Stealth Enterprises Pty Ltd v Calliden Insurance Ltd

Stealth Enterprises Pty Ltd, the insured, sought to recover damages from Calliden Insurance Ltd, the insurer, following a fire that destroyed the insured's premises, a brothel and escort agency. The insurer refused to pay the claim on the basis that the insured had failed to disclose that the sole director and manager were members of the Comancheros outlaw motorcycle gang and that the business registration had lapsed. The insurer argued that it would not have issued the insurance policy if these facts had been known. The dispute was heard in the Federal Court of Australia.

The court was required to determine whether the insurer was entitled to avoid the policy based on non-disclosure under section 21 of the Insurance Contracts Act 1984 (Cth). The court also had to consider whether the insurer could reduce its liability to nil under section 28 of the same Act. Additionally, the court examined the admissibility of expert evidence regarding the conduct of outlaw motorcycle gangs and the granting of an application to call late evidence.

The court found that the insurer would not have issued the policy if the non-disclosed facts had been known. However, the court determined that the non-disclosure did not establish fraud. Instead, the court applied the Jones v Dunkel inference, which allows for the non-disclosure to be considered as a material factor in the insurer's decision-making process. The court concluded that the insurer could reduce its liability to nil under section 28 of the Insurance Contracts Act. The court also admitted expert evidence regarding the conduct of outlaw motorcycle gangs as a matter of common knowledge and allowed the application to call late evidence due to the reliability and credibility of the evidence presented.

The court ordered that Calliden Insurance Ltd pay Stealth Enterprises Pty Ltd a reduced amount for the loss caused by the fire, reflecting the reduction in liability under section 28 of the Insurance Contracts Act. The court also determined that the application to call late evidence was properly granted, and the evidence presented was admissible and relevant to the case.