QBE INSURANCE AUSTRALIA LTD V THE GRAPE HOUSE GROUP PTY LTD

[2022] FCA 1527, Federal Court of Australia, Justice Moshinsky, 16 December 2022

Insurance (trade credit) – Subrogation – Allocation of recovery between insurers and assured – Effect of express terms relating to subrogation

In March 2020 TGH agreed to sell grapes to SPT at a price of AUS$280,000. KF, the sole director of SPT, guaranteed the sums by a charge over his assets as security. The invoices were unpaid and in June 2020 TGH commenced proceedings against SPT and KF. TGH also lodged a caveat on KF’s ownership share of a property. A costs order of AUS$12,874 was made in favour of TGH in June 2020. On 22 April 2021, SPT went into liquidation. TGH as insured by QBE under a trade credit insurance policy for the period 1 January 2020 to 31 December 2020 (the Policy). This covered 90 per cent of unpaid trade debts. Clause 9 of the Policy stated that any recoveries were to be held for TGH and QBE for their respective interests. QBE was entitled to “such proportion thereof as the Insured Percentage of the Insured Debt bears to the total indebtedness of the Insured Buyer to the Insured at the date that a Notifiable Event first occurs ...” and TGH was entitled to the balance. The term “Recoveries” was defined as including “all monies ... received by ... [TGH] or otherwise available for the purpose of reducing the amount of any indebtedness of an Insured Buyer to [TGH] ... which had not been paid at the earliest Notifiable Event which remains unremedied ...”. On 1 October 2020 TGH made a claim for indemnity under the Policy, and on 6 July 2021 QBE paid AUS$259,200 to TGH representing 90 per cent of the outstanding AUS$288,000. On 24 January 2022 a deed of settlement was entered into between TGH, KF and RF, KF's wife. The deed provided for RF to pay TGH the sum of AUS$200,000 in full and final settlement of the County Court proceeding and the costs order. In return the charge on the property was released. The deed did not apportion the amount of AUS$200,000 as between TGH’s claims for the unpaid debt, interest of around AUS$13,000 and the amount of the costs order. A dispute arose between QBE and TGH as to the entitlement to the recovery.