FEDERAL COURT OF AUSTRALIA
Avant Insurance Limited v Darshn [2022] FCAFC 48
Appeal from: Darshn v Avant Insurance Limited [2021] FCA 232; Darshn v Avant Insurance Limited [2021] FCA 706; Darshn v Avant Insurance Limited (No 3) [2021] FCA 1035 File number(s): NSD 909 of 2021 Judgment of: JAGOT, DERRINGTON AND COLVIN JJ Date of judgment: 29 March 2022 Catchwords: INSURANCE — whether lawyers retained by insurer to act for insured had authority to give notice of facts that might give rise to claim on behalf of insured — whether lawyers retained by insurer for insured did give notice of facts that might give rise to claim against insured to insurer — whether insurer’s reliance on insured not having given notice of facts that might give rise to claim against insured contravened insurer’s duty of utmost good faith — whether primary judge erred with respect to scope of declaratory order made — appeal dismissed — part of cross-appeal upheld Legislation: Insurance Contracts Act 1984 (Cth) ss 13, 40(3)
Civil Procedure Act 2005 (NSW), Pt 10
Cases cited: Antico v CE Heath Casualty & General Insurance Ltd (1996) 38 NSWLR 681
CGU Insurance Ltd v AMP Financial Planning Pty Ltd [2007] HCA 36; (2007) 235 CLR 1
Darshn v Avant Insurance Limited [2021] FCA 706
Esined No 9 Pty Limited v Moylan Retirement Solutions Pty Ltd (No 2) [2020] NSWSC 359; (2020) 353 FLR 1
IVI P/L v Baycrown P/L [2005] QCA 205
Mercantile Mutual Insurance (NSW Workers Compensation) Ltd v Murray [2004] NSWCA 151; (2004) ANZ Ins Cas ¶61–612
Newcastle City Council v GIO General Ltd [1997] HCA 53; (1997) 191 CLR 85
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 66 Date of hearing: 17-18 February 2022 Counsel for the Appellant: Mr MT McCulloch SC with Ms T Berberian Solicitor for the Appellant: Carter Newell Lawyers Counsel for the First Respondent: Mr S Habib SC with Ms K Morris Solicitor for the First Respondent: William Roberts Lawyers Counsel for the Second Respondent: Second Respondent submitted to the orders of the Court, save as to costs Counsel for the Cross-Appellant: Mr S Habib SC with Ms K Morris Solicitor for the Cross-Appellant: William Roberts Lawyers Counsel for the Cross-Respondent: Mr MT McCulloch SC with Ms T Berberian Solicitor for the Cross-Respondent: Carter Newell Lawyers ORDERS
NSD 909 of 2021 BETWEEN: AVANT INSURANCE LIMITED
Appellant
AND: SRI BALAKRISHNAN DARSHN
First Respondent
MEDICAL INSURANCE AUSTRALIA PTY LIMITED
Second Respondent
AND BETWEEN: SRI BALAKRISHNAN DARSHN
Cross-Appellant
AND: AVANT INSURANCE LIMITED
Cross-Respondent
ORDER MADE BY:
JAGOT, DERRINGTON AND COLVIN JJ
DATE OF ORDER:
29 MARCH 2022
THE COURT ORDERS THAT:
1.The appeal be dismissed.
2.The cross-appeal be allowed.
3.The declaration made on 23 August 2021 be set aside and in lieu thereof it be declared that:
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- Case
- [2022] FCAFC 48
- Decision Date
CaseChat Overview and Summary
The legal issues that the court needed to address included whether the lawyers retained by Avant on behalf of Dr Darshn had the authority to give notice of facts that might give rise to a claim against Dr Darshn, and if such notice was given, whether Avant's reliance on Dr Darshn not having given notice contravened the insurer's duty of utmost good faith. Additionally, the court had to determine whether the primary judge erred in the scope of the declaratory order made in relation to Avant's liability to indemnify Dr Darshn.
The court found that Avant did not act with the utmost good faith as required by section 13 of the Insurance Contracts Act, as it failed to recognise that the lawyers retained on behalf of Dr Darshn had the authority to give notice of facts that might give rise to a claim against Dr Darshn. The court also held that the primary judge erred in the scope of the declaratory order, as it should have included all members of the Darshn sub-group who suffered injury, loss, and damage due to the insured's actions, rather than only the twelfth plaintiff, Ms Sanchez. Consequently, the appeal was dismissed, and part of the cross-appeal was upheld. The court set aside the previous declaration and issued a new one, declaring that Avant was obliged to indemnify Dr Darshn in respect of all sums reasonably paid and payable by him that are characterised as Civil Liability Claims, Legal Defence Costs, and/or Legal Fees and Other Expenses in respect of the relevant proceedings. The court also ordered the respective parties to bear their own costs for the appeal and cross-appeal.
Orders
Orders of the court
1. The appeal be dismissed.
2. The cross-appeal be allowed.
3. The declaration made on 23 August 2021 be set aside and in lieu thereof it be declared that:
Upon the proper construction of Practitioner Indemnity Insurance Policy Nos. API.16F.3130312 (for period ending 30 June 2017), API.17F.3463741 (for period ending 30 June 2018) and/or API.18F.4062320 (for period ending 30 June 2019) issued by Avant Insurance Limited (the Avant Policies) and in the circumstances that have happened, the first respondent is obliged to indemnify the applicant in respect of all sums reasonably paid and payable by him that are characterised as Civil Liability Claims, Legal Defence Costs and/or Legal Fees and Other Expenses (as defined in the Avant Policies) in respect of proceedings 279308 of 2017 in the Supreme Court of New South Wales, Equity Division.
4. The appellant pay the first respondent’s costs of the appeal as agreed or taxed.
5. The cross-respondent pay the cross-appellant’s costs of the cross-appeal as agreed or taxed.
6. Within 7 days any party wishing to vary orders 4 or 5 may file and serve the terms of any proposed varied order accompanied by a submission in writing in support not exceeding two pages and, if necessary, any affidavit in support.
7. Any party served under order 6 may file and serve a submission in writing not exceeding two pages and, if necessary, any affidavit identifying their position in respect of the proposed varied order.
8. Any costs issue will be determined thereafter without further oral hearing unless, in complying with orders 6 or 7, the party requests an oral hearing and provides a reason in support.
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
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
Accordingly, there is no error in the primary judge’s conclusions that Avant also failed to act with the utmost good faith in respect of Dr Darshn as required by s 13 of the Insurance Contracts Act.The declaration issue Dr Darshn contended that the primary judge erred in confining the declaration of Avant’s liability to indemnify Dr Darshn to legal defence costs and civil liability in relation to claims brought only by Ms Sanchez (the twelfth plaintiff) in the TCI proceeding. After resolving the s 40(3) issues in Dr Darshn’s favour, the primary judge said this (at [172]-[173] of Darshn v Avant Insurance Limited [2021] FCA 706):For the above reasons, I conclude that s 40(3) operates in the present case, with the effect that the insurer (Avant) is not relieved of liability under the 2018-19 Avant policy in respect of Ms Sanchez’s claim against Dr Darshn in the TCI Proceeding, by reason only that it was made after the expiration of the period of insurance cover provided by the policy.It follows from the above that Dr Darshn is entitled to cover under the 2018-19 Avant policy in respect of Ms Sanchez’s claim in the TCI Proceeding, and the legal defence costs associated with defending her claim in the proceeding (which, at the present time at least, equates to his legal defence costs associated with defending the proceeding generally). Dr Darshn’s Second Contention is, therefore, substantially made out. I do not consider it necessary or appropriate to determine, at this time, whether Dr Darshn will be entitled to coverage under the policy with respect to non-party group members within the Darshn Sub-Group. It is more appropriate, in my view, to determine that question if and when any such group members come forward and indicate that they wish to participate in the proceeding (for example, by providing particulars of their personal loss and damage). It may well be the case that the reasoning set out above regarding Ms Sanchez’s claim would apply equally to the claims of such group members; but that is something that can be determined, if necessary, at the point in time when such group members come forward. According to the submissions for Dr Darshn, if the framing of the declaration involved an exercise of discretion, then that exercise miscarried in the sense described in House v R (1936) 55 CLR 499 at 505 because in a representative proceeding under Pt 10 of the Civil Procedure Act 2005 (NSW) (which applies to the TCI proceeding) there is no relevant distinction between the claims of Ms Sanchez as the twelfth plaintiff and the claims of the members in the “Darshn sub-group” as identified in the FASOC in the TCI proceeding. The members of that sub-group are fixed and identifiable by the terms of the FASOC and Ms Sanchez represents those sub-group members to the extent of the common issues. With due respect to the otherwise meticulous reasons of the primary judge, we agree. The error in the primary judge’s framing of the declaration is exposed in the fact that his Honour assumed in [172] and [173] that s 40(3) operates only in respect of Ms Sanchez’s claim, leaving it to his Honour to determine the appropriate scope of the declaration as a matter of discretion. That assumption is incorrect. As the notification was of the Darshn sub-group claims the subject of the representative proceedings, s 40(3) operates in respect of every member of the Darshn sub-group being those women including Ms Sanchez who suffered injury, loss and damage in consequence of undergoing BAS performed by Dr Darshn as described in paragraphs 2 and 2A of the FASOC in the TCI proceeding. The claims of those sub-group members have been made in the FASOC. Those were the claims that were notified to Avant within the policy period. They are claims that may be carried into completion by subsequent steps taken by individual sub-group members bound by the findings in the representative proceedings or there may be individual claimants who opt out of the representative proceedings. However, those future possibilities do not mean that claims by every member of the Darshn sub-group have not been notified to Avant. We do not need to deal with the character of any future claim subsequently made by an individual claimant who elects to opt out. We are here concerned only with a claimed indemnity for liabilities in respect of the representative proceedings. Section 40(3) being satisfied in respect of all sub-group members, the assumption apparent in [172] and [173] in the primary judge’s reasons (that there remained uncertainty as to whether s 40(3) was satisfied in respect of claims by sub-group members other than Ms Sanchez) was in error. Contrary to [173], the primary judge had determined that s 40(3) was satisfied with respect to “non-party group members”. Those sub-group members, by the terms of the FASOC, could not be in any position different from Ms Sanchez for the purposes of s 40(3) of the Insurance Contracts Act. This erroneous assumption caused the primary judge’s framing of the terms of the declaration to miscarry.