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Wednesday, 9 May 1984
Page: 1811


Senator GARETH EVANS (Attorney-General)(12.16) —I move:

(39) Page 21, clause 56, lines 3 to 9, leave out sub-clauses (2) and (3), insert the following sub-clauses:

'(2) In any proceedings in relation to such a claim, the court may, if only a minimal or insignificant part of the claim is made fraudulently and non-payment of the remainder of the claim would be harsh and unfair, order the insurer to pay, in relation to the claim, such amount (if any) as is just and equitable in the circumstances.

'(3) In exercising the power conferred by sub-section (1), the court shall have regard to the need to deter fraudulent conduct in relation to insurance but may also have regard to any other relevant matter.'.

This is essentially the same amendment as the one we dealt with in regard to clause 32. It is a question as to whether the legislation should be drafted in such a way that some degree of fraud can nonetheless be discounted by the courts and the insurer be obliged to meet a claim if, in all the circumstances, it would be harsh and unjust not to do so. The way in which clause 56 was originally framed, as was the case with clause 32, arguably did not place sufficient emphasis on the need to deter fraudulent claims being made and did not place a sufficient degree of legislative focus on the undesirability of any aid, comfort or nourishment being given to fraud in any shape or form. It was arguably too loose and open-textured. With that in mind, the Government's amendment focuses quite specifically on narrowing the scope of the original clause in such a way as to make it clear, in the language of our amendment, that it applies only when 'a minimal or insignificant part of the claim is made fraudulently and non-payment of the remainder of the claim would be harsh and unfair'.

There is emphasis on the quantitative smallness of the element of fraud-for example, the situation in regard to a house and contents policy when there has been a massive fire which has caused perhaps $150,000 worth of damage, and in making the claim there has been some padding of the value of a particular item of furniture or the addition of a particular item of equipment in the household which might be worth only a few hundred dollars in the total claim. The situation that is here contemplated is that a court, if it is satisfied that in the circumstances it would be unjust to refuse the insured the opportunity to claim at all as a result of that small piece of deception, can make an order. There is no obligation in any way on a court to ignore fraud. There is certainly no obligation on the court to divide the claim in some rigorous arithmetical way so that anyone whose frauds are caught up with simply gets his claim discounted by that amount. There is nothing remotely as crude as that in either the original formula or in the refined version of it that is now brought forward.

It has been the product of considerable discussion within the insurance industry. My understanding is that, while the insurance industry would certainly prefer to have no such provision, it is as happy as it could be with the present formulation, on the assumption that the Government wants to meet the strong recommendation of the Law Reform Commission that some opportunity be given to an insured to stay in the field in the circumstances I have mentioned. For all those reasons, I urge that the Committee adopt this amendment as being a reasonable one in the circumstances.