Carter v Chubb Insurance Australia Ltd [2024] FCA 1312
File number(s):
NSD 437 of 2022 NSD 448 of 2022
Judgment of:
HALLEY J
Date of judgment:
14 November 2024
Catchwords:
INSURANCE – claims for indemnity by a chief executive officer and managing director (Director) under a directors and officers liability policy for defence costs incurred in defending criminal charges and civil proceedings – where insurer denied liability on the basis of fraudulent misrepresentations and fraudulent non-disclosures – where insurer also seeks recovery of sums previously advanced – where insurer alleges Director was aware of a course of conduct, that involved payment of bribes and illegal inducements to procurement managers of customers of company – consideration of the nature of the arrangements which allegedly constituted the payment of bribes and illegal inducements – where Director signed proposal for renewal of directors and officers liability policy, made declaration and allegedly failed to disclose payment of bribes and illegal inducements – whether procurement managers had apparent authority to give instructions for distribution of funds for personal benefits – consideration of extent of knowledge of insured – whether Director was aware of potential claims at the time of policy renewal – whether insurer was entitled to deny indemnity – consideration of 28(3) of the Insurance Contracts Act 1984 (Cth) (ICA) and duty of disclosure under s 21(1) of the ICA – where satisfied Director knew, or was recklessly indifferent as to, whether bribes and illegal inducements could give rise to potential claims – Director failed to disclose bribes and illegal inducements to the insurer and thereby engaged in fraud – insurer entitled to deny indemnity – insurer entitled to repayment of sums already advanced
EVIDENCE – Briginshaw considerations and s 140(2) of the Evidence Act 1995 (Cth) – knowledge of the insured – drawing of inferences – whether an inference is more probable than not – where Director gives evidence of absence of knowledge – knowledge can be readily inferred from objective evidence – denials of knowledge unreliable
EVIDENCE – where insurer did not adduce evidence from witnesses to establish absence of knowledge by principal of alleged payment of bribes and provision of illegal inducements to its agent – Jones v Dunkel inferences – whether absence of knowledge can be inferred – whether Jones v Dunkel inferences should be drawn for failure to call on subpoena
PRACTICE AND PROCEDURE – pleadings – whether various contentions of insurer are open on pleadings
[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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AGLC
Carter v Chubb Insurance Australia Ltd [2024] FCA 1312
Case
[2024] FCA 1312
Decision Date
CaseChat Overview and Summary
The case of Carter v Chubb Insurance Australia Ltd involved the chief executive officer and managing director (the Director) of a company, who sought indemnity from the insurer, Chubb Insurance Australia Ltd, for defence costs incurred in defending criminal charges and civil proceedings. The insurer denied liability on the basis of fraudulent misrepresentations and non-disclosures by the Director. The insurer also sought recovery of sums previously advanced to the Director. The insurer alleged that the Director was aware of a course of conduct involving the payment of bribes and illegal inducements to procurement managers of customers of the company. The Director signed a proposal for renewal of the directors and officers liability policy, made a declaration, and allegedly failed to disclose the payment of bribes and illegal inducements. The court had to decide whether the procurement managers had apparent authority to give instructions for the distribution of funds for their personal benefits, the extent of the Director’s knowledge of the insured, whether the Director was aware of potential claims at the time of policy renewal, and whether the insurer was entitled to deny indemnity and to repayment of sums already advanced.
The court examined the nature of the arrangements which allegedly constituted the payment of bribes and illegal inducements, and whether the Director knew, or was recklessly indifferent as to, whether these could give rise to potential claims. The court considered sections 28(3) and 21(1) of the Insurance Contracts Act 1984 (Cth) (ICA), and the duty of disclosure. The court concluded that the Director knew, or was recklessly indifferent as to, whether the bribes and illegal inducements could give rise to potential claims, and that the Director failed to disclose this to the insurer, thereby engaging in fraud. Consequently, the insurer was entitled to deny indemnity and to repayment of sums already advanced. The court also examined the Briginshaw considerations and section 140(2) of the Evidence Act 1995 (Cth) and drew inferences from the objective evidence presented. The court found that the Director’s denials of knowledge were unreliable.
The court also considered whether the insurer was entitled to draw inferences from the absence of evidence from witnesses to establish the absence of knowledge by the principal of the alleged payment of bribes and provision of illegal inducements to its agent. The court examined the Jones v Dunkel inferences and whether they should be drawn for the failure to call on subpoena. The court concluded that the insurer was not entitled to draw Jones v Dunkel inferences, as the insurer did not adduce evidence from witnesses to establish the absence of knowledge by the principal. The court also considered whether various contentions of the insurer were open on the pleadings.
The court dismissed the second cross claim filed on 28 September 2020, and ordered that the cross-claimant pay the costs of the second cross-defendant, as taxed if not agreed. The entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Orders
Orders of the court
1. The second cross claim filed on 28 September 2020 be dismissed.
2. The cross-claimant is to pay the costs of the second cross-defendant, as taxed if not agreed.
[Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.]