the two alleged defects had no substance or materiality to them when the judgments were assessed as a whole (there being other evidence to support the trial judge’s findings and no question having being raised before the courts below as to the possibility of there being two separate agencies causing the fire) as there were no cardinal facts overlooked or an altogether erroneous view taken of the evidence. The alleged defects were not such as to justify the Board opening up the concurrent findings of the courts below. Therefore the Board dismissed the appeal.

Fraudulent Means
The Board reviewed and confirmed the finding of fact that Mr Stemson had given a knowingly false statement to AMP’s claims assessor during the course of the investigation of the claim, as to Mr Stemson’s intention and attempts to sell the house before the fire; a finding that Mr Stemson did not seek to challenge. The Board also confirmed the finding of fact that Mr Stemson only admitted the truth to AMP when it became apparent to AMP that the previous statement was false information. However, Mr Stemson argued that AMP could not avoid liability where he had admitted the true position four months before AMP rejected the insurance claim, so that AMP could not have relied upon the false statement in the rejection of the claim.

Mr Stemson did not take issue with the legal principles advanced by Mance LJ (as he then was) in Agapitos v Agnew (No.1) (The "Aegeon") [2006] QB 556, and specifically accepted para 37 of the opinion, which stated: "Does the fact that the lie happens to be detected or unravelled before a settlement or during a trial make it immaterial at the time when it was told? In my opinion, not."

On that basis, the Board had "no hesitation" in dismissing the submissions of Mr Stemson and upheld the trial judge’s conclusions, because "quite apart from any question of arson, the respondent was entitled to reject the appellant’s insurance claim (as it did) on the ground that the appellant had sought to promote it … by lying to the respondent about the position, and his state of mind, regarding any attempt to sell the house prior to the fire. The materiality of such matters to the respondent’s investigation and evaluation of this insurance claim is not challenged, and is, as the judge indicated, obvious." Therefore the Board would have also dismissed the appeal on this basis.

The decision on the factual reassessment issue shows that, for a court of last resort to reconsider the facts, there must be strikingly obvious defects in the trial judge’s decision and those defects must be such that they have materially affected the conclusions reached. This indicates that there are very few instances in which appellate courts will reverse the trial judge’s findings. The rule primarily developed because the trial judge is best placed to assess the relevance, reliability and weight to be attributed to the evidence in coming to a judgment, having had the benefit of dealing with the witnesses first hand during the course of the trial.

While the opinion of the Board on the issue of fraudulent means and devices is obiter (not necessary for the decision) the opinion is highly persuasive and indicative of the conclusions that would be drawn by their Lordships in the House of Lords. Thus Stemson v AMP has admirably reinforced the principles elaborated in Agapitos v Agnew (No.1). The opinion indicates that, once materially significant fraudulent means or devices are used to promote an insurance claim, they cannot be withdrawn or corrected and will remain a valid ground upon which the insurer may avoid the policy even though the insurer could then have assessed the claim on the basis of its true circumstances. Accordingly, it represents a punitive deterrent to those who may seek to manipulate a claim to their advantage.

Back to Top


These Case Notes have been prepared with care, but neither the Editor nor the International and other Contributors can guarantee that they are free from error, nor that they contain every pertinent point. Reliance should not therefore be placed upon them without independent verification. The Editor and the International and other Contributors disclaim all liability for any loss of whatsoever nature and howsoever arising as a result of others acting or refraining from acting in reliance on the contents of this website and the information to which it gives access. The Editor claims copyright in the content of the website.