Macquarie Underwriting Pty Ltd v Permanent Custodians Ltd - [2007] FCAFC 60

FEDERAL COURT OF AUSTRALIA
Macquarie Underwriting Pty Ltd v Permanent Custodians Limited [2007] FCAFC 60
INSURANCE - Exercise of discretion in joinder of insurer – whether arguable insured had a claim - necessary to have arguable case of liability and arguable case of indemnity.
AGENCY - whether party is insurer – whether proper to be added as insurers.
A.F.G. Insurances Ltd. v Andjelkovic (1981) 54 FLR 398 followed and applied
Andjelkovic v AFG Insurances Ltd (1980) 47 FLR 348explained
Antico v Heath Fielding Australia Pty Ltd (1997) 188 CLR 652 referred to
Bailey v New South Wales Medical Defence Union Limited (1995) 184 CLR 399 applied
East End Real Estate v C E Heath Casualty & General Insurance Ltd (1991) 25 NSWLR 400 referred to
FAI General Insurance Co Ltd v Australian Hospital Care Pty Ltd (2001) 204 CLR 641 referred to
FAI Insurance Co v Perry (1993) 30 NSWLR 89 referred to
Fishwives Pty Ltd v FAI General Insurance Co Ltd (2002) 12 ANZ Ins Cas 61-515 followed
Oswald v Bailey (1987) 11 NSWLR 715 referred to
Pech v Tilgals (1994) 94 ATC 4206referred to
Permanent Trustee of Australia Ltd v FAI General Insurance Co Ltd (1998) 153 ALR 529 referred to
State of New South Wales v AXA Insurance Australia Ltd (2002) 54 NSWLR 409 referred to
Travel Compensation Fund v FAI General Insurance Co Ltd [1999] FCA 1214 referred to
Tzaidas v Child (2004) 61 NSWLR 18 referred to
MACQUARIE UNDERWRITING PTY LTD AND SVB SYNDICATES LIMITED v PERMANENT CUSTODIANS LIMITED (ACN 001 426 384), ARMA PTY LIMITED (ACN 010 889 899) AND NEIL TEVES
NSD 1335 OF 2006
ALLSOP, GRAHAM AND BUCHANAN JJ
3 may 2007
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 1335 OF 2006

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

MACQUARIE UNDERWRITING PTY LTD
First Appellant

SVB SYNDICATES LIMITED
Second Appellant

AND:

PERMANENT CUSTODIANS LIMITED (ACN 001 426 384)
First Respondent

ARMA PTY LIMITED (ACN 010 889 899)
Second Respondent

NEIL TEVES
Third Respondent

JUDGES:

ALLSOP, GRAHAM AND BUCHANAN JJ

DATE OF ORDER:

3 MAY 2007

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1. The appeal be allowed in part.
2.Order 1 made on 4 July 2006 granting leave to Permanent Custodians Limited to join Macquarie Underwriting Pty Limited and SVB Syndicates Ltd as additional respondents to proceeding NSD 1758/2004 be varied by limiting that leave to an action seeking to enforce a charge on insurance moneys under a contract of insurance effective between 26 July 2004 and 26 July 2005 being policy number 103004401796 signed for and on behalf of Macquarie Underwriting Pty Limited.
3.The parties file submissions on the question of costs before the primary judge and of the appeal within 14 days.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 1335 OF 2006

ON APPEAL FROM…

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: [2007] FCAFC 60
Decision Date: 3 May 2007

CaseChat Overview and Summary

The dispute in the case of Macquarie Underwriting Pty Ltd v Permanent Custodians Ltd involved a conflict between the insurer, Macquarie Underwriting Pty Ltd, and the mortgagee, Permanent Custodians Ltd, over the insurer's liability under two separate insurance policies. The case was heard in the Supreme Court of New South Wales, which was asked to determine whether the primary judge had erred in their assessment of the insurer's liability.

The legal issues that the court needed to resolve were primarily focused on whether there was an arguable case for the insured, ARMA, to have a claim under the insurance policies. The court was required to consider whether the insurer had been sufficiently notified of the circumstances that could potentially result in a claim under the policies, whether the insured's representation in the proposal for the second policy was accurate, and whether the insurer had valid grounds to deny liability under both policies.

The court found that the primary judge had indeed erred in their assessment. The insurer had not been adequately notified of the circumstances that could give rise to a claim under the policies, which was a crucial factor in determining the insurer's liability. The court concluded that the insurer had not provided sufficient evidence to support the denial of liability under the policies. Consequently, the appeal was allowed in part, and the orders included varying the leave granted to Permanent Custodians Limited to join Macquarie Underwriting Pty Ltd and SVB Syndicates Ltd as additional respondents, and directing the parties to file submissions on the question of costs.

The final orders of the court included allowing the appeal in part, varying the leave granted to join additional respondents to enforce a charge on insurance moneys under a specific contract of insurance, and directing the parties to submit their costs submissions within a specified timeframe.

Orders

Orders of the court

1. The appeal be allowed in part.

2. Order 1 made on 4 July 2006 granting leave to Permanent Custodians Limited to join Macquarie Underwriting Pty Limited and SVB Syndicates Ltd as additional respondents to proceeding NSD 1758/2004 be varied by limiting that leave to an action seeking to enforce a charge on insurance moneys under a contract of insurance effective between 26 July 2004 and 26 July 2005 being policy number 103004401796 signed for and on behalf of Macquarie Underwriting Pty Limited.

3. The parties file submissions on the question of costs before the primary judge and of the appeal within 14 days.

Background

Background to the litigation

The relevant question on appeal was, therefore, whether the primary judge erred in answering the question whether, by reference to evidence available in the application, it was arguable that the insured had a claim under the relevant policies. The background facts The valuations upon which PCL says it relied were dated 22 May 2003. The alleged default which led to PCL exercising its power of sale over the two properties occurred during the period of the first policy. Mr Teves was advised by letters dated 23 April 2004 and 13 May 2004 from the mortgagee and its solicitors, respectively, of the likelihood of a shortfall upon the mortgagee sale of the properties and that action against him would be taken to recover any such shortfall. ARMA also received a letter dated 13 May 2004 from the mortgagee’s solicitors in similar terms to the second letter to Mr Teves. The last three paragraphs of this letter to Mr Teves and ARMA read as follows:It appears your valuations significantly overvalued the properties, such that our client may suffer a shortfall upon sale of the properties.We have been instructed to take action to recover any shortfall from you.Kindly let us have details of your professional indemnity insurer and confirm they have been notified that circumstances have arisen that may give rise to a claim against you. It does not appear that any action was taken by Mr Teves or ARMA to advise the insurers of the circumstances thereby notified to them prior to the expiry date of the first policy, 26 July 2004. The proposal for the second policy was dated 28 June 2004 and was signed by Mrs Vivian Teves, Mr Teves’ wife, who identified herself as the sole partner/principal/director of ARMA. The proposal contained a representation that no partner, principal, director or employee of ARMA was aware of circumstances that might result in claims against it. It is not necessary for present purposes to explore what rights or remedies this representation might create for the benefit of the insurers, because in the present proceedings they disclaim any reliance upon non-disclosure of the events and circumstances which subsequently generated a claim by ARMA for indemnity under the policy in respect of the shortfall alleged by PCL. The facts and circumstances giving rise to the claim were apparently first notified to Macquarie by letter dated 27 August 2004. Liability under both policies was denied by letter dated 25 October 2004. There were initially three grounds for rejecting the claim. The first was that no indemnity was available under the first policy because the relevant facts, although known, were not notified during the term of that policy. The second was that Mr Teves was not a named valuer under the first policy and so his valuation work was not covered under that policy. The third ground related to the second policy. It was that the second policy, pursuant to the terms of the cover described by it, did not extend to the circumstances which generated the claim for indemnity.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

ALLSOP, GRAHAM AND BUCHANAN JJ

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: ALLSOP, GRAHAM AND BUCHANAN JJ

Full text does not contain this section.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1335 OF 2006

JUDGES:	ALLSOP, GRAHAM AND BUCHANAN JJ
DATE OF ORDER:	3 MAY 2007
WHERE MADE:	SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1335 OF 2006