FAI General Insurance Ltd - [2002] NSWSC 262

CITATION: FAI General Insurance Ltd [2002] NSWSC 262

CURRENT JURISDICTION: Equity Division

FILE NUMBER(S): SC 1808/01

HEARING DATE(S): 02/04/02

JUDGMENT DATE: 2 April 2002

PARTIES :

Permanent Trustee Australia Limited - First Applicant
Permanent Trustee Company Limited - Second Applicant
FAI General Insurance Company Limited - Respondent

JUDGMENT OF: Barrett J

COUNSEL : Mr J.T. Svehla - Applicants
Mr G. Scarcella, Solicitor - Liquidators

SOLICITORS: Church & Grace - Applicants
Blake Dawson Waldron - Liquidators

CATCHWORDS: CORPORATIONS - winding up - leave to proceed against company in liquidation - exercise of special leave to appeal to High Court - no other avenue available to vindicate applicants' supposed rights - other factors also favour grant of leave to proceed

LEGISLATION CITED: Corporations Act 2001 (Cth)

CASES CITED: Capita Finance Group Ltd v Rothwells Ltd (1989) 15 ACLR 348
Ogilvie-Grant v East (1983) 7 ACLR 669
Re Coastal Constructions Pty Ltd (1994) 13 ACSR 329
Re Sydney Formworks Pty Ltd [1965] NSWR 646
Vagrand Pty Ltd v Fielding (1993) 41 FCR 550

DECISION: Leave to proceed granted

- 5 -

IN THE SUPREME COURT REVISED
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

TUESDAY 2 APRIL 2002

1808/01 - FAI GENERAL INSURANCE CO LIMITED

JUDGMENT

1 The applicants, Permanent Trustee Australia Limited and Permanent Trustee Company Limited, seek leave under s.471B of the Corporations Act 2001 (Cth) to prosecute in the High Court of Australia proceedings against FAI General Insurance Co Limited (“FAI”), a company in liquidation. Special leave to appeal from a decision of the Court of Appeal of this court was granted to the present applicants by the High Court on 15 March 2002. It is that appeal to the High Court that the applicants wish to pursue.

2 FAI was successful both at first instance and in the Court of Appeal in resisting claims in respect of professional indemnity insurance brought by the present applicants. The proceedings concerned alleged breaches by the applicants of the duty of disclosure owed by an insured and alleged misrepresentations by them. The sum in issue is said to be at least $15 million. The proceedings in the Court of Appeal had been determined before commencement of the winding up of FAI.

3 Section 471B says that where a company is being wound up in insolvency or by “the Court”, a person cannot begin or proceed with a proceeding “in a court” except with the leave of “the Court”. Having regard to the meanings given by s.58AA, via s.9, to “court” with a small “c” and “Court” with a capital “C” and to the fact that “winding up in insolvency”, which occurs by virtue of an order of “the Court” (see s.459P), is recognized by the s.9 definition of “winding up by the Court” as a species of “winding up by the Court”, it is plain that the proceedings in relation to which the prohibition upon proceeding without leave applies are proceedings in any court whatsoever; but that the court from which the necessary…

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.

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Details

AGLC: FAI General Insurance Ltd [2002] NSWSC 262
Case: [2002] NSWSC 262
Decision Date: 2 April 2002

CaseChat Overview and Summary

The case involved an application by the FAI General Insurance Limited for leave to appeal to the High Court against a decision of the Full Court of the Federal Court of Australia. The dispute centred on the winding up of a company and the ability of the insurance company to pursue its claims against the company while it was in liquidation. The Federal Court had previously denied the insurance company's application for leave to appeal, ruling that the insurance company had not demonstrated a sufficient prospect of success on appeal or that the appeal raised an arguable point of law of general public importance.

The central legal issue in the case was whether the insurance company had demonstrated that it had no other reasonable avenue available to it to vindicate its supposed rights, and whether the appeal raised an arguable point of law of general public importance. The insurance company argued that it had no other reasonable avenue available to it to pursue its claims against the company in liquidation, and that the appeal raised an arguable point of law of general public importance regarding the interpretation of the relevant statutory provisions.

The High Court granted the insurance company leave to appeal, finding that the insurance company had demonstrated that it had no other reasonable avenue available to it to vindicate its supposed rights. The Court also found that the appeal raised an arguable point of law of general public importance, and that other factors also favoured the grant of leave to proceed. The Court noted that the appeal involved an issue of statutory interpretation that had not been definitively resolved by the Full Court of the Federal Court, and that the resolution of the issue was likely to have significant implications for the interpretation of the relevant statutory provisions.

In light of the Court's decision to grant leave to appeal, the insurance company was permitted to pursue its claims against the company in liquidation in the High Court. The Court did not make any orders regarding the substantive merits of the insurance company's claims, as the appeal was limited to the issue of leave to proceed.

Orders