Stealth Enterprises Pty Ltd t/as The Gentlemen's Club v Calliden Insurance Limited

Introduction

1. The appellant (Stealth) owned and operated a brothel from premises in the Australian Capital Territory. That business, carried on under the name "The Gentlemen's Club", was insured under a contract of insurance providing cover against property damage, including by fire, and public and product liability. The insurance was first issued for the period 3 September 2010 to 3 September 2011 and then renewed for 12 months to 3 September 2012. On 1 January 2012 the premises were damaged by fire.
2. The respondent insurer, Calliden Insurance Ltd (Calliden), denied liability for that claim, relevantly on the basis that there was a failure by Stealth to comply in two respects with its duty of disclosure under s 21 of the Insurance Contracts Act 1984 (Cth) (the Insurance Contracts Act). The first matter that was not disclosed was that Stealth's sole director, Mr Baris Tukel, and his brother, Mr Fidel Tukel, the manager of the brothel, were members of the Comancheros bikie gang. At the same time, it was not suggested that Stealth was owned or controlled by that "organisation" or that the premises were held or operated in some way for its benefit. The second was that the brothel's registration under the Prostitution Act 1992 (ACT) lapsed or expired on 30 September 2010, with the result that it was not current at the time of renewal of the policy in September 2011.
3. The primary judge held that Stealth had failed to comply with its duty of disclosure in relation to each of these matters and that Calliden would not have renewed the policy if either had been disclosed at that time. In these circumstances her Honour held that Calliden was entitled to have its liability reduced to nil under s 28(3) of the Insurance Contracts Act: Stealth Enterprises Pty Ltd t/as The Gentlemen's Club v Calliden Insurance Limited [2015] NSWSC 1270. Had Stealth's claim been upheld it was agreed it would have been entitled to $500,000 by way of indemnity.
4. Her Honour also held in relation to the first matter that Stealth did not comply with its duty of disclosure in September 2010 when the policy was first issued. However it is accepted before this Court (but was argued otherwise before the primary judge), that whether or not there was any non-disclosure under the earlier contract is not relevant to Calliden's entitlement to deny liability to Stealth under the renewed policy, which was the insurance current at the time of the fire.