Kernaghan v Corrections Corporation of Australia Staff Superannuation Pty Ltd (No.2) [2007] FCA 1040

Kernaghan v Corrections Corporation of Australia Staff Superannuation Pty Ltd (No.2) [2007] FCA 1040

CCAS is permitted to reopen its case, limited to calling evidence and making submissions on the reasonableness of the agreement to settle the applicants' costs (other than those attributable to AIMS), as the interests of justice favour allowing CCAS the opportunity to establish reasonableness of the insured settlement. The settlement as a whole cannot be considered reasonable where it includes claims not covered by indemnity, but an apportionment based on available evidence is possible and two-thirds of the $450,000 settlement sum (i.e. $300,000) reasonably represents insured costs.

Parties
Applicants: Donald Kernaghan & Ors; First Respondent and First Cross Claimant: Corrections Corporation of Australia Staff Superannuation Pty Ltd (ACN 065 347 186); Second Respondent and Second Cross Claimant: Terence Arthur Lawson; Third Respondent and Third Cross Claimant: John Kenneth Twomey; Fourth Respondent and Fourth Cross Claimant: Australian Integration Management Services Pty Ltd (formerly Correction Corporation of Australia Pty Ltd) (ACN 010 921 641); First Cross Respondent: CGU Insurance Limited (ACN 004 478 317); Second Cross Respondent: Chubb Insurance Company of Australia Pty Ltd (ACN 003 710 647)
Jurisdiction
Australia
Judgment Date
11 July 2007
Procedural Posture
Insurance Dispute / Cross Claim / Post Settlement, Application to Reopen, Determination of Quantum and Reasonableness of Settlement Costs
Outcome
Leave granted to CCAS to reopen its case, and quantum for costs covered by indemnity is determined to be $300,000 of the $450,000 settlement sum. Parties directed to bring in draft orders reflecting conclusions; question of costs of proceedings listed for further hearing.
Legal Topics
Trustee's Liability Insurance, Reasonableness of Settlement, Onus of Proof in Indemnity Claims, Apportionment of Legal Costs
Insurance Law Civil Procedure Trustee's Liability Insurance Reasonableness of Settlement Onus of Proof in Indemnity Claims Apportionment of Legal Costs

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Parties

Donald Kernaghan & Ors

Applicants

Corrections Corporation of Australia Staff Superannuation Pty Ltd (ACN 065 347 186)

First Respondent and First Cross Claimant

Terence Arthur Lawson

Second Respondent and Second Cross Claimant

John Kenneth Twomey

Third Respondent and Third Cross Claimant

Australian Integration Management Services Pty Ltd (formerly Correction Corporation of Australia Pty Ltd) (ACN 010 921 641)

Fourth Respondent and Fourth Cross Claimant

CGU Insurance Limited (ACN 004 478 317)

First Cross Respondent

Chubb Insurance Company of Australia Pty Ltd (ACN 003 710 647)

Second Cross Respondent

Procedural Posture

Insurance Dispute / Cross Claim / Post Settlement, Application to Reopen, Determination of Quantum and Reasonableness of Settlement Costs

Legal Issues

  1. 1 Whether settlement including costs of claims not covered by policy was reasonable
  2. 2 Whether liability ascertainable from settlement agreement
  3. 3 Whether onus was on insurer to prove unreasonableness of settlement

Ratio Decidendi

CCAS is permitted to reopen its case, limited to calling evidence and making submissions on the reasonableness of the agreement to settle the applicants' costs (other than those attributable to AIMS), as the interests of justice favour allowing CCAS the opportunity to establish reasonableness of the insured settlement. The settlement as a whole cannot be considered reasonable where it includes claims not covered by indemnity, but an apportionment based on available evidence is possible and two-thirds of the $450,000 settlement sum (i.e. $300,000) reasonably represents insured costs.

Court Disposition

Leave granted to CCAS to reopen its case, and quantum for costs covered by indemnity is determined to be $300,000 of the $450,000 settlement sum. Parties directed to bring in draft orders reflecting conclusions; question of costs of proceedings listed for further hearing.

Orders

  • By 18 July 2007, the first cross-claimant and the first cross-respondent submit short minutes of orders reflecting the conclusions expressed in the reasons for judgment delivered on 6 January 2006 and on this day.
  • The question of the costs of the proceeding be listed for hearing at 10.15 am on 24 July 2007.