Onley v Catlin Syndicate Ltd as the Underwriting Member of Lloyd's Syndicate 2003

[2018] FCA 370

FEDERAL COURT OF AUSTRALIA

Onley v Catlin Syndicate Ltd as the Underwriting Member of Lloyd’s Syndicate 2003 [2018] FCA 370

File number(s):	NSD 63 of 2018
Judge(s):	ALLSOP  CJ
Date of judgment:	19 March 2018
Legislation:	Insurance Contracts Act 1984 (Cth)
Date of hearing:	19 March 2018
Registry:	New South Wales
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Commercial Contracts, Banking, Finance and Insurance Insurance List
Category:	No Catchwords
Number of paragraphs:	10
Counsel for the Applicant:	Mr R Johnson
Solicitor for the Applicant:	Pure Legal
Counsel for the Respondent:	Mr SR Donaldson SC with Mr MF Newton
Solicitor for the Respondent:	Norton Rose Fulbright

ORDERS

NSD 63 of 2018

BETWEEN:

JASON ONLEY

Applicant

AND:

CATLIN SYNDICATE LTD AS THE UNDERWRITING MEMBER OF LLOYD’S SYNDICATE 2003
Respondent

JUDGE:	ALLSOP CJ
DATE OF ORDER:	19 MARCH 2018

THE COURT ORDERS THAT:

1.On or before 23 March 2018, the parties confer and submit draft short minutes that set out:

(a)a final form of an agreed question for determination by the Full Court;

(b)an agreed statement of the consequences of the agreed question being answered in any particular way; and

(c)directions for the preparation and filing and serving of one combined book enclosing an agreed statement of facts, agreed documents and submissions of the parties by the middle of April 2018.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

ALLSOP CJ:

1. This is a claim by a director and shareholder of a company which owns and controls (as to 50%) another company, called Synep Pty Ltd.  The respondents are members of a Lloyd Syndicate which, in July 2016, issued through an agent in Australia a policy with the second of the above-named companies. The policy, amongst other things, provided for payment of defence costs in respect of certain proceedings.  The applicant in these proceedings (as an insured) seeks payment of defence costs under the policy in respect of costs incurred, and to be incurred, in the course of criminal proceedings and proceedings under the Proceeds of Crime Act 2002 (Cth) brought against the applicant, amongst other people. These proceedings are underway and this context should be kept in mind. The insurer has purported to avoid the policy on the basis of non-disclosure.

2. At a directions hearing on 16 February 2018, the insurer, through its counsel, was not in a position to articulate with precision the reasons for the avoidance of the policy.  The insurer’s solicitors were also unable to produce the letter of avoidance sent to the insured.  Counsel for the insurer also indicated that the insurer would seek to argue that the applicant in this matter is not properly considered to be insured under the policy.  After some discussion, I stood the case management hearing over to a later date and required the parties to cooperate to identify the best method of resolving this dispute.  I was concerned that there may be reasons for non-disclosure that were different from the matters the subject of the allegations, in respect of which indemnity for costs were sought.  If the non-disclosure were to be limited to those matters, a real question would arise as to whether the form of the policy was such as to deny to the insurer an ability to use the provisions of the Insurance Contracts Act 1984 (Cth) to avoid the policy, even through the operation of contract law or other general law principles.

3. The matter came before me for a second case management hearing on 19 March 2018.   On the previous Friday, 16 March 2018, the parties had sent to me an email that indicated that a convenient method of resolution of the case was agreed.  That email stated the following:

   The parties have been exchanging proposals for the further conduct of the proceedings and are in substantial agreement in that regard. More particularly, as we perceive the position:

   1.The parties are agreed that the case be determined on the basis of agreed facts by a Full Court comprising three judges;

   2.Those issues will be, in substance, whether the respondent, by the terms of the policy sued upon, has contracted out of its right to rely upon the non-disclosures that it alleges or is precluded from so relying by waiver or by reason of its duty of utmost good faith;

   3.The hearing of that issue will finally determine the claim, as;

   a.the respondent will not seek to pursue any case to the effect that the defence costs are not within the scope of the indemnity; and

   b.the applicant does not propose to litigate the question of whether there was a breach of the duty of disclosure if the above issues are resolved against it.

4. In accordance with that anticipated agreement, the parties at the case management hearing handed up an agreed question for determination by the Full Court and that document was as follows:

   Whether, either

   i. On the true construction of the Policy; or

   ii. On application of the principles of waiver under the Insurance Contracts Act 1984 (Cth) (“the Act”) or otherwise; or

   iii. Upon application of the duty of utmost good faith under s 13 of the Act

   the Respondent has agreed not to exercise or is otherwise prevented from exercising rights or from relying on remedies under Part IV of the Act under circumstances where:

   (a) a claim has been made against an insured alleging conduct of the Insured of the kind stipulated in the Dishonest or Criminal Intent / Improper Conduct exclusion (“Conduct”);

   and

   (b) the Conduct has not been established by admission, judgment or other adjudication

   and

   (c) the Respondent’s exercise of rights or entitlement to remedies under Part IV of the ICA is or would be based upon the failure by an insured to disclose that the Conduct had occurred or that it was intended or planned to occur.

5. The reason for the reference to the Full Court was that I had indicated to the parties in February that if the matter was a question of law, or largely so, the Court could put together a Full Court in the original jurisdiction to resolve the matter as quickly as possible.  The criminal and quasi-criminal proceedings are pending in other courts, and the sooner this question of coverage is resolved, the sooner the applicant can understand his position.

6. On 19 March 2018, I indicated to the parties that there should be another paragraph in this document indicating the consequences of answering the question one way or another.  The parties are attending to the drafting of that part of the document.

7. I was informed at the directions hearing that there was at least one other potential applicant, a Mr Adam Cranston.  He apparently is commencing proceedings in the Federal Court identical to the applicant, Mr Onley.  I was informed by Mr Johnson, who appears for the applicant, that Mr Cranston wishes to participate in these proceedings along the same lines.  There is also the question of Synep Pty Ltd, which is in provisional liquidation.  Its position is a matter for it.  The parties have been keeping the provisional liquidator informed of what is occurring in these proceedings. They should continue to do so.

8. I have indicated to the parties that I am prepared to convene a Full Court to hear this matter as soon as possible.  I will direct the parties to prepare all necessary documents, including agreed statements of facts and written submissions, by the middle of April 2018.  In accordance with that request to the parties, I have asked the parties to provide agreed dates for counsel to argue this matter.  On the basis of what I have been told, it is no more than half a day.  That half a day could be accommodated in a morning or an afternoon, or if there is difficulty obtaining clear time, two afternoons of not before 3.15pm or not before 4.15pm could be made available.  At the moment, a Full Court may require a video-link to one other registry with two judges hearing the matter in Sydney.

9. I have set these matters out in these reasons so that there is a convenient and unambiguous statement of the Court’s intentions for Mr Cranston, Synep Pty Ltd and any other party interested in participating in the proceeding.  The matter will be heard on the earliest possible date after mid-April.

10. The orders of the Court are that:

    (1)On or before 23 March 2018, the parties confer and submit draft short minutes that set out:

    (a)a final form of an agreed question for determination by the Full Court;

    (b)an agreed statement of the consequences of the agreed question being answered in any particular way; and

    (c)directions for the preparation and filing and serving of one combined book enclosing an agreed statement of facts, agreed documents and submissions of the parties by the middle of April 2018.

I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop.

Associate:    

Dated:        19 March 2018