Abstract

Article

Principles Applicable to a Grant of an Anti-Suit Injunction

In England, the Court has the power to make an anti-suit injunction under s 37(1) of the Senior Courts Act 1981 where it is just and convenient to do so. It includes arbitration cases: see AES UST-Kamenogorsk v Ust-Kamenogorsk JSC [2013] 1 WLR 1889. If it is sought for an exclusive London arbitration agreement, the court’s discretion to restrain a party from commencing or continuing with foreign proceedings in breach of the arbitration agreement will be favourable unless the respondent,who will have agreed to pursue the matter only by arbitration, provides strong reasons to the contrary: Daiichi v Chubb Seguros Brasil S.A. [2020] EWHC 1223 (Comm)..

 

Usually, the Court has no discretion in equity to refuse an injunction to enforce a clear negative covenant, but this does not apply to restraint of foreign proceedings because of tensions with comity with the relevant foreign court. To avoid prejudice to the respondent and out of comity towards the overseas court the application must be made promptly and before the foreign proceedings are too far advanced: The Angelic Grace [1995] 1 Lloyd's Rep 87. Failure to do so may be a strong reason against a grant: Toepfer International GmbH v Molino Boschi SrL [1996] 1 Lloyd's Rep. 510, 515; Donohue v Armco [2002] 1 Lloyd's Rep 425; Essar Shipping Ltd v Bank of China Ltd (The Kishore) [2015] EWHC 3266 (Comm), [2016] 1 Lloyd's Rep. 427; ADM Asia-Pacific Trading Pte. Ltd v PT Budi Semestra Satria [2016] EWHC 1427 (Comm); Ecobank Transnational Incorporated v Tanoh [2015] EWCA Civ 1309, [2016] 1 WLR 2231; Team Y&R Holdings v Ghossoub [2017] EWHC 2401 (Comm) (where there was no significant delay in the circumstances).

There are three factors relevant to delay: (1) There is no set rule as to what will constitute excessive delay, which will depend on all the facts of the case: Essar Shipping Ltd v Bank of China Ltd (The Kishore) [2016] 1 Lloyd's Rep 427; (2) Delay and comity are linked as to whether an injunction would materially increase the perceived interference with the process of the foreign court or lead to a waste of its time or resources; Ecobank Transnational Inc v Tanoh [2016] 1 Lloyd's Rep 360 at paras 129 to 135; The Kishore at para 43; Sea Powerful II Special Maritime Enterprises (ENE) v Bank of China Ltd [2017] 1 HKC 153 at para 21; and (3) The time when the applicant's legal rights became sufficiently clear to justify the application: Sabbagh v Khoury [2018] EWHC 1330 (Comm) at paras 33 to 36. See Qingdao Huiquan Shipping Co v Shanghai Dong He Xin Industry Group Co Ltd [2018] EWHC 3009 (Comm); [2019] 1 Lloyd's Rep. 520. An unsuccessful attempt to have the foreign court hold the respondent to its bargain were not considered as precluding an injunction: Team Y&R Holdings (supra); Enka Insaat v Chubb [2020] EWCA Civ 574.

If a prohibitory injunction may not be practically effective, a mandatory injunction requiring the enjoined defendant to discontinue the foreign proceedings may be granted: The Skier Star [2008] EWHC 213 (Comm), [2008] 1 Lloyd's Rep 652; Ecom v Mosharaf [2013] 2 All ER (Comm) 983 at §§ 37-38; Evergreen v Fast Shipping [2014] EWHC 4893 (QB), though there is no rigid difference between them: Mobile Telecommunications v Abdulaziz [2018] EWHC 1469 (Comm).

If a respondent undertakes to the court to refrain from continuing the suit against the applicant and another, in order to enforce the undertaking relating to the other, the applicant must have sufficient interest to do so, that is, some prejudice, however speculative, and more than an academic interest in enforcing the covenant not to sue: (The Marielle Bolten [2010] 1 Lloyd's Rep 648, a legitimate interest in upholding a contractual agreement: RBS v Highland Financial Partners [2013] 1 CLC 596. That the other could pass up to the applicant any liabilities which might be fond against it in the suit would be sufficient: Daiichi v Chubb Seguros Brasil S.A. [2020] EWHC 1223 (Comm).

“in connection with” - “solely”

Phrases such as “in connection with” are expressions of considerable width which will be satisfied by link or association or a relationship which may be summed up in the phrase “having to do with”: Elkateb v Lawindi (1997) 42 NSWLR 396, at 402. In New Zealand Fire Service Commission v Legg [2016] NZHC 1492; [2016] 3 NZLR 685, following IAG New Zealand Ltd v Jackson [2013] NZCA 302, (2013) 17 ANZIC 61-982 it was held that “in connection with” demands some causal or consequential relationship between the two things. With respect, this is in error, for it relies on authorities which contained those words but also required an element of causation, or where there was no connection at all.  This was remedied in part by the later JCS Cost Management Ltd v QBE Insurance (International) Ltd [2015] NZCA 524 at [37] where it was said that the connection had to be only of sufficient consequence or significance in the circumstances of the case but the nature and closeness of the required connection always depends on context and purpose. In Rian Lane v Dive Two Pty Ltd [2012] NSWSC 104, (2012) 17 ANZIC 61-924 it was said that it did not require a direct causal link but merely a relationship between one thing and another, which is the standard interpretation.

And “solely” means not involving anything else: Esined No. 9 Pty Limited v Moylan Retirement Solutions Pty Ltd (No. 2) [2020] NSWSC 359.

Direct Action when Insured Deregistered - Election

I

In a direct claim against an insurer under s 601AG of the Corporations Act, the plaintiff must establish that as at the date of the deregistration: Almario v Allianz Australia Workers Compensation (NSW) Insurance Ltd (2005) 62 NSWLR 148, its insured company had a liability to the person: Almario v Allianz Australia Workers Compensation (NSW) Insurance Limited; Almario v Allianz Australia Workers Compensation (NSW) Insurance Limited (2005) 62 NSWLR 148; [2005] NSWCA 19, and its quantum; that the insurance contract covered that liability which subsisted immediately before deregistration: Smart v AAI Ltd; JRK Realty Pty Ltd v AAI Ltd [2015] NSWSC 392 at [136]. The proceedings potentially entail elements of both a claim in tort and a claim under the statutory cause of action: Murdock v Lipman [2012] NSWSC 983; Esined No 9 Pty Limited v Moylan Retirement Solutions Pty Ltd Limited [2018] NSWSC 1706.

In such proceedings, the insurer is not disabled by election or estoppel from contesting its relevant liability to provide cover for the claim by having undertaken the defence on behalf of its insured and exercising its right of subrogation pursuant to the contracts of insurance without reserving its right to deny indemnity. Although once the insurer has, to the possible prejudice of the insured, asserted a right which it did not have except under and by virtue of the policy, it cannot later take up a position which involves a denial that it had that right and is estopped from doing so: Hansen v Marco Engineering (Aust) Pty Ltd [1948] VLR 198; Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305, those concepts cannot besuperimposed on the statutory s 601AG action: it creates a new cause of action and is a claim for damages: it is a claim for an amount that was payable to the deregistered company under the relevant insurance contract rather than damages: Almario at [18]. Issues between insurer and insured as to election are to be determined upon their own facts: Soole v Royal Insurance Co Ltd [1971] 2 Lloyd’s Rep 332

Further, at common law election arises from a choice between inconsistent alternative rights or remedies, where one cannot be enjoyed without the extinction of the other: Sargent v ASL Developments (1974) 131 CLR 634 at 655; Commonwealth v Verwayen (1990) 170 CLR 394. In order to avoid prejudice to an insured who has relied upon the insurer’s representation that it would provide coverage under the policy, the principle would prevent it from resiling from its choice. But in proceedings under the section the principle of  election by the insurer of rights against the insured under the contract does not have scope for operation because the insured ex hypothesi no longer exists, and the insurer stands in its shoes as the statutory defendant to the plaintiff’s action so that apart from whether the insured is liable to provide indemnity under the policy, as required by the section, matters incidental to the contract are irrelevant.

Under the section, the plaintiff is subrogated to the rights of the deregistered insured against the insurer and must establish the insured's entitlement to cover. But the insurer is also subrogated to the insured’sposition to defend the cause of action in tort against it. An insurer can consensually be invested with subrogated rights by accepting indemnity, or it can be substituted for the insured by order of the court, thereby preserving its right to contest indemnity; Murdock v Lipman (2012) NSWSC 983. In the latter case, its defence of the action is not a matter of choice which would raise an election, particularly but not necessarily if it is accompanied by a reservation of rights. It would then be an issue whether in some other way the insurer unequivocally represented that the defended claim would come within the cover of its policy, if it were to succeed: Esined No. 9 Pty Limited v Moylan Retirement Solutions Pty Ltd (No. 2) [2020] NSWSC 359.

The claimant may be permitted to advance hearsay evidence of statements by the insured’s principal if the exceptions to the prohibition of hearsay evidence in the Evidence Act are compied with, and it may also be admitted as an admission against interest on the basis that the insured is a putative party to such proceedings, but its quality is another matter: Esined No 9 Pty Limited v Moylan Retirement Solutions Pty Ltd Limited [2018] NSWSC 1706. A Jones v Dunkel (1959) 101 CLR 298 inference cannot easily be drawn: Payne v Parker (1976) 1 NSWLR 191. If the witness is equally available to both sides, the condition for the adoption of the inference is generally unsatisfied. In defending the insured under s 601 AG (a) the insurer might be expected to do so, but when proving its case under section 601 AG (b) it might be expected that the plaintiff would do so, and each inference neutralises the other: Esined No. 9 Pty Limited v Moylan Retirement Solutions Pty Ltd (No. 2) [2020] NSWSC 359.

Breach of Professional Duty

Unless the insured’s profession was to obtaininsurance, its failure to obtain effective insurance cover as required by the Corporations Act is not itself a breach of professional duty which would come within the limited cover of the policy, and the insurer’s issue of such a policy is not a breach of the Act: Esined No. 9 Pty Limited v Moylan Retirement Solutions Pty Ltd (No. 2) [2020] NSWSC 359.

 

Notifican of Claim – Notification of Possible Claim

If there has not been  a claim on the insured within the meaning of the definition of claim, the insured cannot give notice of a claim to trigger the cover, and in such circumstances the issue would usually turn to whether a notice which has been given refers to a potential claim within the meaning of a relevant provision of the policy or of s 40(3) of the Insurance Contracts Act. Whether facts which have been provided in such a notice may give rise to a claim should be assessed objectively: CGU Insurance Ltd v Porthouse (2008) 235 CLR 103. The provision is remedial and alters the balance of interests to ensure a fair operation of relationships between insurers, insureds and other members of the public: Newcastle City Council v GIO General Limited (1997) 191 CLR 85, and so its beneficial construction to protect the insured is preferred over a literal reading: FAI Insurance v Australian Hospital Care (2001) 204 CLR 641. Nevertheless, the notification must identify facts that might give rise to a claim, and if it does not do so, it is inadequate to trigger the cover, General statements in vague terms without a reasonable degree of specificity will not do: TBI Pty Ltd v AON Financial Planning Limited (2004) 13 ANZ Ins Cas 61-601; [2004] VSC 40; Esined No. 9 Pty Limited v Moylan Retirement Solutions Pty Ltd (No. 2) [2020] NSWSC 359.

 

Prior Knowledge Exclusion

This refers, inter alia, to any claim arising from or incurred connection with a fact or circumstance which notice has been or reasonably should have been given under any previous insurance. It is not necessary for a claim to fall within it that the previous insurance had in fact responded to the giving of notice. All that is necessary is that notice has been given under any previous insurance.Save that the exclusion refers to a circumstance, the nature and scope of the notice is of the same order as in that s 40(3) of the Insurance Contracts Act, so that if a notice did not meet the requirements of that section, it would not meet thise of the exclusion.

Conflict-Of-Interest Exclusion

 “WE will not cover the INSURED, including for DEFENCE COSTS or other loss, in respect of...any CLAIM or liability arising from or directly or indirectly attributable to or in consequence of...any failure of any INSURED (or any of its agents) to disclose or adequately disclose any...conflict of interest.”

Approved Product List Exclusion

The following is typical of a Financial Planners exclusion as to the approved product list. It excludes cover for any “CLAIM or liability directly or indirectly based upon or attributable to or in consequence of any...financial products or instruments not contained in the INSURED’S approved product list at the time the advice was given.”

Statement of Advice Exclusion

 “Any CLAIM or liability directly or indirectly based upon or attributable to or in consequence of any...failure to provide a financial services guide, a product disclosure statement or statement of advice in breach of the FSR PROVISIONS (contained in Chapter 7 of the Corporations Act 2001)”

Unregulated Loans Exclusion

 “Any claim or liability directly indirectly based or attributable to or any consequence of any repayment of a debt or money deposited with or lent to a body including, but not limited to, under a promissory note, debenture or similar instrument which is not regulated by the managed investment scheme provisions or the fundraising disclosure provisions and which body is not an authorised deposit-taking institution for the purpose of the Banking Act.

The Duty of Disclosure - Waiver

Section 21(1) of the Insurance Contracts Act imposes a duty to disclose what is known to the insured before the relevant contract of insurance is entered into, the time when the contract is made (s 11(9). There must be disclosure of every matter which the insured knows and also knows, or which a reasonable person could be expected to know, to be a matter relevant to the insurer as to whether to accept the risk or as to the terms on which it would do so. To know means more than to believe or suspect or even strongly suspect: Permanent Trustee. It is the state of mind of a reasonable person in the circumstances of the insured, which protects the insurer against inadequate disclosure by an idiosyncratic insured: CGU Insurance Ltd v Porthouse [2008] 235 CLR 103; Prepaid Services Pty Ltd & Ors v Atradius Credit Insurance NV  [2013] NSWCA 252.

At common law, an insurer can waive its right consequent upon the insured’s failure to disclose: Anglo-African Merchants Ltd v Bayley [1971] 1 QB 311 at [320]. Section 21(2)(d) of the  Act excuses a proposed insured from the duty if compliance with it is waived by the insurer, but this requires that there has been a fair presentation of the risk: Hitchens v Zurich Australia Ltd [2015] NSWSC 825; (2015) 18 ANZ Ins Cas 62-7076. Ordinarily at common law, if an insurer is not put on inquiry an omission to do so is not a waiver, a step which is not lightly to be presumed: Greenhill v Federal Insurance Co Limited [1927] 1 KB 65.

Thesection also excuses the insured if the insurer knows of the relevant material fact.  If it has wilfully shut its eyes to the implications of material that had been disclosed, it should be taken to be on notice of the matter of which it abstained from inquiring, leading to an inference of knowledge: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 81 ALJR 1107; [2007] HCA 22. What disclosed material should have put an insurer on inquiry is ultimately an inference for the court: Esined No. 9 Pty Limited v Moylan Retirement Solutions Pty Ltd (No. 2) [2020] NSWSC 359.

Briginshaw v Briginshaw

Findings of serious misconduct raise special considerations: Briginshaw v Briginshaw (1938) 60 CLR 336. The Court will not lightly find on the balance of probabilities that a party to civil litigation has been guilty of it, and the strength of evidence necessary to establish it may vary according to the nature of what is sought: Neat Holdings Pty Ltd v Karajan Holdings Pty (1992) 67 ALJR 170; [1992] HCA 66 at 170; Amalgamated Television Services Pty Ltd v Marsden [2002] NSWCA 419; Palmer v Dolman; Dolman v Palmer [2005] NSWCA 361; Esined No. 9 Pty Limited v Moylan Retirement Solutions Pty Ltd (No. 2) [2020] NSWSC 359.