Kyriackou v Ace Insurance Ltd - [2013] VSCA 150

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2012 0105

MICHAEL KYRIACKOU
	Appellant
v
ACE INSURANCE LTD (ACN 001 642 020)	Respondent

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JUDGES:	HARPER and TATE JJA and KYROU AJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	12 March 2013
DATE OF JUDGMENT:	20 June 2013
MEDIUM NEUTRAL CITATION:	[2013] VSCA 150
JUDGMENT APPEALED FROM:	Kyriackou v ACE Insurance [2012] VSC 214 (Vickery J)

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INSURANCE – Professional indemnity insurance policy – Proceedings brought by ASIC in respect of an alleged unregistered managed investment scheme – Proceedings discontinued by agreement without determination on its merits – Claim by insured for costs of defending the proceedings – Whether claim covered by insuring clause – Civil compensation or damages not sought by ASIC – Whether such a claim implicit in relief sought under s 1324 of the Corporations Act 2001 (Cth) – Whether claim arose out of a breach of duty in a professional capacity – Whether any exclusion clauses applied – Kantfield Pty Ltd v Lockwood [2003] VSC 420, Toomey v Scolaro’s Concrete Constructions & Ors (2002) 12 ANZ Insurance Cases 61-519, Suncorp Metway Insurance Pty Ltd v Landridge Pty Ltd (t/as L J Hooker Hampton Park) (2005) 12 VR 290 and Solicitors’ Liability Fund v Gray & Anor (1997) 147 ALR 154 discussed – Appeal dismissed.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Dr J D Wilson SC with Mr T J Scotter	Pinto Law
For the Respondent	Mr M W Thompson SC with Ms C M Harris	Moray & Agnew

HARPER JA:

Introduction

As of May 2007, the appellant, Michael Kyriackou, was or had been the director of five of the six corporations in what may be called the Australvic Group. For insurance purposes, the business of the Group (or, more strictly, of the appellant and his co-insured Brian Fisher and Australvic Home Loans Pty Ltd) (‘AVHL’) is described in the schedule to a policy of professional indemnity insurance made in or about August 2006 as:

Finance Originators, Finance Intermediaries, Finance Brokers, Finance Consultants, Mortgage Aggregators.

The insurer under the policy is the respondent, ACE Insurance Ltd (‘ACE’). By clause 1.1 of the policy (‘the insuring clause’), ACE agreed to indemnify the appellant against:

Loss arising from any 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 policy itself defined a number of expressions used in the insuring clause and elsewhere. Those which were reproduced in the governing text of the policy document were identifiable by the use of capitals in their first letter. For present purposes, three definitions are of particular importance. These are the definitions of ‘Loss’, of ‘Claim’, and of ‘Defence Costs’.

The first of these was ‘Loss’. It was defined in clause 5.13 of the policy as:

… the aggregate of all amounts payable by the Insured or ACE as civil compensation or civil damages in respect of a Claim, including judgments, settlements, legal costs…

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: [2013] VSCA 150
Decision Date: 20 June 2013

CaseChat Overview and Summary

Kyriackou v Ace Insurance Ltd concerned a claim for professional indemnity insurance by a defendant in civil proceedings brought by the Australian Securities and Investments Commission (ASIC) regarding an alleged unregistered managed investment scheme. The insured sought to recover the costs of defending the ASIC proceedings under a policy with Ace Insurance Ltd. The Federal Court of Australia had to determine whether these costs were covered by the insurance policy, particularly in the context of proceedings discontinued without a determination on their merits.

The key legal issues were whether the claim for costs of defending the ASIC proceedings constituted civil compensation or damages as defined by the policy, and if the claim arose out of a breach of duty in the professional capacity of the insured. Additionally, the court examined whether any exclusion clauses in the policy applied to prevent coverage for these costs. The case hinged on the interpretation of the insuring clause and the relevant exclusions, drawing on precedents such as Kantfield Pty Ltd v Lockwood, Toomey v Scolaro’s Concrete Constructions & Ors, Suncorp Metway Insurance Pty Ltd v Landridge Pty Ltd, and Solicitors’ Liability Fund v Gray & Anor.

The court held that the claim for costs did not constitute civil compensation or damages because ASIC had not sought such relief in their proceedings. The court reasoned that the insured had not suffered a loss in the form of civil compensation or damages, as the proceedings were discontinued without a determination on their merits. Consequently, the claim did not arise out of a breach of duty in the insured’s professional capacity. The court also found that none of the exclusion clauses applied to exclude coverage for the costs incurred in defending the ASIC proceedings. Therefore, the appeal was dismissed.

No further orders were made by the court, affirming the dismissal of the insured's appeal.

Orders