The sins of the father

By Matt McDonald

The NSW Court of Appeal has unanimously overturned a finding of fraud in a claim arising from a warehouse fire in 2018.


The insured company operated a family warehousing business, which held bonded goods (such as imported cigarettes) for its customers. The family patriarch, Dmitry Fateev, founded the family business, but at the relevant time he worked in a part-time capacity for the insured as a warehouseman and delivery driver. His son, Denis Fateev, was the managing director of the insured company.

The warehouse leased by the insured was destroyed as a result of an arson attack.

The insured claimed against CGU for the losses it suffered under an ISR policy. The insuring clause covered loss and damage caused by fire.

The insured also sought indemnity for its liability to customers under a CGU liability policy covering liability for property damage arising from an ‘Occurrence’, which is defined in the policy to mean ‘an event which results in… property damage… neither expected nor intended from your standpoint.’

First instance

It was held by the trial judge, and not challenged on appeal, that Dmitry was responsible for the arson, that he deliberately caused car tyres to be spread around the warehouse to provide fuel for the fire and that he left the premises unsecured to facilitate the entry of the arsonist. It was also held that, leading up to the fire, Dmitry facilitated the theft of many millions of dollars’ worth of goods owned by the insured’s customers. He was on a flight to Vladivostok 17 hours before the arson, from where he never returned and where he later died. Denis was in Hong Kong, ostensibly on business, when the fire occurred.

The trial judge also held that Dmitry was not the ‘directing mind and will’ of the insured company (CGU did not cross-appeal this finding). It was therefore necessary for CGU to establish that Denis (who, as managing director, personifies the insured company) was complicit in the elaborate heist in order to prove fraud.

The trial judge was scathing of the evidence given by Denis and found that he was complicit in the theft/arson. His Honour found that Denis was in Hong Kong in order to create an alibi and that the suggestion his father had kept him in the dark as to the carefully planned, high-stakes heist was implausible. The trial judge therefore found that CGU was entitled to deny both claims on the basis of fraud.

Court of appeal

The Court of Appeal examined the inferential reasoning undertaken by the trial judge based on the purely circumstantial evidence and found that his Honour had erred by failing to consider the innocent explanations for Denis being in Hong Kong and his lack of inquisitiveness after the fire. Noting that clear and cogent evidence of fraud is required under the ‘Briginshaw standard’, the Court of Appeal found that CGU had not proven Denis was complicit in the theft/arson and therefore failed to prove fraud. In so finding, the Court of Appeal repeatedly gave Denis the benefit of the doubt as to what the trial judge found were suspicious or anomalous circumstances.

Curiously, the Court of Appeal dealt with the claim under the liability policy in one short paragraph [210], holding that CGU’s failure to establish fraud meant that it was bound to indemnify the insured for the liability claim. That finding seems to ignore the fact that under the liability policy, it is the insured which must first establish, on the balance of probabilities, that the liability arises from an ‘Occurrence’, being an event which was ‘neither expected nor intended’ from the insured’s standpoint (contrast that with the ISR claim, which only required the insured to establish that it suffered losses as a result of a fire). The trial judge was not satisfied that there was an ‘Occurrence’. The question which arises (and which is not addressed by the Court of Appeal), is whether the same evidence which was found to fall short of establishing fraud on the Briginshaw standard, may have resulted in the insured falling short of proving the theft/fire occurred without its (meaning Denis’) consent or connivance.


When evidence establishes that the warehouse operated by a family business was burnt to the ground in an arson masterminded by the family patriarch, you might reasonably expect that the insurer would be entitled to deny indemnity. The fact that the Court of Appeal found otherwise is yet another reminder of the difficulty of proving fraud, particularly when the insured is a corporation.

This judgment also shows that courts of appeal will be prepared to overturn findings based on the credibility of witnesses, notwithstanding the fact that the trial judge has the benefit of observing the witness in person, and considering his demeanour, under the pressure of cross-examination.

Admiral International Pty Ltd v Insurance Australia Limited [2022] NSWCA 277


Matt McDonald

Matt is an experienced insurance lawyer acting for leading insurers, specialising in public and product liability.

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