Judge finds units held in trust are indemnified by insurance

Judge finds that units held in trust are considered securities and are indemnified by insurance coverage.

This decision concerned an insurance dispute arising out of two class actions brought on behalf of persons who purchased units in the Murray Goulburn Unit Trust (MGUT) (the Class Actions). Both of the Class Actions have settled, with settlement approval orders made on 20 December 2019 (Endeavour River Pty Ltd v MG Responsible Entity Ltd (No 2) [2020] FCA 968) and 9 April 2020 (Webster (Trustee) v Murray Goulburn Co-Operative Co Ltd (No 4) [2020] FCA 1053) respectively.

In this judgment, Beach J made declarations sought by the respondents to the Class Actions (the MG Entities) in relation to the coverage provided by an insurance policy issued by AIG Australia Ltd (AIG) (the ABC Policy). The first declaration was to the effect that certain claims made in the Class Actions were covered by ‘side C’ insurance coverage under the ABC Policy. The second declaration was to the effect that certain exclusions in the ABC Policy did not exclude cover for the class action claims.

His Honour’s decision naturally turned on a detailed examination of the facts of the case and the words of the ABC Policy. However, in essence, his Honour found that:

  • Units in the MGUT constituted “equity interests” and were therefore “Securities” under the ABC Policy. The effect of this finding was that the claims made in the Class Actions were “Security Claims” under the ABC Policy and were as such indemnified by the ‘side C’ insurance coverage under the ABC Policy.
  • Certain endorsements under the ABC Policy, which in effect excluded coverage for liability arising out of the issue of sales under a disclosure document or in connection with any representations in a disclosure document, did not apply to the claims in the Class Actions in respect of on-market acquisitions. In doing so, his Honour rejected AIG’s argument that on-market acquisitions were captured by the exclusions because the continuous disclosure claims pleaded by the applicants in the Class Actions referred to representations in a Product Disclosure Statement (PDS) published by the MG Entities. His Honour held that “[t]he objective intention and effect of [the] exclusions [was] relevantly to exclude claims of people who purchased their units off-market pursuant to the offer in the PDS” (at [221]). As such, the exclusions did not capture the claims of on-market purchasers.
  • An exclusion in the ABC Policy for liability arising out of the provision of third-party professional services did not apply to the claims in the Class Actions. His Honour was not convinced that certain of the MG Entities provided “professional services” to unitholders within the meaning of the ABC Policy and, in any event, the continuous disclosure and misleading or deceptive conduct claims pursued in the Class Actions were not causally connected to a failure to perform any such services by the relevant MG Entities.

Case details

Murray Goulburn Co-operative Co Ltd v AIG Australia LTD [2021] FCA 288

Federal Court of Australia, Beach J;
26 March 2021;
Applicant’s Solicitors: Herbert Smith Freehills;
Respondent’s Solicitors: Carter Newell Lawyers;
Applicant’s Funder: N/A
Austlii link: Accessible here

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