Genworth Financial Mortgage Insurance Pty Ltd v KCRAM Pty Ltd (in Liquidation) (No 2)

Genworth Financial Mortgage Insurance Pty Ltd applied for leave to join an insurer as a party to proceedings against a liquidated company, KCRAM Pty Ltd. The dispute arose from a claims made policy for professional indemnity insurance. The insurer denied liability, and the applicant sought a declaration that the insurer was liable to the insured company, which was in liquidation. The case was heard by the Federal Court of Australia, which needed to decide whether the applicant was entitled to join the insurer as a party and whether a statutory charge under section 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) was available to the applicant.

The legal issues before the court were whether the applicant could join the insurer as a party and whether the statutory charge was available under section 6 of the Act. The court examined whether the event giving rise to the claim by the third party occurred before the policy period. The applicant also sought a declaration that the insurer was liable to the insured company, which was in liquidation. The court needed to determine whether the third party had priority under section 562 of the Corporations Act 2001 (Cth).

The court found that the event giving rise to the claim by the third party occurred before the policy period, and therefore, there could be no grant of leave under section 6(4) of the Act. The court also found that the applicant was not entitled to join the insurer as a party on the basis of the valuer’s entitlement to indemnity. The court concluded that section 562 of the Corporations Act did not provide an alternate path for the applicant. The court granted leave to proceed against the insurer in relation to the Tweed Heads claim under section 6(4) of the Act and permitted its joinder to the proceedings as a second respondent for the purposes of obtaining a declaration as to the operation of Endorsement 1 for the claim on the property at Surfers Paradise. However, the court did not grant leave in respect of the same claim under section 6(4). The court also concluded that there should be neither a grant of leave under section 6(4) nor a joinder for declaratory relief in respect of the Bundall and Burleigh Waters claims.

The court directed the parties to bring in agreed short minutes of order giving effect to the reasons for judgment within 7 days, failing which the matter would be listed for further directions on 11 October 2011. The court also noted that the parties should bear their own costs in light of both parties’ success.