Yeganeh v Zurich Plc & Anor

An appellate court should not uphold a finding of fraud where the trial judge has failed to address material evidence bearing on the alleged deception. Where the defence necessarily makes a witness complicit, the judge must make a finding on that witness’s credibility and honesty. A finding based on a late theory that was not pleaded, and that experts were not asked to investigate, is unsafe unless the theory is properly analysed against the evidence. The proper course is to set aside the order and remit the relevant issue for rehearing.

The appellant claimed indemnity under a household insurance policy for damage caused by a fire. The insurer avoided the policy, alleging deliberate ignition of the fire and a knowingly false claim for clothing said to have been lost.

The trial judge rejected the allegation of arson but found that the clothing claim was fraudulent. He dismissed the claim, entered judgment for the insurer in the sum of £20,665.03, and ordered the appellant to pay 30% of the insurer’s costs. The appellant appealed against the findings concerning the clothing claim. The central issues were whether the judge had properly assessed material evidence from the appellant’s partner and whether he was entitled to rely on a late, unpleaded theory that the clothing had been planted.

Disposition

Ward LJ delivered the judgment of the court. Jacob LJ and Patten LJ agreed. The appeal was allowed, the orders made on 24 May 2010 were set aside, and the dishonest clothing claim was remitted to the High Court for rehearing.

1. The trial judge failed to deal with material evidence from the appellant’s partner, Ms Courtnell. Her evidence supported the appellant’s account that a substantial quantity of clothing had been stored in the bedroom before the fire. Since the insurer’s case necessarily implied that she had participated in the deception, the judge had to decide whether he believed her and whether she was herself dishonest. That was a crucial finding of fact, and its omission rendered the decision unsafe.
2. The judge accepted that there had been a pile of clothing on the bed and accepted the evidence of both experts. He nevertheless accepted, for the first time at trial and without prior pleading, the theory that the appellant had planted clothing between the experts’ inspections. That theory raised important unanswered questions concerning how the clothing could have been burnt, transported and distributed throughout the room.
3. The experts had not been asked to investigate the planting theory. It should have been properly investigated and pleaded before being relied upon as the basis for rejecting the claim. The judge’s acceptance of the theory without analysing how it could have been achieved was an error requiring a rehearing.

Zurich’s unchallenged failure to establish arson did not determine the separate issue concerning the clothing claim.

1. Court of Appeal (Civil Division): On 11 April 2011, the appeal was allowed. The orders of 24 May 2010 were set aside and the dishonest clothing claim was remitted to the High Court for rehearing.
2. Queen’s Bench Division, London Mercantile Court: His Honour Judge Mackie QC dismissed the appellant’s claim, entered judgment for Zurich in the sum of £20,665.03, and ordered the appellant to pay 30% of Zurich’s costs.