Averkin v Insurance Australia Ltd [2016] NSWCA 122

Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Averkin v Insurance Australia Ltd [2016] NSWCA 122 Hearing dates: 6 May 2016 Decision date: 23 May 2016 Before: McColl JA at [1]; Basten JA at [2]; Leeming JA at [30] Decision: 1. Appeal allowed.

2. Set aside orders 1 and 2 made by the District Court on 24 April 2015, and in lieu thereof enter judgment for the plaintiff.

3. Direct the parties to file and serve, within 14 days, submissions not exceeding 5 pages indicating the orders they propose as to (a) the amount of the judgment to be entered, if such an order is required, and (b) costs at first instance and on appeal, if any orders as to costs are sought. Catchwords: EVIDENCE – hearsay – business records – where representations made in connection with investigation relating to or leading to a criminal proceeding – burden of proof – representations contained in records made by police officer responding to report of burning vehicle – Evidence Act 1995 (NSW), s 69(2) and (3)

INSURANCE – policy insuring vehicle against destruction by fire – insurer denied indemnity and alleged insured was complicit in vehicle's destruction –whether primary judge reversed onus of proof – whether primary judge erred in admitting expert evidence as to engine immobiliser – whether primary judge erred in admitting records made by police relating to the incident – whether primary judge erred in concluding that insurer had established the exclusion applied – appeal allowed and judgment entered in favour of insured Legislation Cited: Companion Animals Regulation 2008 (NSW), cl 5 Evidence Act 1995 (Cth), s 143 Evidence Act 1995 (NSW), ss 59, 69, 140, 190; Pt 3.2 Motor Vehicle Standards Act 1989 (Cth) Supreme Court Act 1970 (NSW), s 101 Uniform Civil Procedure Rules 2005 (NSW), rr 36.16, 42.35, 51.29 Vehicle Standard (Australian Design Rule 82/00 – Engine Immobilisers) 2006 Cases Cited: Australian Competition and Consumer Commission v Advanced Medical Institute Pty Ltd (No 2) (2005) 147 FCR 235 Averkin v Insurance Australia Ltd (30 March 2015, unrep) Averkin v Insurance Australia Ltd t/a NRMA Insurance (24 April 2015, unrep) Cassell v The Queen [2000] HCA 8; 201 CLR 189 Commercial Union Assurance of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Lewincamp v ACP Magazines Ltd [2008] ACTSC 69 Thomas v State of New South Wales [2008] NSWCA 316; 74 NSWLR 34 Vitali v Stachnik [2001] NSWSC 303 Walsh v Walgett Shire Council [2014] NSWSC 812 Texts Cited: Uniform Evidence Law (December 2005, ALRC Report 102, NSWLRC Report 112, VLRC Final Report) Category: Principal judgment Parties: Mr Michael Averkin (Appellant) Insurance Australia Ltd (Respondent) Representation: Counsel: D R J Toomey SC, T B Jones (Appellant) G Carolan (Respondent)

Solicitors: Toby Tancred Solicitor (Appellant) MCK Lawyers (Respondent) File Number(s): 2015/147224 Decision under appeal Court or tribunal: District Court of New South Wales Jurisdiction: Civil Date of Decision: 30 March 2015 Before: Norton DCJ File Number(s): 2014/22660

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Judgment 1. McCOLL JA: I agree with Leeming JA's reasons and the orders his Honour proposes. 2. BASTEN JA: I agree with the orders proposed by Leeming JA and, subject to what follows, with his reasons.

Admissibility of police records

(a) background 1. The appellant challenged an interlocutory judgment in the District Court [1] admitting into evidence the contents of the notebook of the police officer who attended the burning vehicle and a further record prepared by the same officer, some hours later, being a report of the events of the evening, including an attendance at the appellant's house and a conversation with both the appellant (by telephone) and with his wife. There was also a note of a conversation with neighbours. The judge accepted that the contents of the documents constituted hearsay evidence but determined that they were admissible as business records, pursuant to the exception to the hearsay rule provided by s 69 of the Evidence Act 1995 (NSW). 2. The structure of Pt 3.2 of the Evidence Act, dealing with the hearsay rule, commences with the proposition that "[e]vidence of a previous representation made by a person is not admissible to prove the existence of a fact that it can reasonably be supposed that the person intended to assert by the representation": s 59(1). The content of the police officer's notebook included representations as to what she observed when she attended at the scene of the burning vehicle. That part of the documentary record constituted first-hand hearsay evidence when tendered at the trial. 3. There were, however, further matters identified in the notebook, relating to the personal details of the appellant and his wife and his occupation. These were almost certainly based on information supplied to her and constituted second-hand hearsay. Similarly, the content of conversations set out in the COPS report prepared later that night also constituted second-hand hearsay. 4. It was not in dispute that both the notebook and the COPS record constituted business records for the purposes of the Evidence Act. Accordingly they were said to be admissible pursuant to an exception to the hearsay rule with respect to business records, set out in s 69 of the Evidence Act. This section covers both first-hand and second-hand hearsay. It is convenient to set out the relevant parts: 69 Exception: business records … (2) The hearsay rule does not apply to the document (so far as it contains the representation) if the representation was made: (a) by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact, or (b) on the basis of information directly or indirectly supplied by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact. (3) Subsection (2) does not apply if the representation: (a) was prepared or obtained for the purpose of conducting, or for or in contemplation of or in connection with, an Australian or overseas proceeding, or (b) was made in connection with an investigation relating or leading to a criminal proceeding. … (5) For the purposes of this section, a person is taken to have had personal knowledge of a fact if the person's knowledge of the fact was or might reasonably be supposed to have been based on what the person saw, heard or otherwise perceived (other than a previous representation made by a person about the fact).

(b) burden of proof 1. In some cases the application of this provision may turn upon questions of fact with the burden of proof lying on one party rather than the other. This is not such a case: the application of the section was to be inferred from the material before the Court. As the burden of proof does not affect the outcome in this case, the question of who bears that burden need not be addressed. Little was said on this point in the course of submissions and the answer is not clear. 2. The standard approach is to say that the burden of proving an exception to a rule lies on the party relying on the exception. On one view, the exception to the hearsay rule was contained within subs 69(2) and (3), taken as defining the exception and its limits, and the burden was therefore on the insurer to prove that the documents were not merely within subs (2) but also were not excluded by subs (3). On another view, the general rule was relevantly identified as the business record exception contained in subs (2) (which the insurer could readily satisfy) and it was up to the appellant to demonstrate that the material was not admissible, because it fell within subs (3). The preferable construction should await another case.

(c) excluded representations 1. Although the material was not analysed in this way, either in the judgment below or in submissions in this Court, some of the representations in the documents fell within subs (2)(a) (first-hand hearsay) and some fell within subs (2)(b) (second-hand hearsay). Rather, the focus of the argument below was s 69(3)(b). 2. In the interlocutory judgment, after referring to the decision of McDougall J in Walsh v Walgett Shire Council [2] the trial judge stated: "In that decision it was pointed out that the primary rationale behind s 69(3)(b) is that if proceedings – in this case, criminal proceedings – are in contemplation then there is likely to be self-serving statements made and therefore the weight that can be attached to a document is significantly undermined." 1. The relevant connecting factor identified in this passage ("if proceedings … are in contemplation") is not to be found in par (3)(b); first, the connecting link in par (b) is "in connection with" and, secondly, the connection is between the making of the representation and an investigation, rather than between the representation and the contemplated proceedings. (The slide from one paragraph to the other was not to be found in the judgment of McDougall J.) 2. This passage in the judgment at trial raises questions as to the scope and operation of pars (a) and (b) respectively. Structurally, the paragraphs differ in four respects. These are as follows: 1. the activity in par (a) is a representation that was "prepared or obtained": the activity in par (b) is a representation that was "made"; 2. in par (a) there are four connecting concepts: in par (b) there is a single connecting concept, "in connection with"; 3. in par (a) the connection is with "an Australian or overseas proceeding": in par (b) the connection is with "an investigation"; 4. in par (b) the investigation is one relating to leading to a "criminal proceeding". 1. These variations give rise to confusion, both because there is apparent overlap between the two paragraphs and because, to the extent that they do not overlap, they may operate differently, for reasons which are not obvious. 2. The first difference is significant: the verbs in par (a) ("prepared or obtained") could be understood to refer to first-hand and second-hand hearsay respectively. In other words the officer's note of what she saw is a representation which she prepared; her note of the conversation she had with the victim's wife involves a representation which she obtained. A similar analysis was accepted by Lindgren J in Australian Competition and Consumer Commission v Advanced Medical Institute Pty Ltd (No 2), [3] dealing with the equivalent provision in the Evidence Act 1995 (Cth). However, that leaves open a question as to whether "made" (the sole verb in par (b)) includes both first-hand and second-hand hearsay. 3. The second set of variations concerned the connecting terms in each. Is there some distinction sought to be drawn by the expansive use of four different terms in par (a) and only one of those terms in par (b)? The first two connectors in par (a) ("for the purpose of conducting" and "for") and the fourth connector ("in connection with") are, in each case, ambivalent as to whether or not there must be proceedings on foot at the time the representation was made. That ambiguity appears to be resolved by the third connector ("in contemplation of") which suggests that proceedings need not be on foot but are to be contemplated at the relevant time. 4. The same problem arises with the ambivalent connecting factor in par (b) ("in connection with"), which is not coupled with any phrase directly referring to contemplated proceedings. On the other hand, the connection, as noted in the third variation, is not directly with a proceeding, but with an investigation. That may be understood to introduce the element of foresight or contemplation as sufficient without an existing proceeding at the time of the representation, as accepted by Besanko J in Lewincamp v ACP Magazines Ltd [4] and by McDougall J in Walsh v Walgett Shire Council. [5] Although an investigation "relating… to" a criminal proceeding may suggest the criminal proceeding should be on foot, an investigation "leading to" a criminal proceeding implies that the criminal proceeding is not then on foot. This conclusion involves no expansion of the ordinary meaning of the language. 5. The final variation concerns the nature of the relevant proceedings. Paragraph (a) uses the phrase "an Australian or overseas proceeding" which is itself a defined phrase meaning "a proceeding (however described) in an Australian court or a foreign court." [6] On its face, it is difficult to see why that language would not include a criminal proceeding; however, if that is so, par (a) will cover most (if not all) of the territory covered by par (b), unless the other variations result in par (b) having a more expansive operation in some respect. 6. There is another problem with language which seems to apply equally to first-hand and second-hand representations. Although there may be good practical reasons for not applying the hearsay rule too broadly (described by Campbell JA in Thomas v State of New South Wales [7] as "minimising unnecessary time, trouble and expense involved in calling live witnesses, and avoiding situations where the court is deprived of relevant information because no available live witness can depose to it from his or her own knowledge"), the scope of the exception is underpinned by the concept of reliability. To put the matter neutrally, once legal proceedings are on foot or in contemplation, there is a real risk of people making self-serving statements (either to exculpate themselves, or inculpate others and whether as to criminal or civil liability). Thus, the scope of the limitation on the business record exception is to be identified by reference to that underlying principle. Importantly, that principle is to be borne in mind in construing the statute. 7. The trial judge referred to the information contained in the officer's notebook as including nothing "which could be tainted with any suspicion of being self-serving." However, that approach involves an elision; the question of unreliability is to be understood as assisting in the construction of the statutory language, it does not form an independent statutory test. There is an important distinction between applying a legal principle to the facts and applying a principle in construing the statutory terminology. 8. This distinction may be illustrated by the distinction between first-hand and second-hand hearsay and a criminal proceeding which may, for the purposes of the discussion, be treated as commencing when a charge is laid. Arguably representations by a police officer (or any other independent witness, especially a professional witness) should not be treated as significantly unreliable, even if proceedings were in contemplation. Therefore, the unreliability test should apply differentially to representations by police officers and representations made by others, especially in circumstances where the maker of the representation may be apprehensive of a charge being laid. To take the analysis a step further, a person who believes they are suspected of a crime may be more likely to make a self-serving statement than someone who has no such apprehension; and a person who knows they have committed a crime will be more likely to make a self-serving statement that is unreliable than an innocent person who merely fears being suspected of committing a crime. It is simply not possible, however, to apply this analysis to the statutory construction of subs (3). 9. The authorities referred to earlier accepted that because some level of contemplation of, or leading up to, a proceeding not yet commenced, is within the scope of the statutory exceptions, it should not matter whether or not, at some later point in time, proceedings are actually commenced. The relevant point in time (which does flow from the reliability principle) must be that at which the representation is prepared, obtained or made. Again, if reliability is the touchstone of the scope of the provision, it may be necessary to ask in whose contemplation, or in whose view, may this lead to a proceeding? In the alternative, the proper approach may be for the court to undertake an objective assessment, leaving aside the knowledge that a proceeding has or has not eventuated. Both McDougall J and the trial judge accepted the proposition in respect of par (b), articulated by Besanko J in Lewincamp, [8] that "if an investigation does not in fact relate or lead to a criminal proceeding, it must be of a type such as to relate or lead, in the ordinary course of events, to a criminal proceeding." 10. This language is, to some extent, elusive. In Walsh v Walgett Shire Council, McDougall J appeared to have had a similar ambivalence, stating: [9] "Of course, there are many investigations that do not lead to a criminal proceeding; and, a fortiori, that do not in that sense relate to a criminal proceeding. But it seems to me that where an investigation is carried out to see whether there has been a contravention of a legislative provision, which contravention (if it occurred) would be attended by criminal consequences, the investigation is one that could be said, in the ordinary use of the English language, to be one at least relating to a criminal proceeding in relation to that contravention." 1. While properly adopting the language of the section, this explanatory reasoning also has its limitations: is a contravention which "would be attended by criminal consequences" a statement of a legal conclusion or does it mean that there would be criminal proceedings? If the former, are circumstances which might not give rise to criminal consequences to be excluded? If the latter, how does one know if this is one of the many investigations which would not lead to a criminal proceeding, even though at some stage (need it be before or after the representation is made?) the police appear to have evidence of a contravention of a law to which a penalty is attached? 2. It should not go unnoted that, contrary to the suggested approach at [20] above, the joint Law Reform Commissions, in December 2005, rejected any change to s 69(3)(b) stating: [10] "For instance, without s 69(3), a note deliberately written in a police officer's notebook with the intention of implicating a person in alleged criminal activities could be admissible as evidence of the fact asserted in the note. If such documents were deemed to be reliable by including them within the s 69(2) exception, fabricated evidence could be admissible as evidence of the truth of the representation made, even though the maker might not be available for cross-examination."

(d) application of statute 1. In applying the principles articulated in the case-law (not the law reform report) to the material in the COPS report, the trial judge concluded: "The question to be asked is whether in this particular case the investigation by the police had reached a stage where in the ordinary course of events, it would have led to a criminal proceeding. In my opinion, it was still a general investigation and it had not reached that stage. I therefore allow the tender." 1. No doubt it is true that a judge of the District Court is bound to apply a construction of a statute adopted by a superior court. However, that principle does not require that the judge replace the statutory language with some judicial exegesis. In this passage, only the word "investigation" and the phrase "a criminal proceeding" are to be found in par (3)(b). 2. In this case, the police were called to attend a burning vehicle beside the road. The incident type was described as "actual fire" and "actual stolen vehicle/vessel". The officer recorded in the COPS report: "From the burn patterns on the vehicle, the extreme heat coming from the vehicle, and the difficulty extinguishing it with both rain and hoses, it was apparent that an accelerant was almost certainly used to start the fire." 1. It is patently obvious that on arrival at the scene the police had quickly formed the view that at least two serious property offences had been committed. If the correct approach is an objective assessment, this Court should come to the same view on the facts then apparent to the police. The police then took further steps by way of making inquiries of the owner's wife, speaking to the owner on the phone and speaking to neighbours. The purpose of the inquiries was patently to determine if and when the vehicle had been stolen and whether any keys were missing. The representations recorded in the COPS report (and in the officer's notebook) were made in connection with an investigation which would probably lead to a criminal proceeding, if an offender could be identified and located. In my view, that is sufficient to engage the exception in s 69(3)(b). 2. I would also conclude that the representations were prepared and obtained in contemplation of an Australian proceeding, whether or not the proceeding would eventuate, as it would not, if no offender was identified and located. Accordingly, s 69(3)(a) was also satisfied. On this basis, all of the evidence contained in the police notebook and the COPS report, so far as it contained representations otherwise relevant to the proceedings, was inadmissible. 3. LEEMING JA: Mr Michael Averkin appeals from the judgment for the respondent, Insurance Australia Ltd, given by her Honour Judge Norton in the District Court: Averkin v Insurance Australia Ltd t/a NRMA Insurance (24 April 2015, unrep). Mr Averkin made a claim on the insurance policy issued by the insurer following the destruction by fire of his 2008 Nissan Navara Ute on around 23 August 2013. The agreed value was $38,870. The insurer refused indemnity, leading to proceedings being commenced in the District Court. Although the amount in issue is (considerably) below the $100,000 threshold for an appeal as of right imposed by s 101(2)(r) of the Supreme Court Act 1970 (NSW), in light of the importance of the questions of principle and the implicit finding of fraud, leave was granted. 4. In order to understand and resolve the issues arising in the appeal, it is necessary to give a precise account of the procedural history of the litigation.

Procedural history 1. Mr Averkin commenced proceedings by statement of claim dated 22 January 2014. His pleading positively alleged that his vehicle had been stolen, that the theft was a "theft" within the meaning of the policy, and that he was not complicit in the theft or otherwise involved in the theft. 2. It was admitted on the pleadings that Mr Averkin notified the insurer of "loss occasioned by the theft of the vehicle", and that claim number CPNCR13/10709 was allocated to the notification. The claim was not in evidence, nor was any correspondence between insured and insurer. Mr Averkin alleged that the insurer's refusal to indemnify him in respect of the theft was wrongful. 3. The insurer's defence denied that the vehicle had been stolen, giving as particulars that the vehicle displayed no physical signs consistent with its being stolen, and that the plaintiff had failed to demonstrate that the vehicle had been taken without his consent or connivance. The insurer positively alleged the following matters of fact: 1. the locks on the door of the vehicle were found unlocked; 2. the ignition steering lock assembly (ISLA) of the vehicle had not been bypassed; 3. the engine control unit (ECU) of the vehicle had not been disturbed or bypassed, with the consequence that the vehicle could only have been operated with an electronically correct operational key; 4. Mr Averkin was in possession of both keys given by the manufacturer and was in financial difficulty and had motive to lodge a theft claim. 1. The defence also alleged that Mr Averkin had not been truthful and frank when he had claimed that the vehicle was stolen, when he asserted that he was having dinner with his wife between 5 and 5:30pm on 23 August 2013, when he asserted that he did not have the key to the vehicle on him when he left home on that evening, and when he asserted that he had tyres fitted on the vehicle at Bob Jane T-Marts in Orange. 2. Both statement of claim and defence were verified, the latter by a "litigation consultant" who claimed to be authorised to verify the defence on the insurer's behalf. 3. In July 2014, the statement of claim was amended to add an allegation that it was a term of the policy that the insurer would pay Mr Averkin $38,870 in the event that the vehicle was a total loss due to damage to the vehicle caused by fire, and an allegation that the vehicle was destroyed by fire (paragraphs 7A and 9A). The insurer admitted the term of the policy, although repeated in its defence to the amended statement of claim that Mr Averkin had lodged a claim alleging that the vehicle was stolen, and gave a qualified admission to the allegation that the vehicle had been destroyed by fire. 4. The matter came on for final hearing on 30 March 2015 at the Orange sittings of the District Court. The plaintiff, in his very short opening, elicited a concession that the vehicle had been destroyed by fire. He tendered the insurance policy, and pointed to the insuring clause which extended to loss or damage to the vehicle caused by, inter alia, fire. By way of indicating the issues raised by the defence, he drew her Honour's attention to the relevant exclusion in the insurance policy, which stated, "Loss or damage caused intentionally by you, or a person acting with your express or implied consent", and closed his case. 5. The insurer tendered the report of Mr Ross Squire dated 10 October 2013. One of the grounds of appeal relates to her Honour's admission, over the objection of Mr Averkin, of part of one sentence of this report, and other grounds relate to the findings which it could sustain. Accordingly, it is necessary to summarise it in some detail. 6. Mr Squire traded under the name ABC Forensic Services. His report identified the insurance claim number, and the "ABC Forensic reference" as "ABC BIN: 40". He referred to the instruction from an officer in the NRMA Claims Enquiries Unit requesting forensic examination of a vehicle recovered burnt out and which was the subject of a motor vehicle theft claim. The report stated that the instruction date was 10 September 2013 and the inspection date 11 September 2013, and that the recovery and examination of exhibits took place on 12 September 2013. It stated, under the heading "Working Assumption and Aims", that: "I set out to discover the means of entry to the vehicle and the manner in which the perpetrator/s had bypassed the first and second stages of immobilisation, firstly the Ignition Steering Lock Assembly (ISLA) and secondly the electronic engine immobiliser. All facts and opinions contained in this report, unless otherwise specified, are based on my own first hand knowledge and experience." 1. Mr Squire said that he was bound by the code of ethics of the International Association of Investigative Locksmiths and by the expert witness code of conduct. The report stated that his CV and his client's instructions were attached to the report. Neither was attached to the report as served or initially tendered at trial, nor was either included in the appeal books, although the CV was subsequently made available to both the trial judge and this Court. No complaint was made of the missing letter of instructions, which was never tendered. 2. Section 2 of the report identified the vehicle by reference to its NSW registration plate and its vehicle identification number or VIN (a 17 character unique number). Section 3 recorded the results of a perimeter examination of the vehicle, and recorded Mr Squire's conclusions that the doors had been unlocked and latched shut pre-fire. 3. Section 4 dealt with the "two stages of immobilisation": physical and electronic. The first stage was the Ignition Steering Lock Assembly, or ISLA, with which Mr Squire said the vehicle had been equipped "[i]n accordance with Australian and international design regulations of the day". Mr Squire recovered the remains of the ignition switch assembly and took them to his laboratory for recovery and detailed examination. It is unnecessary to summarise this aspect of the report. 4. Section 4.5 was headed "Stage 2 – Electronic immobilisation of engine" and read as follows: "4.5 Stage 2 – Electronic immobilisation of engine As previously noted, this vehicle type is equipped with an OEM [original equipment manufacturer] electronic engine immobiliser. This Transponder based device forms the second stage of immobilisation and in brief operates as follows: 4.5.1 Transponder: 'Transpond' means to transmit and respond. A transponder is an electronic device that receives a predetermined signal from another device and transmits a response. In modern automative engine immobilisation systems the transponder responds to a signal from a vehicle's engine management/immobiliser system transmitted via an aerial coil fitted in close proximity to the keyway of the ISLA's cylinder. The transponder is typically found encased in the plastic head of a vehicle's door/ignition key or remote device. 4.5.2 Passively armed and disarmed: Because this type of engine immobiliser is armed and disarmed passively, other than removing the key, no action is required on the part of the driver. 4.5.3 Inductive coupling: On insertion and rotation of a mechanically and electronically correct key to the 'ON' position, the aerial coil module fitted to the ISLA generates an electro-magnetic field which then energises the transponder chip within the head of the key enabling the chip to receive an encrypted code via the aerial coil module from the Engine Control Unit (ECU). On verification of this code ECU will allow the engine to start and continue to run. This type of communication that requires no mechanical connection between circuits is known as inductive coupling." 1. The primary judge struck out the words "As previously noted" at the commencement of section 4.5, but overruled Mr Averkin's objection to the balance of the opening sentence. That evidentiary ruling was the subject of ground 6 of the appeal. 2. Section 4.6 was not objected to. It was in the following terms: "4.6 Bypass of electronic engine immobiliser Whilst the term 'hot-wire' remains in common use, since the introduction of transponder based electronic engine immobilisers, the practice is now in fact virtually obsolete. As noted, because this model vehicle is equipped with [an] engine immobiliser, in the absence of a mechanically and electronically correct key that is uniquely programmed to match the engine management system, the engine would not start and continue to run. … Whilst superior systems are currently available, this vehicle type's factory level security system provides an effective deterrent against opportunistic thieves …" 1. In section 4.7, Mr Squire recorded that he found the ECU had burned in place, and drew the conclusion that: "the perpetrator/s had made no attempt to bypass the OEM immobiliser system using surrogate parts. Therefore in the absence of an electronically correct key the vehicle could not have been driven under its own power to its point of recovery." 1. Section 5 of the report addressed "custody of exhibits". Mr Squire recorded that on 11 September 2013, "I received two OEM Nissan remote/keys by express post", and his report included a photograph of those keys located on a padded envelope. The photograph bore the caption: "Image: 12 shows the keys as received, identified from left to right for this report as KEY-1 & KEY-2". 1. KEY-2 comprised an electronic key-head (with buttons for locking and unlocking) to which a metal blade was attached. On the other side of the key-head appears a "Nissan" logo. The other key (KEY-1) was missing the blade. There was no photograph of the other side of KEY-1 in the report. 2. The keys bore a tag on which was written "BHS97K" (the registration plate of the vehicle) and "white STX manual". The envelope had written on it the insurance claim number. 3. Another photograph in the body of the report showed that the reverse of the tag bore the name and details of a motor dealer located in Orange. The later photograph also showed that another label had been attached to the key ring recording "Bin 40" and the claim number. 4. Section 6 dealt with the laboratory examination of exhibits. Subsections 6.3.1-6.3.7 were as follows: "6.3.1 Both KEY-1 and KEY-2 are of OEM supply and production and are the two keys provided with the vehicle from new. 6.3.2 Of the two devices KEY-1 displays the highest level of operational and general handling wear. 6.3.3 The key blade, being the entire mechanical portion required to operate the ISLA, of KEY-1 is missing. Under microscopic examination I found two clean fracture points that showed the key blade had recently broken through its fastening point leaving only a small portion of the key blade in the remote key-head. Whilst it is not possible to determine chronologically when the break occurred, the absence of corrosion or surface debris on either fracture indicates the break is recent. 6.3.4 Because the key blade is required to operate the ISLA, KEY-1 is no longer capable of unlocking the steering and/or operating the ignition switch. Therefore, the remote key head would only operate the central locking. 6.3.5 Under macro and microscopic examination I found that the debris present on the blade of KEY-2, which are the operational and environmental contaminants that become impregnated in the lockmaker's lubricant transferred between the ISLA cylinder and the key blade during normal operation cycles, shows only low levels of contamination. This is made evident by the appearance of the lubricating grease which although dry with age remains largely clean and partly translucent. This shows that KEY-2 had been the key of secondary use throughout its service life. Furthermore as suggested in 6.3.3, the absence of any newly deposited contaminants strongly indicates KEY-2 has had very little use since the blade of KEY-1 was broken. 6.3.6 Because the key blade of KEY-1 is missing no determination can be reached regarding possible duplication. 6.3.7 Neither side 'A' nor side 'B' of KEY-2 has been subjected to a process of conventional mechanical duplication. ... 6.3.10 I decoded the direct cuts of KEY-2 as 2-3-1-1-3-2-1-3-3-3. 6.3.11 I input the direct cuts of the key into my InstaCode program, which yielded the OEM lockmaker's key code of 21653." 1. The report included two photographs showing "the two clean fracture points of the only remaining portion from the broken key blade of KEY-2". 2. Mr Squire's ultimate conclusion was: "From all available evidence, it is clear that the subject vehicle's last operation under its own power was by use of a correct key. Therefore, careful consideration of the care, and custody of the owner's key/s must be taken into account." 1. During the determination of objections to Mr Squire's report, counsel for Mr Averkin made it clear that he would be putting the insurer to "strict proof" on matters such as chain of possession of the keys. On that basis, the primary judge rejected the hearsay statement within Mr Squire's report that (an unidentified person within) Nissan Australia had confirmed that the lock maker's key code associated with the surviving key matched the subject vehicle's VIN. 2. The portions of Mr Squire's report which had been rejected were not indicated in the appeal books, contrary to Uniform Civil Procedure Rules 2005 (NSW), r 51.29(3). This should be done as a matter of course by the appellant (and, if it is not, it should be pointed out by the respondent), and is a matter of some significance when the grounds of appeal included a challenge to the judge's ruling on admissibility. It was corrected, almost but not entirely accurately, by Mr Averkin at the commencement of the appeal. 3. Mr Squire gave evidence on the voir dire, and in cross-examination, to which it is convenient to return when dealing with the grounds of appeal. The insurer then closed its case. 4. Over the objection of Mr Averkin, the insurer was permitted to reopen its case to tender documents obtained on subpoena from the NSW Police (in fact, Mr Averkin had indicated, pursuant to a pre-trial direction from the District Court, that he would be tendering those documents). 5. The documents included a copy of two pages of a police officer's notebook which recorded: "10:30pm Cadia Rd Car fire VOI: Nissan Navara Ute BHS97K Rego 30/6/13" and then provided contact details of Mr Averkin, a Rural Fire Services officer and Ms Averkin. 1. The documents also included COPS records relating to event number E54530589. The "Event Summary Details" of that event included three "incidents". The first was described as "actual fire" to a "vehicle – aircraft/motor veh/train/vessel", and gave a date/time of 23/08/2013 from 21:50 to 21:53 and a location of "Cadia Rd, near Int Woodville Rd, Bloomfield, NSW". The second was "actual stolen vehicle", and gave a date/time of 23/08/2013 from 08:30 to 21:50 and Mr Averkin's address. The third was "located vehicle/vessel – recovered" and gave a date/time of 23/08/2013 from 21:50 to 22:00, and the same location, "Cadia Rd, near Int Woodville Rd, Bloomfield, NSW", as for the first incident. This page also included a section (between the first and second incidents) which stated "MO Type: Criminal Characteristic Desc: Arsonist" and gave the name, address and telephone number of Mr Averkin as owner and victim. The event also included the following narrative: "The owner of this vehicle lives at 2 xxxxxx Place Orange. The vehicle has been unregistered since 30/6/2013, and the owner had left it parked in the vacant block next to 1 xxxxxx Place since that time. The owner recalls seeing the vehicle parked at this location at 8:30am 23/8, however cannot be sure if it was still there later in the day. He left home for work, a courier trip to Sydney, around 5:30pm. Around 9:50pm police received a call from a passerby on Cadia Road, stating that a car was on fire. Police arrived and saw that the vehicle was well alight. The vehicle was parked on the side of the road, where there is a large patch of gravel used as a rest area. Springside Rural Fire Service arrived at 10:30pm and extinguished the fire. From the burn patterns on the vehicle, the extreme heat coming from the vehicle, and the difficulty extinguishing it with both rain and hoses, it was apparent that an accelerant was almost certainly used to start the fire. Around 11:30pm police attended the victims house and spoke to his wife. She stated that she believes the vehicle had been there during the day, but cannot be sure. She located one key for the vehicle, and stated that there should be a spare key somewhere. The victim phoned while police were in attendance – he had been contacted about the vehicle by a friend with a scanner. As above, the last time he is sure he saw the vehicle was around 8:30am. He stated the vehicle was secured, and that there should be a spare key to the vehicle. He believes the vehicle is still insured even though it is unregistered, however will confirm this with his insurance company. He stated the vehicle had almost no fuel in it, so it is unlikely the vehicle would have been able to get further than it did. The neighbours at 4 xxxxxx Place made themselves known to police and stated they had not seen or heard anything suspicious. They again could not be sure when they last saw the vehicle as they are used to seeing it there. No other neighbours were approached due to the late hour. The other neighbours will be contacted to see if they noticed anything during the day." 1. The documents were tendered on an expressly limited basis, in order to support the following hearsay representations: 1. the location where the vehicle was found, 16km out along Cadia Road, and that it had last been seen parked outside Mr Averkin's address; and 2. the statements made by Mr Averkin's wife at around 11:30pm on the day the vehicle was destroyed. 1. Her Honour gave a separate ruling admitting the documents produced by NSW Police: Averkin v Insurance Australia Ltd (30 March 2015, unrep). Her Honour recorded that objection was taken on the basis that the business records exception in s 69(2) of the Evidence Act 1995 (NSW) did not apply by reason of the exclusion contained within s 69(3)(b), and noted that it was common ground that there were no criminal proceedings instigated by the police. Her Honour observed that there was nothing in the representations sought to be established which "could be tainted with any suspicion of being self-serving". Her Honour applied the decision in Walsh v Walgett Shire Council [2014] NSWSC 812 and identified as the critical question whether the investigation was of a type which in the ordinary course of events would lead to a criminal proceeding. Her Honour concluded that "it was still a general investigation and it had not reached that stage" and accordingly allowed the tender.

Reasons of the primary judge 1. The primary judge reserved and delivered judgment shortly thereafter. After summarising the background to the trial, her Honour recorded that the issue to be determined was whether the defendant had shown that the destruction of the vehicle by fire was caused intentionally by the plaintiff or someone acting with his express or implied consent. Her Honour then observed that there was no direct evidence of Mr Averkin causing the fire, and that the defendant's case was a circumstantial one, proof of which was subject to s 140 of the Evidence Act. No issue was taken with any of those matters. 2. Her Honour summarised at some length the report of Mr Squire and his cross-examination and then concluded at [32]-[33]: "There is no direct evidence as to how the 2 keys came to be posted to Mr Squire. The plaintiff's wife gave the police a key and both she and the plaintiff said there was a spare key. The plaintiff gave no evidence with respect to the second key. I find that the only reasonable inference is that both keys were given to the police or the defendant by either the plaintiff or his wife. They were then provided to Mr Squire by either the police or the defendant. I therefore find that the keys examined by Mr Squire were the keys given to the plaintiff when he purchased the vehicle. The evidence of Mr Squire is that key 2 had never been duplicated. The plaintiff gave no evidence that he had key 1 duplicated or lent the keys to any person who could have had them duplicated. In the circumstances I find on the balance of probabilities that key 1 and key 2 were the only keys coded to operate this vehicle." 1. Her Honour then, under the heading "Was the vehicle stolen?", stated at [35]: "The plaintiff has the onus of showing that there was a theft of the vehicle. In the absence of any evidence from the plaintiff I conclude that the vehicle was driven with a key supplied to him when he purchased the car and was not stolen or taken without his knowledge." 1. In the concluding section of her judgment, under the heading "Has the defendant shown that the destruction of the vehicle by fire was outside the cover?", her Honour recorded that, "The circumstances are very suspicious and the plaintiff gave no evidence and thus it can be inferred that any evidence he could give would not assist." Her Honour noted, however, that "[o]n this point … the plaintiff has no onus". Her Honour repeated, shortly thereafter, that the plaintiff had no onus on this point and that the allegation made by the defendant was a grave one. The dispositive parts of her Honour's reasons were as follows, at [50]-[52]: "Had the fire destroyed the vehicle where it was usually parked I could not have been comfortably satisfied that it was destroyed by the plaintiff or someone acting with his implied or express consent. The vehicle was moved, however, with the use of one of the two keys which are programmed to operate it from the position near the plaintiff's home to some distance away. The plaintiff reported it stolen to the police and the allegation that it was stolen was repeated in the Statement of Claim. It is no more than a theoretical possibility that the plaintiff authorised the moving of the vehicle but not its destruction by fire. Even after the Statement of Claim was amended to include paragraphs relating to the fire it continued to allege that the vehicle had been stolen. In all the circumstances I am comfortably satisfied that the moving of the vehicle and its destruction by fire are linked and the plaintiff was involved in both its removal and its destruction. In those circumstances there must be a verdict for the defendant." Her Honour gave judgment for the defendant.

The appeal 1. Five grounds of appeal were pressed. The first was directed to the ultimate conclusion. The remaining grounds were: 1. the primary judge erred by reversing the onus of proof; 2. the primary judge erred in admitting evidence of Mr Squire's hearsay assertion that the car was fitted with an engine immobiliser; 3. the primary judge erred in admitting the police records under s 69(2) when it fell within the exclusion from that exception contained in s 69(3)(b); 4. the primary judge erred in finding that (i) there were only two keys coded to operate the vehicle; (ii) the keys examined by Mr Squire were those for the subject vehicle; and (iii) the car had an engine immobiliser fitted to it. 1. The second, third and fourth grounds listed above reflected challenges to essential steps in the reasoning process advanced by the insurer to establish its defence, which was (i) the vehicle was moved from near Mr Averkin's home to a distance away, (ii) the vehicle had an engine immobiliser, (iii) because the vehicle had an engine immobiliser, it was moved by a person in possession of a key, (iv) there were only two keys, both of which were in the possession of Mr Averkin, and therefore (v) Mr Averkin was complicit in the movement of the car, and its destruction by fire. 2. I shall deal with the grounds in substantially the order set out above.

Did the primary judge reverse the onus of proof? (ground 2) 1. Mr Averkin was correct to submit that the reasons of the primary judge included, at [35], an erroneous statement that the plaintiff bore the onus of showing that there was a theft of the vehicle. That statement had been apt in relation to the claim as originally formulated in the pleadings, but had been superseded by the narrower case advanced by the plaintiff at trial. 2. In terms of its materiality, Mr Averkin observed that the conclusion at [35], based upon that reversal of the onus, that the vehicle had been driven with a key supplied by Mr Averkin, came very close to establishing the defence propounded by the insurer ("That was really the end of the case for the plaintiff, that finding"). Further, at [45], her Honour said that, "I am not satisfied the plaintiff has proven on the balance of probabilities that he was not complicit in a plan to have the vehicle moved." 3. Against this, in the dispositive part of the judgment, her Honour correctly observed, twice, that Mr Averkin bore no onus and that in light of the seriousness of the allegation advanced by the insurer, the heightened standard reflected in s 140(2) of the Evidence Act applied. 4. Although paragraphs towards the end of her Honour's reasons correctly recited the onus borne by the insurer, the conclusions in [35] and [45] fed directly into the reasoning at [51] that the vehicle had been moved "with the use of one of the two keys". Moreover, that reference back to the findings at [35] and [45] came after the (repeated) recitation that the plaintiff bore no onus. The involvement of Mr Averkin in moving the vehicle was relied on by her Honour to conclude that he was involved in its destruction by fire (hence the conclusion at [52] that "the plaintiff was involved in both its removal and its destruction"). I think that it must be concluded in the circumstances that the errors at [35] and [45] materially contributed to the ultimate and dispositive conclusion. 5. Accordingly, I would regard this ground as made out. However, it does not follow that, by reason of that ground alone, there must be a judgment in favour of the appellant, as opposed to a retrial.

The challenge to the admission of Mr Squire's "hearsay" assertion that the vehicle was fitted with an engine immobiliser (ground 6) 1. Mr Averkin submitted that the first sentence in section 4.5 of Mr Squire's report was plainly inadmissible and ought to have been excluded. I would reject this ground on two bases. 2. First, although objection was taken to the first sentence in section 4.5 of Mr Squire's report, no objection was taken to the sentence in section 4.6 which commences, "As noted, because this model vehicle is equipped with an engine immobiliser …" That may seem overly technical, turning upon the failure by Mr Averkin to make what would have become a purely formal objection to that section following the rejection of his objection to section 4.5. Indeed, the presence of identical, unobjected to words in section 4.6 was not relied upon by the insurer in its written or oral submissions (both of which were extremely short) as an answer to this ground. 3. However, there can be no error on the part of a primary judge in admitting unobjected to portions of an expert report. It follows that any error in relation to the materially identical words to which objection was taken is immaterial. 4. If I were wrong about that, even so I would not consider that error has been shown in the admission of the first sentence of section 4.5 of Mr Squire's report. Contrary to Mr Averkin's submissions, I do not think that it is to the point that the presence or absence of an engine immobiliser could not be determined from the charred remains of the vehicle (as was ultimately confirmed during Mr Squire's cross-examination). 5. Mr Squire's expertise as a certified forensic locksmith was unchallenged. He had worked in the industry for some 40 years. In 2008 he had been appointed as Australasian Director of the International Association of Investigative Locksmiths, and in 2012 elected to the board of directors and international chairperson of the Certified Forensic Locksmith Examination Committee. His CV recorded that he was the only Australian ever to have received formal recognition as an instructor to the Associated Locksmiths of America and the International Association of Investigative Locksmiths. He gave evidence on the voir dire that he had been certified by that international association for a course on arson of motor vehicles in 2003. He said he had had updates annually and that, "I go across to North America each year to both keep up to date with my training and certification, as well as to teach investigative locksmithing". He said that he examined in excess of 100 vehicles forensically each year, and that throughout his career he would have written in the order of 2,000 reports. Of those, he said on the voir dire that probably more than 50% would have involved vehicles the subject of arson. 6. I think it was open to the primary judge to conclude that a man who had witnessed the introduction of engine immobiliser technology over the course of his career would be in a position to state from his personal knowledge that this vehicle type was equipped with an OEM electronic engine immobiliser. His report stated expressly that all facts and opinions were based on his own firsthand knowledge and experience. Although those words often seem formulaic in an expert report, given Mr Squire's experience they are apt to describe the basis of his knowledge. 7. Ultimately, Mr Averkin's submission reduces to the proposition that admissible evidence of the presence of a component in the vehicle could only be given based on what Mr Squire saw from its burnt remains. I do not agree. It is to be recalled that the sentence is not that the vehicle was equipped with an engine immobiliser, but the vehicle type (ie 2008 Nissan Navara) was so equipped. I consider that Mr Squire could give admissible evidence of features in the vehicle based on sources of knowledge aside from what he had seen when he inspected the remains. 8. This ground fails.

The finding that the car had an engine immobiliser (ground 3(c)) 1. In one sense, this ground falls away following the failure of Mr Averkin's challenge to admissibility. In the absence of any countervailing evidence, and in light of the fact (as will be seen below) that Mr Squire was unshaken as to his belief in cross-examination, there can be no appellable error in her Honour's finding. 2. However, it is desirable to deal with the ground more substantively, because I would reject Mr Averkin's submissions on additional bases. 3. Mr Averkin submitted that "[t]he only way the respondent could properly have proved the existence of an immobiliser in the circumstances of this case was to tender evidence from the manufacturer itself". He was also critical of the reliance by Mr Squire on an "Australian Design Regulation", which could not be named, or specified, and was not produced by the insurer. Mr Averkin went so far as to invoke Commercial Union Assurance of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419 to suggest that it would be inferred that whatever was available to be produced would not have assisted the insurer. I do not agree with any of this. 4. In order to address the substance of this ground, it is necessary to turn to the details of Mr Squire's evidence. In cross-examination, Mr Squire was asked: "Q. There was no international or Australian design regulation that stipulated that a vehicle of this model must be fitted with an engine immobiliser, was there, at the relevant time? A. Yes there is. Q. At the relevant time? A. Yes there is. It is an honest – under Australian Design Regulations. Q. That this particular vehicle must be fitted with an engine immobiliser, is that correct, is that what you are saying? A. This particular vehicle was, which was confirmed by the manufacturer and the interrogation of the keys themselves. Q. Please just direct yourself to the question I am asking if you wouldn't mind. My question to you was whether there was an Australian or international design regulation that prevailed at the time of the manufacturer of this vehicle that stipulated that there must be an engine immobiliser in it? A. I know that there is, I could not take you directly to the passage of text though. Q. I am sorry, you know that there is an engine immobiliser or you know that there was an international design regulation? A. No, there is an Australian regulation that states that a vehicle of this category must have one. Q. You can't point to what that regulation is? A. No I cannot, not here now. Q. You haven't referred to it in your report, have you? A. No I have not." 1. After an adjournment, the cross-examiner returned to the subject: "Q. Mr Squire, leaving aside the question of the keys and anything you might have done with them, from a visual examination of the engine control unit alone in its charred state after the fire, you could not determine whether or not that vehicle had an engine immobiliser, could you? A. No, only that all the operating systems were in place. It is my knowledge that the vehicle does." 1. Mr Squire then acceded to the proposition that from the charred engine control unit alone, he could not determine that there was an engine immobilisation system. 2. Mr Squire was also asked an open question as to whether he had done anything further with the keys, to which he replied that "each of the key-heads was checked to see that they had an operational transponder chip". 3. In re-examination, no questions were asked concerning the design regulation. However, Mr Squire was asked – over the objection of the plaintiff but with leave given for further cross-examination – about the electronic interrogation he had conducted of the key and the transponder chip. He gave this evidence: "Q. What is that purpose [of the transponder chip]? A. It is to, once a communication and the passing of the data or code stored in that chip, it must match the operating system of the vehicle to enable it to start and continue to run. Q. In other words, it is indicative or it confirms the presence of an immobiliser? A. That is correct, yes, there is no other purpose for a transponder chip in that application." 1. Mr Averkin was granted a short adjournment, but chose not to ask any further questions in cross-examination. 2. It will be seen that Mr Squire's opinion rested upon (a) his belief that there was a design regulation which required the vehicle to have an immobiliser, and (b) the interrogation of the electronic keys which he conducted. 3. No party referred this court to the Vehicle Standard (Australian Design Rule 82/00 – Engine Immobilisers) 2006, a vehicle standard issued under the Motor Vehicle Standards Act 1989 (Cth). It provides, in cl 2.2, that vehicles to which the standard applies "must be equipped with an engine immobilising device complying with the relevant requirements of this national standard" (save for vehicles with 24V electrical systems). The vehicles to which the standard applied included "Passenger car", "Forward-control passenger vehicle" and "Off-road passenger vehicle", in each case manufactured on or after 1 July 2001. 4. That is entirely consistent with one of the bases identified by Mr Squire for his opinion. 5. I also disagree with Mr Averkin's submission that Mr Squire's inability to identify the precise design standard while sitting in the witness box devalued his conclusion. For example, a council worker may know that there is a law that requires all dogs to be fitted with a microchip between their scapulae, without being able to point directly to cl 5 of the Companion Animals Regulation 2008 (NSW) which imposes the requirement. Ignorance of the detail does not materially undermine the well-founded opinion that there was a legal requirement to install an engine immobiliser in a modern passenger vehicle or a microchip between a dog's scapulae. 6. The standard is a legislative instrument of which proof is not required: Evidence Act 1995 (Cth), s 143(1)(d). However, the insurer did not take the trial judge or this Court to the Engine Immobilisers Design Rule. Nor was it mentioned on appeal (this was a little surprising, given the written submissions advanced in that respect). Because the submissions made on behalf of Mr Averkin seemingly presupposed there being some controversy about there being a legal requirement mandating the presence of an engine immobiliser, I would have invited the parties to make further submissions in light of the foregoing if the construction of that standard were determinative of this ground of appeal. However, it is not necessary to take that course, for the following reasons. 7. First, there was unchallenged evidence from Mr Squire that "since the introduction of transponder based electronic engine immobilisers, the practice [of "hot-wiring"] is now in fact virtually obsolete" (paragraph 4.6, reproduced in full above), a theme which recurred throughout the report (see pages 11 and 22). 8. Secondly, there was evidence from Mr Squire that he identified a transponder chip in the key which, although given in re-examination, could have been the subject of further cross-examination had Mr Averkin so applied. 9. Thirdly, there was not the slightest evidence to the contrary called by Mr Averkin. 10. Putting to one side the design standard, those three matters persuade me that there is no error, let alone appellable error, in the finding by the primary judge accepting the evidence of Mr Squire that the vehicle contained an engine immobiliser.

Did the primary judge err in admitting Exhibit 3? (ground 5) 1. Exhibit 3 comprised 10 pages: a covering letter to the District Court from the NSW Police, a memorandum prepared by the constable who investigated the fire on 23 August 2013, the subpoena issued by the insurer, a COPS record, and a copy of two pages of the constable's notebook. 2. However, as noted above, Exhibit 3 was tendered on a limited basis, namely, to establish two representations: (a) that the vehicle was found some distance from Mr Averkin's home where it had last been seen, and (b) that Ms Averkin had located one key for the vehicle and had said that there should be a spare key somewhere. 3. Very little turned on this ground. Mr Averkin contended on appeal that the insurer's defence failed at the outset because there was no evidence (save for Exhibit 3) to establish that the vehicle had been moved from outside his house. I bear in mind that the insurer was not prosecuting Mr Averkin for a crime, but defending civil litigation commenced by him. It is true that the insurer's defence necessarily alleged criminal conduct on his part, and so had to be established in accordance with s 140(2) of the Evidence Act. Even so, it needed to be established to the civil standard in s 140(1), and inferences were available from the failure of Mr Averkin to give evidence. 4. Mr Averkin had alleged that his vehicle was stolen, and made an insurance claim in respect of that theft. Although neither party chose to tender the claim, the fact that "[t]he Plaintiff notified the Defendant of the loss occasioned by the theft of the vehicle" was admitted on the pleadings. Moreover, Mr Averkin had verified both his original and amended statement of claim. The primary judge was alert to this, and observed in the penultimate paragraph of her reasons that even after the pleading had been amended "it continued to allege that the vehicle had been stolen". 5. To put the matter squarely, I do not see how it was open to Mr Averkin to contend that there was no evidence of theft, in light of the claim of theft verified in his statement of claim and admitted on the pleadings. 6. Turning to the second representation, it will be seen in more detail below that the insurer's case was not materially advanced by evidence that Ms Averkin had located one key and said that there should be a spare key. 7. It follows that nothing turns upon the error, if there was error, in the primary judge admitting Exhibit 3 as evidence of the two representations on which the insurer relied. 8. There is a second reason why this ground is not dispositive. This reason arises from the fact that although the ruling of the primary judge was addressed to the COPS narrative, as were the written submissions on appeal, Exhibit 3 included other documents, including the portion of the COPS Event Summary which referred to an incident of an "actual fire" in a vehicle on Cadia Road with a date/time of 23 August 2013 from 21:50 to 21:53. 9. It will be seen that that entry by itself (coupled with Mr Averkin's address in Orange which is found in the insurance policy and the statement of claim) is sufficient to indicate that the burnt remains of the vehicle were not located at Mr Averkin's home. As it was put when the appeal was heard: "MCCOLL JA: … Why isn't what appears at combined book 50, address where the vehicle is kept, 2 xxxxx Place, Orange, sufficient to indicate that where it was found was somewhere where it wasn't ordinarily kept? TOOMEY: Because all that that establishes is that's where the car is garaged, not where it might be at any given time. The very nature of motor vehicles is that they move around. The respondent had to establish that the car had been moved, because that was crucial to its case." 1. I do not accept this response. It may readily be inferred from the fact that the vehicle was located on Cadia Road that it had been moved from Mr Averkin's home. 2. Subsection (3) carves out from the exception to the hearsay rule for which s 69(2) provides as follows: "(3) Subsection (2) does not apply if the representation: (a) was prepared or obtained for the purpose of conducting, or for or in contemplation of or in connection with, an Australian or overseas proceeding, or (b) was made in connection with an investigation relating or leading to a criminal proceeding." 1. When paragraphs (a) and (b) are read together, it may be seen that both provisions look forward to future litigation, but they do so in quite different ways. Paragraph (a) will at least ordinarily require an answer to the question why the representation was prepared or obtained. If that was for the purpose of conducting litigation, or for or in contemplation of or in connection with litigation, then it applies. The words "for" (twice), "purpose" and "in contemplation" are all words which are directed to identifying a purpose. When there is such a purpose connecting the preparation or obtaining of the representation to litigation, then the subsection applies. 2. In contrast, paragraph (b) turns on the circumstances in which the representation was made. No question of purpose arises; there must instead simply be a sufficient connection between the making of a representation and an investigation. True it is that the investigation must be one which relates to or leads to a criminal proceeding, and in that way paragraph (b) also looks to the future. It is in this way that there is a link between the representation and litigation. 3. In both paragraphs (a) and (b), the exception to the hearsay rule created by s 69(2) is unavailable because there is a link with litigation. It is well established that the underlying purpose of the carve-out in subsection (3) is a concern that the relaxation of the hearsay rule for business records might lead to the admission of self-serving documents. That rationale was given by Barrett J in Vitali v Stachnik [2001] NSWSC 303 at [12] and has been endorsed in numerous subsequent decisions, including in this Court in Thomas v State of New South Wales [2008] NSWCA 316; 74 NSWLR 34 at [25] (Campbell JA) and [88] (Gyles AJA, dissenting as to the application of the provision). 4. Paragraph (a) of subs 69(3) proceeds expressly on the basis that the litigation may not presently be in existence (notably, by the words "in contemplation of"). I consider, favourably to Mr Averkin, that the criminal proceedings in paragraph (b) likewise need not be in existence at the time the representation is made, and indeed need never in fact commence. I would readily accept the force of McDougall J's observation that many investigations do not in fact lead to a criminal proceeding, and that it would unduly confine the language of the carve-out to insist that criminal proceedings must in fact have been commenced: Walsh v Walgett Shire Council at [18] and [20]. A further reason for reaching that conclusion is that it would be a capricious result that the hearsay rule would not apply to a document at one point in time but would apply later (namely, if and when criminal proceedings were ultimately commenced). There are after all many reasons why a prosecution may be delayed. 5. However, what is dispositive of Mr Averkin's submissions based on s 69(3) are the following two matters. 6. The first is that this litigation has been conducted on the basis that the onus of demonstrating that the carve-out in s 69(3) applied was borne by Mr Averkin. As Basten JA has observed, there may be scope to question that assumption, and in acceding to the parties' approach, I do not wish to be taken as expressing an opinion on an issue which was not argued. 7. The second is that although the criminal proceedings may be in the future and need never eventuate, the investigation in connection with which the representation was made must be extant at the time it is made in order to fall within s 69(3)(b). That emerges clearly enough from the ordinary meaning of the language and the contrasting structures of paragraphs (a) and (b). It is not sufficient if a representation is made in connection with a possible investigation in the future, which in turn might lead to criminal proceedings. 8. "Investigation" is not defined, and will turn on the facts of a particular case. Some investigations may be formal, some less so. But I would not conclude that an investigation had commenced merely upon the police receiving a report of a burning vehicle on Cadia Road. I do not consider that, in the facts of this case, an investigation commenced prior to police forming the view from the burn patterns, extreme heat and difficulties extinguishing the fire that accelerant had been used (to refer to the considerations mentioned in the COPS narrative) and that the case was likely one of arson. 9. It is not clear when the first entry in the COPS Event Summary concerning an actual fire in a vehicle on Cadia Road was made. The entry contains a time of 21:50 to 21:53 in the evening of 23 August 2013. One possibility is that the entry was made at around the time the passerby called the police reporting the vehicle. Another is that that entry, and others, were made later, after the constable had driven to the location, and formed the view that the case was one of arson. The materials as I read them do not enable a view to be formed one way or the other between those possibilities. In those circumstances, I would not conclude that Mr Averkin has shown that an investigation had commenced at the time the first entry was made so as to preclude the insurer from relying upon the representation that a vehicle was found burning on Cadia Road. 10. The constable's notebook records "10:30pm CADIA RD CAR FIRE VOI: NISSAN NAVARA" and gives the number plate of Mr Averkin's vehicle. In the ordinary course, one would expect the constable to identify the number plate immediately after establishing there were no people in the vehicle, so as to enable its owner to be identified. Once again, I would not conclude that Mr Averkin has shown that an investigation had commenced at the time those words were written. 11. Because the first representation on which the insurer relied (which was the only one which mattered) could be established from those aspects of Exhibit 3, I would conclude without more that there was no material error in the broader course taken by the primary judge. 12. It follows that I respectfully disagree with Basten JA's conclusion that no aspect of Exhibit 3 was available to support the representations relied on by the insurer. However, I agree with his Honour that once the view was formed that the case was one of theft and arson, the representations were made in connection with an investigation which would lead to a criminal proceeding if the offender could be located. I agree that the portions of the COPS narrative on which the insurer relied should not have been used as they were used by the primary judge. That said, although error is established, the error was immaterial. 13. Finally, Mr Averkin criticised the primary judge's reasons insofar as they were based on the absence of any self-serving element in the documents. But on a fair reading of her Honour's reasons, her Honour approached the matter by reference to the statutory language. Her Honour's reference to the absence of any self-serving element was merely an introductory (and correct) observation. 14. Accordingly, although her Honour's ruling was incorrect, the error is not material.

The finding that the two keys examined by Mr Squire were keys for the vehicle (ground 3(b)) 1. As noted above, Mr Averkin put the insurer to "strict proof" of whether the keys examined by Mr Squire were the keys of Mr Averkin's vehicle. 2. The evidence which bore on that question was: 1. the photograph of the keys resting on the envelope which had written on it the claim number allocated to Mr Averkin's claim; 2. Mr Squire's opinion that both were OEM keys; 3. the fact that the keys were plainly for a Nissan vehicle (one self-evidently from the photographs in the report); and 4. the tag attached to the keys associated with an Orange car dealer and on which Mr Averkin's vehicle's registration number had been written. 1. The materials potentially available to the insurer which bore on that fact were quite extensive: 1. the original claim made by Mr Averkin and subsequent correspondence between him and it; 2. the letter from the insurer to Mr Squire containing his instructions, which should in any event have been annexed to his report; 3. other records of the instructions given by the insurer to Mr Squire; 4. the materials which had permitted the insurer to file a verified defence alleging, inter alia, that (a) Mr Averkin was in possession of both keys given by the manufacturer, and that (b) Mr Averkin had asserted that he did not have the key to the vehicle on him when he left home on the evening of 23 August 2013. 1. Admittedly, some of those materials may not have been readily available, when the matter was called on for hearing in Orange. But others might be expected to be in counsel's brief or his instructing solicitor's file. 2. What is remarkable in the present case is that no attempt was made to tender any of those items. In those circumstances, there is no reason to draw an inference favourable to the insurer. 3. Even so, I see no error in the conclusion of the primary judge that Mr Squire was examining keys to Mr Averkin's vehicle. The evidence all pointed in one direction, and there was no evidence to the contrary. 4. Mr Squire's unchallenged evidence in his report was that the envelope in which he received the keys had written on it the claim number given by the insurer to Mr Averkin's claim. The keys in that envelope were attached to a keyring with the registration number of Mr Averkin's vehicle written on it. It may confidently be inferred that the officer acting on behalf of the insurer who placed those keys in the envelope believed that they were keys to the vehicle the subject of Mr Averkin's claim upon his policy. I see no reason not to infer that in the course of making and investigating that claim, the insurer obtained the keys either directly from Mr Averkin or his wife or indirectly from the police. 5. Ultimately, I think Mr Averkin's submission about requiring "strict proof" is merely a forensic flourish, as it was put in Cassell v The Queen [2000] HCA 8; 201 CLR 189 at [18]. The insurer did not have to prove a chain of custody of the keys in the same way that a prosecutor might have to provide chain of custody of some piece of physical evidence in a criminal trial. True it is that the evidence deployed by the insurer had to be admissible at the final hearing of a trial, and no dispensation under s 190(1) of the Evidence Act was available, but that does not mean that the insurer fails if there is a gap in admissible evidence relating to one link in the chain on which it relied.

The finding that there were only two keys coded to operate the vehicle (ground 3(a)) 1. Mr Averkin's threshold submission was that there was no evidence to support the finding by the primary judge (at [33], reproduced above) that there were only two keys coded to operate the vehicle. I disagree. Mr Squire's report dealt with this at 6.3.1. He was well-placed to say whether the keys he had been provided were OEM, and to express the view that the two keys "are the two keys provided with the vehicle from new". Moreover, the proposition that a new vehicle is ordinarily supplied with two sets of keys is supported by common experience. 2. Alternatively, Mr Averkin said that there was insufficient evidence to conclude that there were only two keys, given that the insurer's case was one of fraud. This submission is much more soundly based. 3. Mr Squire's report was commendably precise. Although he expressed the view (based upon a microscopic examination of the blade) that neither side of KEY-2 (the undamaged key) had been mechanically copied, he said that he could express no opinion concerning KEY-1, which lacked its blade. 4. How did KEY-1 come to be given to Mr Squire, and in what circumstances was it damaged? There is the theoretical possibility that it was given intact to police or to the insurer and was broken while in their possession, but I do not regard that as remotely plausible, and proceed on the basis that somehow the key was broken before coming into the possession of the insurer. 5. One possibility is that KEY-1 was one of the two keys initially supplied with the vehicle, but was broken at some stage prior to August 2013, leading to Mr Averkin purchasing a replacement key. It is possible that the replacement key was stolen, and used to take the vehicle, and that when making his claim, Mr Averkin supplied the only keys remaining in his possession to the police who passed them to the insurer, or alternatively directly to the insurer. That account would be consistent with Mr Averkin (or his wife) supplying both KEY-2 and what remained of KEY-1 directly to the insurer, or alternatively to police officers who supplied them to the insurer. In those circumstances, then there would in all likelihood be an explanation from Mr Averkin for how and when KEY-1 came to have been broken, and how and when the replacement key was stolen. That would bear directly on how the vehicle was moved. 6. Another possibility is that there were only ever two keys, of which KEY-1 was stolen from Mr Averkin, used to steal the vehicle, and was then broken, and the electronic key-head was recovered by police or a stranger who noticed it where it had been discarded. If so, then Mr Averkin (or his wife) would only have supplied KEY-2 to the insurer (or to the police who supplied it to the insurer). Once again, in those circumstances there would in all likelihood have been an explanation from Mr Averkin of the last time KEY-1 had been used by him, and there would be material bearing upon how KEY-1 had come to have been (separately) supplied to the insurer. 7. There are of course other possibilities which are consistent with Mr Averkin's complicity in the destruction of his vehicle. 8. A consideration of those matters compels the conclusion that the way in which the insurer came to possess the electronic key-head which it forwarded to Mr Squire who labelled it KEY-1 was centrally relevant to the allegation of fraud which was its defence. 9. As noted above, there was a deal of material which was available to the insurer to address those possibilities. The letter containing Mr Squire's instructions (which should have been annexed to his report) may have borne upon the issue. Even if it did not, the officer of the insurer who placed the keys in the envelope and sent them to Mr Squire would have been able to give evidence which would fill some of the gaps identified above. Further, the communications between Mr Averkin and the insurer following the making of his claim would have borne upon the issue. To the extent that there had been communications between insurer and police, they too would bear upon it. 10. There was no explanation from the insurer for why no efforts were made by the insurer to supplement its case in these respects. The absence of evidence or explanation was particularly conspicuous given Mr Squire's concluding paragraph, stating that "careful consideration of the care and custody of the owner's key/s must be taken into account" (emphasis added). That must have been obvious to the insurer who retained him. It must also have been obvious that, at least after Mr Squire's report was served, Mr Averkin would also highly likely emphasise the lack of explanation as to the circumstances leading to Mr Squire acquiring the keys. And at least some of the matters referred to above were squarely within the knowledge of the officers of the insurer who were involved in the litigation. 11. It is not necessary to go so far as Mr Averkin submitted, namely, to infer that there had been a deliberate forensic decision taken by the insurer not to adduce evidence to fill the gaps identified by Mr Squire. This ground does not turn upon determining why the evidence in the insurer's case was as limited as it was. It turns on the proposition that, having regard to the gravity of the allegation made against Mr Averkin, and the inferences to be drawn against the insurer based on its unexplained failure to adduce any evidence of the matters highlighted by Mr Squire, the primary judge ought not to have concluded that fraud had been established. 12. The primary judge did not address how the keys came into the possession of Mr Squire. To be fair, the considerations outlined above seem not to have been advanced to her Honour at all. Instead, the focus of submissions before the primary judge replicated many of the factual challenges addressed in earlier grounds of this appeal. Those submissions, both at first instance and on appeal, were substantially without merit. It may be that Mr Averkin's submissions on points lacking merit at trial served to distract attention from the critical gap in the insurer's case. 13. This ground is made out. I am not satisfied that the inferences sought to be drawn by the insurer, that Mr Averkin was involved in the movement and subsequent destruction of his vehicle, should be drawn, given the gaps in the evidence, and the unexplained failure on the part of the insurer to fill those gaps. Given the nature of the error and of the trial, this Court is in no worse position than the primary judge and can and therefore should determine the issue, rather than ordering a retrial. Taking the insurer's case at its highest, it had failed to make good its defence.

Conclusion and orders 1. It follows that the appeal must be allowed, orders 1 and 2 made on 24 April 2015 must be set aside, and in lieu thereof judgment entered in favour of Mr Averkin. I would expect the parties will readily be able to reach agreement as to the amount of the judgment to which Mr Averkin is entitled. If an order is required, an application may be made within 14 days in accordance with UCPR r 36.16. 2. Although Mr Averkin has succeeded, I have rejected most of his grounds of appeal. Further, he commenced proceedings in the District Court seeking an amount of $38,870 plus interest plus costs, well within the jurisdictional limits of the Local Court, and at least arguably engaging the rule in UCPR r 42.35 that an order for costs "will not ordinarily be made". If either party nevertheless seeks a costs order, he or it should file and serve written submissions, not exceeding 5 pages, on the costs orders which should be made in this Court and at first instance. 3. The formal orders I propose are: 1. Appeal allowed. 2. Set aside orders 1 and 2 made by the District Court on 24 April 2015, and in lieu thereof enter judgment for the plaintiff. 3. Direct the parties to file and serve, within 14 days, submissions not exceeding 5 pages indicating the orders they propose as to (a) the amount of the judgment to be entered, if such an order is required, and (b) costs at first instance and on appeal, if any orders as to costs are sought.

**********

Endnotes 1. Averkin v Insurance Australia Ltd (30 March 2015, unrep). 2. [2014] NSWSC 812 at [20]. 3. (2005) 147 FCR 235 at [25]-[27]. 4. [2008] ACTSC 69. 5. Walsh at [18]. 6. Evidence Act, Dictionary, Australian or overseas proceeding. 7. (2008) 74 NSWLR 34; [2008] NSWCA 316 at [27]. 8. Lewincamp Annexure 2 at [29]. 9. Walsh at [20]. 10. Uniform Evidence Law (December 2005, ALRC Report 102, NSWLRC Report 112, VLRC Final Report) at [8.151].

Amendments 10 November 2016 - [35] - "T-Mart" replaced by "T-Marts" [58] - "averkin" replaced by "Averkin" [75] - heading - "with" inserted after "fitted" [91] - "choose" replaced by "chose" [133] - "[2008]" replaced by "[2000]" 14 November 2016 - Cases cited - "Cassell v The Queen [2008] HCA 8" replaced by "Cassell v The Queen [2000] HCA 8" DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 November 2016