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[2007] HCA 36
appellant. In M127 of 2006: appeal allowed with costs; orders of the Full Court of the Federal Court made on 2 September 2005 and order 3 made on 8 June 2006 set aside and, in lieu, appeal to that Court...
AMP paid millions to investors who lost money through bad advice from its representatives without anyone actually suing it. Its insurer CGU had said 'act as a prudent uninsured' and agreed to a claims-handling protocol in principle but dragged its feet on deciding whether to cover the payments and eventually said no because AMP was not actually liable. The High Court held that because no formal court claim was ever filed, AMP still had to prove it was legally liable and that the amounts it paid were reasonable. AMP could not do so: it settled mainly to keep ASIC happy and protect its licence rather than because the claims were strong, and it never considered a key legal defence under the Corporations Law. CGU's delay was not ideal but did not create an estoppel or a good-faith obligation to pay anyway, especially since AMP was also not acting entirely fairly towards CGU. The appeal by the insurer succeeded and AMP recovered nothing for the settlements.
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3,359 words · generated 24/04/2026
The litigation arose from the collapse of investments recommended by two financial advisers, Mr Pal and Mr Howarth, who held proper authorities from AMP Financial Planning Pty Ltd as a licensed securities dealer under the Corporations Law. Their company, Macquarie Advisory Group Pty Ltd (MAG), went into liquidation after ASIC investigations revealed serious misconduct, including investments in Hibiscus Spa where client funds were lost. AMP notified its professional indemnity insurer, CGU Insurance Limited, of potential claims in December 1999 and September 2000 under two successive policies.
Following a February 2001 meeting with ASIC, which emphasised that investors should be compensated promptly without the need for court proceedings and that AMP's obligations to investors overrode insurance concerns, AMP proposed a detailed protocol for managing investor complaints. The protocol required notification to CGU, preparation of liability reports, and instructions from CGU within 14 days on whether to settle or defend. CGU responded that, pending a decision on indemnity, AMP should "act as a prudent uninsured" and later agreed "in principle" to the protocol while reserving its position on indemnity. AMP's solicitors repeatedly pressed for confirmation of indemnity and warned that settlements would proceed to protect AMP's licence and reputation.
Between October and November 2001, AMP settled 47 investor claims for approximately $3.23 million without any investor commencing legal proceedings. These settlements occurred while CGU was still questioning liability, had indicated it would seek senior counsel's opinion, and had not committed to indemnity. CGU ultimately denied indemnity in November 2002, asserting that AMP had no legal liability under s 819 of the Corporations Law. AMP commenced proceedings in the Federal Court seeking indemnity, relying on estoppel arising from the protocol and CGU's representations, breach of the duty of utmost good faith under s 13 of the Insurance Contracts Act 1984 (Cth), and the objective reasonableness of the settlements.
Heerey J dismissed AMP's claim. He found that the policies responded only to "Claims" defined as originating processes in legal proceedings, that no estoppel prevented CGU from requiring proof of liability, that there was no breach of utmost good faith (which he equated with dishonesty), and that the settlements were unreasonable because they were driven by ASIC pressure rather than an assessment of litigation risk and failed to consider the possible application of s 819(4) of the Corporations Law. The Full Court of the Federal Court (Moore and Emmett JJ, Gyles J dissenting) allowed AMP's appeal and remitted four specific questions concerning inducement to assume that proof of liability by admissible evidence would not be required, reliance, whether CGU was estopped or would lack good faith in so asserting, and whether the settlements were on reasonable terms. CGU appealed to the High Court, which allowed the appeal, set aside the Full Court's orders, dismissed the appeal to the Full Court, refused AMP's application for special leave to cross-appeal, and remitted a separate costs issue.
The majority (Gleeson CJ, Crennan, Callinan and Heydon JJ) held that Heerey J's undisturbed findings left no room for the remitted questions, that AMP had not established estoppel or a breach of s 13 that relieved it of its evidentiary burden, and that the settlements were not reasonable. Kirby J dissented, emphasising CGU's protracted delay and prevarication as contrary to the duty of utmost good faith.
The majority reasoned that the policies provided cover only for "Claims for Civil Liability" where "Claim" was defined as an originating process in a legal proceeding or arbitration and "Civil Liability" meant liability ordered by a civil court. Because AMP had deliberately structured its response to avoid formal claims (partly to satisfy ASIC and prevent CGU from taking over conduct under cl 7.5), the insuring clause was not directly engaged. This context was critical when evaluating estoppel and good faith arguments. The majority accepted Gyles J's view that CGU was estopped from relying on cl 7.6 (prohibiting admission of liability or settlement without consent) or the absence of formal claims, but emphasised that this did not relieve AMP of proving that the settlements were reasonable and that it was actually liable to the investors.
On estoppel, the majority held that CGU's repeated statements to "act as a prudent uninsured" and agreement in principle to the protocol did not convey a representation that AMP "would not subsequently be required to prove its liability to the investors with whom it had settled by calling those investors as witnesses in its case in any subsequent legal proceeding". Heerey J had found that AMP knew CGU had not accepted liability, that AMP paid for its own commercial reasons (including preserving relations with ASIC and its licence), and that AMP had a motive to settle while the indemnity issue remained unresolved so as to reduce the risk of CGU assuming conduct. These findings, which were not set aside, negated both reliance and the requisite detriment. The questions posed by the Full Court for remitter therefore achieved nothing; they had already been answered adversely to AMP.
Regarding s 13 of the Insurance Contracts Act 1984 (Cth), the majority accepted the broader view that utmost good faith is not confined to dishonesty and may require an insurer to act with due regard to the legitimate interests of the insured. However, the Act does not empower a court to impose liability as a punitive sanction for breach. Even assuming CGU's delay throughout 2002 breached the duty, most settlements had already been paid in 2001 when CGU was expressly questioning liability. The asserted want of good faith was CGU's litigation stance that AMP must prove liability by admissible evidence, not mere delay. Because AMP itself had not acted with reciprocity—it prioritised ASIC demands, explicitly ignored CGU's interests, failed to consider s 819(4), and did not invoke the senior counsel clause in cl 7.8—the duty could not be invoked in its favour.
On reasonableness, the majority upheld Heerey J's finding that the settlements failed the objective test in Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd. The process was "so dominated by pressure from ASIC" that settlements would not have been reached on the same terms absent that pressure. AMP did not merely fail to give proper weight to CGU's interests; it was told by ASIC to ignore them. Additionally, the settlements ignored the potential s 819(4) defence that could have rendered MAG rather than AMP liable. AMP had tendered 30 lever-arch files only to prove its state of mind at the time of settlement, not the underlying facts of liability. Heerey J was not required to examine every document in detail when senior counsel for AMP had indicated it was sufficient to observe the pattern. The hypothesis underlying the Full Court's remitter—that AMP had not proved liability by admissible evidence—meant that Heerey J could form only a tentative view on the limited material, which supported unreasonableness. Emmett J's criticisms did not alter the outcome because the primary judge had done what he was asked to do on the evidence presented.
The second appeal concerning costs orders was remitted because the Full Court had not dealt with CGU's cross-appeal on construction issues once it allowed AMP's appeal. The majority's disposition therefore restored Heerey J's orders (subject to the costs remitter) and confirmed that AMP had not established an entitlement to indemnity.
Prior to this decision, the precise content of the duty of utmost good faith under s 13 of the Insurance Contracts Act 1984 (Cth) was unsettled. Some authorities, including dicta in CIC Insurance Ltd v Barwon Region Water Authority and Kelly v New Zealand Insurance Co Ltd, suggested that want of utmost good faith required proof of dishonesty. There was also uncertainty about whether an insurer's delay in responding to a claim could constitute a breach, and the extent to which the duty was reciprocal. The decision in Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd had established that an innocent party forced into third-party litigation by a contract-breaker's breach could recover a reasonable settlement, but its application to insurance where no formal "Claim" had been made and the insurer was not yet in breach remained unclear. The operation of s 819 of the Corporations Law, particularly the exculpatory effect of sub-s (4), had produced judicial disagreement.
After the decision, it is clear that the duty under s 13 is broader than dishonesty. It may require an insurer to act consistently with commercial standards of decency and fairness and with due regard to the insured's legitimate interests, potentially including a timely response to claims. However, a breach does not automatically create or expand contractual liability; there must be a principled link to the contract of insurance. The duty is explicitly reciprocal, so an insured that manoeuvres for commercial advantage (for example, to satisfy a regulator while preserving rights against the insurer) cannot readily invoke the insurer's want of good faith. The case reinforces that, where an insured settles without a formal Claim as defined in the policy, it bears the onus of proving both its underlying liability and the objective reasonableness of the settlement, judged from the perspective of the risk the insured faced at the time. Regulatory pressure, while relevant, does not excuse failure to consider all defences or the insurer's interests. Estoppel will not lightly relieve an insured of these evidentiary burdens where the insurer has reserved its position and the insured knew indemnity had not been accepted. The senior counsel clause in policies (cl 7.8 here) assumes greater practical importance as a mechanism for resolving disputes efficiently.
The decision also illustrates that s 819(4) of the Corporations Law can operate to shift liability to another "indemnifying principal" (here MAG) where both principals are before the court and it is proved that the representative acted for that other person. Failure to consider such a defence can render a settlement unreasonable.
Paragraph [4] (Gleeson CJ and Crennan J): "Payment of the settlement amounts was not within the terms of the cover provided by the contract of insurance. (There were, in fact, two contracts, covering successive years, but it is convenient to refer to the insurance cover in the singular.) Under the insuring clause, CGU agreed to provide cover for 'Claims for Civil Liability' arising from the conduct of AMP's 'Insured Professional Business Practice' made while the policy was in force. 'Civil Liability' was defined to mean liability for damages, costs and expenses which a civil court ordered the insured to pay on a claim. 'Claim' was defined (so far as presently relevant) to mean any originating process in a legal proceeding or arbitration. None of the investors to whom settlement amounts were paid made a claim, as defined."
Plain-English translation: The policies only paid out if someone actually sued AMP and a court ordered it to pay. Because AMP settled everything before any writ was issued, the policy wording did not automatically cover the payments. This background colours every argument about whether CGU behaved badly or is stuck with the bill.
Paragraph [8] (quoting Gyles J): "AMP was entitled to rely upon that assurance. It follows that CGU is estopped from denying liability to indemnify AMP for any payment pursuant to a settlement reached accordingly, notwithstanding any policy conditions to the contrary. Whether it did in fact act as a prudent uninsured in making the payments is another and, in my opinion, the main, issue. If it did so, it would have acted to its detriment."
Plain-English translation: CGU cannot hide behind the policy clauses that stop AMP admitting liability or settling without consent, because it told AMP to behave as if it had no insurance. But that concession only gets AMP so far; it still has to show that what it paid was a sensible amount that a careful uninsured person would have paid.
Paragraph [15] (Gleeson CJ and Crennan J): "However, the Act does not empower a court to make a finding of liability against an insurer as a punitive sanction for not acting in good faith. If there is found to be a breach of the requirements of s 13 of the Act, there remains the question how that is to form part of some principled process of reasoning leading to a conclusion that the insurer is liable to indemnify the insured under the contract of insurance into which the parties have entered."
Plain-English translation: Even if CGU did breach its good-faith duty, a judge cannot simply order it to pay as punishment. There must still be a logical legal path from the breach to actual liability under the insurance contract. That path was missing here.
Paragraph [20] (Heerey J, approved by majority): "the whole process was so dominated by pressure from ASIC that I am quite unable to conclude that the Settlements would have been reached in the agreed amounts, or indeed at all, had that pressure not existed ... Apart from the question of process, the Settlements were unreasonable because they failed to take into account the availability of the s 819(4) defence."
Plain-English translation: ASIC was leaning on AMP so hard that the settlements were not commercial decisions based on what might happen in court; they were regulatory compliance exercises. On top of that, AMP never even thought about a defence that might have let it off the hook entirely. That makes the payments unreasonable from an insurance perspective.
This precedent is triggered whenever an insured under a claims-made professional indemnity policy settles third-party demands without those demands ever crystallising into formal "Claims" as defined (originating processes in legal proceedings or arbitration). It is especially relevant where the insured faces regulatory pressure from a body such as ASIC to compensate quickly and without technical defences, develops a protocol for handling claims, obtains the insurer's agreement "in principle" to that protocol, and is told to "act as a prudent uninsured". The case applies when the insurer reserves its rights, delays deciding on indemnity while questioning liability, and ultimately denies cover on the basis that the insured was never actually liable or that the settlements were unreasonable.
Key triggers include: (1) the insured's internal documents or evidence showing that settlements were motivated primarily by commercial or regulatory concerns (licence protection, reputation, avoidance of insurer takeover of claims) rather than an objective assessment of litigation risk; (2) failure to consider all available defences, such as statutory exculpatory provisions like s 819(4); (3) tender of investigative materials only to prove the insured's state of mind rather than the underlying facts of liability; (4) absence of any invocation of a senior counsel clause to resolve disputes about whether claims should be defended; and (5) lack of reciprocity by the insured in its own conduct towards the insurer. The precedent is engaged in any dispute where the insured seeks to rely on estoppel or s 13 to shortcut the need to prove both liability and reasonableness of voluntary payments.
The High Court's reasoning has been treated as settling the proposition that a breach of s 13 does not, without more, create contractual liability where the policy terms are not satisfied. The majority's insistence on a "principled process of reasoning" linking any breach to the contract has been influential in confining the remedial scope of the section. The affirmation of Heerey J's findings, despite Emmett J's criticisms in the Full Court, underscores that a trial judge's assessment of reasonableness will not lightly be disturbed where the insured has presented its case on a limited evidentiary basis (state of mind rather than proof of facts).
The decision distinguishes between the estoppel that arises against reliance on policy conditions such as cl 7.6 (which the majority accepted) and any wider estoppel that would relieve the insured of proving its underlying liability (which was rejected). Later analysis has treated the reciprocal nature of the s 13 duty as requiring the insured to demonstrate diligence and regard for the insurer's interests, particularly where the insured has manoeuvred to keep the insurer at arm's length. The treatment of ASIC pressure as a factor that can render settlements unreasonable when it displaces objective assessment of litigation risk has narrowed the circumstances in which regulatory intervention can be used to justify voluntary payments.
The remitter mechanism employed by the Full Court was characterised as futile once it was recognised that Heerey J's undisturbed findings already answered the remitted questions. This has reinforced the principle that an appellate court should not remit for further consideration issues that have, on a fair reading of the primary judgment, already been determined. The majority's approach to s 819(4) has been treated as confirming that an insured must turn its mind to all available statutory defences at the time of settlement if it wishes to characterise the payment as reasonable.
The decision leaves open the precise point at which an insurer's delay in responding to a notification of circumstances crosses the line into a breach of s 13, particularly where the insured event (a formal Claim) has not yet occurred. While the majority accepted that timely response may be required, it did not articulate a bright-line test or the circumstances in which delay before the insured event would ground relief.
The exact content of the reciprocal obligation on the insured under s 13 remains unsettled in detail. The majority noted AMP's lack of diligence and its prioritisation of its own interests, but did not exhaustively catalogue what an insured must do to maintain reciprocity when under regulatory pressure. Whether an insured that has been expressly told by a regulator to ignore the insurer's interests can ever satisfy the duty is unclear.
The interaction between a regulator's demands and the objective reasonableness test for settlements requires further elaboration. The majority accepted that ASIC pressure dominated the process but did not address whether, and to what extent, an insured can rely on regulatory expectations that conflict with the insurer's legitimate interests without rendering the settlement unreasonable.
The proper approach to assessing s 819(4) defences on a claim-by-claim basis where evidence is incomplete also remains open. Heerey J formed a tentative view on the limited material; the majority held that was all he could do. Future cases may need to clarify the evidentiary burden on an insured that has settled without calling third parties when the insurer later raises a statutory defence that was not considered at the time.
Finally, the practical utility of senior counsel clauses in policies (cl 7.8 here) when both parties have acted with some lack of candour is unresolved. The majority noted the clause had not been invoked; whether an insurer's failure to suggest its use could itself constitute want of good faith was not decided.
Most practitioners still assume that once an insurer says "act as a prudent uninsured" and agrees in principle to a protocol, the insured is home free on liability and need only show the settlements were commercially sensible. The majority quietly buried that assumption: the estoppel is narrow and does not dispense with the need to prove the insured was actually liable and that the payments were objectively reasonable. Another trap is treating s 13 as a get-out-of-jail-free card for the insured; the duty is reciprocal, and an insured that prioritises its regulator over its insurer, fails to consider statutory defences, and deliberately keeps the insurer at arm's length will struggle to invoke the section. The case also contains a hidden warning about tendering 30 lever-arch files "to show state of mind only"—it may satisfy the trial judge that you followed a process, but it will not prove the underlying liability or reasonableness if the judge concludes the process was distorted by external pressure. Finally, most lawyers forget the senior counsel clause until it is too late; had AMP invoked cl 7.8 early, the entire dispute might have been resolved on economics and prospects rather than years of expensive litigation. These nuances justify close attention because they turn on the precise wording of findings that are easily missed on first reading.
The application of the relevant Corporations Act provisions and our views on liability are clearly set out in the liability reports. We have also previously requested (most recently in our letter … dated 19 September 2001 to which … we have received no response) that if you or CGU disagree with the conclusions reached in the liability reports to let us know immediately.
Fundamentally, our client's responsibilities under its dealer's licence, in particular its obligation to act efficiently, honestly and fairly, require it to go ahead with settlements. The agreement with ASIC requires claims to be settled with a minimum of delay. … To delay settlements at all in circumstances where [AMP] has formed a clear view of liability, and particularly for the period of 28 days from 5 October 2001 as you suggest is untenable and inconsistent with the agreement reached with your client in May this year and not disputed until your letters of 1 October 2001. … Our client is not prepared to put its licence and its business or its commercial reputation at risk because its insurer has not yet made a decision on indemnity on the Policy.
In our view, CGU has had the information necessary to make that decision for some considerable time. …
Until CGU makes a decision on indemnity under the Policy, our client will continue to act in good faith as a prudent uninsured, consistently with its obligations under the Policy and its dealers licence, to keep its exposure (financial, regulatory or to its reputation) to a minimum."
"In the meantime, as we pointed out in our letter to you dated 5 October 2001 and at our meeting, until CGU informs us that it will provide indemnity under the Policy, [AMP] is obliged to continue to act as a prudent uninsured. Accordingly, and bearing in mind its obligation to act efficiently, honestly and fairly, [AMP] is obliged to go ahead with settlements."
"We note that your client has yet to confirm with our client whether indemnity under its policy will be granted. While we understand that you have only recently received instructions in this matter, we note that we met with CGU's solicitors first in late 2000, then again with CGU's solicitors and CGU approximately 1 year ago, and again with CGU's (second) solicitors and CGU late last year.
At all times, our client has been willing to discuss this matter with CGU and its solicitors, and to provide any documents requested. We believe that we have complied, at all times, with requests for documents. If you believe that further documents need to be provided, please indicate which documents you require and we will attempt to find them."
"We are instructed that our client continues to reserve its rights with respect to its liability to indemnify under the professional indemnity insurance policy issued to your client ...
[Y]our firm has acted for both [AMP] and [Hillross] throughout the claims administration process ... There is a clear conflict of interest in your firm acting for both potential defendants to any claim by the third party clients.
Our client insists that your firm immediately ceases to act for [AMP] and [Hillross] and that independent solicitors be appointed to administer any claims made against that entity.
As your firm is aware our client has obtained Senior Counsel's advice on the liability of [AMP] to clients of [MAG]. Counsel's advice is that your firm's interpretation of the Corporations Law is incorrect and accordingly in many cases no liability to a third party claimant exists.
We confirm your ... verbal advice ... that [AMP] has obtained releases and paid monies to investor clients of MAG. It is our view that to the extent the payments relate to any claim covered by the policy that the insured has breached the no admission or settlement condition set out in clause 7.6 of the policy.
Our client believes that the procedure adopted by the insured to resolve disputes with clients of MAG may be in breach of condition 7.2 of the policy and in breach of the obligations imposed on the insured by Section 13 of the Insurance Contracts Act 1984 as amended.
However our client is prepared to consider the insured's claim for indemnity arising from claims made by the clients of MAG on an individual basis.
In the circumstances we have been instructed to review each client file to assess any liability on the part of the insured to the claimants for which it is entitled to be indemnified. In order for us to do this we seek that the insured provide us with a list setting out the name of every client of MAG where [AMP] considers that a claim for indemnity exists. We have on file numerous lists of clients some of which duplicate names on earlier notices and some of which are stand alone lists.
As stated our client believes that your office should not continue to act for [AMP] ... On a without prejudice and reserved rights basis our client is prepared to take over conduct of all outstanding claims with our office acting for the insured."
"(a) whether CGU admits that the Policy applies to the claims made against [AMP] relating to Pal's activities detailed in the enclosed table ('Claims');
(b) if CGU admits the Policy applies to the Claims, whether CGU proposes to conduct negotiations and any legal proceedings in respect of any Claims which remain unresolved."
"In relation to the claims as listed in Schedule A, CGU maintains that no legal liability exists on the part of [AMP] to the claimant investors.
We note that your solicitors, Minter Ellison, have advised [AMP] that the Court is likely to find that a legal liability exists to each of the Schedule A claimants under section 819 of the Corporations Act. They have advised that the liability exists on the basis that the claimants however believe that Pal was acting on behalf of 'some principal'.
We are advised that Minter Ellison's legal opinion on the operation of section 819 is flawed and not supported by case law. We are also advised that for [AMP] to be liable under section 819, what is required on the part of the claimant is actual belief that Pal's conduct in providing advice was performed in connection with [AMP]'s business. Moreover, the investors' belief must be reasonably held.
It is clear that none of the Schedule A investors held a belief that Pal acted on behalf of [AMP] at the time that the advice was provided or the investment made.
Consequently, in the circumstances of the subject claim, indemnity is not available to [AMP]."[137]
"We regret to advise that the additional documents do not contain any information that alters the basis of [AMP's] claim. We maintain our original decision to deny indemnity on the basis that [AMP] is not legally liable for the acts of Mr Pal in recommending unauthorised investments. ...
We enclose a copy of the most recent advice received from Mr Archibald SC and Mr Settle of Counsel. You will see that their advice confirms our view that no legal liability exists on the part of [AMP] to the claimant investors."
"13. On or about 11 May 2001, the [appellant] represented to the [respondent] that:
(a) the [appellant] agreed in principle to the protocol;
(b) in accordance with the protocol, the [appellant] would, within 14 days of provision of the liability report in respect of each investor claim, consider the [respondent's] claim for indemnity and communicate with the [respondent] in relation to settling or defending such claims ('protocol representation').
(a) received the investor claims set out in Schedule 1 and Schedule 2 and notified each investor claim to the [appellant];
(b) obtained legal advice in relation to issues of liability and quantum regarding each investor claim;
(c) forwarded liability reports to the [appellant] in relation to each investor claim; and
(d) provided further information in relation to the investor claims when requested to do so by the [appellant].
(a) the [appellant] was aware of and accepted the [respondent's] obligations and intention to deal with the investor claims prudently and in an efficient, honest and fair manner;
(b) the [appellant] would provide its instructions either to settle or to defend the investor claims within 14 days of the provision by the [respondent] to the [appellant] of each liability report in accordance with the protocol;
(c) if the [appellant] failed to respond to the [respondent's] requests for instructions, the [respondent] might reasonably proceed to settle the investor claims notified to the [appellant] under the protocol as it was legally and commercially compelled to do; and
(d) by so settling, the [respondent] would not adversely affect its rights to obtain indemnity under the insurance contracts.
"Is CGU prevented by any principle of law (estoppel …) from relying upon its argument … that [AMP] is not now entitled to claim damages for breach of contract (in respect of settled investor claims) and an order that CGU indemnify it under the policies (in respect of unresolved or unknown claims) … because it settled with some investors after the claims management protocol had been agreed but before CGU had expressly repudiated the contracts of insurance, particularly having regard to the fact that [AMP] was told by CGU to act as a 'prudent uninsured' in relation to claims which to the knowledge of CGU, [AMP] proposed to settle?"
"1. By agreeing to the Protocol as the means by which the Investors' claims would be managed and, where appropriate, settled, and by instructing [AMP] to act as a 'prudent uninsured' until a decision on indemnity was made, and by standing by while [AMP] settled Investor claims full details of which had been given to CGU, CGU is now estopped from relying on the fact that [AMP] settled claims prior to CGU denying cover under the policy in toto.
(a) CGU was aware of and accepted [AMP]'s obligation and intention to deal with the Investor claims prudently and in an efficient, honest and fair manner, as required, in particular, in order to protect [AMP]'s licence under the Law (see s 826(1)(j));
(b) CGU would provide its instructions either to settle or to defend the Investor claims within 14 days of the provision by [AMP] to CGU of each liability report in accordance with the Protocol;
(c) if CGU failed to respond to [AMP]'s requests for instructions, [AMP] might reasonably proceed to settle the Investor claims notified to CGU under the Protocol as it was legally and commercially compelled to do; and
(d) by so settling, [AMP] would not adversely affect its rights to obtain indemnity under the insurance contracts in the manner which CGU now submits occurred.
(a) CGU made a representation or fostered an assumption;
(b) [AMP] relied to its detriment on the representation or assumption by proceeding to deal with and settle claims with the Investors on the basis of the agreed Protocol; and
(c) for CGU to act contrary to the representation or assumption would be unconscionable in all the circumstances …"
"Up until the receipt of the letter of 14 November 2002 [AMP] recognised, as was the fact, that CGU had neither admitted nor denied liability to indemnify under the Policies. The most senior responsible person at [AMP] who gave evidence (although not, it would seem, the ultimate decision maker) was Mr Stephen Tudjman. He is a legal practitioner. He said in cross-examination:
'Q ... Until receipt of that letter of 14 November [2002], whenever that occurred at the earliest, there was no denial of liability?
Q So you were acting on the basis that the policy was on foot. Leave aside the question of whether it ceased to be on foot after that date, but you were acting on the basis that the policy was on foot?
[AMP] had no belief that CGU had accepted liability. On the contrary, it was apparent to it that CGU had not yet made up its mind. CGU was, to use Ms Sutherland's metaphor, sitting on the fence. It was equally possible that CGU might, at some future time, deny liability. [AMP] entered into the Settlements and paid the Investors not in reliance of [sic] any commitment or promise or representation by CGU but because [AMP] considered the Settlements were desirable in its own interests, especially having regard to the attitude of ASIC."
"[F]ormally we pleaded the protocol gave rise to an estoppel, but the estoppel would only be relevant in the circumstances that your Honour postulated earlier if CGU was now suggesting that the arrangements that were made were a breach of the policy for some reason, but that's all disappeared, your Honour." (emphasis added)
"The appeal should be upheld and the orders made by the primary judge should be set aside. The matter should be remitted to the primary judge for further consideration, in the light of these reasons, of the following questions in relation to each of the investor demands referred to in the SC Schedule:
. whether AMP was induced by CGU's conduct to assume that, if it settled that demand on reasonable terms, it would not be required to establish by admissible evidence that it was legally liable to that investor in order to be reimbursed by CGU for the amount paid pursuant to such settlement;
. if so, whether AMP settled that demand in reliance upon that assumption;
. whether, in the light of the answers to those questions, CGU is estopped from asserting that, or it would be a want of utmost good faith for CGU to assert that, AMP is required to establish by admissible evidence that it was legally liable to that investor;
. whether AMP settled that demand on reasonable terms."
"A contract of insurance is a contract based on the utmost good faith and there is implied in such a contract a provision requiring each party to it to act towards the other party, in respect of any matter arising under or in relation to it, with the utmost good faith."
AMP Financial Planning Pty Ltd v CGU Insurance Ltd (No 2) [2004] FCA 1397. See (2005) 146 FCR 447 at 471 [67]. ↑
(2005) 146 FCR 447 at 492 [167], 493 [169] per Gyles J. ↑
(1998) 192 CLR 603 at 615-616 [33] per McHugh J. ↑
cf reasons of Gleeson CJ and Crennan J at [9]. ↑
(2005) 146 FCR 447 at 472 [70]; see also at 491-492 [163] per Gyles J. ↑
(2005) 146 FCR 447 at 449 [1] per Moore J, 472 [71]-[72], 474 [82], 489 [154] per Emmett J. ↑
CGU Insurance Limited
AMP Financial Planning Pty Ltd
CGU Insurance Limited v AMP Financial Planning Pty Ltd [2007] HCA 36
[2006] HCATrans 534
[2007] HCATrans 047
(1974) 130 CLR 1
(1998) 192 CLR 603
(2005) 146 FCR 447
(2004) 139 FCR 223
(2007) 81 ALJR 582
(1988) 164 CLR 387
(1990) 170 CLR 394
(1933) 49 CLR 507
(1947) 75 CLR 378
(1986) 160 CLR 226
(1979) 143 CLR 24
(1996) 130 FLR 97
(1990) 55 SASR 145
(2004) 183 FLR 164
(2005) 12 VR 79
(2003) 77 ALJR 1598
(1988) 180 CLR 491
In M127 of 2006: appeal allowed with costs; orders of the Full Court of the Federal Court made on 2 September 2005 and order 3 made on 8 June 2006 set aside and, in lieu, appeal to that Court dismissed with costs; application for special leave to cross-appeal refused. In M128 of 2006: orders 1, 2 and 4 of the Full Court made on 8 June 2006 set aside and the cross-appeal remitted to the Full Court for further consideration in light of the decision in M127 of 2006.