In Genworth Financial Mortgage Insurance Pty Ltd v KCRAM Pty Ltd
(in liq) (No 2)  FCA 1124, the Federal Court considered the
point at which an "event giving rise to the claim for damages
or compensation" occurs for the purposes of section 6(1) of
the Law Reform (Miscellaneous Provisions) Act 1946 (NSW)
Genworth provided mortgage insurance to lenders. KCRAM was a
property valuer. When four security properties were sold below
their valuation price following default by the borrowers, Genworth
sued KCRAM claiming that the valuations were prepared
After KCRAM went into liquidation, Genworth sought leave, under
s 6(4) of the Act, to join the valuer's professional indemnity
insurer, International Insurance Company of Hannover Limited
(Hannover), as a second respondent to the
proceeding. Leave would have given Genworth, pursuant to s 6(1) of
the Act, the possibility to enforce a charge over insurance funds
payable by Hannover to KCRAM. There was also an application by
Genworth under the Federal Court Rules to join Hannover so Genworth
could seek a declaration about Hannover's liability to
indemnify under the professional indemnity policy.
Section 6(1) of the Act provides that a charge will arise in
relation to insurance money payable on the happening of an
"event giving rise to the claim for damages or
The "event giving rise to the claim"
Hannover submitted that the "event giving rise to the
claim" was the time at which the loss became readily
ascertainable, because recoupment of the loan amount was not
possible through sale of the properties. Conversely, Genworth
contended that the "event" for the purposes of the Act
happened when it paid out the insured lender's claim.
The Court accepted Hannover's submission that the
"event giving rise to the claim," for the purposes of the
Act, happened when it became readily ascertainable that Genworth
would suffer a loss.
Hannover submitted that, in order for 6(1) of the Act to apply,
the relevant insurance policy had to exist at the time of the
"event" giving rise to the claim. The court accepted this
submission. Accordingly, the Court refused Genworth leave to join
Hannover as a respondent under section 6 of the Act in respect of
those properties where the relevant "event" occurred
before the inception of Hannover's insurance policy. The Court
did, however, permit the joinder of Hannover under the second limb
of the application, so that Genworth could seek a declaration as to
Hannover's liability to KCRAM under its PI policy (because
Hannover had relied upon an endorsement to deny indemnity).
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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