Chubb has gained a Federal Court costs order in a dispute over a theft, fraud and dishonesty claim related to failed brokerage All Class.

Justice James Allsop has ordered that All Class Insurance Brokers, which is in liquidation, should provide $50,000 security for Chubb’s costs, ensuring the funds are available if required after an expected one-day hearing to consider the dispute.

The disputed insurance claim seeks cover for unauthorised All Class trust account withdrawals, totalling around $2 million, made by former sole director and company secretary Leroy Bowmaker from the late 2000s to 2013.

Mr Bowmaker’s wife notified Chubb of the claim, via Steadfast Group, contending Mr Bowmaker was an employee for the purposes of the policy and All Class was entitled to be covered for the theft.

Chubb says the transfers were not theft, fraud or dishonesty by an employee, but acts of All Class itself, through its director.

The insurer argues Mr Bowmaker, as sole director and company secretary, does not constitute an employee under the policy, there was no direct loss to All Class as funds were applied to its benefit, and the claim is statute-barred.

All Class went into liquidation in April 2013 and various processes have been taking place since then to pursue the insurance matter, leading to disagreement last year over a Chubb proposal for security for court costs, should an order be made in its favour.

Justice Allsop says there are 26 All Class creditors with outstanding claims totalling $2.26 million, based on a list of those who have submitted formal proofs of debt.

All but three appear to be underwriters or brokers – six creditors have claims amounting to more than $100,000 each and Hollard is owed $841,272.19.

Justice Allsop says the liquidator sent a notice to All Class creditors in March regarding the costs issue, with responses showing that Global Transport, Hollard, IAG and High Street Underwriting Agency are willing to contribute a total of $49,123.30 as security.

“In these circumstances I am satisfied that, if I were to grant some security for costs, All Class’ own impecuniosity would not be a bar to the continuation of these proceedings,” he says.

Chubb had initially sought $380,826.91 under the costs order, but later revised its request down to $117,800 for a 1-2 day hearing to resolve the disputed liability question.

The Australian Securities and Investments Commission (ASIC) cancelled All Class’s financial services licence on May 6, 2013. Mr Bowmaker was banned from providing financial services in July that year and was banned from engaging in credit activity in 2015.

The Federal Court decision is available here.