Readers may recall our previous entries in July 2012 and August 2013 concerning the decisions of Prepaid Services Pty Ltd v Atradius Credit Insurance NV  NSWSC 608 and Prepaid Services Pty Ltd & Ors v Atradius Credit Insurance NV  NSWCA 252. In the 2012 decision, the Supreme Court of NSW held that the insurer was entitled to avoid a trade credit insurance policy (pursuant to section 28(2) of the Insurance Contracts Act 1984 (Cth)) due to fraudulent misrepresentation by the insured. However, in the 2013 decision, the NSW Court of Appeal found that the evidence was not sufficient to establish the threshold of fraudulent misrepresentation, such that the insurer was not entitled to avoid the policy. The question of whether the insurer could alternatively rely on section 28(3) of theInsurance Contracts Act 1984 (Cth) to reduce its liability was remitted to the primary judge for further hearing. This is where the 2014 decision of Prepaid v Atradius (No.2)  NSWSC 21 comes in.
In the 2014 decision (which represented the primary judge’s determination of the remitted question), the judge found, on balance and following a comprehensive assessment of the evidence adduced, that the insurer would not have issued the subject policy if truthful and complete answers had been given in response to an insurance proposal. The insurer was therefore entitled to judgment, given the operation of section 28(3) of the Insurance Contracts Act 1984(Cth). Importantly however, there was no evidence or submission addressed to the question of whether some alternative policy might have been issued, or on what terms.