UNDERWRITERS at LLOYDS and ORS v ELLIS and ORS [1998] NSWCA 242

UNDERWRITERS at LLOYDS v ELLIS

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MEAGHER, HANDLEY and POWELL JJA

4 July 1997, 25 February 1998

[1998] NSWCA 242

Damages — Costs of proceedings — Whether recoverable as damages.

Insurance — Professional indemnity insurance — Lawcover — Exclusion where relevant liability "brought about by the dishonest or fraudulent act of the Assured including any Partner or former Partner of the Assured" — Whether exclusion also extends to costs incurred by Assured in defending claim.

Meagher JA I agree with Powell JA.

Handley JA In these matters I have had the benefit of reading the reasons for judgment of Powell JA in draft form. I agree with those reasons and the orders his Honour has proposed but wish to add brief additional reasons of my own.

Mr Plowes signed a certificate which stated that he was acting as solicitor for Mr Nikolai Mecak, Mr Craig Mecak and Kimberley McDonald in relation to the mortgage transaction between Nikolai and Farrow Mortgage Services Pty Ltd. The certificate also stated that he had explained to his clients the nature and contents of the documents and their respective obligations and liabilities under them. He then forwarded the certificate to Farrow who acted upon it by making an advance to Nikolai. The trial Judge, following the dicta of this Court in Comino v Manettas (5 March 1993, u/r) held that the certificate was dishonest but not fraudulent.

The facts referred to demonstrate that Mr Plowes made material representations of existing fact to Farrow which were false, which he knew to be false, and on which he intended Farrow to rely. Farrow relied on those representations, acted to its detriment, and suffered damage when it was forced to litigate the validity of its mortgage with Nikolai without the benefit of a valid certificate from his solicitor. All the ingredients of the long established tort of deceit were therefore present and Mr Plowes' conduct must be characterised not only as dishonest, but also as fraudulent.