CGU Insurance Ltd. v Porthouse - [2007] NSWCA 80

NEW SOUTH WALES COURT OF APPEAL

CITATION: CGU Insurance Ltd. v. Porthouse [2007] NSWCA 80
This decision has been amended. Please see the end of the judgment for a list of the amendments.

FILE NUMBER(S):
40202/06

HEARING DATE(S): 7 September 2006

JUDGMENT DATE: 11 April 2007

PARTIES:
CGU Insurance Ltd. - appellant
Anthony Porthouse - respondent

JUDGMENT OF: Hodgson JA Young CJ in Eq Hunt AJA

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 728/05

LOWER COURT JUDICIAL OFFICER: Balla DCJ

LOWER COURT DATE OF DECISION: 17 March 2006

LOWER COURT MEDIUM NEUTRAL CITATION:
Not applicable

COUNSEL:
Mr. M.A. Pembroke SC with Mr. G. Lucarelli for appellant
Mr. L. King SC for respondent

SOLICITORS:
Kennedys (Sydney) for appellant
Langes (Sydney) for respondent

CATCHWORDS:
Damages payable to person injured carrying out work in accordance with Community Service Orders Act 1979 — Tort law reform restricting damages to be awarded in common law claims effected by Workers Compensation Legislation Further Amendment Act 2001 — Transitional provision applying provisions of that Act to existing rights before its commencement, but not in cases where litigation started before that commencement.
Barrister retained by plaintiff so injured to advise on commencement of proceedings unaware of applicability of these provisions — Proceedings commenced 14 days after legislation commenced — Plaintiff’s claim dismissed — Barrister found to be negligent.
Professional indemnity policy — Known circumstances excluded from policy included any fact, situation or circumstance which a reasonable person in the insured's professional position would have thought, before the policy began, might result in someone making an allegation against insured in respect of a liability that might be covered by policy — Meaning of exclusion clause — Whether barrister's claim for indemnity excluded.

LEGISLATION CITED:
Civil Liability Act 2002
Community Service Orders Act 1979
Crimes (Administration of Sentences) Act 1999
Workers Compensation Act 1987
Workers Compensation Legislation (Further Amendment) Act 2001
Workplace Injury Management and Workers Compensation Act 1998
Corporations Act 2001 (Cwth),
Insurance Contracts Act 1984 (Cwth)

CASES CITED:
Correll v Costello 404 NYS (2d) 836, 838 (1978)
Cussons v FCT (2003) 47 ACSR 107
D’Orta-Ekenaike v Victoria Legal Aid (2000) 223 CLR 1
FAI General Insurance Ltd v McSweeney & Ors (1999) ANZ Insurance Reporter §61-443 at 75,033-034
Fishwives Pty Ltd v FAI General Insurance Co Ltd [2001] NSWCA 103
GIO General Ltd v Wallace [2001] NSWCA 299; (2001) 11 ANZ Ins Cas 61-506
Heydon v NRMA Ltd (2000) 51 NSWLR 1
L’Aloia v FCT (2003) 48 ACSR 204
Macrae v Stevens (1996) Aust Torts Reports §81-405
Permanent Trustee Australia v FAI General Insurance Co Ltd (1998) 44 NSWLR 168; and on appeal: (2001) 50 NSWLR 676; (2003) 214 CLR 514
Regina v Jeffrey [1967] VR 467
Safety Cab Inc v Ferguson 205 NE (2d) 827, 831 (1965)
Saif Ali v Sydney Mitchell & Co [1980] AC 198
Sims v Celcast Pty Ltd (1998) 71 SASR 142
State of New South Wales v Bahmad [2004] NSWCA 287

DECISION:
By majority (Hunt…

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.

Keep reading for free

Create a free CaseChat account to read CGU Insurance Ltd. v Porthouse and more:

Read every judgment in full
Ask AI and get answers linked to paragraphs
See how each paragraph was cited in later cases
Download judgments as PDF or Word

Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details

Case: [2007] NSWCA 80
Decision Date: 11 April 2007

CaseChat Overview and Summary

CGU Insurance Ltd. appealed a decision of the primary judge concerning a claim for indemnity under a professional indemnity policy. The dispute arose from a claim brought by Mr. Bahmad, who was injured while undertaking community service. Mr. Bahmad's legal representative, the respondent barrister, was found to have been negligent in commencing proceedings after amendments to relevant legislation came into effect, which ultimately defeated Mr. Bahmad's claim. The primary judge found the barrister negligent but held that the claim for indemnity against CGU was not excluded by the policy's "known circumstances" clause.

The Court of Appeal was required to determine whether the primary judge erred in finding that a reasonable person in the barrister's professional position would not have thought, as at the policy commencement date, that a situation existed which might result in an allegation of negligence against him. This involved construing the "known circumstances" exclusion clause within the professional indemnity policy, specifically the meaning of "a reasonable person in the Insured's professional position," "would have thought," and "might result in someone making an allegation against an Insured in respect of a liability that might be covered by this Policy."

By majority, the Court of Appeal dismissed CGU's appeal. The majority found that the primary judge's assessment of the barrister's state of mind was open to her. The primary judge had found that while the barrister understood there were legal difficulties with Mr. Bahmad's case, he believed he had taken all reasonable steps and that Mr. Bahmad had good prospects of success on appeal. Crucially, the primary judge found that it had not occurred to the barrister that the issues concerning the late filing of the statement of claim or the failure to find relevant legislation could give rise to a claim against him, and that the possibility of such a claim only became apparent after the Court of Appeal hearing. The majority upheld the primary judge's conclusion that the exclusion clause was not engaged.

Orders

Orders of the court

By majority (Hunt AJA dissenting), the appeal is dismissed with costs.

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

YOUNG CJ

On 27 August 2004, the Court of Appeal allowed the Crown’s appeal, and set aside the verdict in favour of Mr. Bahmad. These proceedings were commenced on 3 March 2005. DECISION OF PRIMARY JUDGE The primary judge found negligence established against the respondent, on the basis that he should have found the provision under the CAS Act, should have realised the WC Act applied, should have appreciated that the amendments proposed to commence on 27 November 2001 could defeat Mr. Bahmad’s claim, and therefore should have given advice to ensure that a Statement of Claim was filed before 27 November 2001. As regards the respondent’s claim against CGU, the primary judge referred to cl.11.12, and held that the case did not fall within par.(a) of that clause, because she found the respondent did not know, before the policy commenced, that Mr. Bahmad might make an allegation of negligence that might be covered by the policy. No challenge is made by CGU against that finding, so the relevant part of the primary judge’s judgment, for the purpose of this appeal, is that which supported her finding that par.(b) of cl.11.12 was not engaged. On this question, the primary judge was satisfied that, before the policy commenced, the respondent understood there were legal difficulties with Mr. Bahmad’s case, he considered he had taken all reasonable steps to prepare Mr. Bahmad’s claim, Mr. Bahmad had not made any complaint to him about his conduct of the case, Mr. Bahmad had obtained a verdict from an arbitrator and then from a judge, and the respondent believed there were good prospects that Mr. Bahmad would succeed in the appeal. The primary judge found that it did not occur to the respondent that the issue concerning the late filing of the Statement of Claim or the failure to find relevant legislation could be matters which would give rise to a claim against him. The primary judge found that the possibility that Mr. Bahmad might believe there could be some fault on the part of his lawyers first became apparent to the respondent after the Court of Appeal hearing on 19 July 1994. The primary judge continued as follows:The issue is then whether a reasonable person in the second defendant's professional position would have thought, before 30 June 2004, that something had occurred which might result in someone making an allegation against him. Counsel for the cross defendant submitted that: CGU appeals on the following grounds:1. The trial judge erred in finding that a reasonable person, in the respondent's professional position, with knowledge of all material facts, would not have thought, as at 30 June 2004, that there existed any fact, situation or circumstance which might result in someone making an allegation against the respondent in respect of a liability that might be covered by the Professional Indemnity Policy. 2. Additionally, the trial judge misconstrued the definition of "Known Circumstance" in Clause 11.12 of the Professional Indemnity Policy, in particular in Her Honour's construction of the following words and phrases: (a)"a reasonable person in the Insured's professional position..." (b)"would have thought..." (c)"might result in someone making an allegation against an Insured in respect of a liability that might be covered by this Policy". SUBMISSIONS

Ratio Decidendi

Legal Principle Established

Established by: YOUNG CJ

Full text does not contain this section.