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A bird set loose

Clancy ODonovanIn Wayland v Bird [2017] NSWCA 26, the NSW Court of Appeal (NSWCA) held a professional indemnity insurer should not be joined under section 6(4) of the Law Reform (Miscellaneous Provision) Act 1946 (NSW) (Act), to a proceeding in which its insured was the defendant, in circumstances where it was entitled to refuse indemnity due to prejudice caused by the insured – notwithstanding there was an arguable case the insurance policy responded to the Claim (as defined below).

In July 2013, Mr and Mrs Wayland (Waylands) sued Mr Bird in the District Court of NSW alleging they had suffered loss and damage as a result of Mr Bird’s breach of contract and negligent provision of pest inspection and control services (claim). Mr Bird consistently failed to cooperate with his professional indemnity insurer, Pacific International Insurance Limited (Pacific), particularly, by failing to provide its lawyers with necessary information and instructions to enable them to file a defence on his behalf. In May 2015, the Waylands filed a motion seeking leave to join Pacific to the proceeding pursuant to section 6(4) of the Act, however, the primary judge dismissed the application, finding Pacific was entitled to refuse indemnity to Mr Bird and section 6(4) of the Act was not enlivened.

On appeal, the NSWCA affirmed the primary decision, finding it was clearly open to the primary judge to conclude Pacific might withhold indemnity if its ability to defend the proceedings had been prejudiced by Mr Bird’s lack of cooperation and this, while not necessarily determinative, was an appropriate matter to inform the court’s discretion as to the grant of, or refusal to grant, leave.