CGU Insurance Limited v AMP Financial Planning Pty Ltd [2007] HCA 36

HIGH COURT OF AUSTRALIA

GLEESON CJ,

KIRBY, CALLINAN, HEYDON AND CRENNAN JJ

CGU INSURANCE LIMITED APPELLANT

AND

AMP FINANCIAL PLANNING PTY LTD RESPONDENT

CGU Insurance Limited v AMP Financial Planning Pty Ltd [2007] HCA 36

29 August 2007

M127/2006 & M128/2006

ORDER

In M127 of 2006

1. Appeal allowed with costs.

2. Set aside the orders of the Full Court of the Federal Court made on 2 September 2005 and order 3 of the orders made on 8 June 2006 and, in lieu thereof, order that the appeal to that Court be dismissed with costs.

3. Application for special leave to cross-appeal refused.

In M128 of 2006

Set aside orders 1, 2 and 4 of the Full Court of the Federal Court made on 8 June 2006 and remit the matter of the cross-appeal to the Full Court of the Federal Court to that Court for further consideration in the light of the decision of this Court in M127 of 2006.

On appeal from the Federal Court of Australia

Representation

A J Myers QC with P Zappia for the appellant (instructed by Deacons Lawyers)

N J O'Bryan SC with P D Crutchfield for the respondent (instructed by Minter Ellison)

Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

CGU Insurance Limited v AMP Financial Planning Pty Ltd

Insurance – Appellant agreed to provide insurance to the respondent in respect of claims for civil liability – Respondent notified the appellant of potential liability to investors arising out of misconduct of financial advisers who were representatives of the respondent for the purposes of the Corporations Law – Appellant represented to the respondent that it would not rely on clause prohibiting the respondent from admitting liability or settling claims or clause requiring formal claims against the respondent – Appellant told the respondent to act as a prudent uninsured – Respondent, for sound commercial reasons including preservation of its relations with the Australian Securities and Investments Commission, proposed a protocol for responding to the investors' claims designed to recompense investors without the need for legal proceedings – Appellant agreed in principle to the protocol – No legal proceedings were commenced – Respondent sought confirmation that the appellant would indemnify it for settlement amounts – Respondent paid settlement amounts to the investors at a time when the appellant had not accepted liability – Whether the appellant's liability to indemnify the respondent extended to payment of reasonable settlement amounts – Whether the settlement amounts were reasonable – Relevance of the requirement to act with utmost good faith in s 13 of the Insurance Contracts Act 1984 (Cth).