FEDERAL COURT OF AUSTRALIA

Carter v Chubb Insurance Australia Ltd [2024] FCA 1312

ORDERS

THE COURT ORDERS THAT:

1.    The parties are to confer and submit draft orders giving effect to these reasons for judgment by 4.00 pm on Thursday, 28 November 2024.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT ORDERS THAT:

1.    The second cross claim filed on 28 September 2020 be dismissed.

2.    The cross-claimant is to pay the costs of the second cross-defendant, as taxed if not agreed.

[Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.]

REASONS FOR JUDGMENT

HALLEY J:

A.     INTRODUCTION

A.1.     Overview

1    These proceedings are concerned with claims for indemnity by John Carter under a directors and officers liability policy that Orix Australia Corporation Limited (Orix) had obtained from Chubb Insurance Australia Limited (Chubb).

2    Mr Carter was at all relevant times the Managing Director and Chief Executive Officer of Orix.

3    Chubb was previously called ACE Insurance Limited but changed its name to Chubb Insurance Australia Limited with effect from 1 November 2016. In order to avoid unnecessary confusion, in these reasons for judgment the single defined term Chubb has been used to refer to the company without distinguishing between periods when it was called ACE Insurance Limited and periods when it was called Chubb Insurance Australia Limited.

4    The claims made by Mr Carter under the directors and officers liability policy issued by Chubb are with respect to defence costs incurred by him in defending (a) criminal charges that were brought against him by the Director of Public Prosecutions, and (b) civil proceedings brought against him by Orix.

5    Chubb has denied liability on the basis that Mr Carter was engaged in, and aware of alleged fraudulent misrepresentations and fraudulent non-disclosures at the time that he signed a renewal proposal for Orix’s directors and officers liability policy with Chubb (Proposal) on 30 October 2014. In addition, Chubb cross claims against Mr Carter seeking recovery of money that it had paid for defence costs in defending the criminal charges prior to advising Mr Carter that his claims for indemnity had been denied.

A.2.     Claims made under the Policy

6    Following the submission of the Proposal, Chubb issued Orix with a Directors & Officers Liability Insurance Policy No. 01CH534086 (Policy) for the period 31 December 2014 to 31 December 2015. Mr Carter is an “Insured” within the meaning of the Policy.

7    On 25 March 2015, the New South Wales Police executed a search warrant at Orix’s offices in Macquarie Park.

8    On 2 April 2015, Mr Carter was arrested.

9    On 2 April 2015, Mr Carter was charged by the New South Wales Police with four counts of corruptly receiving or soliciting a benefit pursuant to s 249B(1) of the Crimes Act 1900 (NSW) (Crimes Act) and one count of knowingly dealing with proceeds of crime pursuant to s 193B(1) of the Crimes Act (together, Criminal Charges).

10    On 4 June 2015, Mr Carter notified Chubb of the Criminal Charges.

11    Mr Carter claimed an indemnity under cl 1.1 of the Policy and sought payment of “Emergency Defence Costs” under cl 2.3 of the Policy.

12    Chubb initially accepted that Defence Costs, as defined in cl 3.5 of the Policy, were payable, but reserved its rights under the Policy and at law as further information came to light. Pursuant to that acceptance and reservation, Chubb advanced an amount of $657,277.38 (excluding GST) to Mr Carter (Sums Advanced).

13    Following its review, however, of the material served by the New South Wales Police in the Local Court criminal proceedings no. 2015/00098199 brought against Mr Carter (Criminal proceedings), Chubb notified Mr Carter on 13 April 2017 that:

(a)    it believed that Mr Carter was engaged in, and aware of, fraudulent non-disclosure by Orix to Chubb at the time the Policy was entered into;

(b)    the advancement of Defence Costs under the Policy was suspended; and

(c)    it sought repayment of the Sums Advanced.

14    Mr Carter has not repaid the Sums Advanced.

15    In September 2019, the Criminal proceedings were discontinued.

A.3.     Overview of the two proceedings

16    These reasons for judgment concern two proceedings, NSD 437 of 2022 and NSD 448 of 2022, which were case managed and heard together.

A.3.1.     Carter proceedings (NSD 437 of 2022)

17    On 7 October 2020, Mr Carter commenced proceedings against Orix and Chubb, initially in the New South Wales Supreme Court (proceeding no. 2020/00283307), later transferred to the Federal Court of Australia on 7 June 2022 (proceeding NSD 437 of 2022) (Carter proceedings). Mr Carter claims pursuant to the Policy an amount of $3,230,369.95 which he contends to have expended in defending the Criminal Charges.

18    On 16 November 2022, Mr Carter’s claim against Orix in the Carter proceedings was dismissed.

19    In its further amended defence filed on 30 March 2023, Chubb contends:

(a)    during Mr Carter’s tenure as Chief Executive Officer and Managing Director of Orix, he was aware of a course of conduct that involved, in broad terms:

(i)    the payment of bribes and provision of illegal inducements to Bryan Pereira, the procurement manager of Coca-Cola Amatil Ltd (CCA), a fleet customer of Orix; and

(ii)    two transactions (GrainCorp Transactions) which amounted to the payment of bribes and provision of illegal inducements to Tony Chidiac, the procurement manager for GrainCorp Ltd (GrainCorp), also a fleet customer of Orix; and

(b)    Mr Carter did not disclose this knowledge and thereby gave a false declaration, and thereby caused Orix to make fraudulent misrepresentations and fraudulent non-disclosures when he signed the Proposal on behalf of Orix.

20    In its further amended cross claim filed on 4 April 2023, Chubb repeats the matters pleaded in its further amended defence and contends that Mr Carter was and is not entitled to his defence costs advanced by Chubb and Mr Carter was in breach of the recoupment term by not repaying the Sums Advanced to Chubb after Chubb sought repayment of them on 13 April 2017.

21    By way of a defence to the further amended cross claim filed on 11 April 2023, Mr Carter contends, in broad terms, that (a) he was and is entitled to indemnification, (b) he is not liable to repay the Sums Advanced, (c) Chubb has no entitlement to recover the Sums Advanced until final adjudication, and (d) Chubb waived any rights it has under s 28(3) of the Insurance Contracts Act 1984 (Cth) (Insurance Contracts Act) by renewing the Policy on 29 January 2016.

A.3.2.     Orix proceedings (NSD 448 of 2022)

22    On 12 June 2020, Orix commenced proceedings, initially in the Supreme Court of New South Wales (proceeding no. 2020/00174863), that were subsequently transferred to the Federal Court of Australia on 7 June 2022 (proceeding NSD 448 of 2022) (Orix proceedings). In those proceedings, Orix sought compensation pursuant to s 1317H of the Corporations Act 2001 (Cth) (Corporations Act) from Mr Carter for contraventions of s 180, s 181 and s 182(1), certain declarations, equitable compensation for breach of fiduciary duties, damages for breach of contractual duties, damages in tort, and damages and/or compensation pursuant to s 236 or s 237 of the Australian Consumer Law in Sch 2 to the Competition and Consumer Act 2010 (Cth) with respect to Mr Carter’s conduct in relation to the transactions with CCA and GrainCorp. Orix also brought claims against George Georgiou, an Orix employee, for breaches of s 181 and s 182(1) of the Corporations Act, declarations, equitable compensation, and damages for breach of contractual duties.

23    By an amended cross claim filed on 22 July 2021 pursuant to leave granted by Black J, Mr Carter sought damages for breach of an executive services agreement and deed of Indemnity, Insurance and Access (first cross claim).

24    By a second cross claim filed on 28 September 2020, Mr Carter seeks a declaration that Chubb must indemnify him under the Policy and indemnify him for the costs incurred in defending the Orix proceedings (second cross claim).

25    On 16 November 2022, Orix’s claim against Mr Carter, and the first cross claim, were dismissed.

26    On 18 January 2023, the claims brought by Orix against Mr Georgiou, and Mr Georgiou’s cross claim filed on 4 November 2020, were also dismissed.

27    By a further amended defence in response to the second cross claim, filed on 4 April 2023, Chubb claims that at the time Mr Carter signed the Proposal, he (a) knew the relevant facts regarding the CCA and GrainCorp transactions, (b) did not disclose the information he knew, (c) declared that the information in the Proposal was true and correct in every detail, and (d) caused Orix to make fraudulent representations and engage in fraudulent non-disclosure. Chubb contends that Mr Carter is therefore not entitled to indemnification under the Policy. Chubb’s further amended defence to the second-cross claim in the Orix proceedings was largely pleaded in identical terms (including as to paragraph numbers) to Chubb’s further amended defence in the Carter proceedings.

28    On 15 June 2021, Mr Carter also commenced proceedings against Orix (proceeding NSD 559 of 2021) regarding claims under the Fair Work Act 2009 (Cth). This proceeding was dismissed on 16 November 2022.

29    Pursuant to an order made on 30 September 2022, proceedings NSD 437 of 2022, NSD 448 of 2022 and NSD 559 of 2021 (prior to its dismissal), were case managed together and evidence in one case was to be evidence in the other.

A.4.     Issues for determination

30    In order to facilitate the efficient resolution of these proceedings, the parties have agreed a list of 55 issues to be determined. By way of summary, these issues are:

(a)    the nature of the arrangements that Orix entered into with Systems Reporting Services Pty Ltd (SRS) under which SRS invoiced Orix for “management inspection fees” (SRS arrangements) (Issues 1 to 7);

(b)    the extent of Mr Carter’s knowledge of the SRS arrangements (Issues 8 to 13);

(c)    whether it is open on the pleadings for Chubb to contend that CCA (other than Mr Pereira) was not aware of the alleged use by Orix of a ledger account and subsequently an income account to act as a “slush fund” for the benefit of Mr Pereira (Slush Fund arrangements) and Mr Pereira was directing Orix to implement the Slush Fund arrangements without any authorisation from CCA (Issues 14 to 15);

(d)    the sources of the funds that were the subject of the Slush Fund arrangements and the extent of the knowledge of, and authorisation by, CCA of the Slush Fund arrangements (Issues 16 to 25);

(e)    the extent of any payments to, or on behalf of Mr Pereira, pursuant to the Slush Fund arrangements (Issues 26 to 29);

(f)    the extent of Mr Carter’s knowledge of the Slush Fund arrangements (Issues 30 to 37);

(g)    whether it was open on the pleadings for Chubb to contend that GrainCorp was not aware of the funds advanced to Mr Chidiac to facilitate his daughter’s purchase of a motor vehicle (Issue 38);

(h)    the circumstances in which the funds were advanced by Orix to Mr Chidiac to facilitate his daughter’s purchase of a Mazda 3 motor vehicle and a purchase by Mr Chidiac of a Subaru Liberty motor vehicle (together, GrainCorp Transactions) (Issues 39 to 42);

(i)    Mr Carter’s knowledge of the circumstances in which the funds were advanced by Orix to Mr Chidiac to facilitate the purchase of the Mazda 3 and Subaru Liberty motor vehicles (Issues 43 to 44);

(j)    whether Mr Carter made fraudulent representations to Chubb in connection with the renewal of the Policy (Issues 45 to 48);

(k)    whether Mr Carter fraudulently failed to disclose to Chubb the SRS arrangements, the Slush Fund arrangements and the GrainCorp Transactions (Issue 49);

(l)    whether Chubb was entitled to deny indemnity to Mr Carter under cl 7 of the Policy by reason of findings made that Mr Carter had made fraudulent representations and fraudulently failed to disclose matters to Chubb (Issue 50);

(m)    whether Chubb would have offered any policy to Orix if Mr Carter had disclosed to Chubb the SRS arrangements, the Slush Fund arrangements and the GrainCorp Transactions (Issue 51);

(n)    whether the claims made by Mr Carter for defence costs with respect to the Orix proceedings and the Criminal proceedings would be excluded by reason of cl 4.1 of the Policy (Issue 52);

(o)    whether the legal costs claimed by Mr Carter in these proceedings referrable for work done are claims that are covered by the Policy (if he was otherwise entitled to be indemnified under the Policy) and in what amount (Issues 53 to 54); and

(p)    whether any requirement to repay the Sums Advanced only arises if the exclusion under cl 4.1 of the Policy applies or whether the exclusion also operates where the insured is not entitled to indemnity for any other reason (Issue 55).

31    Chronologically, the events addressed in Issues 1 to 13 occurred after the events addressed in Issues 14 to 37 with respect to CCA and have therefore been addressed after those issues in these reasons.

32    Although the issues are discrete, the matters relevant to each issue at times substantially overlap. Many matters are equally relevant to establishing (a) the nature of the impugned conduct, (b) whether the impugned conduct could constitute the payment of a bribe or provision of an illegal inducement, and (c) Mr Carter’s knowledge of the impugned conduct and whether it could constitute the payment of a bribe or the provision of an illegal inducement. Where necessary, matters might be repeated for particular emphasis but to the extent possible I have sought to limit any repetition of matters, in particular matters that are plainly relevant to questions of whether the impugned arrangements could constitute bribes or illegal inducements and Mr Carter’s knowledge of whether they could.

33    The issues agreed between the parties used the description “slush fund” to refer to the alleged scheme or course of conduct in which payments of bribes and provision of illegal inducements were alleged to have been made to Mr Pereira from a fund maintained by Orix, that was referred to in contemporaneous documents by various names, including “slush fund”, but more generally by the more neutral term “CCA Marketing Account”. For the sake of clarity, the term “CCA Marketing Account” rather than “slush fund”, is used to refer to the fund, except to the extent that different names are used in extracts from documents included in the reasons. Further, the parties interchangeably referred in their pleadings and submissions to “secret commissions”, “secret benefits” as well as “illegal inducements”. Again, for the sake of clarity except to the extent the reference is context specific, the term “illegal inducements” is used in the reasons.

A.5.     Overview of Mr Carter’s case

34    As submitted by Mr Carter, the fundamental issue for determination in the proceedings is whether Mr Carter had actual knowledge of illegal or dishonest activity that he failed to inform Orix’s insurer of at the time that he completed the Proposal for the renewal of the Policy.

35    Mr Carter’s closing written submissions included a 9 page submission entitled “Mr Carter’s statement of critical facts and concepts”. It provided a useful summary of the case that Mr Carter seeks to advance. Mr Carter’s case is founded on the following critical propositions.

36    First, the manner in which the funds for the CCA Marketing Account were provided to Orix by Mr Pereira meant that Mr Pereira had apparent authority to give instructions for the distribution of the funds, even if those directions seemed to a third party observer to be for the personal benefit of Mr Pereira.

37    Second, given Mr Pereira had apparent authority to give such directions, Orix had no discretion to refuse them and therefore the question of alleged bribes or illegal inducements cannot arise.

38    Third, the evidence of Mr Carter’s involvement in the impugned transactions is distorted by the emails he received from Mr Georgiou. Mr Georgiou would appear to have been deliberately seeking to implicate Mr Carter in those transactions.

39    Fourth, Chubb cannot contend that Mr Carter had actual knowledge that Mr Pereira was not authorised by CCA to direct payments from the CCA Marketing Account because Chubb has not adduced any direct evidence or pleaded such a claim.

40    Fifth, properly understood, Chubb’s complaint is a criticism of Mr Carter’s failure to take effective action in response to a “possible misuse” by Mr Pereira of his apparent authority to deal with the CCA Marketing Account. Such a complaint might give rise to a claim in negligence but no such claim has been pleaded by Chubb.

41    Sixth, there was simply no reason for Mr Carter to have risked his entire career and even liberty by participating in any fraud involving Mr Pereira in circumstances where he gained no direct or indirect personal benefit from the alleged dishonesty or illegal acts.

42    Seventh, the proposition that Mr Carter in approving the SRS invoices was deliberately approving fraudulent and fictitious invoices as some form of inducement to Mr Pereira is entirely illogical because at the time that the SRS invoices were paid Mr Carter understood that Mr Pereira was about to be removed from CCA and agreement on the terms of a fourth fleet flip had been finalised more than six months prior to the SRS payments being made.

43    Eighth, there is no evidence that Mr Carter had any actual knowledge of the extent of Mr Chidiac’s authority to deal with the GrainCorp profit share account and Chubb has not adduced any evidence that Mr Chidiac did not have such authority.

44    For the reasons that follow, I have concluded that none of the critical propositions advanced by Mr Carter have substance or otherwise preclude Chubb from denying indemnity to Mr Carter and recovering the Sums Advanced. As I explain below, Mr Carter’s various denials of his knowledge of the payment of bribes and provision of illegal inducements are implausible given the extent of his involvement in the impugned transactions as demonstrated by the contemporaneous documents and the inherent logic of events. There is little, if any, ambiguity in the emails passing between Mr Georgiou and Mr Carter concerning the impugned transactions both as to their content and their purpose in promoting the commercial interests of Orix in its commercial dealings with CCA. The contention that Mr Georgiou was seeking to deliberately implicate Mr Carter in the emails he sent to Mr Carter is fanciful. On no plausible view was Mr Carter a peripheral observer who did not have any real or substantive appreciation of the payment of bribes and provision of illegal inducements to Mr Pereira and Mr Chidiac. Further, it can readily be inferred from the nature of the payments made in response to the requests made by Mr Pereira that Mr Carter knew that the payments had not been authorised by CCA.

B.     DRAMATIS PERSONAE

B.1.     Orix

45    At all relevant times, Orix carried on a business specialising in the acquisition, financing and management of motor vehicles. On the “fleet” side of its business, its services included fleet management and leasing of passenger, light commercial and heavy commercial vehicles to small and large businesses, as well as vehicle rentals.

John Carter

46    Mr Carter was an employee of Orix from October 1986 until June 2015. Mr Carter was a director of Orix from March 2001 to June 2015, and was the Chief Executive Officer and Managing Director of Orix from 1 April 2005 until the termination of his employment in June 2015.

George Georgiou

47    Mr Georgiou was the General Manager for Fleet Services for Orix in the period from August 2005 until the termination of his employment in June 2015. From about 2002, Mr Georgiou oversaw Orix’s commercial relationship with CCA. In the period 2003 to August 2005, Mr Georgiou had been the Corporate & Public Relations Director of Orix.

William McCulloch

48    Mr McCulloch was employed by Orix from February 1999 to June 2015. He was the National Operations Manager at Orix between April 2007 and March 2015.

49    Mr McCulloch was responsible for overseeing all departments of an operational nature, including the purchasing of vehicles, repairs and maintenance, disposing of vehicles (end of lease), revising lease pricing, and managing Orix’s short term rental fleet.

Gary Dundas

50    Mr Dundas was the Group Financial Controller of Orix between 27 November 2006 and 20 July 2015. Mr Dundas was responsible for overseeing Orix’s balance sheet, profit and loss reporting, setting budgets, forecasting profits and taxation compliance. Mr Dundas was also involved in reporting Orix’s results to its parent company and its auditors.

Other Orix personnel

51    Narelle Manley worked on the CCA account exclusively, and had the day to day management of the account from 2002 or 2003 to March 2009 (except for a period of maternity leave between December 2006 and May 2007).

52    Kim Scott was a Relationship Manager of Orix who worked on the CCA account between March 2009 and December 2012.

53    Hayley Tunnicliff was a Relationship Executive of Orix who worked on the CCA account from approximately 2009. In July 2012 she was promoted to Senior Relationship Executive. In the period up to December 2012 she reported to Ms Scott. In December 2012, she took over all of Ms Scott’s existing responsibilities on the CCA account, other than meetings with Ray Ward, a former procurement manager at CCA.

54    Christopher Briggs held various roles with Orix from 2000 to 2019. From 2005 to 2014, Mr Briggs held the title “General Manager Fleet Operations and New Zealand”, and during this time, reported to Mr Carter.

55    Peter Forster is the company secretary of Orix. Mr Forster commenced employment with Orix in 1996, and reported directly to Mr Carter from 2007 until Mr Carter was suspended in April 2015.

56    David Lyons was the National Credit Accounts Manager at Orix from 2008. He did not have specific responsibilities relating to the CCA account, but oversaw the issuing of invoices, allocation of receipts and credit, and collection of invoices, including from the CCA account.

57    Phillip Davie was the National Legal and Compliance Manager at Orix from February 2009 to November 2011, before becoming the National Manager Credit and Legal in November 2011, and then the National Credit Manager in July 2015.

58    Kerri Ryan was Mr Carter’s Executive Assistant. Ms Ryan was the only Executive Assistant at Orix and also performed work for other senior managers including Mr Georgiou.

59    Mark Goldstein is the Vehicle Remarketing Manager at Orix. He commenced employment with Orix in 1996.

60    Una Hughes commenced employment with Orix in November 1998, initially as an Accounts Payable Clerk. Ms Hughes then became the Accounts Payable Supervisor from 2005 or 2006, initially reporting to Mark Levy and Leanne Aitken before reporting to Mr Dundas until May 2015.

61    Greg Roberts commenced employment with Orix in 1997 and has worked in several different roles. Mr Roberts is responsible for managing various corporate business applications, including Orix’s fleet management and leasing system known as “Willow”. Prior to Mr Carter’s suspension, Mr Roberts reported to Mr Briggs, who in turn reported to Mr Carter.

62    Raymond Beddie is the General Manager of Finance at Orix. Mr Beddie has held various positions with Orix since October 2000, including Group Management Accountant, Project Manager, Resources Manager, Infrastructure Manager, Fleet Accounting Manager and Group Financial Controller.

B.2.     CCA

63    CCA was one of Orix’s customers. In the period between March 1998 and June 2003, Orix supplied some vehicles to CCA but Orix was not its principal fleet provider.

64    Between 2011 and 2016, the CCA account was the second largest account for Orix in terms of exposure (amortised value of funded leases) and vehicle numbers on a Trans-Tasman basis.

Bryan Pereira

65    Mr Pereira was the Procurement Manager for CCA from 2003 until March 2015. Mr Pereira dealt with whoever of Ms Manley, Ms Scott or Ms Tunnicliff had the day-to-day management of the CCA account in that period on a daily basis. Mr Pereira also dealt with Mr Georgiou.

Bill Mossati

66    Mr Mossati was the National Manager, Capital Projects and Procurement of CCA. Mr Pereira reported to Mr Mossati.

Raymond (Ray) Ward

67    Prior to early 2002, Mr Ward was the Senior Purchasing Manager and responsible for the ongoing management of CCA’s fleet contract with Orix. In early 2003, Mr Ward departed CCA and provided consulting services to Clintons Motor Group (Clintons).

68    Mr Ward was the relevant “introducer” for vehicles which Orix procured from Clintons to lease to CCA.

B.3.     GrainCorp

69    GrainCorp was a fleet client of Orix since at least 2008.

70    Anthony (Tony) Chidiac was the Procurement Manager Procurement and Shared Services for GrainCorp.

B.4.     Other

71    Gary Chua was an associate of Mr Pereira. Mr Chua was not employed by Orix, CCA or GrainCorp.

72    Cyril Rodrigo Jr was an associate of Mr Pereira based in Singapore. Mr Rodrigo was not employed by Orix, CCA or GrainCorp.

C.     EVIDENTIARY ISSUES

C.1.     Overview

73    Each party relied upon evidence of lay and expert witnesses.

74    In addition to his own evidence, Mr Carter relied upon the lay evidence of Mr Briggs and Mr Lyons.

75    Chubb relied upon the lay evidence of two of its former employees, Christopher Madell and Christopher Brown.

76    Chubb also subpoenaed the following current and former employees of Orix to give evidence: Mr Dundas, Mr McCulloch, Ms Manley, Ms Ryan, Ms Hughes, Ms Scott, Ms Tunnicliff, Mr Davie, Mr Forster, Mr Roberts, Mr Beddie, Mr Goldstein and Timothy Clarke.

C.2.     The evidence of Mr Carter

77    The critical issue in these proceedings is the extent of Mr Carter’s actual knowledge, at the time he signed the Proposal, of the alleged bribes or provision of illegal inducements, the likelihood of claims being made against him with respect to those matters and whether those matters might give rise to a claim under the Policy.

78    Mr Carter swore three affidavits in the proceedings and was extensively cross examined over four and a half hearing days. He found the exercise confronting and all too often adopted an adversarial approach to his cross examiner. I accept that the elapse of time since the events he was being cross examined on may well have made it difficult for him to distinguish between recollection and reconstruction, particularly when confronted with allegations of actual knowledge of alleged bribery or illegal inducements of procurement managers of customers of Orix. Nevertheless, it was clear that much of his evidence was informed by a keen appreciation of the case that had been advanced against him rather than genuine recollection. This appreciation was particularly evident at the conclusion of his cross examination when he was being challenged on his understanding of whether matters might give rise to a claim against him and whether claims in respect of such matters might give rise to a claim under the Policy.

79    The adversarial and at times evasive approach adopted by Mr Carter in the course of his cross examination was exemplified in the following exchange about his understanding of the use of the word “penguin”, informed no doubt by his knowledge that his cross examiner would at some stage take him to an email that he received from Mr Georgiou in February 2013 with the heading “Another penguin caught in our nets !!”:

MR JONES: Thank you. Now, Mr Carter, at the time that you worked at ORIX, did you ever hear the word “penguin” used to describe a person?---Yes.

And did you ever read the word “penguin” being used to describe a person?---Sorry, what was that?

Did you ever read the word “penguin” being used to describe a person?---I can’t recall that.

No. Have you ever used the word “penguin” to describe someone yourself?---Yes.

All right. Are you able to tell his Honour what you understood, if anything, the word “penguin” may have meant if used to describe a person?---My – I described a penguin is that, if anyone was – got any – was invited to a lunch or anything, I would regard them – I would say that everyone is a penguin.

Would you agree that that is someone - - -

HIS HONOUR: So, sorry, could you – I don’t follow that. So, if someone was invited to a lunch, they were a penguin?---Yes. I would say anyone who was taken a benefit of anything, if you invite someone to a lunch or you – or anything there, a function - - -

You mean in a business context?---Yes.

You don’t ask penguins to lunch at home?---No.

All right.

MR JONES: And what you’re saying there, is it, that that is – that a person that accepts a benefit that they have no entitlement to?---No.

You agree with that?---No, I don’t.

So when someone comes to a business lunch, you say that they have an entitlement to go to that business lunch?---Yes.

I see. And do you say you had that understanding in 2013/2014?---Yes.

80    Much of Mr Carter’s affidavit evidence and evidence in cross examination was directed at seeking to refute or otherwise put in context email communications that, at least on their face, were starkly inconsistent with his professed denials of any knowledge of bribery or illegal inducements.

81    Mr Carter sought to address these emails by claiming that he had no recollection of reading them, denied reading them, denied or did not recall reading particular parts of them, read but did not believe their contents or did not understand the potential significance of them. He claimed that as a busy chief executive officer of a large company he was “time poor” and had a practice of not opening all emails and for emails that he opened he would glance at them and only read the important parts closely. He also stated that he expected senior executives to speak to him directly about significant matters that required his attention rather than sending him emails.

82    Mr Carter also submits that admissions he made against interest and concessions that he made in cross examination demonstrated that his denials of knowledge could be accepted. I do not accept that the alleged admissions against interest or concessions rose above concessions that almost incontrovertibly arose from contemporaneous documents, the objective logic of events or otherwise supported the case that Mr Carter was seeking to advance in the proceedings.

83    I accept that it was likely that Mr Carter was not able to read all emails in detail that were sent to him and that senior executives would seek to speak to him directly, rather than sending an email, about significant matters requiring his attention. I do not accept, however, given the extent of the emails that he exchanged with Mr Georgiou about Mr Pereira’s requests for the disbursement of funds out of accounts held by Orix and the implementation of the SRS arrangements that it is plausible that he did not read and understand the significance of emails that he received from Mr Georgiou on these issues.

84    Ultimately, however, the question of whether it was more probable than not, that Mr Carter opened an email and read and understood its significance, rather than simply glancing at the email, falls to be determined by the identity of the sender, the email’s objective content, the context in which it was sent and any subsequent response by Mr Carter. It is those matters, not generalised claims made by Mr Carter many years after emails were received that he did not read them, did not understand their potential implications or did not believe them, that I found to be more probative.

85    In giving limited weight or rejecting Mr Carter’s denials of knowledge I do not make any finding that Mr Carter has deliberately given false evidence. Such a finding should only be made, as Deane J observed in Smith v New South Wales Bar Association (No 2) (1992) 176 CLR 256; [1992] HCA 36 at 271, when it is “truly necessary for the purpose of disposing of the particular case”. Here the contemporaneous emails sent and received by Mr Carter provide a compelling, almost inescapable, basis from which Mr Carter’s actual knowledge of alleged bribery or illegal inducements of procurement managers of customers of Orix can readily be inferred, notwithstanding his testimonial denials. Mr Carter’s denials have to be carefully scrutinised against the inherent logic of events given the risk that they were self-serving and unreliable because they were advanced with the benefit of hindsight and under significant personal pressure given the seriousness of the case advanced by Chubb and the adverse financial consequences for Mr Carter if the denials were not accepted.

C.3.     Mr Carter’s lay witnesses

86    Mr Carter relied on evidence from Mr Briggs and Mr Lyons, neither of whom was cross examined.

Christopher Briggs

87    Mr Briggs gave evidence on the relationship between CCA and Orix, the introducer fees payable to Mr Ward, and the accounts maintained by Orix with respect to CCA variously referred to as the slush fund, the CCA profit share account and the accrual account.

88    Mr Briggs also responded to the evidence of (a) Mr McCulloch, with respect to the purchase of the Mercedes for Mr Pereira, the 2013 fleet flip (known as the “Fourth Fleet Flip”), and the introducer fees, and (b) Mr Roberts, with respect to the CCA inspection fees.

David Lyons

89    Mr Lyons gave evidence on (a) the CCA account, (b) dealings with Mr Pereira, (c) meetings of the “Collections Committee”, (d) the various CCA accounts maintained by Orix, and (e) a company search for Systems Management Services Pty Ltd, and later for SRS, that Mr Carter requested.

C.4.     Chubb’s lay witnesses

C.4.1.     The evidence of Mr Dundas

90    Mr Dundas was subpoenaed to give evidence and gave evidence on (a) Orix’s processes for paying and verifying payments made to external parties, (b) Orix’s processes for reimbursing expenses incurred personally by employees, (c) the CCA account and accounts related to Mr Ward, (d) the introducer fees paid to an entity related to Mr Ward and other payments made to SRS, (e) the various payments including with respect to the purchase of the Mercedes for Mr Pereira, (f) the Fourth Fleet Flip, and (g) internal Orix communications regarding GrainCorp.

91    Mr Dundas was cross examined. He answered questions directly, without hesitation and did not act as an advocate. He made appropriate concessions, particularly when confronted with contemporaneous documents that were inconsistent with his evidence. In resolving factual issues where the evidence of Mr Dundas and Mr Carter conflicted, I accepted the evidence of Mr Dundas except to the extent that it was not consistent with the apparent logic of events.

C.4.2.     The evidence of Ms Scott and Mr McCulloch

Kim Scott

92    Ms Scott was subpoenaed to give evidence. In her affidavit she gave evidence as to (a) her role and specific responsibilities in managing the CCA Marketing Account including payment of the introducer fee, managing the “Ray Ward R1107766 Account”, (b) changes to the “Ray Ward R1107766 Account” and (c) her involvement with the accounts after 2012.

93    Ms Scott was excused from attending to give evidence on the ground that she had pressing personal family matters and Chubb had therefore indicated it was not going to call on her subpoena to give evidence. By consent, various paragraphs of her affidavit were admitted into evidence notwithstanding that she was not available for cross examination.

William McCulloch

94    Mr McCulloch was subpoenaed to give evidence.

95    Mr McCulloch affirmed two affidavits in the proceedings. He gave evidence of (a) vehicle inspection services conducted by Pickles Auctions (Pickles), (b) communications regarding pre-end of lease inspections, (c) Orix’s leasing arrangements, including disposal of vehicles and residual values, (d) fleet flips conducted by CCA and Orix between 2003 and 2015 and early termination fees, (e) the closure of the “Ray Ward AR Account” in 2012, (f) monitoring of the accrual account, and (g) the “GrainCorp Profit Share Account” between 2012 and 2015.

96    Mr McCulloch was excused from attending to give evidence on the ground that he was the subject of a tragic family event in the days preceding the hearing, and in light of those events, Chubb indicated it was not going to call on his subpoena to give evidence. By consent, various paragraphs of his affidavits were admitted into evidence notwithstanding that he was not available for cross examination.

C.4.3.     The evidence of Mr Brown and Mr Madell

Christopher Brown

97    From October 2010, Mr Brown was employed by Chubb as a Senior Finance Lines Underwriter. Mr Brown was responsible for new financial lines business and had a book of renewals for existing insureds. In March 2016, Mr Brown was promoted to New South Wales Financial Lines Distribution Manager, Independent Broker Unit.

98    Mr Brown was subpoenaed to give evidence, and gave evidence on (a) his role and responsibilities as a Senior Financial Lines Underwriter, (b) his underwriting process for directors and officers financial institutions business, (c) notification of claims and circumstances, and (d) the policy provided to Orix and the notification of a possible claim on 10 April 2015.

99    Mr Brown was cross examined. Mr Brown answered questions put to him directly and without hesitation. Although much of his evidence was directed at what he would have done had certain disclosures been made to him and therefore by its nature was hypothetical and subject to hindsight bias, I generally accepted it because it was consistent with the apparent logic of events.

Christopher Madell

100    Mr Madell commenced employment with Chubb in March 2013, as the New South Wales Financial Lines Manager and Australia and New Zealand Head of Financial Institutions. From March 2016 to October 2017, Mr Madell was the Global Broking Unit Manager.

101    Mr Madell gave evidence on (a) his responsibilities as Australia and New Zealand Head of Financial Institutions, (b) his underwriting process for directors and officers financial institutions business, (c) his process for claims and circumstances notified, (d) Orix’s policy and the notification of a possible claim on 10 April 2015, and (e) his awareness of the allegations and alleged lack of disclosure.

102    Mr Madell was cross examined. Mr Madell also answered questions put to him directly and without hesitation. Again, although much of his evidence was directed at what he would have done had certain disclosures been made to him and therefore by its nature was hypothetical and subject to hindsight bias, I generally accepted it because it was consistent with the apparent logic of events.

C.4.4.     Other lay witnesses

103    As noted above, Chubb subpoenaed several current and former employees of Orix to give evidence. Some were cross examined but their evidence was largely uncontroversial. I accept that to the extent they were cross examined each gave evidence to the best of their recollection and answered questions put to them directly and without prevarication. It is not necessary to make any further comments about their evidence at this stage.

C.5.     The absence of Mr Georgiou and Mr Pereira

104    Neither Mr Georgiou nor Mr Pereira gave evidence. Both were central characters in the alleged bribery and provision of fraudulent inducements. The absence of Mr Pereira was not the subject of any Jones v Dunkel submissions by either Mr Carter or Chubb.

105    As noted above, Mr Georgiou had been the second defendant in the Orix proceedings but the proceedings against him were dismissed, by consent, on 18 January 2023.

106    The candour, familiarity and language in the contemporaneous emails passing between Mr Carter and Mr Georgiou demonstrate the extent of the close relationship between them. Notwithstanding the closeness of that relationship, Chubb did not invite the Court to draw any Jones v Dunkel inference against Mr Carter for his decision not to seek to rely on any evidence of Mr Georgiou.

107    Mr Carter submits that Jones v Dunkel inferences should be drawn against Chubb because of its failure to provide any explanation for why it chose not to call on the subpoena it had issued to Mr Georgiou to give evidence.

108    I do not accept that any Jones v Dunkel inferences should be drawn against Chubb with respect to Mr Georgiou. Mr Georgiou had filed affidavit evidence in the proceedings as a defendant sued by Orix but he ceased to be a party after the proceedings against him were dismissed. The mere issue of a subpoena to Mr Georgiou, a former defendant, cannot give rise to findings that it would have been natural for Chubb to have called Mr Georgiou, he was in Chubb’s camp, or he could be expected to be available to give evidence for Chubb: Payne v Parker [1976] 1 NSWLR 191 at 201-202 (Glass JA); Hung v Warner, in the matter of Bellpac Pty Ltd (Receivers and Managers Appointed) (in liq) [2013] FCAFC 48 at [55]-[56] (Jacobson, Gordon and Robertson JJ); Secured Lending 1 Pty Ltd v Mahmassani [2021] NSWSC 811 at [60] (Davies J).

109    Moreover, I would in any event decline to draw any Jones v Dunkel inference with respect to the absence of Mr Georgiou given the following unequivocal statement made by senior counsel for Mr Carter in his oral opening submissions:

I think it’s fair to say that Mr Georgio[u] is not in anybody’s camp and I’m not going to claim that he is in Chubb’s camp. He’s certainly not in our camp.

C.6.     Expert witnesses

C.6.1.     Overview

110    Mr Carter relied on the expert evidence of Stephen Dubedat, Dawna Wright and Rodney McKemmish. Chubb relied upon the expert evidence of John Temple-Cole and Owen Bourke.

111    Ultimately, with the exception of the evidence given by Mr Dubedat which is addressed at [464] to [465] below, there was no material controversy raised by the expert evidence.

C.6.2.     Forensic expert evidence

112    Mr Dubedat is a forensic document examiner. Mr Dubedat gave evidence as to the authenticity of signatures on three expense reimbursement claim forms purported to have been signed by Mr Carter. Mr Dubedat concluded, based on an examination of 15 sample signatures provided by Mr Carter, that one of the signatures was probably, or very probably genuine, one of the signatures was “probably not genuine”, and the third signature was “not genuine”.

C.6.3.     Accounting expert evidence

113    Ms Wright is a qualified chartered accountant and forensic accounting specialist. Ms Wright gave evidence on:

(a)    the source of credits recorded in certain accounts and ledgers of Orix from the date each ledger was opened until March 2015;

(b)    how those credits were recorded in Orix’s fleet management system, Willow, and whether such treatment was in accordance with accepted accounting standards;

(c)    how debits from the specified accounts were recorded in Willow and whether such treatment was in accordance with accepted accounting standards;

(d)    in particular, how “introducer fees” and “inspection fees” paid or payable in relation to the CCA account were accounted for in Orix’s books and records from 2003 to 2015; and

(e)    what the total level of income received by Orix from CCA was during the period from March 2003 to June 2016.

114    Mr Temple-Cole is an experienced forensic accounting specialist. Mr Temple-Cole gave evidence on:

(a)    whether records provided substantiated, from an accounting perspective:

(i)    payments listed as “Introducer Fees”;

(ii)    payments listed as “Management Service Inspection Fees”;

(iii)    payments listed on the “Accounts Receivable account: Ray Ward AR R1107766” and “McCulloch Spreadsheet”;

(iv)    a payment described as “Payment to Gary Chua”; and

(v)    payments described as “GrainCorp Transactions involving Tony Chidiac”; and

(b)    identifying, explaining and describing, based on the records provided, the accounting processes by which the fees identified above were entered and recorded in Orix’s internal systems.

115    Both Ms Wright and Mr Temple-Cole were briefly cross examined.

C.6.4.     Email time stamp and metadata expert evidence

116    Mr Bourke is a partner of Forensic and Technology Services at Clayton Utz. Mr Bourke gave evidence on the various steps taken to identify, categorise and resolve time stamp and metadata issues in various emails.

117    Mr McKemmish is a qualified digital and cyber forensic specialist. Mr McKemmish responds to evidence given by Mr Bourke in relation to ascertaining the correct dates and times of email communications produced in the proceeding.

118    A joint expert report was prepared by Mr McKemmish and Mr Bourke. Mr McKemmish and Mr Bourke agreed that (a) email communications examined contained a mixture of emails that had reliable date and time stamps as well as emails that had anomalous dates and times, (b) the anomalous dates and times were a result of the migration of emails from a Group Wise email server to a Microsoft Exchange server, (c) there are alternative sources with accurate date and time stamps, such as the message header, (d) emails were backed up regularly from the Group Wise server using a dedicated backup software, (e) the dedicated backup software contains a contemporaneous record of email dates and times as at the time of backup and (f) the approaches taken by both Mr Bourke and Mr McKemmish have resulted in identical date and time properties for the emails examined, or within a small variance of seconds.

119    Neither Mr Bourke nor Mr McKemmish was cross examined.

D.     OVERARCHING ISSUES

D.1.     Overview

120    Chubb’s core contention is that Orix failed to disclose the Slush Fund arrangements, GrainCorp Transactions and SRS arrangements at the time it submitted the Proposal, which affected the presentation of risk to Chubb. Chubb contends, as pleaded, that had those matters been disclosed it would have brought to Chubb’s attention that officers of Orix were facilitating the payment of bribes or provision of illegal inducements to senior employees of two of Orix’s customers, CCA and GrainCorp.

121    Mr Carter’s core contention with respect to the Slush Fund arrangements is that Orix held the funds in the various iterations of the CCA Marketing Account beneficially for CCA on the condition that they be released in accordance with directions given by Mr Pereira. Mr Carter contends that Mr Pereira had the apparent authority of CCA to give such directions. Mr Carter therefore submits that Orix was not providing Mr Pereira with any benefit and therefore the disbursement of funds could not be a bribe as the funds were CCA’s money and Orix had no discretion “to refuse to deliver up” to Mr Pereira the funds he had placed with Orix.

122    These core contentions raise for consideration, (a) the drawing of inferences as to Mr Carter’s knowledge, (b) in what circumstances can a party rely on the doctrine of apparent authority, (c) what constitutes a bribe or provision of an illegal inducement, and (d) how might the payment of a bribe or provision of an illegal inducement give rise to a claim under a directors and officers liability insurance policy.

D.2.     Drawing of inferences

123    The principles regarding the drawing of inferences are well established. For present purposes the following summary of those principles is sufficient.

124    First, any inference must be based on facts established by admissible evidence and be drawn by a process of reasoning, not speculation or guesswork: Masters Home Improvement Australia Pty Ltd v North East Solution Pty Ltd (2017) 372 ALR 440; [2017] VSCA 88 at [101] (Santamaria, Ferguson and Kaye JJA).

125    Second, where direct proof is not available to a party seeking to establish that an inference ought to be drawn it must demonstrate that that inference is the more probable one. Its task is to demonstrate that on the balance of probabilities the inference for which it contends has a greater degree of likelihood than any competing inference: Holloway v McFeeters (1956) 94 CLR 470 at 480-481 (Williams, Webb and Taylor JJ).

126    Third, in determining whether an inference is to be drawn as a matter of probability, the Court is not required to consider each primary fact, established by the evidence, in isolation. Rather, the totality of those facts are to be considered together, giving effect to their united and combined force: Masters Home Improvement at [101].

D.3.     Apparent Authority

127    The principles concerning whether an agent has the “apparent” or “ostensible” authority of a principal to engage in transactions on behalf of the principal are well established. The principles can relevantly be distilled as follows.

128    First, the onus of establishing that an agent had ostensible authority to act on behalf of a principal is on the party seeking to establish the existence of the authority: Lysaght Bros & Co Ltd v Falk (1905) 2 CLR 421 at 428 (Griffiths CJ).

129    Second, apparent or ostensible authority is a legal relationship established between a principal and a contractor created by a representation that is made by the principal to the contractor that an agent has the authority to enter into a contract of a kind within the scope of the “apparent” authority that operates as an estoppel preventing the principal from asserting that they were not bound by the contract: Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503 (Diplock LJ).

130    Third, the representation must come from the principal, not the agent. The conduct of the agent is not irrelevant to the representation, but the principal’s conduct must be the source of the representation: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 at [36] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).

131    Fourth, the representation by the principal giving rise to the apparent authority may be conveyed in a variety of ways of which the most common is a representation by conduct, namely by permitting an agent to act in a particular manner in the conduct of the principal’s business: Freeman & Lockyer at 503.

132    Fifth, a party dealing with a company cannot rely on any doctrine of apparent authority if they are put on inquiry as to whether the authority exists by reason of the nature of the transaction or other matters and no further inquiry is made or the principal fails to satisfy the inquiry: Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 at 154-155 (Mason CJ), 180-182 (Brennan J), 212 (Gaudron J).

133    Sixth, a party cannot rely on the doctrine of apparent authority if they know that the agent of the principal is acting in their own interests and not for the benefit of their principal: Lysaght Bros at 429-431; Combulk Pty Ltd v TNT Management Pty Ltd (1993) 41 FCR 59 at 66 (Neaves, Beaumont and Burchett JJ); AL Underwood Ltd v Bank of Liverpool [1924] 1 KB 775 at 791-792 (Scrutton LJ).

D.4.     Bribery

134    Bribery can be the basis of a civil claim brought by a principal against the agent being bribed, or a criminal offence.

135    In Industries & General Mortgage Company Ltd v Lewis [1949] 2 All ER 573, Slade J at 575-576 defined the meaning of bribe in the context of a civil claim as the payment of a secret commission, which contains three elements:

…. (i) that the person making the payment makes it to the agent of the other person with whom he is dealing; (ii) that he makes it to that person knowing that the person is acting as the agent of the other person with whom he is dealing; and (iii) that he fails to disclose to the other person with whom he is dealing that he has made that payment to the person whom he knows to be the other person’s agent. Those three are the only elements necessary to constitute the payment of a secret commission or bribe for civil purposes. I emphasise “civil purposes” because the Prevention of Corruption Act, 1906, s 1(1), introduced the adverb “corruptly”, and, except in the case provided for in s 2 of the amending Act of 1916, the onus is put on the prosecution of showing that the payment has been made corruptly. I hold that proof of corruptness or corrupt motive is unnecessary in a civil action and my authority is the decision of the Court of Appeal in Hovenden and Sons v Milhoff where the plaintiffs carried on business as hairdressers’ sundrymen and the defendant was a member of a firm of wholesale tobacconists.

136    The Full Court of this Court cited the definition of bribe provided by Slade J in Lewis with approval, as one of “the better known descriptions of bribes and secret commissions”: Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 at [190] (Finn, Stone and Perram JJ). Secret commissions need not necessarily take the form of a payment of money and could be in other forms such as a gift of shares: Grimaldi at [191] citing Eden v Risdale’s Railway Lamp & Lighting Co (1889) 23 QBD 368.

137    The Full Court in Grimaldi also cited at [192] with approval the following observations of Lawrence Collins J in Daraydan Holdings Ltd v Solland International Ltd [2005] Ch 119 at [53]:

In proceedings against the payer of the bribe there is no need for the principal to prove (a) that the payer of the bribe acted with a corrupt motive; (b) that the agent’s mind was actually affected by the bribe; (c) that the payer knew or suspected that the agent would conceal the payment from the principal; (d) that the principal suffered any loss or that the transaction was in some way unfair; the law is intended to operate as a deterrent against the giving of bribes.

138    After citing the above passages from Lewis and Daraydan, the Full Court in Grimaldi then concluded at [193]:

Finally, as both of the above quotations make plain, the payer of a secret commission to a person known to be acting in the matter on behalf of another, is taken to have assumed the risk of the payee having not obtained his or her principal’s informed consent to receipt of the payment: Grant v Gold Exploration and Development Syndicate [1900] 1 QB 233 at 249. Knowing that the payee is acting on another’s behalf is sufficient of itself to attract liability, unless full disclosure is made by the payer or “agent” and consent is given by the principal to the payment. Importantly, the payer’s liability does not turn on his or her knowing or suspecting that the agent has not received the principal’s informed consent to the payment: Daraydan Holdings at [53]; Bartram & Sons Ltd (1904) 90 LT 357 at 359-60.

139    Mr Carter submits that the characteristics of a bribe are definitively stated in Paul Finn, Fiduciary Obligations (The Federation Press, 2016) at [496] in the following terms:

i.    The payment of money or money’s worth to a person in a fiduciary position;

ii.    In circumstances in which the payment could possibly induce the fiduciary, as fiduciary, to show favour towards or to exert influence on behalf of, the donor in the donor’s dealings with the fiduciary or with the fiduciary’s beneficiary; and

iii.    The payment being undisclosed to the beneficiary.

140    Mr Carter seeks to rely on the third stated characteristic to contend that Chubb must establish that the alleged bribes were not disclosed to CCA. The profound difficulty with that contention is that this description of the characteristics of a bribe must be read subject to the Full Court’s statements in Grimaldi that (a) the payer of a bribe is taken to have assumed the risk that the agent (as payee) had not obtained their principal’s informed consent and (b) the liability of a payer does not turn on them knowing or suspecting that the agent (as payee) had not obtained their principal’s consent. A difficulty compounded by the fact that Finn J was the presiding Judge in Grimaldi and in a footnote to the paragraph that Mr Carter seeks rely upon in Fiduciary Obligations, the two best known definitions of a bribe in the context of a principal and agent relationship, are stated to be that provided by Slade J in Lewis at 575 and by Romer LJ in Hovendon & Sons v Milhoff (1900) 83 L.T. 41 at 43.

141    Moreover, it is stated in Fiduciary Obligations (at [495]), quoting from the decision of Romer LJ in Hovendon at 43:

Thus, once it is established that a bribe has been given -

… the court will not inquire into the donor’s motive in giving the bribe, now allow evidence to be gone into as to the motive. Secondly the courts will presume in favour of the [beneficiary] and as against the briber and the [fiduciary] bribed, that the [fiduciary] was influenced by the bribe; and this presumption is irrebuttable.

142    Bribery is a criminal offence by reason of s 249B of the Crimes Act. Section 249B relevantly states:

(1)    If any agent corruptly receives or solicits (or corruptly agrees to receive or solicit) from another person for the agent or for anyone else any benefit—

(a)    as an inducement or reward for or otherwise on account of—

(i)    doing or not doing something, or having done or not having done something, or

(ii)    showing or not showing, or having shown or not having shown, favour or disfavour to any person,

in relation to the affairs or business of the agent’s principal, or

(b)    the receipt of any expectation of which would in any way tend to influence the agent to show, or not to show, favour or disfavour to any person in relation to the affairs or business of the agent’s principal, the agent is liable to imprisonment for seven years.

(2)    If any person corruptly gives or offers to give to any agent, or to any other person with the consent or at the request of any agent, any benefit—

(a)    as an inducement or reward for or otherwise on account of the agent’s—

(i)    doing or not doing something, or having done or not having done something, or

(ii)    showing or not showing, or having shown or not having shown, favour or disfavour to any person,

in relation to the affairs or business of the agent’s principal, or

(b)    the receipt or any expectation of which would in any way tend to influence the agent to show, or not to show, favour or disfavour to any person in relation to the affairs or business of the agent’s principal,

the firstmentioned person is liable to imprisonment for 7 years.

(3)    For the purposes of subsection (1), where a benefit is received or solicited by anyone with the consent or at the request of an agent, the agent shall be deemed to have received or solicited the benefit.

143    Section 249B(2) of the Crimes Act is the key provision relevant to this case. Section 249B(2) and s 249B(1) are symmetrical in operation. Section 249B(2) creates the offence for the provision of an illegitimate benefit by any person to the agent of a principal. In contrast, s 249B(1) creates the offence for the receipt of an illegitimate benefit by an agent from another person.

144    As explained in Mehajer v R [2014] NSWCCA 167 at [67] (Bathurst CJ, Johnson and Hulme JJ agreeing), in order to constitute a criminal offence pursuant to s 249B(2)(b) (where the accused is the payer or provider of the benefit to the agent) it would be necessary for the Crown to prove:

(a)    the payee was the agent of a principal;

(b)    the accused gave or offered to give to the agent a benefit;

(c)    the given or offered benefit was one which, objectively, would tend to influence the agent to show favour or disfavour to any person in relation to the affairs or business of the agent’s principal;

(d)    the given or offered benefit was made with the payer intending, knowing or believing that it would tend to influence the agent to show favour or disfavour to any person in relation to the affairs or business of the agent’s principal; and

(e)    the payment was corrupt according to normally received standards of conduct.

145    For the last of these elements, a payment to an agent without the knowledge or consent of the principal and having the purpose described on s 249B(2)(a) (the matter in (c) above) or the tendency to have the effect described in s 249B(2)(b) (the matter in (d) above) would generally satisfy the “corrupt” element: Mehajer at [63].

146    In Mehajer, Bathurst CJ referred to the distinction between s 249B(1) and s 249B(2) in the following terms at [68]-[70]:

The differences in the elements of each offence can be summarised as follows. For a benefit or offer of a benefit to constitute an offence under s 249B(2)(a)(i) of the Act, it is necessary to establish that the donor of the benefit intended the benefit or offer as an inducement to the agent to do or refrain from doing a particular act in relation to the principal’s affairs (or as a reward for doing or refraining from doing such an act).

By contrast, s 249B(2)(a)(ii) of the Act does not require the payment to be an inducement or reward for doing or not doing a particular act. Rather it requires that the payment was intended by the donor as an inducement or reward for showing or not showing favour to a particular person in relation to the affairs of the principal.

The difference between the elements of s 249B(2)(a)(i) and (ii) of the Act with s 249B(2)(b) is that, for the purposes of the latter section, the donor, whilst not offering the payment or benefit as an inducement or reward, must make the payment or offer to make the payment knowing, believing or intending that the payment was one which would tend to influence the agent to show favour or disfavour in relation to the affairs or business of the principal of the agent.

147    As stated above, s 2489B(1) provides reflective provisions directed at the recipient agent of the benefit. The elements of the criminal offence (where the accused is the agent) are:

(a)    the accused was the agent of a principal;

(b)    the accused received or solicited receipt from another person a benefit for the accused or another person;

(c)    the received benefit or expectation would, objectively, tend to influence the accused to show favour or disfavour to any person in relation to the affairs or business of the accused’s principal; and

(d)    the payment was corrupt according to normally received standards of conduct.

D.5.     Potential directors and officers liability insurance claims

D.5.1.     Overview

148    For the purposes of a directors and officers liability policy, there are principally three types of claims identified by the parties relevant to these proceedings that could fall within coverage where a person is a director or officer of a company engaged in the payment of a bribe or provision of an illegal inducement:

(a)    a claim by the Australian Securities and Investments Commission (ASIC) for breaches of statutory duties under the Corporations Act;

(b)    a claim by a corporation for breaches of statutory and equitable duties owed to it causing it harm; and

(c)    investigations by ASIC into the conduct.

149    The critical issue in these proceedings is the extent of Mr Carter’s knowledge, at the time he signed the Proposal, of matters which may give rise to the above claims, and the failure to disclose those matters to Chubb.

D.5.2.     Breaches of statutory duties

150    The statutory duties owed by a director or officer of a corporation include the duties to act with care and diligence in s 180(1) of the Corporations Act, duties to act in good faith and for a proper purpose in s 181(1) of the Corporations Act, and duties not to improperly use their position to gain an advantage for themselves or cause harm to the corporation in s 182 of the Corporations Act.

151    The statutory duties imposed on directors pursuant to s 180(1) reflect the common law and equitable duties owed by a director to their corporation: Re HIH Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler (2002) 41 ACSR 72; [2002] NSWSC 171 at [372] (Santow J). The principles relevant to each of the statutory directors’ duties in s 180(1), s 181(1) and s 182 of the Corporations Act and at common law and in equity are well established and were not in dispute. For present purposes, it is not necessary to make any further reference to them. The relevant question here is whether Mr Carter knew at the time he signed the Proposal of matters that might give rise to a claim that he breached his duties to Orix, not whether he had breached those duties.

D.5.3.     Related accessorial responsibility for conduct

152    There are three sources of liability as an accessory for a party who is not a principal contravener with respect to civil and criminal actions for bribery.

153    First, in respect of the criminal offence of bribery, pursuant to s 249F of the Crimes Act, a person who aids, abets, counsels, procures, solicits or incites the commission of an offence under Pt 4A of the Crimes Act, in which s 249B is located, is also guilty of an offence. Such an action would be brought by the Crown, as it enforces the Crimes Act.

154    Second, s 79 of the Corporations Act provides:

A person is involved in a contravention if, and only if, the person:

(a)     has aided, abetted, counselled or procured the contravention; or

(b)     has induced, whether by threats or promises or otherwise, the contravention; or

(c)     has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention; or

(d)     has conspired with others to effect the contravention.

155    Third, equity also invites responsibility for a fiduciary breach upon a non-fiduciary where the non-fiduciary assists, that is, participates without inducing or procuring a dishonest and fraudulent design on the part of the fiduciary: Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 at [78] (Leeming JA, Barrett and Gleeson JJA agreeing).

D.5.4.     Exposure to investigations

156    Prior to commencing proceedings for contraventions of the Corporations Act or prosecutions under the Crimes Act, the relevant authorities typically conduct broad ranging investigations. Investigation powers are generally engaged when a relevant authority has reason to suspect that a person or persons may have committed a contravention or offence, including the facilitation of or involvement in any payment of bribes or the provision of illegal inducements. Further, investigations are commonly not limited to enquiry with the person of interest, but are commonly fact gathering exercises that also involve interviews and the production of documents from persons that may not be the central focus of the investigation.

E.     THE CCA MARKETING ACCOUNT

E.1.     Introduction

157    As explained above, the description “CCA Marketing Account” was used from time to time in contemporaneous documents and by parties in their submissions to refer to the “slush fund” that Chubb contends was utilised by Mr Pereira for his own purposes including as a mechanism to make it appear to CCA that he had extracted significant concessions from Orix. The latter use was represented by Mr Pereira to Orix, and understood by Orix, as making “Orix look good” and thereby favour Orix in its commercial negotiations with CCA, in particular, in competing with Toyota Financial Services.

E.1.1.     CCA Fleet Agreement and the First Fleet Flip

158    As noted above, CCA was a major client of Orix. The first fleet agreement with Orix was dated 13 March 1998 (CCA Fleet Agreement).

159    The CCA Fleet Agreement included “Standard Conditions” that:

(a)    incorporated into the CCA Fleet Agreement references to the types of services provided by Orix, including the Fleet Lease (described in the First Schedule) and Fleet Service and Fleet Management (described in the Second Schedule);

(b)    provided that CCA could lease vehicles from Orix by:

(i)    requesting Orix to provide a quotation for the lease; and

(ii)    delivering a Quotation and Order Form in relation to the vehicle, which set out the applicable rates;

(c)    provided that the term over which each lease was provided, the chargeable rate (which for the Fleet Lease was charged as a “Monthly Charge”) and the other integers relevant to ascertaining the commercial outcomes of the lease were all defined by reference to values recorded in the relevant Quotation and Order Form;

(d)    included cl 12.8 which provided as follows:

[CCA] acknowledges that persons may from time to time be introduced to ORIX by a broker, agent, dealer or other person and in such circumstances ORIX may pay commission, fees or other remuneration to such person. If a Lease results from any such introduction, [CCA] consents to the payment of ORIX of commission fees or other remuneration to such person and acknowledges that ORIX may have taken such payment into account in arriving at the total rent payable under the relevant Lease.

(e)    did not contain an equivalent to cl 12.8 where:

(i)    the recipient of payment was not a broker, agent, dealer or other person providing an introduction to Orix but an employee of CCA; or

(ii)    CCA consented upfront to the use of CCA’s own money by Orix to make the payment; and

(f)    did not contain, as found in other fleet agreements with customers such as GrainCorp, any provision for “profit sharing” (that is, where a profit was realised upon the disposal of vehicles leased by the customer, that profit would be shared equally by Orix and the customer).

160    The quotation process was central to the contractual process and the financial returns that Orix could expect from its commercial arrangements with CCA. The Fleet Agreement and the Standard Conditions did not identify the amounts to be charged by Orix to CCA, or the basis upon which they would be charged. For the fleet leases, that was to be determined through the provision of quotations by Orix to CCA.

161    Orix had a system for authorising the payment of third-party supplier invoices for a fleet expense, which required the relevant invoice to be signed and dated by the relevant person in Fleet Leasing who approved the invoice for payment.

162    Prior to 2003, CCA procured a large proportion of its vehicles from fleet providers other than Orix, including Toyota Financial Services.

163    In March 2003, Mr Georgiou set up a lunch with Mr Pereira, to “throw… [Orix’s] hat in the ring for ALL [of CCA’s] business”.

164    By June 2003, Mr Georgiou confirmed that Orix had “won the Toyota cars from [Toyota Financial Services] for Coke”.

165    The replacement of existing vehicles leased from Toyota Financial Services, with Orix vehicles, began in June 2003, and was known as the “First Fleet Flip”. Orix procured vehicles from Clintons to lease to CCA.

E.1.2.     The origin of the introducer fee

166    In July 2003, Mr Georgiou instructed Ms Manley to include an “introducer fee” in the CCA quotation template that was payable to Clintons for each vehicle delivered as part of the First Fleet Flip, including on Holden vehicles that were not procured from Clintons. From this time, Ms Manley included a $30 per month introducer fee component in the quotation template. This amounted to $1,000 over the life of the lease (which was 36 months).

167    The introducer fee was recorded as a finance element in the quotation. It was included in the capital cost of the vehicle leased to CCA. Upon delivery of a vehicle to CCA, the full amount of the introducer fee was posted to the accounts payable ledger associated with the “introducer”, and then Orix recovered the amount through the “introducer fee” component of the monthly rental.