Abstract

In a direct action claim, prior admissions by the Insured are admissible against the Insurer

Article

In a direct action claim under s 601AG of the Corporations Act 2001 by claimants against the insurer of a deregistered company, evidence of certain statements made by the principal of the insured to some of the plaintiffs may be admitted as evidence of the truth of allegations of fact.

To support such a claims, the plaintiff must establish that the insured was liable to it immediately prior to deregistration and the quantum, and that the relevant insurance entered into by the defendant insurer covered that liability. It must have subsisted as at the date of deregistration: Almario v Allianz Australia Workers Compensation (NSW) Insurance Limited (2005) 62 NSWLR 148, and the policy must have covered it immediately before deregistration: Smart v AAI Ltd; JRK Realty Pty Ltd v AAI Ltd [2015] NSWSC 392 at [136].

Hearsay is prima facie inadmissible under the Evidence Act, but there are several exceptions, for example, that it would not be reasonably practicable to call the person who made the representation. It requires that the party who seeks to lead the evidence gives reasonable notice. That obligation may be excused, but not to the disadvantage of the other party. Lateness is a serious consideration, particularly in a complex case. Further, particular statements in lengthy affidavits which are to be isolated as exceptions to the hearsay rule  need to be identified clearly in advance.

Admissions as such are admissible under the Evidence Act, including those that are made by a person with authority to make them, if they are capable of assisting the plaintiff’s case against the insured, though in one sense they were not made by made by a person who is or becomes a party to a proceeding, as the Act requires. But the purpose of s 601AG requires the insurer to stand in the shoes of the company to the extent necessary to allow its creditor to recover from the insurer whatever amounts it was entitled to recover from the company had it not been deregistered: Almario v Allianz Australia Workers Compensation (NSW) Insurance Limited (2005) 62 NSWLR 148; Murdock v Lipman [2012] NSWSC 983; Allianz Australia insurance Ltd v Mercer (2014) 309 ALR 154; [2014] TASFC 3 at [109] to [122].

By becoming substituted in the name of its insured, the insurer is subrogated to the insured’s rights to defend the proceedings as if it were a party, the insurer is subject to the admission of evidence which would have been admissible against the insured, but its right to contest indemnity is preserved: Esined No 9 Pty Limited v Moylan Retirement Solutions Pty Ltd [2018] NSWSC 1706.