In 2017, the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (“the Act”) was enacted on recommendations by the NSW Law Reform Commission. The Act aimed to streamline the process by which third party claimants can recover against insurers directly, which was previously addressed by the controversial s 6 of the Law Reform (Miscellaneous Provisions) Act 1946.

This article examines the decision of Count Financial Limited v Pillay [2021] NSWSC 99, which clarifies the operation of ss4(1) and 5 of the Act.

Background facts

Mr Pillay (‘the Insured’), a chartered accountant employed by Count, provided accounting services and taxation advice in relation to “accounting and tax aspects of identified agribusiness products to identified clients”.[1]

Incorrect advice was given clients made claims against Count in relation to their loss. Count made commensurate payments to its clients and then sought to recover those costs from the Insured, claiming he failed to exercise reasonable care and skill in his accounting and taxation practice to avoid economic loss to Count.

Count sought leave to join the Insured’s insurers to the proceedings under his professional indemnity policy, pursuant to s 5(1) of the Act.

The court was asked to consider whether the policy would respond to Count’s claim against the Insured. It found the exclusion clause in the policy was enlivened and as such, the Court refused Count leave to proceed against the insurers.

General operation of the Act

In order for Count to be granted leave to proceed against the insurers, it had to show that:

  1. it had an arguable case against the Insured;
  2. there was a real possibility that the Insured was not be able to meet judgement, if judgment was obtained against him; and
  3. it had an arguable case that the policy responded to its claim against the Insured.[2]

Under s 5(4) of the Act, leave must be refused if the insurer can show the policy does not respond to the dispute.

Policy response to the claim

The insurers denied indemnity under the policy based on the wording of the exclusion clause, directed at liability arising from “any investment introduced or recommended by the Insured”.

In the words of Count’s representation, “[Count’s] case is that Mr Pillay provided accounting and personal taxation advice to his Clients in relation to the relevant agribusiness Products.”[3]

The court considered those words echoed, albeit not precisely (“in relation to” rather than “in respect of”)[4] the words of the exclusion, and as such Justice Stevenson was satisfied the insures had in this case established an “entitlement to disclaim liability”.[5]

The Court thereby refused Count leave.