In the relative calm of the post-Christmas period we bring to
your attention two developments that occurred in December 2016.
First, the Expert Witness Code of Conduct
contained in schedule 7 of the Uniform Civil Procedure Rules
2005 (NSW) (the Code) was amended as of 9 December 2016. The
amendment makes the Code conform with harmonised rules approved by
the Council of Chief Justices.
For insurers and solicitors, the main issue is to ensure experts
are instructed with the amended version of the Code. From an
expert's perspective there are a few key differences in the
amended Code, including:
Requiring an expert to provide a supplementary report
forthwith, if the expert changes their opinion on a material
The expert must declare that they have made all the inquiries
they believe are desirable and appropriate, save for any matters
already expressly identified in the report, and that no matters of
significance (that the expert regards as relevant to their
knowledge) have been withheld from the court.
Second, on 19 December 2016 the Attorney General released the
NSW Law Reform Commission's (NSWLRC) report, which reviews
s 6 of the Law Reform (Miscellaneous Provisions) Act
1946 (NSW). The report includes draft legislation to
amend s 6, which aims to clarify some of its uncertainties. The
proposed amendments will be of particular interest to claimants and
insurers that provide D&O cover and/or write policies on a
"claims made and notified" basis.
The key change is that the concept of a statutory charge in s 6
is proposed to be replaced with a provision that allows for a
plaintiff to have direct access to an insurer, which follows the
approach in s 601AG of the Corporations Act 2001 (Cth) and s 51 of
the Insurance Contracts Act 1984 (Cth). The NSWLRC
considers that providing for direct access, rather than a charge on
insurance monies, will overcome the:
Uncertainties around whether insurers can pay defence costs of
directors and officers of a company if they come from the same pool
of funds that are available to meet the company's liability and
the statutory charge has descended. Current NSW Court of Appeal
authority is that the statutory charge does not prevent an insurer
from discharging its obligation to an insured to pay legal costs
(Chubb Insurance Company of Australia Ltd v Moore 
NSWCA 212), however, there is New Zealand authority to the contrary
(BFSL 2007 Ltd v Steigrad  NZSC 156). A clear
resolution of this issue will assist insurers to ensure defences
are appropriately funded and run.
Uncertainties around when the rights conferred by s 6 arise in
cases of pure economic loss.
Inability to apply the statutory charge to "claims made
and notified" policies where the relevant events giving rise
to the liability occurred before a policy commenced. While this
amendment will result in greater exposure for insurers, it arguably
strikes a fair balance between the interests of claimants and
To ensure insurers are not exposed to unwarranted action, the
draft legislation proposes that leave be required for a plaintiff
to obtain direct access to an insurer (as is the case with s 6).
Leave is not to be granted if the insurer can establish it is
entitled to disclaim liability under the policy of insurance or any
relevant law. Interestingly, the draft legislation does not contain
the requirement currently under s 6(4) for the prohibition of the
granting of leave, that is, that any proceedings necessary to
establish that the insurer is entitled to disclaim liability have
been taken. The report does not explain why it is proposed that
this requirement be dispensed with.
Otherwise, the draft legislation provides for an insurer to
retain any defences it could have raised against the defendant, as
well as defences the defendant could raise against the plaintiff
(as is currently the case with s 6)—that specific provision
be made for the limitation period for bringing proceedings against
an insurer and that it be made clear that the new provision will
not apply to re-insurance.
The NSWLRC strongly advocated for the Commonwealth to enact a
general provision to provide for a national approach and it remains
to be seen if this call will spur any action. In the meantime, we
await with interest the government's response to the report and
will keep you updated.
You can view the NSWLRC's report and the draft bill
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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