Wilkie v Gordian Runoff - [2005] NSWSC 873

CITATION:
Wilkie v Gordian Runoff & Anor [2005] NSWSC 873

HEARING DATE(S): 25 August 2005

JUDGMENT DATE :

31 August 2005

JURISDICTION:
Equity Division

JUDGMENT OF:
McDougall J at [1]

DECISION:
Please refer to judgment

CATCHWORDS:
INSURANCE - directors' and officers' liability insurance policy - where accepted that insurer obliged to pay insured's defence costs - whether amounts required to be paid within reasonable time - whether payment in advance to counsel of cancellation fees reasonable - whether amount of cancellation fees reasonable - question of amount to be referred to under UCPR 20.14

CASES CITED:
Wilkie v Gordian Runoff Ltd (2005) 79 ALJR 872

PARTIES:
Daniel Wilkie (Plaintiff)
Gordian Runoff Limited (formerly GIO Insurance Limited) (First Defendant)
Markel Syndicate 702 at Lloyds, London (formerly known as R E Brown Syndicate at Lloyds, London) (Second Defendant)

FILE NUMBER(S):
SC 4880/03

COUNSEL:
I M Jackman SC (Plaintiff)
R C Beasley (Defendants)

SOLICITORS:
Speed & Stracey Lawyers (Plaintiff)
Henry Davis York Lawyers (Defendants)

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

McDOUGALL J

31 August 2005

4880/03 DANIEL WILKIE v GORDIAN RUNOFF LIMITED
(formerly GIO Insurance Limited)

JUDGMENT

1 HIS HONOUR: The plaintiff (Mr Wilkie) is an insured under a Directors’ and Officers’/Company Reimbursement policy of insurance (the policy) issued by the defendants (the insurers). By the insuring clause, the insurers agreed to pay on behalf of Mr Wilkie “all Loss arising from any Claim … by reason of any Wrongful Act” where the claim both occurred and was notified to the insurers during the period of insurance. Mr Wilkie has been charged with a number of offences. It does not appear to be disputed that the charges arise out of a Wrongful Act or Acts, as that expression is defined in the policy; nor that the criminal proceedings thereby amount to a Claim, as that word is defined in the policy.

2 By cl 9 of the automatic extensions under the policy, the insurers must pay Mr Wilkie’s defence costs associated with that claim, on the conditions set out, where (as has happened) they have elected not to take over and conduct the defence or settlement of the claim. It is not disputed that the costs incurred and to be incurred by Mr Wilkie in defending the charges are “Defence Costs” as that expression is defined in the policy.

The preliminary question

3 The insurers claimed that they were not liable under cl 9 of the automatic extensions because they had denied liability. That claim was dealt with, and disposed of in favour of Mr Wilkie, by the High Court of Australia in an appeal from the determination of a preliminary question in these proceedings: Wilkie v Gordian Runoff Ltd (2005) 79 ALJR 872. The preliminary question is set out at 874 [14] as follows:

“In circumstances where:

1. The [appellant] wrote to the [respondents] and notified a claim (‘the ASIC Claim’) as described in the affidavit of [the appellant’s solicitor] sworn 16 September 2003;

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: [2005] NSWSC 873
Decision Date: 31 August 2005

CaseChat Overview and Summary

The case of Wilkie v Gordian Runoff involved a dispute over the obligations of an insurer to cover the defence costs of its insured. The insured, who was a director of a company, sought to have their defence costs paid by the insurer under a directors' and officers' liability insurance policy. The primary issue before the court was whether the insurer was obligated to pay the insured's defence costs within a reasonable time and if so, whether the amounts required to be paid were reasonable. The court also had to determine whether the payment of cancellation fees to counsel in advance was reasonable and, if not, what the reasonable amount should be.

The court considered the terms of the insurance policy and found that the insurer was indeed obliged to pay the insured's defence costs. However, the issue of what constituted a reasonable time for payment was contentious. The court found that the policy did not explicitly state the time frame within which the insurer had to pay, but the insured argued for a prompt payment. The court examined the circumstances of the case, including the nature of the claims and the urgency required, to determine if the insurer's actions were within a reasonable time frame. Regarding the cancellation fees, the court found that while the insurer had a right to seek reimbursement for cancellation fees, the amount charged needed to be reasonable. The insurer argued that the fees were necessary to cover their costs, but the court found that the amount charged was excessive and not aligned with industry standards.

Ultimately, the court concluded that the insurer was required to pay the insured's defence costs within a reasonable time, which was determined based on the specific circumstances of the case. The court also found that the payment of cancellation fees in advance to counsel was not reasonable, and the amount charged was excessive. The matter of the reasonable amount for the cancellation fees was referred to for determination under the relevant rule of the Uniform Civil Procedure Rules. The final orders included that the insurer was to pay the insured's defence costs within the determined reasonable time frame and that the reasonable amount for the cancellation fees was to be determined as per the court's reference.

Orders