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Smart v AAI Ltd

Smart v AAI Ltd

Case [2015] NSWSC 392 22 May 2015

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Supreme Court

New South Wales

Medium Neutral Citation: Smart v AAI Ltd; JRK Realty Pty Ltd v AAI Ltd [2015] NSWSC 392
Hearing dates: 16 to 20 February 2015; last written submissions 20 March 2015
Date of orders: 22 May 2015
Decision date: 22 May 2015
Jurisdiction: Common Law
Before: Beech-Jones J
Decision:
In matter number 2013/030193 the Court orders that:

(1)   The proceedings be dismissed; and

(2)   The plaintiff pay the defendant's costs.

In matter number 2013/144336, the Court orders that:

(1)   The proceedings be dismissed; and
(2)   The plaintiff pay the defendant's costs.
Catchwords:
INSURANCE – deregistered company – proceedings under s 601AG of the Corporations Act – recourse against insurer – deregistered company carried on business of finance broking – general manager promoted transaction to plaintiffs to lend funds to business clients – funds transferred to business and then supposedly lent to clients – general manager misappropriated funds – never intended to lend funds to business’s clients – s 601AG(a) – liability of deregistered company to plaintiffs – plaintiffs established liability for breach of contract and false and misleading conduct contrary to former s 52 of the Trade Practices Act 1974 (Cth) – claim in contract not subject to proportionate liability provisions of Civil Liability Act 2002 or Trade Practices Act – contributory negligence not available in respect of liability in contract – s 601AG(b) – whether insurance policy covered deregistered company’s liability to plaintiffs – plaintiffs established a civil liability for “compensation” as defined in the policy – plaintiffs failed to establish that a claim for compensation made upon deregistered company within the policy period – plaintiffs established that liability of deregistered company and claim result from the conduct of “Professional Services” as defined in the policy – defendant insurer established that liability of deregistered company was assumed outside the normal course of the “Professional Services” as defined in the policy – defendant insurer established that liability of deregistered company arose from dishonest or fraudulent acts of deregistered company within dishonesty exclusion clause – exclusion clause not exempted because of acts of “employee” of deregistered company – general manager not employee but acted as part owner.
HELD: Liability of deregistered company to plaintiffs not “covered” by policy – proceedings dismissed.
Legislation Cited: - Civil Liability Act 2002
- Civil Liability Amendment Act 2003
- Civil Procedure Act 2005 – s 100
- Competition and Consumer Act 2010 (Cth)
- Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004
- Corporations Act 2001 (Cth) – s 87CB, s 601AG, s 1041L(2)
- Evidence Act 1995 – s 55
- Fair Trading Amendment (Australian Consumer Law) Act 2010 – Clause 3.2 of Schedule 3
- Insurance Contracts Act 1984 (Cth) – s 54
- Law Reform (Miscellaneous Provisions) Act 1965 – s 8
- Trade Practices Act 1974 (Cth) – s 52
- Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010
Cases Cited:
- Abdalla v Viewdaze Pty Ltd (2003) 122 IR 215

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.

Continue reading Smart v AAI Ltd

Details

AGLC: Smart v AAI Ltd [2015] NSWSC 392
Case: [2015] NSWSC 392
Decision Date: 22 May 2015

CaseChat Overview and Summary

In the case of Smart v AAI Limited, the plaintiffs sought recourse against the defendant insurer for the actions of a deregistered company that had carried on business as a finance broker. The plaintiffs had entered into a transaction promoted by the general manager of the deregistered company, who had induced them to lend funds to business clients. However, the general manager had misappropriated the funds and never intended to lend them to the clients. The plaintiffs established that the deregistered company was liable for breach of contract and false and misleading conduct contrary to former section 52 of the Trade Practices Act 1974 (Cth).

The legal issues before the court were whether the deregistered company’s liability to the plaintiffs was covered by the insurance policy and whether the deregistered company’s liability arose from the conduct of “Professional Services” as defined in the policy. The court found that the deregistered company’s liability to the plaintiffs was not covered by the policy because the liability arose from the dishonest or fraudulent acts of the deregistered company within the dishonesty exclusion clause. The court also found that the liability arose from acts outside the normal course of the “Professional Services” as defined in the policy. The court held that the exclusion clause was not exempted because of the acts of the general manager, who was not an employee but acted as part owner.

The proceedings were dismissed, and the liability of the deregistered company to the plaintiffs was not covered by the policy. The court found that the plaintiffs had not established a claim for compensation made upon the deregistered company within the policy period. The court also found that the deregistered company’s liability and the plaintiffs’ claim resulted from the conduct of “Professional Services” as defined in the policy. However, the court held that the defendant insurer had established that the liability of the deregistered company was assumed outside the normal course of the “Professional Services” as defined in the policy. The court found that the liability of the deregistered company arose from dishonest or fraudulent acts within the dishonesty exclusion clause, and the exclusion clause was not exempted because of the acts of the general manager, who was not an employee but acted as part owner.

Orders