When we began analysing in depth the possibility of Britain exiting the European Union, 18 months prior to the June 2016 referendum, the HERBERT businessSMITH FREEHILLS consensus w07as very muchSECTION TITLE that Brexit was a remote prospect that either would never happen or not matter.
Fast forward just over two years and the reality could not be more different. In this updated edition of our Brexit legal guide, we take stock of the present situation, summarising the key developments since last year's vote and what is to be expected in the months ahead. 10 33 99
Whether an insured had misrepresented and/or failed to disclose to an insurer that its professional services encompassed directors and officers services.
In Issue
- Non-Disclosure and misrepresentations by insureds
- Consideration of sections 21 and 26 of the Insurance Contracts Act 1984 (Cth)
The Background
Year in Review - Australia Law in 2016
Insolvency proceedings can often be a very chaotic and drawn out process. Amidst the flurry of activity undertaken by creditors, liquidators and directors, a question to consider is what happens when we throw an insurer’s rights of subrogation into the mix.
Subrogation
Subrogation is the act of one party (normally an insurer) having standing to prosecute a cause of action in the name of another, where the former has reimbursed the latter for losses.
Liquidators of insolvent Australian companies often pursue directors of the failed company in recovery proceedings for the benefit of creditors. Following a High Court of Australia decision in April 2016, it is now clear that a liquidator can join liability insurers of defendant directors in such proceedings, even when the insurer has denied liability under a policy. The liquidator, even though not a party to the contract, may then seek a declaration in the same proceedings that the insurer is liable to indemnify the insured defendant.
In CGU Insurance Limited v Blakeley [2016] HCA 2 previously summarised by William Roberts earlier this year the High Court of Australia found that a potential plaintiff can pursue a claim against an insolvent company’s insurer under that company’s insurance policy.
Summary
The unanimous decision of the High Court on 9 November 2016 in Timbercorp Finance Pty Ltd (in liq) v Collins & Timbercorp Finance Pty Ltd (in liq) v Tomes may increase the likelihood of satellite litigation by individual group members following group proceedings.
It follows from the decision that, if group proceedings are heard, group members are only bound by the answers to common questions and the pleadings; they are not, for example, precluded from raising individual claims which were not raised in the group proceeding.
This week’s TGIF considers Re Akron Roads Pty Ltd (in liq) (No 3) in which the Court held that the liquidators had standing to seek a declaration against an insurer arising from the assignment of rights under a policy.
WHAT HAPPENED?
The previous High Court decision
Liquidators of insolvent Australian companies often pursue directors of the failed company in recovery proceedings for the benefit of creditors. Following a High Court of Australia decision in April 2016, it is now clear that the liquidators can join liability insurers of defendant directors in such proceedings, even when the insurer has denied liability under a policy. The liquidators, even though not a party to the contract, may then seek a declaration in the same proceedings that the insurer is liable to indemnify the insured defendant.
In Berryman v Zurich Australia Ltd [2016] WASC 196 it was decided that a bankrupt's entitlement to claim a TPD benefit under a life insurance policy is not an entitlement that is divisible amongst the bankrupt's creditors, and therefore such an entitlement does not vest in the Official Trustee in bankruptcy. Tottle J of the Supreme Court of Western Australia ruled that the bankrupt insured could continue an action in his own name to recover the TPD benefit. Life insurers may need to adjust their claims' payment practices in light of the Berryman decision.