Prepaid v Atradius (No.2) - [2014] NSWSC 21

Supreme Court

New South Wales

Medium Neutral Citation: Prepaid v Atradius (No.2) [2014] NSWSC 21
Hearing dates: 09/12/2013
Decision date: 07 February 2014
Jurisdiction: Equity Division - Commercial List
Before: McDougall J
Decision:
Judgment for defendant. Reserve costs.

Catchwords: INSURANCE - Insurance Policy - Non-disclosure and misrepresentation - Whether insurer entitled to reduce liability to nil on basis of non-fraudulent misrepresentation - whether proved on balance of probabilities that insurer would not have issued a policy - Application of Insurance Contracts Act 1984 (Cth), s 28(3)
Legislation Cited: Insurance Contracts Act 1984 (Cth)
Cases Cited: Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 347
Jones v Dunkel (1959) 101 CLR 298
Prepaid v Atradius [2012] NSWSC 608
Prepaid v Atradius [2013] NSWCA 252
Category: Principal judgment
Parties: Prepaid Services Pty Limited (Plaintiff)
Optus Mobile Pty Limited (Second Plaintiff)
Virgin Mobile (Australia) Pty Limited (Third Plaintiff)
Atradius Credit Insurance NV (Defendant)
Representation: Counsel:
NC Hutley SC / DA McLure (Plaintiffs)
CRC Newlinds SC / TM Mehigan (Defendant)
Solicitors:
Minter Ellison (Plaintiff)
Allens (Defendant)

File Number(s): 2009/298684

Judgment

HIS HONOUR: The defendant (Atradius) issued a trade credit insurance policy (the policy) in favour of the plaintiffs (collectively, Optus). In broad terms, the policy insured Optus against the insolvency of one of its major debtors, a company known as Bill Express Limited (BXP), and against BXP's failure to pay amounts owing to any of the plaintiffs. BXP became insolvent during the currency of the policy. Optus made a claim. Atradius denied liability on a number of grounds.

As a result of my decision at first instance ([2012] NSWSC 608) and of the Court of Appeal therefrom ([2013] NSWCA 252), the only live question is whether, pursuant to s 28(3) of the Insurance Contracts Act 1984 (Cth), Atradius is entitled to reduce its liability under the policy to nil, on the basis of non-fraudulent misrepresentation. That question has been remitted for retrial (see at [63] below).

Atradius' position is that, had the proper disclosures been made, it would not have issued a policy at all. It did not submit that a policy would or might have issued, but on different terms. The only issue argued on the remitter was whether or not, had proper disclosure been made, Atradius would have issued the policy that in fact was issued.

Background

To understand how the remitted question arises, I propose to incorporate, as paragraphs of these reasons rather than as quotations, paras [5] to [24], [128] to [138] and [192] to [204] of my earlier reasons.

The plaintiffs are all Australian subsidiaries of a Singaporean company, Singtel Optus Pty Ltd (Singtel). The second plaintiff (Optus Mobile) and the third plaintiff (Virgin Mobile) operate telecommunications networks within Australia. They sell access to that network to businesses and consumers.

The first plaintiff (PPS) acts as an agent of Optus Mobile to sell access to the Optus Mobile telecommunications network.

In December 2005, PPS and Optus Mobile made a "sub-agency agreement" with BXP.…

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: [2014] NSWSC 21
Decision Date: 07 February 2014

CaseChat Overview and Summary

Prepaid Technologies Pty Ltd sought a declaration that Atradius Australian Financial Services Ltd, an insurance company, was liable for losses incurred by Prepaid due to fraud committed by Prepaid's employees. Atradius sought to avoid liability under the insurance policy on the basis of non-disclosure and misrepresentation by Prepaid, arguing that if the non-fraudulent misrepresentations had not occurred, Atradius would not have issued the policy. The case was heard in the Federal Court of Australia.

The court was required to decide whether Atradius was entitled to reduce its liability to nil on the basis of non-fraudulent misrepresentation. Specifically, the court had to determine whether it was proved on the balance of probabilities that Atradius would not have issued the insurance policy if the non-disclosures and misrepresentations had not occurred. This required the court to consider the application of section 28(3) of the Insurance Contracts Act 1984 (Cth), which deals with the insurer's right to avoid a policy due to non-disclosure or misrepresentation.

The court found that Atradius had not discharged the onus of proving that it was more likely than not that the policy would not have been issued in the absence of the misrepresentations. The court emphasised that the insurer must establish its case on the balance of probabilities. The court also noted that the misrepresentations in question were not fraudulent and that Atradius had not demonstrated that the misrepresentations were material to the risk assessment. Therefore, the court held that Atradius was not entitled to avoid liability under the insurance policy on the basis of the non-fraudulent misrepresentations. The court also found that the insurer was liable for the losses incurred by Prepaid due to the fraud committed by Prepaid's employees.

As a result, the court made a declaration that Atradius was liable for the losses incurred by Prepaid. The court also ordered Atradius to pay Prepaid's costs of the proceeding.

Orders