Professional Liability Guide

CHAPTER 5 – WHAT IS A PROFESSIONAL/PROFESSIONAL DUTY?

The Victorian Court of Appeal was guided by the decision of GIO in Kyriackou v ACE Insurance Limited. 357 Mr Kyriackou was the director of a group of companies that provided a range of financial services and was the subject of Federal Court proceedings brought by ASIC for operating unregistered managed investment schemes. Mr Kyriackou sought to be personally indemnified by ACE for the legal costs he incurred defending the claim under the company’s professional indemnity policy. While the Court ultimately determined that Mr Kyriackou was not entitled to cover under the professional indemnity policy in respect of ASIC’s claim, it was for reasons separate from the question of whether he was acting in a ‘professional capacity’ within the meaning of the policy. In that regard, it was ACE’s position that Mr Kyriackou’s conduct was entrepreneurial, not professional because he had solicited money from the public to invest in the relevant schemes rather than provide professional advice or services. Justice Harper (Tate JA and Kyrou AJA agreeing) referred to the reasoning of Buchanan JA in Suncorp v Landridge, noting that the question of whether there had been a breach of a professional duty: ‘depends upon characterisation of the overall activity in the context of which the breach occurs, and is not answered by concentrating on the specific task which has not been performed or badly performed so as to give rise to liability.’ 358 The description of the insured’s business in the policy schedule included ‘Finance Originators, Finance Intermediaries, Finance Brokers, Finance Consultants, Mortgage Aggregators.’ Justice Harper accepted that Mr Kyriackou was acting in a professional capacity not because his activities were characterised as ‘ professional ’ but because, in the context of the policy, ‘the activities of a finance originator, finance intermediary or finance consultant fell within the phrase “professional capacity” in the insuring clause. ’ 359 The additional comments of Kyrou AJA demonstrate the courts’ increasing attention to the commercial purpose of the policy as opposed to adhering strictly to traditional notions of a ‘ professional ’, which might render a policy largely ineffective: ‘In modern times, professional indemnity policies are sold to all types of business, including fencing contractors. Yet, many policies continue to retain the Professional Capacity Wording in the insuring clause. If such a policy is sold to a person who is not in a traditional profession, a narrow reading of the Professional Capacity Wording would deprive the insured of any meaningful cover. Recent authorities have recognised this problem and have sought to overcome it. a) the insuring clause of a professional indemnity policy contains the Professional Capacity Wording; b) the policy is sold to a person who is not in a traditional profession; and c) the policy defines the business that the person conducts, the effect of the Professional Capacity Wording is simply to require that the liability for which cover is sought under the policy arises from a breach of duty owed in connection with that business.’ 360 In my opinion, where:

357 [2013] VSCA 150. 358 Ibid [85]. 359 Ibid. 360 Ibid [141]–[142].

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