Zurich Australian Insurance Limited v CIMIC Group Limited & Ors [2024] NSWCA 229
Hearing dates:
19-22 September 2023
Date of orders:
18 September 2024
Decision date:
18 September 2024
Before:
White JA, Stern JA and Griffiths AJA
Decision:
(1) Zurich Appeal (2022/00334409)
(a) Zurich’s appeal allowed in part.
(b) CIMIC’s cross-appeal dismissed.
(c) AIG’s cross-appeal dismissed.
(2) Berkley Appeal (2022/00334264)
(a) Berkley’s appeal allowed.
(b) CIMIC’s cross-appeal dismissed.
(3) Arch/Dual Appeal (2022/00335502)
(a) Arch/Dual’s appeal allowed.
(4) Chubb Appeal (2022/00336236)
(a) Chubb’s appeal dismissed.
(5) Set aside Orders 9, 10, 11 and 13 made on 12 October 2022 and Orders 7 and 8 made on 23 June 2023.
(6) In lieu thereof order that:
(a) Subject to the relief granted by Orders 2 to 5 made on 12 October 2022 and Orders 1-6 and 9 made on 23 June 2023, CIMIC’s further amended summons dismissed with costs.
(b) AIG’s first cross-claim against Berkley dismissed with costs.
(7) Within 28 days hereof the parties provide the Court with consent orders as to the costs of the proceedings in this Court, to the extent agreement has been reached.
(8) To the extent agreement as to the costs of the appeals, cross-appeals, and notices of contention has not been reached, within 28 days hereof the parties concerned are to file and serve written submissions not exceeding six pages identifying the areas of disagreement and containing that party’s submissions on the matters in contention concerning costs. The issues of costs will, subject to any contrary order, be dealt with on the papers and without a further hearing.
Catchwords:
INSURANCE – Insurance Contracts Act 1984 (Cth) – non-disclosure and misrepresentation – duty of disclosure – where senior executive of Leighton made a file note in November 2010 detailing conversations with another senior executive (“Iraq File Note”) – where that executive advised he had an opportunity to extend/vary a contract for a major infrastructure project in Iraq but it would require payment to a third party nominated subcontractor of $50-$60 million where the real value of the work was less than 50% of the payment, and that the current contract was won by a payment to a nominated subcontractor “on the same terms” – where Iraq File Note not disclosed to insurers for 2011 year (“2011 Insurers”) – where Leighton subsequently entered into primary and excess layers of D&O Insurance for the 2011 year (“2011 Policies”) – whether Leighton breached its duty of disclosure under s 21 of the Insurance Contracts Act and made a misrepresentation to the 2011 Insurers
INSURANCE – Insurance Contracts Act 1984 (Cth) – whether the 2011 Insurers were entitled to reduce their liability to nil under s 28(3) of the Insurance Contracts Act
INSURANCE – Liability insurance – directors and officers – whether cll 5.3 and 7.1 of the 2011 Policy precluded the 2011 Insurers from reducing their liability under s 28 of the Insurance Contracts…
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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AGLC
Zurich Australian Insurance Limited v CIMIC Group Limited [2024] NSWCA 229
Case
[2024] NSWCA 229
Decision Date
CaseChat Overview and Summary
In Zurich Australian Insurance Limited v CIMIC Group Limited, the New South Wales Court of Appeal considered appeals and cross-appeals concerning a dispute over Directors and Officers (D&O) liability insurance policies. The central issue involved whether Leighton (now CIMIC Group Limited) had breached its duty of disclosure under the *Insurance Contracts Act 1984* (Cth) by failing to disclose an internal file note detailing concerns about payments to a nominated subcontractor in Iraq when seeking D&O insurance for the 2011 financial year. The insurers argued that this non-disclosure entitled them to reduce their liability to nil.
The Court was required to determine several key legal questions. Firstly, whether the "Iraq File Note," which recorded a senior executive's concerns about the true value of work performed under a contract and the nature of payments to a nominated subcontractor, constituted a material non-disclosure or misrepresentation to the insurers for the 2011 policies, thereby engaging section 21 of the *Insurance Contracts Act 1984*. Secondly, the Court had to consider whether, assuming a breach of disclosure, the insurers were entitled to reduce their liability to nil under section 28(3) of the Act. Thirdly, the Court examined whether specific clauses within the D&O policies, namely clauses 5.3 and 7.1, precluded the insurers from relying on section 28 of the Act, and whether clause 5.3(ii) operated to limit the liability under the 2011 policies by reference to the limits of previous years' policies. Finally, the Court addressed issues of equitable contribution between insurers and the procedural fairness of the primary judge's conduct.
The Court of Appeal allowed some appeals and dismissed others, setting aside previous orders. It found that while there was a breach of the duty of disclosure, the insurers were not entitled to reduce their liability to nil under section 28(3) of the *Insurance Contracts Act 1984*. The Court also determined that certain policy clauses did not preclude the insurers from reducing their liability, but that the limit of liability under the 2011 policies was not to be reduced by amounts paid under previous policies. The Court dismissed CIMIC's further amended summons and AIG's cross-claim against Berkley, with directions given for consent orders regarding costs or written submissions on contested costs.
Orders
Orders of the court
(1) Zurich Appeal (2022/00334409)
(a) Zurich’s appeal allowed in part.
(b) CIMIC’s cross-appeal dismissed.
(c) AIG’s cross-appeal dismissed.
(2) Berkley Appeal (2022/00334264)
(a) Berkley’s appeal allowed.
(b) CIMIC’s cross-appeal dismissed.
(3) Arch/Dual Appeal (2022/00335502)
(a) Arch/Dual’s appeal allowed.
(4) Chubb Appeal (2022/00336236)
(a) Chubb’s appeal dismissed.
(5) Set aside Orders 9, 10, 11 and 13 made on 12 October 2022 and Orders 7 and 8 made on 23 June 2023.
(6) In lieu thereof order that:
(a) Subject to the relief granted by Orders 2 to 5 made on 12 October 2022 and Orders 1-6 and 9 made on 23 June 2023, CIMIC’s further amended summons dismissed with costs.
(b) AIG’s first cross-claim against Berkley dismissed with costs.
(7) Within 28 days hereof the parties provide the Court with consent orders as to the costs of the proceedings in this Court, to the extent agreement has been reached.
(8) To the extent agreement as to the costs of the appeals, cross-appeals, and notices of contention has not been reached, within 28 days hereof the parties concerned are to file and serve written submissions not exceeding six pages identifying the areas of disagreement and containing that party’s submissions on the matters in contention concerning costs. The issues of costs will, subject to any contrary order, be dealt with on the papers and without a further hearing.