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

The appeal concerned the interpretation and application of sections 21 and 26 of the *Insurance Contracts Act 1984* (Cth) to an arrangement for a short extension of an existing insurance policy. The appellants, Permanent Trustee Australia Limited and Permanent Trustee Company Limited, sought professional indemnity insurance cover of $70 million, with FAI General Insurance Company Limited (In Liq) providing a significant portion of the excess cover. The dispute arose when the appellants, through their broker Sedgwick, decided not to invite FAI to renew its participation in the insurance program for the upcoming year, instead seeking quotes from other insurers. Despite this decision, Sedgwick requested a 30-day extension of the existing cover from FAI, without disclosing the appellants' intention not to offer renewal.

The central legal issues before the High Court were whether the appellants' decision to obtain and consider quotes from other insurers before approaching FAI, and their contemplation that FAI might not be invited to participate in the renewal, constituted a "matter relevant to the decision of the insurer whether to accept the risk" under section 21(1)(a) of the Act. Additionally, the Court considered whether this non-disclosure amounted to a misrepresentation in breach of section 26(2) of the Act. The appellants argued that the interpretation of these sections by the lower courts was too broad.

The High Court reasoned that the appellants' intention not to renew FAI's participation, coupled with the instruction to Sedgwick to hold off approaching FAI, was a matter relevant to FAI's decision to accept the risk for the extension period. The Court found that FAI, as an insurer, would have considered the prospect of renewal when deciding whether to grant an extension, and the non-disclosure of this intention deprived FAI of material information. The Court noted that the trial judge and the Court of Appeal had made findings of fact that the appellants had provisionally decided not to offer renewal to FAI and had instructed their broker accordingly, and that the broker had deliberately omitted to disclose this to FAI during the extension request.

The High Court allowed the appeal, setting aside the orders of the New South Wales Court of Appeal. The Court entered judgment for the appellants against the respondent for substantial sums, representing the amounts claimed under the insurance policies, together with interest. The respondent was also ordered to pay the appellants' costs at first instance and on appeal.