Martin John Green in his capacity as liquidator of Arimco Mining Pty Limited (in liquidation) v CGU Insurance Limited & Ors [2008] NSWSC 825

Reported Decision : 66 ACSR 398

New South Wales Supreme Court

CITATION : Martin John Green in his capacity as liquidator of Arimco Mining Pty Limited (in liquidation) v CGU Insurance Limited & Ors [2008] NSWSC 825

HEARING DATE(S) : 14/07/08-18/70/08, 21/07/08-24/07/08, 28/07/08, 4/08/08-5/08/08

JUDGMENT DATE : 18 August 2008

JURISDICTION : Equity Division Commercial List

JUDGMENT OF : Einstein J

DECISION : Parties to bring in short minutes of order.

CATCHWORDS : Insurance - Insurance Contracts Act - Directors and Officers liability - Insolvent trading claim under section 588 M Corporations Law brought by the plaintiff in his capacity as liquidator - Section 6 (4) Law Reform Miscellaneous Provisions) Act - Non-disclosure /misrepresentation - Relevant test that of the reasonable insured not the prudent insurer - Knowledge requires considerably more than "suspicion" or "belief" - Matter must be known to insured at the time to be a matter relevant and known to insured or a reasonable person to be relevant to the decision of insurer whether to accept the risk and if so on what terms - Legislative history of sections 21 and 28 of Insurance Contracts Act - Dangers posed by litigation proceeding through benefit of hindsight - Finding that had proper disclosure been made insurer would not have issued a policy without an insolvency exclusion - Terms of settlement reached by liquidator with directors of directors agreed to entry of judgment against each of them in the amount of $15,000,000, liquidator agreeing to receive far smaller amounts from directors presently - Terms of settlement include agreement by liquidator to discharge judgment if either the (1) proceedings terminate in favour of the liquidator or (2) liquidator reaches a compromise of the proceedings against insurer or (3) proceedings terminate in favour of the insurer - Finding that liquidator contracted for the entry of judgment but relevantly agreed not to enforce the judgment and agreed to discharge it in any event - Liquidator alleged to have approbated and reprobated - Section 588G (2) (b) of Corporations Law - Reasonable grounds for suspicion of insolvency - Belief in insolvency on the grounds of balance of probabilities not the test