General Reinsurance Australia Ltd v HIH Casualty & General Insurance Ltd (in liquidation)

General Reinsurance Australia Ltd (General Re) appealed to the Court of Appeal of New South Wales against a decision of the Supreme Court of New South Wales concerning the interpretation of a reinsurance treaty. The dispute arose between General Re and HIH Casualty & General Insurance Ltd (in liquidation) (HIH) regarding whether certain insurance policies issued by HIH, described as "trade credit insurance," were covered by the reinsurance treaty between the parties.

The central legal issue before the Court of Appeal was whether the supply of goods by a financier on credit, in circumstances where the financier took title to the goods, fell within the scope of the "trade credit insurance" as defined and contemplated by the reinsurance treaty. This required the court to consider the nature of trade credit insurance and the characterisation of the commercial arrangements under which the goods were supplied.

The Court of Appeal affirmed the primary judge's finding that the relevant insurance policies did not constitute trade credit insurance within the meaning of the treaty. The court reasoned that the core of trade credit insurance is the protection of a seller against the risk of non-payment by a buyer. In the present case, the financier, by taking title to the goods, was not acting as a seller in the traditional sense, and the arrangement was not primarily designed to insure against a buyer's default on a purchase price. Instead, the financier was essentially providing finance, with the transaction structured in a way that the financier bore the risk of non-payment for the goods it had acquired. The court examined the invoices and bills of lading to ascertain the intention of the parties and the true character of the commercial arrangements, concluding that the passing of property to the financier meant the insurance did not cover a typical trade credit risk.

The appeal was dismissed, and General Re was ordered to pay HIH's costs.