1. International Association of Auto Theft Investigators
Fred van Reede
Ligeti Partners
Seminar Partners:
Platinum Gold Gold Gold Silver

2. In Civil Proceedings, when Theft is not Theft

3. SCENARIO
The Insureds held a policy with the insurer of comprehensive motor vehicle insurance for the insured vehicle. Insurance cover was provided under the policy for an insured event of the theft of the vehicle. The meaning of “theft” or “stolen” was not defined in the insurance policy. There was no exclusion clause in the policy that the policy does not respond to “contractual disputes”.
The Insureds advertised the vehicle for sale on the internet. A person (“the Rogue”) contacted the Insureds and said he was interested in buying the insured vehicle. Arrangements were made for the Rogue to inspect the vehicle.
Day 1 – The Rogue attended the Insureds’ residence and inspected vehicle and its logbook. The Rogue advised that he wanted to buy the vehicle. The sale price of $100,000 was agreed upon. It was agreed that the Insureds would obtain a roadworthy certificate for the insured vehicle, and the Rogue would provide a bank cheque in settlement of the purchase price.

4. Day 2 – The Rogue returned to the Insureds’ residence and handed the Insureds a bank cheque for $100,000. In exchange, the Insureds provided the Rogue the insured vehicle, a roadworthy certificate, both sets of keys and also VicRoads transfer documents. The insureds did not obtain the Rogue’s licence details.
Day 3 – The Insureds attended the Bank and deposited the cheque. The Bank accepted the cheque.
Day 4 - The Bank contacted the Insureds and told them that the cheque was fake. The Insureds then reported the matter to the Police and lodged a claim with the insurer. The Police advised their investigation was ongoing.

5. DEFINITION OF THEFT FOR INSURANCE CLAIMS In the South Australian Supreme Court decision of Lockwood & Lockwood v Insurance Australia Ltd (t/as SGIC Insurance) [2010] SASC 140, Justice Kourakis stated: “In my view the indemnity for theft extends to any dishonest taking of the insured vehicle which materially interferes with the owner’s proprietary interest in it. A person steals a vehicle for the purpose of the policy if he or she takes the vehicle without the owner’s permission in circumstances where he or she knows the owner would not consent and knowing that the degree of their interference is material or wrong.”

6. CASE PRECEDENT
In the English decision of Lewis v Averay (No. 1) [1972] QB198, the facts were similar, only that in the Lewis matter the vehicle had subsequently been sold by the “thief” to an innocent third party (Averay). The case dealt with Lewis’ right to recover the vehicle from Averay. Lord Denning remarked:
“When a dealing is had between a seller (such as the Insureds) and a person who is actually there present before him (such as the Rogue), then the presumption in law is that there is a contract, even though there is a fraudulent impersonation by the buyer representing himself as a different man than he is. There is a contract made with the very person there, who is present in person. It is liable no doubt to be voided for fraud, but it is still a good contract under which title will pass unless it is voided…”

7. The Court found that the seller “made a contract” as the Court does not look at the intention, or into the mind of the seller and buyer to know what they were thinking, but instead “to the outward appearances”.
“On the face of the dealing, Mr Lewis made a contract under which he sold the car to the rogue, delivered the car and the logbook to him, and took a cheque in return. The contract is evidenced by the receipts which were signed. It was, of course induced by fraud. The rogue made false representations as to his identity. But it is still a contract, though voidable for fraud. It was a contract under which property passed to the rogue, and in due course passed from the rogue to Mr Averay…”

8. DID AN INSURED EVENT TAKE PLACE?
An insurer is entitled to put an insured to proof of the happening of an insured event.1
It is also accepted that, having put the insured to proof, it is open for an insurer to suggest and seek to prove an uninsured cause of the loss and for the Court to conclude in an appropriate case that the cause of the loss, even on the balance of probabilities, remains in doubt, with the consequence that the insured has failed to discharge the burden of proof and must fail.2
In a case in which there are multiple potential causes of a loss, such as Rhesa, in which the ship in question may have broken up by reason of its poor condition, or may have been scuttled or, as ultimately contended for by the insured, may have come into collision with a passing submarine as a peril of the sea, there is no question that the insured bears the onus of proving the cause of the loss as a matter of fact so as to bring its claim under the policy.
_____________________
As per Simon v NRMA Insurance Ltd, Court of Appeal, 22 October 1991, unreported, NASA v Australian Associated Motor Insurers Ltd, Court of Appeal, 22 October 2001, unreported; To v Australian Associated Motor Insurers Ltd (2001) 3 VR 279; Hammoud Brothers Pty Limited v Insurance Australia Limited [2004] NSWCA 366
As per Rhesa Shipping Co SA v Edmunds 1 WLR 948 and the observations of Handley JA in Vidal v NRMA Insurance Ltd [2005] NSWCA 390 at [15].

9. CONCLUSION
The onus was upon the Insureds to demonstrate that the loss of the insured vehicle was covered under the terms of their policy of insurance with the insurer and that the loss was “an insured event”. In the event the Insureds were unable to demonstrate that the loss resulted from an insured event, then they would not be covered for the loss of the insured vehicle under the policy.
It was concluded that the loss of the insured vehicle was not an insured event as covered by the insurance policy for the following reasons:
The insured entered a contract with the Rogue for the sale of the insured vehicle. This was evidenced by the outward appearance of the transaction, namely the Insureds handing the Rogue the insured vehicle, its keys, logbook, roadworthy certificate and registration papers in exchange for a bank cheque from the Rogue in the agreed purchase sum of $100,000. The fact that the bank cheque turned out to be a fake did not mean a contract was not entered into, although it was voidable for reasons of fraud. Therefore, the Insureds’ loss resulted from a breach of the contract by the Rogue, and not the result of the insured vehicle being stolen.

10. The policy only covered the Insureds for losses arising from events as defined in the contract of insurance. Losses suffered as a result of a breach of contract was not an event defined in the contract of insurance. As the loss was not the result of a theft (a defined event), but rather the result of a breach of contract, even absent the exclusion clause, the subject loss event was not covered under the policy because the insured vehicle was not stolen.