In a significant decision for the insurance industry, the Federal Court of Australia has granted leave to shareholders to bring a direct action against a company’s insurers where the (insured) company was in liquidation. This is one of the earliest cases to make use of the new Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (Third Party Claim Act), and provides some useful guidance for the industry on how this new legislation will be applied.

The decision impacts plaintiff lawyers, policyholders and insurers alike. Importantly:

Introduction

The High Court recently considered, in European Bank Limited v Robb Evans of Robb Evans & Associates, the nature and extent of a "usual undertaking as to damages" given by a receiver in accordance with Part 28, rule 7(2) of the Supreme Court Rules 1970 (NSW). In doing so, it overturned the decision of the NSW Court of Appeal to reinstate the trial judge's finding that the receiver was liable for substantial losses suffered by a third party deprived of the funds which were at the heart of the dispute.

Background