The New South Wales Court of Appeal has overturned an earlier decision of the NSW Supreme Court in Bank of Queensland Limited v AIG Australia Limited1. We reported the Supreme Court decision in our bulletin of November 20182.

The claim concerned a class action against the Bank of Queensland (the Bank) alleging a failure by the Bank to protect investors’ interests in the face of a fraudulent Ponzi scheme. There were around 200 members of the class, and the Bank ended up settling for a total of AUD6m. The Bank’s insurance policy contained a “per claim” deductible of AUD2m and each individual claim within the class action fell well below this level.

The Bank claimed on its insurance policy on the basis that the claims within the class action were a single claim or, failing that, that they should be deemed be one claim by virtue of the aggregation clause. The Supreme Court rejected both of these arguments, finding that each member of the class had their own individual claim and, more controversially, that the claims did not aggregate. The Court of Appeal upheld the first finding but overturned the second.

The aggregating language in the policy provided that “all Claims arising out of, based upon or attributable to one or a series of related Wrongful Acts shall be considered to be a single Claim”. The Supreme Court found that the claims did not aggregate on the grounds that each fraudulent withdrawal from an investor’s account, which gave rise to a claim, was a fresh wrongful act, unrelated to withdrawals from other investors’ accounts.

The Court of Appeal disagreed, deciding that the claims were sufficiently similar so to have arisen from a series of related wrongful acts. The unifying factor was the knowledge of fraud allegations in the class action pleadings. One relevant factor was that the court had permitted the claims to be heard as a class action due to the considerable common ground between the claims.

This decision brings the Australian position more into line with the recent English Supreme Court decision in AIG v Woodman3, which was referred to by the NSW Court of Appeal.