Admiral International Pty Ltd v Insurance Australia Ltd

The appeal before the Court of Appeal of New South Wales concerned a dispute between Admiral International Pty Ltd (the insured) and Insurance Australia Ltd (the insurer), specifically relating to claims made under property and business interruption insurance policies following the theft and arson of a bonded warehouse. The insurer had denied the claims on the grounds that the insured company, through its controlling mind and will, had knowledge of, connived in, or consented to the theft and arson. The insured, in turn, alleged that the insurer's denial of indemnity and its allegations of arson constituted a breach of the duty of utmost good faith implied by section 13 of the *Insurance Contracts Act 1984* (Cth) and sought damages for consequential loss. The insured also faced a defence from the insurer that it had failed to take reasonable precautions to secure the warehouse.

The primary legal issues before the Court of Appeal were whether the primary judge's findings of fact, particularly those based on circumstantial proof and inferences regarding the insured's knowledge and connivance in the events, were sustainable. The court was also required to determine whether the insurer's conduct breached its duty of utmost good faith and, in relation to the business interruption cover, to assess the measure of indemnity, including whether the insured company had a positive revenue growth trend and concrete prospects of procuring new customers, given disagreements between forensic accounting experts.

The Court of Appeal considered the primary judge's reasoning, which relied heavily on circumstantial evidence and inferences to conclude that the controlling mind of the insured company possessed the requisite knowledge. The court analysed whether the individual strands of the primary judge's reasoning were sufficient to support the ultimate conclusion. In relation to the business interruption claim, the court had to make its own assessment of the available evidence to determine the extent of the loss, acknowledging that it must do the best it can with the evidence presented.

The Court of Appeal allowed the appeals in both the CGU and Brightcity proceedings in part, setting aside specific orders made by the primary judge. The parties were directed to file Short Minutes of Order and submissions on costs, with any outstanding questions to be determined on the papers.