Chubb has won a $4.5 million directors’ and officers’ claim dispute after a court found the former CEO of fleet hire company Orix failed to disclose knowledge of alleged bribes connected to customers.

The Federal Court heard John Joseph Carter signed a D&O renewal proposal on behalf of Orix on October 30 2014. On April 2 the next year, he was arrested and charged with four counts of corruptly receiving a benefit and one count of knowingly dealing with proceeds of crime.

Mr Carter notified Chubb of the charges in June, and it initially accepted the claim for defence costs and advanced $657,277.38. But the insurer later sought repayment and denied liability after reviewing court material. The criminal proceedings were discontinued in September 2019. Mr Carter also sought cover related to civil proceedings that were dismissed.

Justice John Halley said the critical issue in the insurance dispute was the extent of Mr Carter’s knowledge when he signed the renewal proposal of the alleged bribes or inducements and the likelihood of action that might lead to a claim.

Chubb said Mr Carter made a fraudulent non-disclosure by responding “no” to a renewal question about awareness “after enquiry, of any fact, circumstance, act or omission” that may lead to a claim.

The court heard evidence of payments that benefited Coca-Cola Amatil (CCA) procurement manager Bryan Pereira and GrainCorp procurement manager Anthony Chidiac. The arrangements included a “slush fund” allegedly established to support CCA fleet business with Orix.

Justice Halley said he was satisfied Mr Pereira was receiving “substantial personal benefits in order for Orix to promote and retain his ongoing support” in its dealings with Coca-Cola Amatil.

“It can readily be inferred from the nature of the payments made in response to the requests made by Mr Pereira that Mr Carter knew the payments had not been authorised by CCA,” he said.

Evidence included “candid” email exchanges between the Orix fleet services general manager (who held the position from 2005 to 2015) and Mr Carter that the CEO said he had not fully read. He told the court that as a busy head of a large company, he expected executives to speak to him directly on important matters.

Mr Carter said emails received that were headed “Coke FYI only!!” and “Another penguin caught in our nets!!” did not indicate he shared the views of the sender or suggested anything significant.

In another follow-up email received, which discussed Mr Chidiac seeking to buy a car for his daughter, the fleet services manager wrote “come to me baby…”.

Justice Halley said Mr Carter had adopted an adversarial and at times evasive approach during cross-examining, and it was clear much of his evidence “was informed by a keen appreciation of the case that had been advanced against him, rather than genuine recollection”.  

“On no plausible view was Mr Carter a peripheral observer who did not have any real or substantive appreciation of the payment of bribes and provision of illegal inducements to Mr Pereira and Mr Chidiac,” Justice Halley said in the judgment.

The judge ruled Mr Carter had knowledge of dishonest or fraudulent conduct at the time he answered the policy questions, and either knew or was “recklessly indifferent” as to whether the facts were relevant to the insurer’s decision on accepting the risk. Justice Halley accepted that if misrepresentations had not been made, Chubb would not have offered a policy on any terms.

The court found Chubb does not have to provide cover for total claimed costs of $4.5 million and Mr Carter is required to repay $723,005.12 previously advanced.

The decision is available here.