Permanent Trustee Australia Ltd & Anor v FAI General Insurance (In Liq)

Permanent Trustee Australia Ltd and another party (the appellants) appealed to the High Court of Australia against a decision of the Full Court of the Supreme Court of New South Wales, which had affirmed a judgment in favour of FAI General Insurance (in liquidation) (the respondent). The dispute concerned the interpretation of a directors and officers liability insurance policy and whether it covered certain claims made against the directors of a company, the subject of which was a substantial shortfall in the company's superannuation fund. The appellants, as former directors, sought indemnity under the policy for claims brought against them by the liquidator of the company.

The High Court was required to determine whether the claims made against the directors constituted "Loss" as defined by the policy, and specifically whether the shortfall in the superannuation fund fell within the exclusion for "any liability for any shortfall in any superannuation fund or retirement fund". A further issue was whether the policy provided cover for claims brought by a liquidator on behalf of a company against its directors.

The High Court, by majority, held that the claims against the directors did not constitute "Loss" under the policy. Their Honours reasoned that the policy was intended to cover claims made by third parties against directors for wrongful acts, not claims made by the company itself (or its liquidator) for breaches of duty owed to the company. Furthermore, the superannuation fund shortfall was found to be a liability for which the directors were not indemnified due to the clear exclusion clause. The principles applied centred on the construction of insurance policies, the ordinary meaning of the words used, and the intention of the parties as evidenced by the policy wording, particularly in relation to the scope of cover and exclusions.

The appeal was dismissed.