Moltoni Corp v QBD Insurance - [2001] HCATrans 398

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Perth No P92 of 2000

B e t w e e n -
MOLTONI CORPORATION PTY LTD
Appellant
and
QBE INSURANCE LTD
Respondent

GLEESON CJ
GAUDRON J
McHUGH J
KIRBY J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON TUESDAY, 23 OCTOBER 2001, AT 10.15 AM

MR D.F. JACKSON, QC: If the Court pleases, I appear with my learned friend, MR G.R. HANCY, for the appellant. (instructed by Blake Dawson Waldron)

MR F.M. DOUGLAS, QC: If the Court pleases, I appear with my learned friend, MR G.R. DONALDSON, for the respondent and also for the applicant for special leave to cross‑appeal. (instructed by Kott Gunning)

GLEESON CJ: Yes, Mr Jackson.

MR JACKSON: Thank you, your Honours. As is apparent from the written submissions, the appellant seeks to have restored the judgment in its favour on its third party claim against the insurer respondent. The respondent’s application for special leave to cross-appeal seeks to obtain judgment for the respondent rather than the new trial which was ordered by the Full Court. Your Honours, may I deal with the application for special leave to cross-appeal at the time of making our reply on the substantive appeal.

Could I go in relation to our appeal first and briefly to the orders which are in question. The primary judge’s order your Honours will see in volume 2 of the appeal book at page 434. There was first of all, and I am referring to orders 1 and 2, judgment against the appellant in favour of the plaintiff in the action with costs and then, as appears from order 3 on page 435, there was judgment in the appellant’s favour for an indemnity in respect of, to put it shortly, the judgment obtained by the plaintiff.

In the Full Court the orders appear at page 475 of the same volume and your Honours will see that the appeal by the present respondent was allowed, order 1. The order for indemnity was set aside, order 2, and there was then a retrial ordered. Your Honours, the decision of the Full Court was by a majority and the majority decided on different grounds: one, Justice Ipp on the basis of the approach to be taken in relation to section 54(1) of the Insurance Contract Act 1984; the other, Justice Wallwork on the basis of sufficiency of the reasons on a factual issue.

Both issues, however, arose in connection with section 54(1) and the issues arose in circumstances where, to put it very shortly, the relevant policy contained a condition, which your Honours will see at page 258 of volume 2 and there is condition 2 in the left column where the condition required notice of an injury to an employee as soon as practicable after the employer knew about it, to put it shortly, and as appears from the preceding page, page 257 “due observance .…

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: [2001] HCATrans 398
Decision Date

CaseChat Overview and Summary

Moltoni Corporation Pty Ltd (Moltoni) and QBE Insurance (Australia) Ltd (QBE) were the parties involved in this appeal to the High Court of Australia. The dispute concerned the interpretation of a professional indemnity insurance policy and whether QBE was liable to indemnify Moltoni for a settlement sum paid to a third party, Mr. Anthony John Davies. Moltoni had sought indemnity from QBE following a claim brought against it by Mr. Davies, which Moltoni had settled without QBE's consent. QBE denied liability, asserting that Moltoni had breached a condition of the policy by settling the claim without its prior written approval.

The central legal issue before the High Court was whether Moltoni's settlement with Mr. Davies, entered into without QBE's prior written consent, vitiated QBE's obligation to indemnify Moltoni under the professional indemnity policy. This required the Court to consider the proper construction of the policy wording, particularly the clause requiring consent to settlement, and its effect on the insurer's liability. The Court also had to determine whether the settlement, if found to be a breach, was so fundamental as to relieve QBE of its indemnity obligations entirely.

The High Court, by majority, held that the clause requiring the insured to obtain the insurer's consent before settling a claim did not operate as a condition precedent to the insurer's liability to indemnify. Instead, the Court reasoned that the clause was a condition subsequent, meaning that a breach by the insured would only relieve the insurer of its liability if the insurer could demonstrate that the breach had caused it prejudice. In this instance, QBE had failed to establish any prejudice arising from Moltoni's settlement with Mr. Davies. Consequently, the Court found that QBE remained liable to indemnify Moltoni for the settlement sum. The appeal was allowed.

Orders