Kyriackou v Ace Insurance - [2012] VSC 214

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. S CI 6953 of 2009

MICHAEL KYRIACKOU	Plaintiff
v
ACE INSURANCE LIMITED (ACN 001 642 020)	Defendant

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JUDGE:	Vickery J
WHERE HELD:	Melbourne
DATES OF HEARING:	17 May 2012 - 18 May 2012
DATE OF JUDGMENT:	18 May 2012
CASE MAY BE CITED AS:	Kyriackou v ACE Insurance
MEDIUM NEUTRAL CITATION:	[2012] VSC 214

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INSURANCE – Professional indemnity insurance policy – Claim for legal costs incurred – Whether within the insuring clause – ASIC proceeding in respect of which legal costs incurred –Damages or compensation not sought – Section s.1324(10) Corporations Act 2001 considered - No claim made by ASIC in respect of the insured in a ‘Professional Capacity’ – Construction of the phrase ‘Professional Capacity’ considered.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Dr. J. D. Wilson SC with Ms. C. L. Welsh	Pinto Law
For the Defendant	Mr. M. W. Thompson SC with Ms. C. M. Harris	Moray & Agnew

TABLE OF CONTENTS

Introduction…………………………………………………………………………………………..1

The ASIC Proceeding……………………………………………………………………………….1

Claim for Indemnification under the Policy…………………………………………………….2

The Policy…………………………………………………………………………………………….3

Was the ASIC Proceeding a Claim as Defined in the Policy…………………………………..4

Orders………………………………………………………………………………………………..11

HIS HONOUR:

Introduction

The Plaintiff, Mr Kyriackou, sues for a declaration that the Defendant, ACE Insurance Limited, (“ACE”), is liable to indemnify him in respect of certain legal costs incurred by him under a policy of professional indemnity insurance provided by ACE.

Mr Kyriackou also seeks damages.

ACE has admitted that it issued an insurance policy providing professional indemnity insurance by policy No.01P1532747 (the “Policy”) to Mr Kyriackou and Others (the “Insured”), for the period of 6 September 2006 to 6 September 2007.

Pursuant to clause 1.1 of the Policy it was provided that ACE would indemnify the Insured

[A]gainst Loss arising and Claim in respect of civil liability for breach of a duty owed in a professional capacity first made against an Insured during the Period of Insurance.

The ASIC Proceeding

On 28 May 2007, during the period of insurance, the Australian Securities and Investment Commission (“ASIC”), commenced Federal Court proceeding number VID448207 against Mr Kyriackou and Others seeking interlocutory and final relief, including declarations and other orders (the “ASIC Proceeding”).[1]
[1] Australian Securities & Investments Commission v Kyriackou [2010] FCA 9

In the ASIC Proceeding, ASIC alleged that Mr Kyriackou and Others were involved in an unregistered managed investment scheme.

ASIC sought interlocutory and final relief against Mr Kyriackou.

Mr Kyriackou engaged solicitors and counsel to defend the ASIC Proceeding and in doing so incurred substantial costs, legal costs and expenses.

On 22 July 2008 ASIC sought leave to discontinue the ASIC Proceeding and on 20 January 2010 leave to discontinue was granted.

Accordingly there was no determination on the merits of the ASIC Proceeding.

Claim for Indemnification under the Policy

On 20 March 2009 Mr Kyriackou lodged a claim under the Policy for indemnification.

ACE refused to indemnify Mr Kyriackou under the Policy thus giving rise to these proceedings.

In broad…

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

Case: [2012] VSC 214
Decision Date: 18 May 2012

CaseChat Overview and Summary

Kyriackou v Ace Insurance was a case before the Federal Court of Australia involving a dispute between a policyholder and an insurer regarding the coverage of legal costs incurred in a proceeding brought by the Australian Securities and Investments Commission (ASIC). The central issue was whether the policyholder's legal costs, incurred in response to a proceeding by ASIC, were covered by the professional indemnity insurance policy issued by Ace Insurance.

The primary legal issue the court had to address was whether the policyholder's costs were within the insuring clause of the policy. Specifically, the court needed to determine if the proceeding by ASIC constituted a claim made by a third party against the policyholder in their professional capacity, as required by the policy. Additionally, the court considered the interpretation of the phrase "Professional Capacity" and whether ASIC's proceeding could be considered a claim made in that capacity, despite ASIC not seeking damages or compensation against the policyholder personally.

The court found that the proceeding by ASIC did not constitute a claim made by a third party against the policyholder in their professional capacity. The court held that the phrase "Professional Capacity" should be interpreted narrowly, focusing on claims made directly against the policyholder in their professional role. Since ASIC's proceeding did not directly claim damages or compensation against the policyholder in their professional capacity, the policyholder's legal costs were not covered by the insurance policy. The court's reasoning was grounded in the plain language of the insuring clause and the absence of a direct claim against the policyholder's professional actions.

The court ultimately dismissed the policyholder's claim for the legal costs incurred in the ASIC proceeding. The judgment clarified the scope of coverage under professional indemnity insurance policies and reinforced the importance of the specific wording of policy clauses in determining coverage.

Orders