AXA Global Risks (UK) Ltd v Haskins Contractors Pty Ltd (in liq)

AXA Global Risks (UK) Ltd (AXA) sought to recover from Haskins Contractors Pty Ltd (in liq) (Haskins) the sum of $1.2 million, representing the value of a performance bond issued by AXA in favour of the Commonwealth of Australia. The Commonwealth had called upon the bond due to Haskins' alleged breach of a construction contract for the construction of a naval base at Garden Island, New South Wales. AXA argued that it was entitled to be indemnified by Haskins for the payment made under the bond, as Haskins had failed to complete the works and had been placed into liquidation. The matter came before the High Court of Australia.

The High Court was required to determine whether AXA, as the issuer of the performance bond, had a right of indemnity against Haskins, the principal under the contract and the party whose liquidation was the subject of the proceedings. Specifically, the court considered the nature of the indemnity arising from the issuance of a performance bond and whether the principles of subrogation or an independent right of indemnity applied in this context, particularly in light of Haskins' insolvency.

The High Court held that AXA was entitled to an indemnity from Haskins. The court reasoned that the issuance of a performance bond by a bank or insurer creates a primary obligation to the beneficiary, but it also gives rise to an equitable right of indemnity in favour of the issuer against the party at whose request the bond was issued. This right of indemnity is distinct from any rights that might arise under the underlying contract. The court affirmed that this equitable right of indemnity is not defeated by the insolvency of the party requesting the bond, and that AXA was subrogated to the rights of the Commonwealth against Haskins to the extent of AXA's payment under the bond.

The High Court ordered that AXA was entitled to prove in the liquidation of Haskins for the sum of $1.2 million, with interest.