CGU Insurance Limited v One.Tel Limited (In Liquidation) & Ors

CGU Insurance Limited (CGU) and One.Tel Limited (in liquidation) and its directors were parties to proceedings before the High Court of Australia. The dispute concerned the interpretation and application of the Corporations Act 2001 (Cth) and the Insurance Contracts Act 1984 (Cth) in the context of a claim by the liquidators of One.Tel against CGU under a directors and officers liability insurance policy. The liquidators sought to recover from CGU amounts paid to creditors of One.Tel, alleging that the directors had breached their duties and that CGU was liable under the policy.

The High Court was required to determine, among other things, whether the liquidators were entitled to bring a claim against CGU directly, notwithstanding the existence of the insurance policy. Specifically, the Court had to consider the scope of section 167 of the Insurance Contracts Act, which allows a third party to claim against an insurer where the insured is liable to the third party, and whether this provision applied to the circumstances of the case, particularly in light of the insolvency of One.Tel and the nature of the claims made by the liquidators.

Gummow J, delivering the judgment of the Court, reasoned that section 167 of the Insurance Contracts Act was intended to provide a direct right of action for a third party against an insurer in circumstances where the insured is liable to that third party. However, his Honour found that the claims brought by the liquidators against the directors were not of a nature that would engage the indemnity provided by the directors and officers liability policy in a way that would permit a direct claim under section 167. The Court held that the liquidators' claims were essentially proprietary in nature, seeking to recover assets for the benefit of the company's creditors, rather than claims for loss or damage suffered by the creditors directly as a result of the directors' conduct.

The High Court therefore held that the liquidators were not entitled to pursue a direct claim against CGU under section 167 of the Insurance Contracts Act. The appeal was dismissed.