AIG Australia Limited v Kaboko Mining Limited - [2019] FCAFC 96

FEDERAL COURT OF AUSTRALIA
AIG Australia Limited v Kaboko Mining Limited [2019] FCAFC 96

Appeal from: Kaboko Mining Limited v Van Heerden (No 3) [2018] FCA 2055

File number: WAD 54 of 2019

Judges: ALLSOP CJ, DERRINGTON AND COLVIN JJ

Date of judgment: 14 June 2019

Catchwords: INSURANCE - professional indemnity insurance - directors and officers liability policy - appeal from decision of primary judge on preliminary question - whether an insolvency exclusion precluded cover under the policy for the claims made by the first respondent - proper construction of the insolvency exclusion - whether the subject matter of the Claim must have the alleged insolvency link - appeal dismissed

Legislation: Corporations Act 2001 (Cth) ss 436A, 588G

Cases cited:
Bond v Chief Executive, Department of Environment and Heritage Protection [2017] QCA 180; [2018] 2 Qd R 112

Halford v Price [1960] HCA 38; (1960) 105 CLR 23

Kaboko Mining Ltd v Noble Resources International Pte Ltd [2015] WASC 67

Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216

Onley v Catlin Syndicate Ltd as the Underwriting Member of Lloyd's Syndicate 2003 [2018] FCAFC 119

Rexel Electrical Supplies Pty Limited v Mentha (Administrator) in the matter of ACN 004 410 833 Limited (formerly Arrium Limited) [2018] FCAFC 229

Date of hearing: 27 May 2019

Registry: Western Australia

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Category: Catchwords

Number of paragraphs: 69

Counsel for the Appellant: Mr MA Jones SC with Ms JA Thornton

Solicitor for the Appellant: Clyde & Co Australia

Counsel for the First Respondent: Mr N Kirby

Solicitor for the First Respondent: Clayton Utz

Counsel for the Second, Third and Fifth Respondents: The Second, Third and Fifth Respondents did not appear

Counsel for the Fourth Respondent: The Fourth Respondent filed a submitting notice

ORDERS

WAD 54 of 2019

BETWEEN:
AIG AUSTRALIA LIMITED (ABN 93 004 727 753)

Appellant

AND:
KABOKO MINING LIMITED (ACN 107 316 683) (SUBJECT TO A DEED OF COMPANY ARRANGEMENT)

First Respondent

ANDRIES TOBIAS VAN HEERDEN

Second Respondent

JANE ROSEMARY FLEGG

Third Respondent

SHANNON JANE ROBINSON
Fourth Respondent

JASON PAUL BREWER
Fifth Respondent

JUDGES:

ALLSOP CJ, DERRINGTON AND COLVIN JJ

DATE OF ORDER:

14 JUNE 2019

THE COURT ORDERS THAT:
1.The appeal be dismissed.
2.The appellant pay the costs of the appeal to be assessed if not agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT
THE COURT:

This appeal concerns the meaning of an insolvency exclusion endorsed on an insurance policy covering directors and officers liability. The policy was issued by AIG Australia Limited (AIG) to cover directors and officers of Kaboko Mining Limited (Kaboko).
Kaboko, now subject to a deed of company arrangement, has commenced proceedings in this Court against four of its former directors and officers (Former Officers). It claims that the Former Officers breached duties to act with due care and diligence…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] FCAFC 96
Decision Date: 14 June 2019

CaseChat Overview and Summary

In the matter of AIG Australia Limited v Kaboko Mining Limited, the case before the court involved a dispute over professional indemnity insurance, specifically a directors and officers liability policy. Kaboko Mining Limited sought coverage under the policy for claims made against them, but AIG Australia Limited argued that the claims were excluded due to an insolvency exclusion clause in the policy. The appeal was from the decision of the primary judge on a preliminary question, specifically whether the insolvency exclusion precluded cover for the claims made by Kaboko. The legal issues before the court centred on the proper construction of the insolvency exclusion clause and whether the subject matter of the claim needed to have a direct link to the alleged insolvency.

The court considered the arguments presented regarding the construction of the insolvency exclusion clause and whether the primary judge had erred in his interpretation. The arguments had evolved during the appeal, but the court found no basis to conclude that the primary judge was incorrect in his decision. The court held that the preliminary question should be answered in the negative, meaning that the insolvency exclusion did not preclude coverage for the claims made by Kaboko. As a result, the appeal was dismissed.

The court ordered that the appeal be dismissed, and the appellant, AIG Australia Limited, was to pay the costs of the appeal. The court noted that if any matter came to light that might affect the costs order, provision should be made for an application to vary the costs order within 14 days. This decision emphasised the importance of the proper construction of exclusion clauses in insurance policies and the consequences of misconstruing such provisions.

Orders

Orders of the court

1. The appeal be dismissed.

2. The appellant pay the costs of the appeal to be assessed if not agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Ground 5 claimed that the primary judge erred in his construction of the insolvency exclusion. To some extent the arguments as to the proper construction of the provision appear to have been refined and developed in the course of the appeal. However, it has not been shown that the primary judge was wrong in the conclusion that the preliminary question should be answered in the negative.Conclusion and costs It follows that the appeal should be dismissed. No matter was advanced as to why costs should not follow the event. As matters presently stand, AIG should pay Kaboko's costs of the appeal. In case there is some matter of which the Court is not aware that bears upon costs, provision should be made for liberty to apply to vary the costs order within 14 days.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

Appeal from:	Kaboko Mining Limited v Van Heerden (No 3) [2018] FCA 2055
File number:	WAD 54 of 2019
Judges:	ALLSOP CJ, DERRINGTON AND COLVIN JJ
Date of judgment:	14 June 2019
Catchwords:	INSURANCE - professional indemnity insurance - directors and officers liability policy - appeal from decision of primary judge on preliminary question - whether an insolvency exclusion precluded cover under the policy for the claims made by the first respondent - proper construction of the insolvency exclusion - whether the subject matter of the Claim must have the alleged insolvency link - appeal dismissed
Legislation:	Corporations Act 2001 (Cth) ss 436A, 588G
Cases cited:	Bond v Chief Executive, Department of Environment and Heritage Protection [2017] QCA 180; [2018] 2 Qd R 112 Halford v Price [1960] HCA 38; (1960) 105 CLR 23 Kaboko Mining Ltd v Noble Resources International Pte Ltd [2015] WASC 67 Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216 Onley v Catlin Syndicate Ltd as the Underwriting Member of Lloyd's Syndicate 2003 [2018] FCAFC 119 Rexel Electrical Supplies Pty Limited v Mentha (Administrator) in the matter of ACN 004 410 833 Limited (formerly Arrium Limited) [2018] FCAFC 229
Date of hearing:	27 May 2019
Registry:	Western Australia
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Category:	Catchwords
Number of paragraphs:	69
Counsel for the Appellant:	Mr MA Jones SC with Ms JA Thornton
Solicitor for the Appellant:	Clyde & Co Australia
Counsel for the First Respondent:	Mr N Kirby
Solicitor for the First Respondent:	Clayton Utz
Counsel for the Second, Third and Fifth Respondents:	The Second, Third and Fifth Respondents did not appear
Counsel for the Fourth Respondent:	The Fourth Respondent filed a submitting notice

JUDGES:	ALLSOP CJ, DERRINGTON AND COLVIN JJ
DATE OF ORDER:	14 JUNE 2019