Wilkie v Gordian Runoff Ltd

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.