King & Wood Mallesons

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Statutory charges and the Steigrad litigation — who, what and why

Litigation involving directors of the Bridgecorp group and QBE is still on foot. Directors of the failed Bridgecorp group have claimed indemnity from QBE in respect of their defence costs. At first instance, the directors were unsuccessful (Steigrad v BFSL 2007 Ltd [2011] NZHC 1037). An appeal by one of the directors — Steigrad — was successful (Steigrad v BFSL 2007 Ltd [2012] NZCA 604). The Supreme Court of New Zealand has granted leave to appeal this decision.

At the centre of this litigation is the statutory charge provisions found in the Law Reform Act 1936 (NZ) section 9. Similar legislation exists in NSW, ACT and NT. The legislation does two things. It throws a ‘net’ over certain moneys that are or may be payable under an insurance policy. It also permits certain third parties (subject, in some cases, to obtaining the leave of the court) to recover those moneys by proceedings against an insurer in the same way as they might have proceeded against the insured. In this way, the provisions protect third parties who might be unable to recover from an insured and prevent insurance moneys from being distributed to other creditors of the insured…

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