In the matter of Clear Skies Corp Pty Ltd (in Liquidation)

[2025] NSWSC 1467

Supreme Court of NSW

Built by Barristers,
For Australian Law.

1. Insurance
1. Procedure
1. Civil
1. whether leave should be granted to amend pleading to proceed against underwriters pursuant to s 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW)

An insolvency exclusion clause in a D&O policy that excludes claims 'arising from or in any way whatsoever connected with' the insolvency of the company captures not only insolvent trading claims (where insolvency is a necessary element of the cause of action) but also breach of directors' duty claims where the loss claimed is the debts incurred while insolvent, because such claims are founded upon and could not have arisen absent the company's insolvency, applying the reasoning in AIG Australia Limited v Kaboko Mining Limited [2019] FCAFC 96.
A notification to insurers under a claims-made policy that refers exclusively to insolvent trading under s 588G of the Corporations Act does not constitute notification of separate breach of directors' duty claims, and s 40(3) of the Insurance Contracts Act 1984 (Cth) does not extend the notification where the notification letter contains no facts that might give rise to the distinct breach of duty claims.
Under s 5(4) of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW), leave to proceed against an insurer must be refused where the insurer establishes entitlement to disclaim liability, including by demonstrating that the claims fall within a policy exclusion clause — this is a mandatory ground for refusal, not a matter of discretion.