Malamit Pty Ltd v WFI Insurance Ltd

Malamit Pty Ltd (the appellant) appealed a decision concerning a professional indemnity insurance policy issued by WFI Insurance Ltd (the respondent). The dispute arose from civil proceedings commenced by the trustee for a unit trust against Malamit. Malamit sought a declaration of indemnity from WFI under its policy and, alternatively, damages against its insurance brokers. The appeal concerned the interpretation of the insurance policy, specifically whether the claim brought by the trustee fell within the scope of cover or was excluded by certain provisions.

The central legal issues before the Court of Appeal were whether the civil proceeding brought by the trustee constituted a claim brought by a third party within the insuring clause of the policy, and whether the claim was excluded by provisions relating to claims brought for the benefit of the insured or its associates, particularly given the director and shareholder connections between Malamit, the trustee, and entities associated with the director's family. The court also considered whether the insurance brokers should be joined as parties to the appeal, given that their liability was contingent on the insurer's non-liability.

The Court of Appeal reasoned that the insurance policy was a composite policy, and its terms were to be construed distributively. The court found that the claim brought by the trustee was indeed a claim brought by a third party within the insuring clause. However, it also determined that the claim was brought for the benefit of the director of Malamit and his family members, who were unitholders in the trust through corporate entities. This brought the claim within the scope of the exclusion clause, which excluded claims brought on behalf or for the benefit of associates of the insured. Consequently, the appeal was dismissed.

The Court of Appeal ordered that Arthur J Gallagher (Aus) Pty Ltd and Martin Andrews be joined as second and third respondents to the appeal. The appeal itself was dismissed, with the appellant ordered to pay WFI Insurance Ltd’s costs of the appeal and the second and third respondents’ costs of their notice of motion to be joined as parties.