Abstract

Article

Cancellation of a Policy in futuro.

At common law an insurer has the right to cancel a contract prospectively upon the basis of a breach of contract of such a serious nature as the commission of a fraud against the insurer: Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd [2001] UKHL 1; [2003] 1 AC 469 at 498-499 [61]. See also Versloot Dredging BV v HDI Gerling Industrie Versicherung AG [2016] UKSC 45; [2017] AC 1 at 10 [8]. Under the Insurance Contracts Act 1984 (Cth), avoidance ab initio as distinct from refusal of a claim is prohibited. The ability to avoid had been uncertain: Manifest Shipping [2003] 1 AC at 501 [66]; Britton v Royal Insurance Co [1865] EngR 66; (1866) 4 F&F 905; 176 ER 843 at 909; and AXA General Insurance Ltd v Gottlieb [2005] EWCA Civ 112; Lloyd’s Rep IR 369 at 374-375 [17]-[22]. But the right to terminate or cancel the policy in futuro for the making of a fraudulent claim remains available: AIA Australia Ltd v Richards (No 3) [2017] FCA 1069, Alexander Raymond Walton v The Colonial Mutual Life Assurance Society Ltd [2004] NSWSC 616 esp at [49] to [51]notfollowed. Avoidance is not termination in futuro.

Damages for Fraudulent Claim

Upon  breaches of the contract of insurance by the making of fraudulent claims the policy sums paid out on that basis, with with pre-judgment interest, are recoverable as restitution for money paid by mistake of fact.   Investigation costs, plus pre-judgment interest, for investigations carried out because of suspicion about claims that were in fact fraudulent are also recoverable: Hadley v Baxendale [1854] EngR 296; (1854) 9 Ex 341; 156 ER 145 at 151; European Bank Ltd v Evans [2010] HCA 6; 240 CLR 432 at 437-438 [11]; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; 236 CLR 272 at 286 [13]; AMP Financial Planning Pty Ltd v CGU Insurance Ltd [2004] FCA 1330; 139 FCR 223 at 254-255; AIA Australia Ltd v Richards (No 3) [2017] FCA 1069.

Judgment in Party’s Absence

Rule 39.05(a) of the Federal Court Rules 2011 (Cth) provides that the Court may vary or set aside a judgment or order after it has been entered if it was made in the absence of a party.