The High Court has dismissed an appeal from a decision of the Victorian Court of Appeal on jurisdiction to make declarations sought by parties outside of a contract. The first respondents were appointed liquidators of the second respondent (Akron Roads) and later commenced proceedings against the remaining respondents for insolvent trading as directors of Akron Roads. One of those respondents, Crewe Sharp Pty Ltd, claimed indemnity to those claims under an insurance policy it had with the appellant. After the appellant denied liability, the respondent liquidators sought to have CGU joined as a defendant to the proceedings. The VSCA dismissed CGU’s appeal against Judd J’s decision to grant the orders sought by the respondent liquidators, holding that the Supreme Court had jurisdiction to grant the declaratory relief sought: while only contracting parties have an interest in the contract to which they are parties, in the case of insurance contracts, once an insured party becomes insolvent an unpaid claimant to whose claim an insurance policy responds will have an interest in the contract (see at ff).
The High Court unanimously held that the appeal should be dismissed. The joint judgment (French CJ, Kiefel, Bell and Keane JJ) held that because CGU’s liability to indemnify Crewe Sharp and others arose under s 588M of the Corporations Act 2001 (Cth), the respondent liquidators’ claim involves a question arising under a law of the Commonwealth, and is thus within the subject matter area of federal jurisdiction (see –). Consequently, the question of whether this reflects a justiciable controversy between the respondent liquidators and CGU could be answered ‘quite shortly’: given CGU’s denial of liability to ensure Crewe Sharp, the respondent liquidators, if they can make good their claims against Crewe Sharp and Mr Crewe and establish CGU’s liability to indemnify the insured, stand to receive the proceeds of that policy (see –). The liquidators’ claim is not that they are a party to the insurance contract or entitled to the benefit of that contract, but rather is the consequence of s 562 of the Corporations Act (or if Crewe becomes a bankrupt, s 117 of the Bankruptcy Act 1966 (Cth)) which founds their right to the proceeds of the policy, and thus a justiciable controversy between the liquidators and CGU (see ). Nettle J also dismissed the appeal, agreeing that CGU’s liability formed an essential prerequisite to the success of the liquidators’ claims against the directors and thus was sufficient for a justiciable controversy (see at ), but also dealt with a number of subsidiary arguments made by CGU, including the privity issue, in more detail (see ff).
|High Court Judgment|| HCA 2||11 February 2016|
|High Court Documents||CGU Insurance
|Full Court Hearing|| HCATrans 324||9 December 2015|
|Special Leave Hearing|| HCATrans 232||11 September 2015|
|Appeal from VSCA|| VSCA 153||19 June 2015|
|| VSC 34||13 February 2015|