FEDERAL COURT OF AUSTRALIA

Travel Compensation Fund v FAI General Insurance Co Ltd [1999] FCA 1214

INSURANCE – whether leave should have been granted under s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) to sue the insurer – effect of finding against insurer’s defence.

Law Reform (Miscellaneous Provisions) Act 1946 (NSW), s 6(4)

AFG Insurances Ltd v Andjelkovic (1981) 54 FLR 398 referred to

Oswald v Bailey (1987) 11 NSWLR 715 referred to

TRAVEL COMPENSATION FUND v FAI GENERAL INSURANCE CO LTD

NG 1002 of 1998

Burchett, Lehane and Hely JJ

Sydney

31 August 1999

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

EX TEMPORE REASONS FOR JUDGMENT

1                     BURCHETT J:   What I am about to say represents the judgment of the Court.  This appeal relates to one narrow point out of many issues in a difficult case arising out of the disputed insurance of accountants against their liability to professional negligence claims.

2                     The point is whether an order should have been made under s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) giving leave to the appellant to commence an action against the insurance company.  It was held in AFG Insurances Ltd v Andjelkovic (1981) 54 FLR 398 at 400, that, in such an application:

“[T]he court has a general power to grant leave in all cases which do not fall within the provision that it shall not grant leave and in which it is made to appear by evidence available in the application that there is an arguable case of liability against the insured being a liability against which the insured is indemnified by a contract of insurance in force at the time of the happening of the event said to give rise to the claim.”

That view of the matter received the endorsement of Priestley JA in Oswald v Bailey (1987) 11 NSWLR 715 at 734, when he said:

“A principal test which the court applies in deciding whether or not to grant leave pursuant to s 6 of the Law Reform (Miscellaneous Provisions) Act is whether the applicant has shown: ‘an arguable case of liability against the insured, being a liability against which the insured is indemnified by a contract of insurance in force at the time of the happening of the event said to give rise to the claim’.”

His Honour referred to Andjelkovic, and added:

“[O]r, more simply ‘has the (applicant) presented a case which is at least arguable’”?

3                     The appellant says the course approved in Andjelkovic should have been followed here.  Whether that be so, or not - and we do not propose to go into the discretionary considerations that applied at the outset of the litigation - the appellant's principal point now is that all the insurance company's defences have failed, and that accordingly there was no good reason to deny the appellant leave.  We think this must be right. 

4                     Accordingly, the appeal should be allowed to the extent of granting the leave sought by the appellant, and the Court so orders.

Associate:

Dated:                        8 September 1999