Australia: Dodgy Lawyers and Bad Investments – What Constitutes an "Event" in Relation to the Joinder of an Insurer to Proceedings?

Curwoods Case Note
Last Updated: 17 December 2012
Article by Paul Garnon and Yasmin Bell

Perpetual Trustees Victoria Limited v Malouf [2012] NSWSC 1119

Judgment date: 31 October 2012
Jurisdiction: Supreme Court of New South Wales1

In Brief

  • Pursuant to s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (the Act) a claimant may, with leave of the court, proceed directly against an insured's professional indemnity insurer.
  • Section 6 is triggered on the happening of an "event" that gives rise to the claim.
  • The court will refuse to grant leave when the relevant event happened before the policy's inception, even in claims made policies.
  • The courts have considered that the happening of the event to be the moment when the cause of action is completed.


Albert Malouf borrowed on his parents' house to invest in the short term loan market. The money was lost and Perpetual Trustees Victoria Limited (Perpetual), the lender, sought possession of the house.

In May 2004, the parents attended their solicitor's office, Mr Goldberg, where they signed certain documents, the contents and effect of which were not explained to them. They later learned that as a result of the signed documents:

  1. Mrs Malouf was no longer an owner of the property;
  2. Albert had become a tenant in common with his father; and
  3. a mortgage of $700,000 had been placed over the property.

The advance of $700,000 was paid to Albert out of Mr Goldberg's trust account in June 2004.

On 3 June 2004, Albert agreed to advance the sum of $700,000 to George and Habib Farah, who had interest in a group of companies that owned various restaurants (the Farah Group). The Farah Group defaulted in repayment of the $700,000 to Albert. Without these funds, Albert and Mr Malouf had fallen into default under the mortgage granted to Perpetual.

In the substantive proceedings, Mr & Mrs Malouf and Albert cross-claimed against Mr Goldberg, claiming that Mr Goldberg did not explain the nature and effects of the document that they signed.

Mr Goldberg has ceased to practise as a solicitor and cannot be found. On 15 July 2004 the Law Society cancelled his Practising Certificate.

From 1 July 2006, LawCover Insurance Pty Ltd (LawCover) insured solicitors who ceased to practise for claims made against them after this date (the Policy). The Policy was a "claims made" policy meaning that coverage is triggered by the date the insured first became aware of the possibility of a claim.

Previously an Application to join LawCover pursuant to s 6 of the Act was brought by Mr & Mrs Malouf. The Motion was heard by McCallum J 2 . Her Honour determined that the event giving rise to the claim against Mr Goldberg, that is, the suffering of the loss by Mr & Mrs Malouf, was suffered before 30 June 2006. The result was that the procedure under s 6 was not available because the event giving rise to the liability of the insured occurred before the entry into the Policy.

Albert also made an application to join LawCover pursuant to s 6 of the Act. This case is in relation to Albert's Application.


Sub-section 6(1) refers to "the happening of the event giving rise to the claim for damages for compensation". Davies J noted that the wording of the section means that the statutory right provided by s 6 arises on the happening of the "event" giving rise to the claim against the insured. The relevant event is whatever completes the plaintiff's cause of action.

This is consistent with the NSW Court of Appeal's decision in Owners-Strata Plan No 50530 v Walter Construction Group Limited (In Liquidation) 3 , where the Court unanimously held that a right to pursue an insurer pursuant to s 6 of the Act did not arise when the event happened before the inception of the relevant policy. This was despite the fact that the policy was a claims made and notified policy which contained a provision for unlimited retroactive cover.

The principal issue to be determined in this matter was whether the event giving rise to the liability arose prior to the Policy's inception on 1 July 2006. His Honour considered that if it arose before the inception of the Policy leave should be refused. Albert contended that the event was the sale of the property which occurred on 6 October 2006. LawCover submitted that the event was Mr Goldberg's breach of his contract of retainer in 2004 when the loan was first made. It submitted that the fact that a cause of action in negligence may not have become complete until a later period of time (when damage was suffered) was irrelevant because s 6 is simply concerned with "the happening of the event giving rise to the claim for damages".

LawCover also submitted that if the time for suffering damage was the relevant date, this was in about December 2005 when Albert defaulted in repayments, or alternatively in April 2006 when recouping the money from Albert was impossible.

The policy was a "claims made" policy. There was no dispute that Mr Goldberg was served with Albert's cross-claim on 14 March 2007, which was within the Policy period.

His Honour held that if the allegations are established and Mr Goldberg is found liable for breach of his retainer with Albert, the breach took place in 2004 when the loans were made. The cause of action to which the policy responds is complete on the breach. His Honour held the event therefore occurred in 2004 prior to the inception of the Policy.

His Honour considered that it was irrelevant that the tort of negligence arising from the same matters may not be complete until a later time because damage had not been suffered.

His Honour therefore concluded that the Policy was not in existence at the time of the happening of the event which gave rise to the claim for damages and therefore the Application to join LawCover pursuant to s 6 of the Act was refused.

This is despite the fact that in a claims made policy the policy is not triggered until notification of a claim is made in respect of the event.


The decision illustrates that the language of s 6 of the Act creates a statutory right to join an insurer on the happening of the event giving rise to the claim against the insured. Should the event happen prior to policy inception, then the Application will be refused.

The language of s 6 of the Act is consistent with "occurrence" based policies, meaning policies in which it was the happening of an "event" during a policy period which activated or triggered coverage.

It is not the happening of an event which triggers coverage under a "claims made" policy. It is the notification of the claim against the insured. The event which triggers the operation of s 6 of the Act may often occur before policy inception and there may be many cases where a claimant will not be able to proceed directly against a professional indemnity insurer under s 6.

The language of s 6 of the Act is clearly inconsistent with "claims made" policies which are now typical in professional indemnity insurance. In such circumstances it is possible that, although indemnity would be available under a policy, an insurer can avoid being joined to the proceedings pursuant to s 6 as the event occurred prior to the policy's inception.

To succeed in an application to join an insurer pursuant to s 6 in respect of a "claims made" policy, a plaintiff must therefore establish that both the event and claim occurs after policy inception. This appears largely inconsistent with the purpose of s 6 of the Act and it will be interesting to see whether the wording of the section will be amended to reflect this.


This anomaly may be cured in respect of a corporation by joining an insurer pursuant to s 601AG of the Corporations Act. This provides that a person may recover from the insurer of a company that is deregistered as long as:

  1. the company had a liability to the person; and
  2. the insurance contract covered that liability immediately before deregistration.

In relation to a bankrupt individual, s 117 of the Bankruptcy Act 1966 provides that where a bankrupt was insured under a contract of insurance against liability to third parties and such a liability has been incurred, the bankrupt's right to indemnity vests in the trustee and any amount received by the trustee from the insurer under the policy shall be paid in full to the third party. However, a limiting feature of this section is that it does not provide third parties with a direct cause of action against an insurer.

Section 51 of the Insurance Contract Act also provides that in respect of liability insurance, if an insured has died or cannot be reasonably found and a policy provides insurance cover in respect of the liability, then the third party may recover from the insurer.

The terms of these sections do not require an event to occur during the policy period and insurers will need to remain wary of alternative remedies in some cases.


1 Davies J

2 Perpetual Trustee Victoria Limited v Malouf [2008] NSWSC 834

3 (2007) 14 ANZ Insurance Cases 61-734

Ranked No 1 - Australia's fastest growing law firm' (Legal Partnership Survey, The Australian July 2010)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.