Smart v AAI Ltd; JRK Realty Pty Ltd v AAI Ltd [2015] NSWSC 392

Supreme Court New South Wales

Medium Neutral Citation: Smart v AAI Ltd; JRK Realty Pty Ltd v AAI Ltd [2015] NSWSC 392 Hearing dates: 16 to 20 February 2015; last written submissions 20 March 2015 Date of orders: 22 May 2015 Decision date: 22 May 2015 Jurisdiction: Common Law Before: Beech-Jones J Decision: In matter number 2013/030193 the Court orders that:

(1) The proceedings be dismissed; and

(2) The plaintiff pay the defendant's costs.

In matter number 2013/144336, the Court orders that:

(1) The proceedings be dismissed; and

(2) The plaintiff pay the defendant's costs. Catchwords: INSURANCE – deregistered company – proceedings under s 601AG of the Corporations Act – recourse against insurer – deregistered company carried on business of finance broking – general manager promoted transaction to plaintiffs to lend funds to business clients – funds transferred to business and then supposedly lent to clients – general manager misappropriated funds – never intended to lend funds to business's clients – s 601AG(a) – liability of deregistered company to plaintiffs – plaintiffs established liability for breach of contract and false and misleading conduct contrary to former s 52 of the Trade Practices Act 1974 (Cth) – claim in contract not subject to proportionate liability provisions of Civil Liability Act 2002 or Trade Practices Act – contributory negligence not available in respect of liability in contract – s 601AG(b) – whether insurance policy covered deregistered company's liability to plaintiffs – plaintiffs established a civil liability for "compensation" as defined in the policy – plaintiffs failed to establish that a claim for compensation made upon deregistered company within the policy period – plaintiffs established that liability of deregistered company and claim result from the conduct of "Professional Services" as defined in the policy – defendant insurer established that liability of deregistered company was assumed outside the normal course of the "Professional Services" as defined in the policy – defendant insurer established that liability of deregistered company arose from dishonest or fraudulent acts of deregistered company within dishonesty exclusion clause – exclusion clause not exempted because of acts of "employee" of deregistered company – general manager not employee but acted as part owner.