Abstract

Article

Direct Action Against Insurer

The Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) applies to claims in respect of harm caused in New Zealand, which may be brought in New South Wales under the Trans-Taman Proceedings Act 2010 (Cth), which is constitutionally valid. And that the applicant and respondent were both resident of New Zealand and that a hypothetical inconsistency with New Zealand insolvency law is not necessarily sufficient to support the refusal of an exercise of the court’s discretion to grant leave. Section 5 of the former Act requires a claimant to establish that he has an arguable case that the insured is liable to him, that the policy responds and that the insured cannot meet his claim in full, , but even then a grant of leave is at the court’s discretion: Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627Koper v Zurich Insurance PLC [2021] NSWSC 1587, which reviews s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW).

Construction

The unitary and iterative process of construction in Rainy Sky was approved in Wood v. Capita Insurance Services Ltd [2017] UKSC 24; [2017] AC 1173, where it was also said that Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance. But negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement. There may often therefore be provisions in a detailed professionally drawn contract which lack clarity and the lawyer or judge in interpreting such provisions may be particularly helped by considering the factual matrix and the purpose of similar provisions in contracts of the same type.

Though it has been suggested that the only relevant meaning is that which the text conveys because of the need to ascertain the intention expressed in the document, and that although context and purpose are relevant, ultimately the court must attribute meaning to the words actually used, this seems to miss the point that the meaning to the words actually used will be modified by those features, and as with them, some literal meaning, though perhaps of some consequence, is not necessarily significantly dominant. Other than that, with respect, it may be unwise to state a general principle by way of preference for one.

An exclusion clause should not be interpreted so as to circumscribe excessively the insuring clause. Transfield Services (Australia) Pty Ltd v Hall [2008] NSWCA 294; (2008) 75 NSWLR 12; Liberty Mutual Insurance Company, Australia Branch v SunWater Ltd (No 2) [2021] NSWSC 1582. This is a refinement of the principle inm Darlington, that an exclusion should be read like any other clause and not necessarily strictly. This gloss merely recognises the general rules of construction that the policy should read commercially, which would take into account any suggested construction which would defeat the purpose of the contract and the need to avoid an absurd result.

When it is relevant, social purpose does not depart from the process of construction of the meaning of a document regulating the private rights of the parties. But it takes into consideration that sometimes a policy, as a commercial document, will have a place in some aspect of society through the rights and obligations it creates. That place will have its weight according to the meaning to the words in question. Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390 at 405.

Because the parties intend to produce a commercial result, a policy should be given a businesslike interpretation which a reasonable business person would give to it. It is interpreted as at the date on which it was entered into. The contextual framework in which a contract is formed, as known by both parties, may be used to assist in identifying its purpose and commercial objective. The use of standard policy wording and insured-specific endorsements, might indicate the factual context is more significant for the construction of the endorsements than for the underwriters understand a description in the policy as they ought to understand it. Birrell v Dryer (1884) 9 App Cas 345

Insurers propose a policy wording, and endorsements are made only with their agreement. They are in the business of assessing the risks they are prepared to accept in exchange for a stipulated premium. A reasonable businessperson in the position of the parties to a Professional Indemnity policy would understand each exemption to operate in clear terms and not to operate so as to alter the extent of cover in ways not clearly expressed in the clause. The underwriters bear the “risk of non-persuasion” in respect of an exclusion clause, and so the onus of proving the exclusion does apply. Major Engineering Pty Ltd v CGU Insurance Ltd [2011] VSCA 226; (2011) 35 VR 458, 471 at [47] (Bongiorno JA, Hansen JJA and Kyrou AJA agreeing), citing: Trickett v Queensland Insurance Co Ltd [1936] AC 159, 164; Bashtannyk v New India Assurance Co Ltd [1967] VR 573, 575; and Haileybury College v Emanuelli [1983] 1 VR 353. If there is ambiguity in the construction of an exclusion, there is a tendency to resolve it in favour of the insured since it is inserted by the insurer for its benefit: Provincial Insurance Aust Pty Ltd v Consolidated Wood Products (1991) 25 NSWLR 541 (at 563) per Mahoney JA; see also Kirby P (at 545); Rich v CGU Insurance Limited [2005] HCA 16; (2005) 79 ALJR 856 (at [67]). However, otherwise an exclusion is to be given no stricter construction than any other provision. Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500.

Rectification

For rectification it is necessary to show that either the document fails to give effect to a prior concluded contract or that when the parties executed the document, they had a common intention as to a particular matter which by mistake the document did not accurately record, as to which it is necessary to show that there was an outward expression between them of accord so that they understood each other to share that intention. An outward expression of accord does not require that the parties' common intention should be declared in express terms, and could be tacit, including an understanding that is so obvious as to go without saying, or would be reached without being spelled out. Contractual rights and obligations are based on mutual assent which the parties have manifested to each other. FSHC Holdings v. GLAS Trust [2020] Ch 365 (FSHC) at [176].

Estoppel by Convention

An estoppel by convention arises if there is a relevant assumption of fact or law, either shared by both parties, or made by one party and acquiesced in by the other; and it would be unjust to allow the former to go back on that assumption. Blindley Heath Investments Ltd. v. Bass [2015] EWCA Civ 1023; Aras v. National Bank of Greece SA [2018] EWHC 1389 (Comm). It is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption. It is not enough that each acts on an assumption not communicated to the other. But a concluded agreement is not a requirement. Republic of India v. India Steamship Co Ltd (No 2) [1998] AC 878.  It is not enough that they merely understood it in the same way: it must be expressly shared between them. Its expression by the party claimed to be estopped must at least imply some element of responsibility for it, in the sense of conveying to the other an understanding that he expected him to rely upon it. And the other must in fact have relied upon it to a sufficient extent, rather than merely upon his own independent view.  His reliance must have occurred in connection with some subsequent mutual dealing between them. And he must have suffered some detriment thereby, or some benefit must have accrued to the other, in either case sufficient to make it unjust or unconscionable for the latter to assert the true legal or factual position. HM Revenue v. Benchdollar [2009] EWHC 1310 (Ch), which, with Blindley Heath was approved in Tinkler v. HMRC [2021] UKSC 39. These principles apply to contractual cases. Mitchell v. Watkinson [2014] EWCA Civ 1472 at [52]; Tinkler per Burrows JSC at [78].

Different types of estoppel have their own particular requirements and effects, and it is irrelevant to the operation of an estoppel by convention that a common assumption had been induced by a representation, and a common subjective assumption is not sufficient unless a statement, particularly a representation, or conduct crosses the line. It applies in both contractual and non-contractual cases. Tinkler; Benchdollar; Blindley Heath. In many cases, unconscionability may not be significant if there was detrimental reliance, but it may have a useful additional role.

The two limbs are separate doctrines so that a shared assumption is not necessary to estoppel by convention by acquiescence, but a question may remain as to whether acquiescence by the party to be estopped involves knowledge of what it is said to be acquiescing in. Jones v. Lydon [2021] EWHC 2321. Acquiescence in equity generally requires knowledge Pauling's Settlement Trusts [1962] 1 WLR 86 at 108. An estoppel by convention based on acquiescence exists only if the parties are subjectively in agreement, but not when the representor knows that the representee has a different understanding, as with the approach adopted in rectification for common mistake. (See FSHC (supra) at [36]) and unilateral mistake A Roberts & Co Ltd v Leicestershire County Council [1961] Ch 555 cited in FSHC at [103] and [105].

Silence can amount to acquiescence only when there is a duty to speak. In relation to unconscionability, an issue is whether it would be unjust or unconscionable for a party to resile from the convention that has been established, but acting honestly and responsibly does not mean that irresponsible behaviour alone is sufficient. But acting honestly in this context does not necessarily require actual dishonesty in the sense of fraud rather than dishonesty in an equitable sense. A relationship of good faith or partnership or something akin to a joint enterprise, does not impose a duty to speak in the absence of impropriety of some description, save that the impropriety may come from silence itself, as where a reasonable person a reasonable person in the position of the party raising the estoppel would expect the person, acting honestly and responsibly, to bring the true facts to the attention of the party known by him to be under a mistake as to their respective rights and obligations. Starbev GP Limited v. Interbrew Central European Holding BV [2014] EWHC 1311 (Comm); The Lutetian [1982] 2 Lloyd's Rep 140]; Avocet Industrial Estates LLP v Merol Ltd [2011] EWHC 3422 (Ch) at [124; ABN Amro Bank NV v Royal & Sun Alliance Insurance plc [2021] UKCA Civ 1789.

7On the other hand, a representor cannot contend that the representee was negligent in relying on his representation if it was intended to be relied upon, but this is not directly relevant to a claim for an estoppel, save perhaps in relation to unconscionability.

To be effective against a claim of estoppel by representation or convention, a non-repudiation clause needs to refer expressly to an estoppel, since it should not ordinarily be inferred that a contracting party has given up rights that the law has conferred upon him to an extent greater than the contractual terms indicate. The clearest language was required to exclude or waive legal rights. If the representations embrace the non-repudiation clause, the estoppel applies to it. HIH Casualty v. Chase Manhattan Bank [2003] 2 Lloyd's Rep 61. But a non-repudiation clause which says that the party will not avoid for misrepresentation, without more, clearly applies to the misrepresentation upon which the estoppel would be invoked. ABN Amro Bank NV v Royal & Sun Alliance Insurance plc [2021] UKCA Civ 1789. ABN Amro Bank NV v Royal & Sun Alliance Insurance plc [2021] UKCA Civ 1789.

Effect of Signing Document

A person who signs a document knowing that it is intended to have legal effect is generally bound by its terms, whether he has actually read them or not. Higgins & Co Lawyers Ltd. v. Evans [2019] EWHC 2809 (QB) at [75]).

Non-avoidance clause

Clauses such as a non-avoidance clause are effective in accordance with their terms. Toomey v. Eagle Star (No. 2) [1995] 2 Lloyd's Rep 88, HIH Casualty and General Insurance Ltd. v. New Hampshire Insurance Co and others [2001] EWCA Civ 735, HIH Casualty and General Insurance Ltd. v. Chase Manhattan Bank [2003] UKHL 6 and Mutual Energy Ltd. v. Starr Underwriting Agents Ltd. [2016] EWHC 590 (TCC)).

The Marine Insurance Act 1906 (UK)

The scope of the Marine Insurance Act 1906 (UK) and what must be proved for its operation are explained in ABN Amro Bank NV v Royal & Sun Alliance Insurance plc [2021] UKCA Civ 1789.

Striking Out

In England, a claim can be struck out if it discloses no reasonable grounds for bringing the claim. Summary judgment can be granted only if it has no realistic prospect of success. There should not be a mini-trial and the decision should depend on not only the evidence before the court but also what may reasonably be expected to be available at trial where a fuller investigation into the facts could add to or alter the evidence available, and consequently the result. Easyair Limited v Opal Telecom Limited [2009] EWHC 339 (Ch); Elite Insurance Co (in Admin) v BCR Legal Group [2021] EWHC 3250 (Comm)

Insurer Against Broker - Time Limitation

 Being exposed to such an obligation, even if contingent, is a liability which amounts to damage for this purpose; see Nykredit Mortgage Bank v Edward Erdman Group [1998] 1 AER 305; Elite Insurance Co (in Admin) v BCR Legal Group [2021] EWHC 3250 (C0mm).

Professional Liability Insurance - Exclusions

In respect of an exclusion of liability for claims arising out of the rendering of or failure to render professional advice or service for a fee by the insured, it will be engaged if in the circumstances the insured was vicariously liable for the negligence of a professional person who was relevantly providing professional services, notwithstanding that the insured was only a provider of professional personnel and without control of the professional conduct of the person provided, the exclusion applied because there was nothing to qualify the clear general words of the clause, such as a significant diminution in the scope of the cover which would imply a need for suitable qualification.

. Liberty Mutual Insurance Company, Australia Branch v SunWater Ltd (No 2) [2021] NSWSC 1582. This exclusion is plainly different from one relating to liability from a breach of a professional duty since the former does not require that the liability arise from a breach of it and the excluded liability may arise otherwise, for example, a breach of the ordinary common law duty of care which did not amount to a professional duty to the claimant. Fitzpatrick v Job[2007] WASCA 63 at [256]; Vero Insurance Ltd v Power Technologies Pty Ltd [2007] NSWCA 226.

Where the exclusion is expressed to be engaged for claims arising out of a breach of professional duty, on its face, literally it clearly does not seem to require that the professional duty should be owed specifically to the claimant. Though there is no reason why the contra proferentem principle should not apply to exclusion clauses, that can be so only if there is ambiguity. This language is abundantly clear on its face, and so it may be ambiguous only by reason of the influence of other features of construction such as a non-commercial result by reason of the insufficiency of the remaining cove for the purpose of the particular kind of policy and its intended scope of cover, all of which must be established to a reasonable degree of assurance as against the clarity of the language used. They should not be lightly assumed, nor should they be supported by any suggestion of ambiguity, for there is none until the suggested effect of their influence has been made out.

On the predicate that to meet the provision’s description of its trigger the professional service may be provided to another than the claimant, it is irrelevant whether the exclusion uses the expression, render advice, or the expression, give advice. So, literally it should be engaged if there is a breach of professional duty and the claim arose out of that, just as the other applies if the claim arose out of some performance of professional service for a fee. Though one is confined to the consequence of a breach and the other not so confined and with a broader scope, both are designed to limit the scope of the cover when the claim arises out of the performance of professional services.

The intent is clear, that the cover should not apply to claims involving professional services, though in one of them a breach of that duty is necessary. There may be good reasons for the confinement of the nature of the risk of the particular kind of policy in this way, just as sometimes the grant of General Liability cover to a business may be confined to exclude liability arising from the business activity of the insured, as distinct from its general public duty of care. Such a policy may be taken out by professional practitioners to supplement their Professional Indemnity policy.

It is necessary to discriminate between the function of professional activity or such a breach as causal of the claim, on the one hand, and its being only part of the contextual background, when its presence would not trigger the exclusion. But if the professional activity or a breach of such a duty, or the insured’s engagement in the professional activity, as the case may be, has the necessary somewhat remote causal relationship to the harm connoted by ‘arising from’ for which the insured is liable, leading to the claim, there should be no reason why on the literal construction the exclusion is not engaged. But in Fitzpatrick v Job, Power Technologies  (supra) and Limit (No 3) Ltd v ACE Insurance Ltd[2009] NSWSC 514 it was held that such a construction would inappropriately circumscribe the cover so as to undermine its commercial purpose too significantly to be accepted, so that the exclusion should be confined to claims by the party to whom the insured owed the professional duty. Contra: Transfield Services (Australia) v Hall [2008] NSWCA 294: although the relevant passages do not appear in the authorised report , as explained in; Liberty Mutual Insurance Company, Australia Branch v SunWater Ltd (No 2) (supra). While there is general authority that an exclusion should not excessively reduce the extent of the cover, it cannot have application until the extent of the intended cover is determined, which of course is the express language as fashioned in its meaning by other well-known factors such as purpose, circumstantial context, and commercial considerations, all variable. Alternatively, the insured may conduct a mixed business in which enough is not of a professional nature as to justify its presence despite the exclusion of the professional part, in which case, the proposition that its confinement would render the cover uncommercial. It should require a serious scrutiny of the circumstances of the particular case before clear words should be qualified by a silent implication that the cover would otherwise be uncommercial. For that issue, the question is not the extent of the excluded liability but that of what liability remains that would justify cover.

There is some apparent conflict in the authorities which needs resolution, though some influence may be exerted by the circumstances as to whether, and by how much the literal reading of the exclusion will affect the intended range of the cover. In that respect, it may be relevant that the insured has other Professional Liability cover, not for the purpose of influencing the meaning of the language of the exclusion but to demonstrate the obvious fact that a professional insured may reasonably take out Liability insurance which excludes professional liability. A fortiori if the other Professional Indemnity cover is part of a composite policy with the general liability cover containing the exclusion. The policy’s mention of the professional details of the business does not suggest the contrary since it is appropriate to the identification of the professional activities which are the subject of the exclusion.

In the case of a composite policy which covers several insureds for their respective interests, the covenant of indemnity which the policy gives must, in such a case, necessarily operate as a covenant to indemnify in respect of each individual different loss which the various named persons may suffer. In such a case there is no joint element at all. General Accident Fire & Life Assurance Corporation Ltd v Midland Bank Ltd [1940] 2 KB 388.  The parties covered by a composite policy are insured for their respective insurable interests, even though the composite policy is a single whole contract. The rights and obligations of different insureds under the same composite policy can be exercised independently of each other - unless there is an express or implied term to the contrary. Federation Insurance Ltd v Wasson [1987] HCA 34; (1987) 163 CLR 303.  For reasons of convenience, a composite policy comprises in one document the interests of a number of persons whose connection with the subject-matter of the insurance makes it natural and reasonable that the whole matter should be dealt with in one policy. Eide UK Ltd v Lowndes Lambert Group Ltd [1999] QB 199. Among other things, it will commonly contain exclusion clauses which deny cover to one Insured while preserving it for another.

Thus, the purpose of an exclusion of any claim or liability directly or indirectly based upon 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 is to deny cover to insured individuals who acted outside their normal authority by marketing financial or investment product which were not on their Approved Product list, but not to deny cover to innocent employers of those individuals. Zhang v Minox Securities Pty Ltd [2009] NSWCA 182. This however, is subject to the language of the provision which, particularly if it is ambiguous, may lead to a different result. EP Financial Services Pty Ltd v Arch Underwriting at Lloyd’s Limited [2021] QSC 347.

The finding in EP Financial Services Pty Ltd v Arch Underwriting at Lloyd’s Limited [2021] QSC 347 is, with respect, in error. It held that a simple exclusion of claims against the insured company for financial planning advice relating to the dealings in products which were not listed in the Insured’s Approved Product List was ambiguous as to whether it applied to both the insured employee who was responsible for a dealing with a product outside the list and his insured employer which was innocent but vicariously liable or  only to the party who engaged in the dealing, and so should be read contra proferentem,. The formulation of the exclusion contained no element referable to the party involved in the dealing, and there was no feature, such as a significant diminution of the cover, which would override the generality of the provision and support an implication of a qualification relating to identity.  The claim against the insured employer arose out of a dealing in the alien product and consequently engaged the exclusion. The provision’s language clearly comprehended engagement whenever a claim arose from a dealing in an alien product, irrespective of the identity of the perpetrator; and it was quite appropriate that such a range should extend to such circumstances. Cf Liberty Mutual Insurance Company, Australia Branch v SunWater Ltd (No 2) [2021] NSWSC 1582 and the cases cited therein, where the only possible qualification of the generality of a provision of such generality was whether its literal meaning would excessively diminish the value of the intended cover.

Nature of Insurance Contract

Before identifying or characterising the contract as one of insurance, it is necessary in each element of premium, promise to pay, indemnity upon a specified unwanted loss producing event according to the purpose and character of the arrangement. Todd v Alterra at Lloyds Ltd Todd v Alterra at Lloyds Ltd (2016) 239 FCR 12. How it came to be effected, its nature and purpose, and how it is to be performed may be relevant. Seaton v Heath  [1899] 1 QB 782. There is no reason to accord to an insurer the consideration given to guarantors and indemnifiers.

Joinder of Assignee on Assignment

As to joinder of a party to whom the plaintiff has assigned the chose in action, see JKC Aust LNG Pty Ltd v AIG Aust Ltd ][2021] WASC 471. The validity of the assignment need not be determined on the application.