But not without the Privy Council giving a rare day-long hearing to Takapuna lawyer Alex Witten-Hannah’s desperate last ditch bid to turn the tables for an old schoolmate at the center of the long-running Firlawn House fire insurance claim.

Mr Witten-Hannah couldn’t persuade the Privy Council to re-examine the Firlawn House case on its facts rather than any error of law but his novel approach drew praise from Lords Nicholls, Hope, Scott, Mance and Baroness Hale, who heard the appeal. (See Quote of the Week on this site)

A cornerstone of the Privy Council appeal was what story was told by broken window glass at the fire site.

Did the position of the broken glass show the house was fire-bombed from the outside or lit from inside or that the fire was the work of two arsonists, working together or independently?

Novel as the proposition might have been the Privy Council in June dismissed an appeal by Michael David Stemson against the refusal by AMP General Insurance (NZ) Ltd to pay out after his historic villa Firlawn House in Coromandel, which he operated as a restaurant and bar, was partially destroyed by fire in May 1992.

Mr Stemson sued AMP in 1998 claiming $295,000 for reinstatement of the property, together with damages for consequential loss and exemplary damages after AMP took the view that it was Mr Stemson himself who deliberately started the fire.

Justice Grant Hammond ruled at the end of an 18 day trial in April 2002, for which Mr Stemson got legal aid, that not only did Mr Stemson arson the property with Molotov cocktails he also lied about his involvement in the fire, which gave AMP two grounds for avoiding liability.

In March 2003 the Court of Appeal, comprising Justices Andrew Tipping, Peter Salmon and John Doogue, dismissed Mr Stemson’s appeal, determining that because it was common ground the fire was arson, the only issue on appeal was whether Mr Stemson was the arsonist.

The Court of Appeal agreed that Justice Hammond got it right in concluding Mr Stemson was responsible for the fire.

When the case came to the Privy Council earlier this year it dealt with the conclusion that Mr Stemson caused the fire and whether AMP was also entitled to avoid liability because Mr Stemson had made a false statement to an insurance investigator claiming he never intended to sell Firlawn House or put it on the market.

The case was entirely a factual one and there was no dispute about the law.

AMP accepted that the onus was on it to prove Mr Stemson’s implication in the fire, and that it had to do so to a very high standard.

AMP’s case was that Mr Stemson drove to Auckland on the night of May 11, 1992, leaving Simon Laing, an alcoholic friend who was living at Firlawn House, in charge of the property.

Later that night Mr Stemson returned to the property where he threw a Molotov cocktail into a rear bedroom. He then went to the front of the house where he threw another Molotov cocktail into the lounge.

Having set the fire he drove immediately back to Auckland.

At the 2002 trial Mr Laing, who said he was wakened by a Molotov cocktail crashing through his bedroom window and exploding on the floor near the foot of his bed, said that before the fire Mr Stemson offered him $50,000 to burn the house down and that he also asked how to make Molotov cocktails.

There was evidence that Mr Stemson had a motive for wanting to set the fire, he had the means to make Molotov cocktails and there was evidence he said things to various people that indicated he was responsible.

Mr Stemson had previously operated a restaurant and bar at Firlawn House in partnership with Libby Daniels, daughter of local businesswoman Barbara Doyle who organizes “murder mystery” weekends.

He bought out Ms Daniels’ interest in 1991 under an agreement that gave her a pre-emptive right in the event of his selling or transferring his interests in Firlawn House.

Mr Stemson was a poor manager, the business was running at a loss and the condition of the property was deteriorating.

At the 2002 trial Justice Hammond found Mr Stemson had developed an obsession that Libby Daniels and Barbara Doyle wanted to get Firlawn House back from him and he originally blamed the fire on the Doyle family.

Justice Hammond, who was satisfied Mr Stemson lit the fire himself and would have convicted him if it had been a criminal trial, found Mr Stemson was manipulative and regarded his evidence as evasive, contradictory and totally unreliable.

At the Court of Appeal a bid to challenge Justice Hammond’s findings of fact foundered, with the court rejecting the argument that Justice Hammond erred in fact when he concluded that Mr Stemson was himself responsible for the fire.

But at the Privy Council Mr Witten-Hannah, who did not enter the case until February this year as a favour to his former schoolmate, accepted that the Privy Council ought not to disturb a concurrent finding of fact by the High Court and the Court of Appeal unless it could be clearly shown that the finding was erroneous.

Mr Witten-Hannah argued there was no evidence upon which the lower courts could arrive at their findings to the high standard of proof required.

He said the Court of Appeal did not go into the facts of the case at all and all it had done was support the process of reasoning which led Justice Hammond to his finding.

He said that if Justice Hammond had analysed forensic evidence about the position of broken glass correctly he might have come to a different conclusion as to whether it had been proved to the required high standard that it was Mr Stemson who set the fire.

According to Mr Witten-Hannah the Court of Appeal’s refusal to go into the facts meant it had omitted to consider the state of the evidence on the separate question as to who started the fire in the lounge.

The Court of Appeal made no finding as to whether or not the presence of fire in both locations – the bedroom and the lounge – was the work of two arsonists and, if so, whether they were acting together or independently.

This was important because if the Privy Council was satisfied that Justice Hammond was wrong to conclude that the fire in the lounge was set by Mr Stemson it would suggest that someone other than Mr Stemson was responsible for the fire in the bedroom.

Mr Witten-Hannah argued unsuccessfully  that it was therefore open for the Privy Council to re-examine the whole issue as to whether it was Mr Stemson who set fire to Firlawn House.

The Privy Council was not persuaded by either argument, saying the overwhelming weight of evidence was that it was Mr Stemson and not Mr Laing who was the arsonist and there were no grounds for opening up the concurrent findings of the High Court and Court of Appeal that it was Mr Stemson who set the fire at Firlawn House.

It also upheld Justice Hammond’s ruling that, apart from any question of arson, AMP was entitled to reject Mr Stemson’s insurance claim on the ground he lied about any attempt to sell Firlawn House before the fire.

Costs were awarded against Mr Stemson. AMP was represented by Michael Ring QC.

Footnote: In June 2004 Michael David Stemson, giving a Coromandel address, incorporated a company called Welfare Investigator Consultant Advocate Broker Accident CYF Support Charity Ltd, of which Companies Office records showed him as its sole director and shareholder.

Feedback on this story to jockanderson@ihug.co.nz  

Posted July 7, 2006