FAI General Insurance Limited v Jarvis

FAI General Insurance Limited (the insurer) sought leave to appeal against a decision of the Supreme Court of New South Wales which granted leave to the respondent, Mr. Jarvis, to proceed against the insurer under section 6 of the *Law Reform (Miscellaneous Provisions) Act 1946* (NSW). Mr. Jarvis had obtained a judgment against a third party who was insured by FAI General Insurance Limited, but the insurer had declined liability under the policy. Mr. Jarvis sought to enforce his judgment directly against the insurer.

The primary legal issue before the Court of Appeal was whether the Supreme Court had erred in granting leave to Mr. Jarvis to proceed against the insurer. This required the court to consider the relevant principles governing the grant of such leave, particularly in circumstances where the insurer asserted a right to decline liability under the policy. The court had to determine whether the considerations applied by the primary judge were sufficient to justify the exercise of discretion in favour of granting leave.

The Court of Appeal found that the primary judge had failed to give sufficient weight to the fact that the insurer had a valid defence to the claim, namely that it was entitled to decline liability under the policy. The court held that the purpose of section 6 of the *Law Reform (Miscellaneous Provisions) Act 1946* (NSW) was not to enable a claimant to circumvent an insurer's valid defence. The court emphasised that leave should not be granted where it would be futile to proceed against the insurer, and that the existence of a valid defence was a critical factor in the exercise of discretion.

The appeal was allowed, and the order granting leave to Mr. Jarvis to proceed against FAI General Insurance Limited was set aside.