Legal Research
Cases
Wilkie v Gordian Runoff Ltd

Wilkie v Gordian Runoff Ltd

Link copied

Case Copied 7 April 2005 25 min read

Contents

On this page

HIGH COURT OF AUSTRALIA
GLEESON CJ,
McHUGH, GUMMOW, KIRBY AND CALLINAN JJ
DANIEL WILKIE  APPELLANT
AND
GORDIAN RUNOFF LIMITED (formerly known as
GIO INSURANCE LIMITED) & ANOR  RESPONDENTS
Wilkie v Gordian Runoff Limited [2005] HCA 17
7 April 2005
S304/2004
ORDER
1.        Appeal allowed with costs.
2.Set aside order 2 of the orders of the Supreme Court of New South Wales made on 18 November 2003 and in its place order "The question be answered 'No'."

3.Respondents to pay the costs of and related to the determination of the question in the Supreme Court of New South Wales.

On appeal from the Supreme Court of New South Wales
Representation:
B W Walker SC with M J Leeming for the appellant (instructed by Speed & Stracey)
M A Pembroke SC with A S Bell for the respondents (instructed by Henry Davis York)
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

GLEESON CJ, McHUGH, GUMMOW AND KIRBY JJ. This appeal concerns the construction of a Directors & Officers/Company Reimbursement Policy dated 23 February 2000 ("the Policy"). The primary operation of the Policy is to insure to a limit of $20 million the "Insured" (defined as including past, present and future directors, officers and employees of FAI Insurance Limited ("FAI") and its subsidiaries, collectively called "the Organisation") against certain Loss arising out of any Claim. The Claim must be first made against an Insured and notified in the Period of Insurance and be in respect of any Wrongful Act committed or alleged to have been committed up to 31 May 1999. The terms "Loss", "Claim", "Wrongful Act" and "Period of Insurance" are all defined. The Period of Insurance commenced on 31 May 1999 and ends on 31 May 2006. The text of the definitions of "Loss", "Claim" and "Wrongful Act" appears later in these reasons. The appellant, Mr Wilkie, is within the class of persons each of which is an Insured because at all relevant times he was an executive officer or employee of FAI or a subsidiary of FAI.
Where the Policy refers to "GIO", it means GIO Insurance Limited (as the first respondent was then known) for 60 per cent of the limit of liability, and RE Brown Syndicate at Lloyds, London (as the second respondent was then known) for 40 per cent of that limit. In these reasons, unless otherwise indicated, references to GIO are to GIO as defined in the Policy and thus to the respondents collectively. The liability of GIO under the Policy in respect of all Claims does not exceed the limit of liability stated above.
The governing law chosen in the Policy is identified as that of the Commonwealth of Australia and of the State where it was issued, which appears to be New South Wales. The result is to attract the application of the Insurance Contracts Act 1984 (Cth) ("the Insurance Contracts Act")[1].
[1]See s 8 thereof and Akai Pty…

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.

Keep reading for free

Create a free CaseChat account to read Wilkie v Gordian Runoff Ltd and more:

Read every judgment in full
Ask AI and get answers linked to paragraphs
See how each paragraph was cited in later cases
Download judgments as PDF or Word

Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details

Case: [2005] HCA 17
Decision Date: 7 April 2005

CaseChat Overview and Summary

The appellant, Mr Wilkie, sought advance payment of defence costs under a directors and officers liability insurance policy following criminal proceedings instituted against him by the Australian Securities and Investments Commission. The respondent insurer denied indemnity, relying on an exclusion clause for dishonest, fraudulent, criminal, or malicious conduct. This exclusion was only enlivened if the conduct was admitted by the insured or established by a court, tribunal, or arbitrator. The appellant had not admitted the alleged conduct, nor had it been judicially determined. The dispute concerned whether the respondent had effectively denied indemnity by relying on this exclusion in the circumstances.

The High Court was required to determine whether the respondent had effectively denied indemnity for the appellant's claim for advance defence costs. Specifically, the Court had to consider whether the respondent's stated reliance upon Exclusion 7 of the policy was sufficient to deny indemnity, and whether that exclusion was engaged in the circumstances of the case, given that the appellant had not admitted the conduct and it had not been established by any adjudication. The Court also considered the application of the Insurance Contracts Act 1984 (Cth).

The High Court allowed the appeal, setting aside the order of the Supreme Court of New South Wales. The Court reasoned that the respondent's reliance on Exclusion 7 was not sufficient to deny indemnity because the conditions for that exclusion to be enlivened – namely, admission by the insured or establishment by adjudication – had not been met. The Court held that the respondent's letter denying indemnity, based solely on the exclusion, did not operate to deny indemnity in the circumstances. The Court answered the agreed separate question in the negative.

Orders

Orders of the court

1. Appeal allowed with costs.

2. Set aside order 2 of the orders of the Supreme Court of New South Wales made on 18 November 2003 and in its place order "The question be answered 'No'."

3. Respondents to pay the costs of and related to the determination of the question in the Supreme Court of New South Wales.

Background

Background to the litigation

The governing law chosen in the Policy is identified as that of the Commonwealth of Australia and of the State where it was issued, which appears to be New South Wales. The result is to attract the application of the Insurance Contracts Act 1984 (Cth) ("the Insurance Contracts Act")[1].[1]See s 8 thereof and Akai Pty Ltd v People's Insurance Co Ltd (1996) 188 CLR 418.The background facts The question of construction of the Policy arises in circumstances where the appellant notified a claim in respect of criminal proceedings and sought the advancement of his Defence Costs (as defined in the Policy) but GIO denied liability, relying upon Exclusion 7, a "dishonesty exclusion". The criminal proceedings were instituted by process issued out of the Local Court at Sydney, on 29 May 2003, on information laid by the Australian Securities and Investments Commission ("ASIC"). The prosecution of the appellant is for alleged offences under the Corporations Act 2001 (Cth) ("the Act"). It is alleged that at Sydney between about 26 June 1998 and 9 September 1998, the appellant, being an officer of FAI General Insurance Company Limited ("FAIG"), permitted the making available to the auditor of FAI, which controlled FAIG, information relating to the affairs of FAIG but with omissions rendering the information misleading in a material respect. The appellant is said thereby to be guilty of an offence under ss 1309(1) and 1311(1) of the Act. It is further alleged that at Sydney between about 1 March 1998 and 6 May 1998 and between about 23 June 1998 and 26 June 1998, the appellant, being an officer of FAIG, knowingly failed to act honestly in the exercise of his powers and the discharge of his duties of office with the intention to deceive the auditors of FAI. The appellant is said thereby to have acted contrary to ss 232(2) and 1317FA of the Corporations Law as taken to be included in the Act by s 1401 of the Act. The appellant has not admitted these offences, nor has there been any adjudication of them. The appellant's claim for indemnity was not brought on the primary operation of the Policy. Rather, the claim was for the Defence Costs to be incurred in the appellant's defence of the charges brought against him by ASIC. Extension 9 to the Policy is headed "ADVANCE PAYMENT OF DEFENCE COSTS" and it was upon this that the appellant relied for payment of those costs as and when incurred. The Commonwealth Director of Public Prosecutions supplied the appellant's solicitors with a copy of the brief of evidence and they, in turn, provided a copy to the solicitors for GIO[2]. After a review of this material by counsel for GIO, on 25 September 2003 GIO's solicitors wrote to the appellant's solicitors informing them that their clients "deny indemnity for the claim pursuant to the terms of Exclusion 7 of the Policy".[2]The Policy required the Insured "to provide such information and assistance to GIO as it reasonably requires ... to enable it to determine its liability under this policy" (Condition 3.4).

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

HUGH, GUMMOW AND KIRBY JJ CALLINAN J (dissent)

It also should be noted that the denial by GIO of indemnity was founded solely on Exclusion 7. No other ground based in the terms of the Policy was asserted. Nor did GIO rely upon any of the statutory grounds of avoidance for failure to disclose a matter before contract or for misrepresentation or incorrect statements[3].[3]Insurance Contracts Act, Pt IV, Div 3 (ss 28-33).The decision of the Supreme Court By his amended summons in the Equity Division of the Supreme Court of New South Wales dated 25 September 2003, the appellant claims, among other relief, a declaration that the respondents were not entitled to rely on Exclusion 7 of the Policy in denying indemnity to him under Extension 9. The appellant also seeks a mandatory order that the respondents pay all the appellant's reasonable Defence Costs as and when they are incurred on condition that the respondents have the right to recover those payments from the appellant in the event, and to the extent, that it be subsequently established by judgment or other final adjudication that the appellant was not entitled to indemnity under the Policy. There have been no pleadings. An order was made by the Supreme Court[4] that the question whether the respondents were entitled to decline to indemnify the appellant be determined as a separate question. The terms of the separate question were then agreed and the matter was promptly heard by the Supreme Court (Nicholas J). On 18 November 2003, his Honour delivered reasons for judgment in which he answered the question "yes" and, thus, answered it adversely to the appellant.[4]Pursuant to Pt 31 r 2 of the Supreme Court Rules 1970 (NSW). In reaching that decision, Nicholas J paid close attention to the decision of the New South Wales Court of Appeal in Silbermann v CGU Insurance Ltd; Rich v CGU Insurance Ltd; Greaves v CGU Insurance Ltd[5], the reasoning in which he regarded as directly applicable to the Policy. This Court granted special leave to appeal directly from the decision of Nicholas J and ordered that the appeal be heard on the same occasion as the then pending appeals in Silbermann and Rich. However, it became apparent in the course of argument that distinct issues arose in those appeals which did not arise in this appeal.[5](2003) 57 NSWLR 469 at 484‑488. The question determined adversely to the appellant by Nicholas J was drawn in precise terms 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;2. The [respondents] on 25 September 2003 wrote to the [appellant] stating that '[the first respondent] and [the second respondent] deny indemnity for the claim pursuant to the terms of Exclusion 7 of the Policy';3. The [appellant] has not admitted that his conduct falls within Exclusion 7;4. The conduct referred to in Exclusion 7 has not been 'subsequently established to have occurred following the adjudication of any court, tribunal or arbitrator'; and5. The [appellant] does not, for the purposes of the determination of this separate question, allege that the [respondents] acted other than in good faith in writing the letter referred to in paragraph 2 above,then:Are the [respondents] free of any obligation to indemnify the [appellant] under [Extension 9] of the Policy when the basis relied upon by the [respondents] in their letter of 25 September 2003 was solely Exclusion 7 of the Policy?"The terms of the insurance policy

Ratio Decidendi

Legal Principle Established

Established by: HUGH, GUMMOW AND KIRBY JJ,

Full text does not contain this section.