Compagnie Francaise D'Assurance Pour le Commerce Exterieur t/as Coface Australia v Sims Group Australia Holdings Ltd

Compagnie Francaise D'Assurance Pour le Commerce Exterieur t/as Coface Australia (the plaintiff) appealed to the Court of Appeal of New South Wales against a decision of the District Court concerning a trade credit insurance policy. The dispute arose from the plaintiff's refusal to indemnify the defendant, Sims Group Australia Holdings Ltd, for losses incurred following the release of a charge over the assets of a company indebted to the defendant. The defendant had insured its trade receivables with the plaintiff, and the policy contained provisions relating to the insured's conduct in managing its affairs and the circumstances under which the insurer's liability would be discharged.

The central legal issues before the Court of Appeal were whether the amounts claimed by the defendant were owing "under" or "in connection with" the contract for the sale of a business, thereby falling within the scope of the plaintiff's charge, and whether the defendant, in releasing a charge over the assets of the indebted company, had acted as a prudent uninsured and, if not, whether this action prejudiced the plaintiff's interests. The court was required to interpret the terms of the insurance policy and assess the defendant's conduct in light of its obligations as an insured party.

The Court of Appeal found that the defendant's release of the charge was not an act that a prudent uninsured would have undertaken in the circumstances, and that this action had prejudiced the plaintiff's interests. However, the court also determined that the defendant was entitled to a partial recovery under the policy. The appeal was allowed in part, with the District Court's orders being set aside. The defendant was ordered to pay the plaintiff a specific sum, representing 90% of the difference between two calculated amounts, plus interest. The parties were directed to submit short minutes of order to quantify this amount and interest. The appellant was ordered to pay the respondent's costs of the appeal.