Previous bulletins have noted the timing difficulties inherent in applying the statutory charge provisions contained in Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s 6 (and cognate legislation in ACT, NT and New Zealand). If the event that gives rise to the claim for damages or compensation does not coincide with the period of insurance cover, there are no insurance moneys to which a s 6 (or equivalent statutory) charge can attach. Sometimes, the event pre-dates the policy, as was the case in Genworth and Malouf. In other cases, the event may post-date the period of cover.
Even where the event and the cover coincide, a third party wishing to proceed against an insurer under s 6 must ensure that they fall within the statutory limitation period that would be imposed on any claim against the insured.
In TPFL Ltd (in liq) v SB Group Property Valuers and Consultants Pty Ltd (in liq)  NSWSC 853, TPFL, the responsible entity for an investment fund, made a number of claims against SB Group, a company which had provided it with several property valuations. As SB Group subsequently went into liquidation, sought to proceed directly against ACE, SB Group’s insurer. For a number of reasons, TPFL was unable to pursue any of its claims. This note deals only with those where the decision turned on the timing issues outlined above.
Contribution claims - s 6 and the event giving rise to the claim for damages or compensation
TPFL had been sued by investors who claimed it had engaged in misleading or deceptive conduct. TPFL settled the litigation by making a payment to the investors. TPFL claimed that it was entitled to contribution from SB Group in relation to the settlement it had made. It sought leave under s 6(4) to proceed against ACE.
Unfortunately for TPFL, timing was a problem. The relevant occurrences were:
- October 2004 - ACE policy commenced
- March 2006 - valuation provided by SB Group
- October 2006 - ACE policy expired
- December 2007 - investors commenced proceedings against TPFL
- May 2010 - proceedings settled
TPFL argued that the event giving rise to the claim for damages or compensation was the provision of the valuation. However, the Court held that the relevant event was the settlement of the proceedings. At that time, no policy was in force, and so there were no insurance moneys to which a statutory charge could attach. This meant that leave was not granted to join ACE to the proceedings.
Contract claim - statutory limitation periods
TPFL also had a number of independent claims against SB Group in connection with other valuations SB Group had provided. These valuations had been given in May 2005 and August 2005. The statutory limitation period for TPFL’s claims against SB Group for breach of contract was six years, with time running from the date on which the cause of action accrued against SB Group.
Here, again, timing was a problem. A cause of action in contract accrues at the time the contract is breached, without the need for loss or damage to have arisen. It followed that TPFL’s cause of action against SB Group accrued at the time that the valuations were delivered, and TPFL was statute-barred from proceeding against either SB Group or ACE.
The judgment in this case deals with a number of other procedural issues, such as TPFL’s failure, at first, to apply for leave to proceed under s 6. However, the findings that relate to timing illustrate the importance of establishing the event that gives rise to the claim for damages or compensation, and the difference between proceeding against a claimant (or their insurer, for that matter) in contract, as opposed to tort. TPFL’s claim in contract was statute-barred because the cause of action accrued at the time the contract was breached, which was the time that the valuation was given. For reasons beyond the scope of this note, TPFL was unable to bring a claim against SB Group (or ACE) in negligence. Where negligence is claimed, loss must be established. TPFL’s cause of action would not have accrued until that loss was reasonably ascertainable. A claim by TPFL against SB Group in negligence might not have been statute-barred. It might also have meant that the event giving rise to the claim coincided with the policy period, which would have allowed TPFL to proceed against ACE.