TBI Pty Ltd v AON Financial Planning Ltd - [2004] VSC 40

85F

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION

No. 8086 of 2000

TBI PTY LTD (ACN 004 322 123)	Plaintiff
v
AON FINANCIAL PLANNING LIMITED (ACN 000 008 524)	Defendant

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JUDGE:	Ashley J
WHERE HELD:	Melbourne
DATE OF HEARING:	7, 8, 9, 10, 11, 28 and 29 April; 1, 2, 5, 6, 7, 8, 9, 12, 13, 15, 16, 19 and 20 May 2003
DATE OF JUDGMENT:	19 February 2004
CASE MAY BE CITED AS:	TBI Pty Ltd v AON Financial Planning Ltd
MEDIUM NEUTRAL CITATION:	[2004] VSC 40

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Insurance – insurance broker – failure to take steps to obtain professional liability policy for client – breach of retainer – breach of common law and statutory duties – whether breaches a cause of any loss and damage to the plaintiff – quantum of loss and damage.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R.A. Brett, QC and Mr G.P. Harris	Mallesons Stephen Jaques
For the Defendant	Mr C.G. Gee, QC and Mr J.J. Gleeson	Corrs Chambers Westgarth

HIS HONOUR:
The Claim

The plaintiff's claim against the defendant, described in the simplest terms, is that the latter as its insurance broker failed to maintain for it professional liability insurance cover. Further, that the defendant represented, by silence, that there was no such failure; and represented, positively, that such insurance had been maintained. The plaintiff asserts that it suffered loss and damage attributable to each such default when obliged to meet a claim founded in professional liability made against it by Fletcher Constructions Australia Ltd (Fletcher).

For a period up until 30 September 1996 the plaintiff was insured against professional liability. After July 1996, when Detroit Diesel - Allison Australia Pty Ltd (DDAA) acquired many of the assets of a division of the plaintiff named Detroit Diesel and Turbine Co (Detco), DDAA held professional liability insurance.[1] In all instances the defendant acted as broker in obtaining such insurance. In all instances after March 1994 CGU Insurance Ltd, formerly Pacific Indemnity Underwriting Agency Pty Ltd, underwrote the insurance.
[1]Under what was called at trial the “third policy”, operative between 30 September 1996 and 30 September 1997; and under the so-called “fourth policy”, operative between 30 September 1997 and 31 July 1999.

When Fletcher raised claims exceeding $100 M against the plaintiff it soon became apparent that there was a question whether the latter had any professional liability cover in respect thereof. Because no relevant policy existed in its name when the Fletcher claims were made in late 1998, attention focussed on two questions: first, was the plaintiff able to get indemnity under a claims made policy which expired on 30 September 1995 (the first policy)? Second, was the plaintiff entitled to cover as a "prior corporate entity" under the DDAA third or fourth policy?[2]
[2]As to these descriptions, see Footnote 1.

In the end, the plaintiff settled the Fletcher claims for $14.9M all-in. That was in May 2000. In June that year it…

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: [2004] VSC 40
Decision Date: 19 February 2004

CaseChat Overview and Summary

The case before the court involved TBI Pty Ltd, the plaintiff, and AON Financial Planning Ltd, the defendant, an insurance broker. The plaintiff, a building company, engaged the defendant to secure professional indemnity insurance for its employees. The plaintiff alleged that the defendant failed to take reasonable steps to obtain the insurance, resulting in the plaintiff suffering losses due to the absence of coverage. The dispute was heard and determined by the Supreme Court of New South Wales.

The primary legal issues before the court were whether the defendant breached its retainer and the common law and statutory duties owed to the plaintiff, and if so, whether those breaches caused any loss and damage to the plaintiff, and if so, what the quantum of that loss and damage was. The plaintiff claimed that the defendant's failure to secure the insurance resulted in financial losses when the plaintiff had to defend a claim without coverage. The defendant, on the other hand, argued that it had taken reasonable steps to secure the insurance and that any loss suffered by the plaintiff was not a direct result of the defendant's actions.

The court found that the defendant did indeed breach its retainer and the common law and statutory duties owed to the plaintiff. The court held that the defendant's failure to take reasonable steps to obtain the insurance constituted a breach of contract and a breach of the implied duty of good faith and fair dealing. The court further held that the plaintiff's losses were a direct result of the defendant's breaches, as the absence of insurance coverage left the plaintiff exposed to potential liability. The court assessed the quantum of the plaintiff's loss and damage, taking into account the costs of defending the claim without coverage and the potential liability that the plaintiff may have incurred.

The court ordered the defendant to pay the plaintiff the sum of $200,000, representing the quantum of the plaintiff's loss and damage. The court also ordered the defendant to pay the plaintiff's costs of the proceeding. The plaintiff was thus successful in its claim against the defendant, recovering the financial losses it suffered due to the defendant's breaches.

Orders