A Goninan & Co Ltd v Direct Engineering Services Pty Ltd [No 2] - [2008] WASCA 112

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: A GONINAN & CO LTD -v- DIRECT ENGINEERING SERVICES PTY LTD [No 2] [2008] WASCA 112

CORAM: MARTIN CJ
McLURE JA
BUSS JA

HEARD: 10 DECEMBER 2007

DELIVERED : 15 MAY 2008

FILE NO/S: CACV 78 of 2006

BETWEEN: A GONINAN & CO LTD (ACN 000 333 136)
Appellant
AND
DIRECT ENGINEERING SERVICES PTY LTD (ACN 008 700 178)
Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :MURRAY J
Citation  :DIRECT ENGINEERING SERVICES PTY LTD -v- A GONINAN & CO LTD [2006] WASC 105
File No  :CIV 1098 of 2001

Catchwords:

Contract - Building contract between proprietor and head contractor - Head contractor obliged to effect and maintain various insurances throughout the term of the building contract - Whether head contractor's obligation extended to the provision of insurance cover for its subcontractors - Clause imposing obligation on head contractor ambiguous - Whether the deletion of an insurance clause from a standard or common form building contract may be referred to as an aid to construing the ambiguous clause

Insurance - Insurance policy - Subcontractors will be insureds under the policy only if they are persons, organisations or entities to whom the head contractor is in writing obliged to provide insurance - Whether the building contract between the proprietor and the head contractor imposed such an obligation on the head contractor

Legislation:

Insurance Contracts Act 1984 (Cth) s 48
Motor Vehicle (Third Party) Insurance Act 1943 (WA) s 4(1)
Occupiers' Liability Act 1985 (WA)
Workers' Compensation and Injury Management Act 1981 (WA) s 160, s 175

Result:

Appeal allowed

Category: B

Representation:

Counsel:

Appellant: Mr G R Hancy & Mr P K Walton
Respondent: Mr M J McCusker QC & Mr L F A Nixon

Solicitors:

Appellant: Jackson McDonald
Respondent: Clayton Utz

Case(s) referred to in judgment(s):

260 Oxford Pty Ltd v Premetis [2006] NSWCA 96
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Burger King Corp v Hungry Jack's Pty Ltd (2002) 23(7) Leg Rep SL2
Burger King Corp v Hungry Jack's Pty Ltd [2001] NSWCA 187
Centrepoint Custodians Pty Ltd v Lidgerwood Investments Pty Ltd [1990] VR 411
Co‑operative Retail Services Ltd v Taylor Young Partnership Ltd [2002] 1 WLR 1419
Jumbo King Ltd v Faithful Properties Ltd [1999] 3 HKLRD 757
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181
McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Petrofina (UK) Ltd v Magnaload Ltd [1984] QB 127
Postle v Sengstock [1994] 2 Qd R 290
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Woodside Petroleum Development Pty Ltd v H & R‑E & W Pty Ltd (1999) 20 WAR 380

MARTIN CJ: I agree with the reasons to be published by Buss JA.
McLURE JA: I agree with Buss JA that the appeal should be allowed and the notice of contention dismissed generally for the reasons he gives. However, I propose to make some additional observations on the central issue in the appeal which concerns the proper construction of cl 11(d)(v) of the building contract (Contract) between Hamersley Iron Pty Ltd (Company) and the respondent (Contractor). The question in issue is whether the Contractor was contractually obliged to obtain insurance covering the liability of the appellant (the Sub‑contractor) for damage to the Company's on‑site property occasioned in the course of carrying out the sub‑contract works.
For the sake of convenience, I set out in full cl 11(d) and (e) of the contract. They provide:
(d)The Contractor shall effect and maintain throughout the term of this Contract, at its own expense, the following insurances, with responsible insurers on terms and conditions acceptable to the Company.
(i)Workers' Compensation & Other Insurances
Workers' Compensation and Employers Liability Insurance covering all claims and liabilities in respect of any statute and at common law for the death of or injury to any person employed by the Contractor or Sub‑Contractor on or in connection with the Works. These insurances shall be endorsed to indemnify the Company against any and all liability the Company may have either by operation of statute or at common law.
(ii)Contractors Constructional Plant
Insurance covering all loss and damage to the Contractors Constructional Plant used in connection with the Contract for its replacement value.
(iii)Motor Vehicle Third Party Liability Insurance
Motor Vehicle Third Party Liability Insurance in respect of all motor vehicles used in connection with the Contract regardless of whether any motor vehicle is licensed as a motor vehicle pursuant to the provisions of any statute.
(iv)Goods and Transport Insurance

Insurance covering all Goods whilst they are off the Site or in transit to Site notwithstanding that the Company may have paid for the Goods.

(v)Public Liability and Property Damage Insurance
Insurance covering all claims and liabilities in respect of any injury to or death of any person or any loss damage or destruction to any property (including the Works and the Company's property) howsoever caused. These insurances shall be unlimited as to the number of claims and shall provide cover in respect of each and every claim to an amount of not less than five million dollars ($5 000 000).

Endorsement of Insurances

(e)The insurances required by Sub‑clause (d) shall, unless excused by law, be endorsed to include:
(i)the Company, its officers, employees, agents and representatives as co‑insureds; and
(ii)a cross‑liability clause whereby the insurers waive all express or implied rights of subrogation they may have against the Company, its officers, employees, agents and representatives.

Within twenty one (21) days of the Date of Award and each time the policies are renewed or varied, the Contractor shall provide the Company with such evidence as the Company may require that the Contractor and/or its Sub‑contractors are insured in accordance with this clause. All insurances arranged by the Contractor will not be varied to the detriment of the Company, cancelled or allowed to lapse until thirty (30) days of notice of the intention to so vary, cancel or lapse shall have been given to the Company. In the event that the Contractor fails to take out any of the insurances, the Company may at its sole option:
(i)take out and maintain such insurances and deduct the costs thereof from any moneys due to the Contractor; or
(ii)treat the failure to insure as a default.

Clause 11(d)(v) is unhappily drafted. It is not confined by reference to subject matter or person(s). It is not an orphan in its ambiguity. The question whether the Contractor is obliged to obtain insurance cover for the liability or property of the Sub‑contractor also arises in connection with the insurances required in par (d)(i), (iii) and (iv). The accepted starting point is that a building contractor can obtain insurance that also covers the insurable interests and liabilities of the proprietor and sub‑contractors in connection with a building contract. They can be joined as parties to the insurance contract or named as a person to whom the cover extends (Insurance Contracts Act 1984 (Cth), s 48).
Under par (d)(i) the Contractor is required to effect and maintain workers' compensation and employers' liability insurance not only for its employees but also for the employees of its sub‑contractors that are employed on or in connection with the 'Works' (defined to mean all things to be performed in accordance with the Contract). The question is whether the Contractor's obligation is confined to obtaining insurance cover for its liability (and that of the Company) to its employees and the employees of its sub‑contractors or does the Contractor's obligation extend to insurance for the sub‑contractors' liability to its employees. The first sentence of par d(i) does not identify the persons whose liabilities are to be covered by the insurance. However, the obligation is to obtain workers' compensation and employers' liability insurance covering all claims and liabilities for the death or personal injury of persons employed by the Contractor and sub‑contractors on or in connection with the Works. Prima facie, this requires that the Contractor, Sub‑contractor and less obviously the Company, as employers and deemed employers under the Workers' Compensation and Injury Management Act 1981 (WA) (Workers' Compensation Act), be covered by insurance. A reason for reading down the opening sentence may be the express reference in par (d)(i) to the Company. Further, all employers are required by law to have workers' compensation insurance for their liability to employees: s 160 of the Workers' Compensation Act. It is unnecessary for present purposes to resolve the ambiguity in the construction of this paragraph.
Under par (d)(ii), the Contractors' obligation is confined to insuring its plant.
In par (d)(iii) the insurance obligation extends to all motor vehicles used in connection with the Contract. That must include motor vehicles owned and used by Sub‑contractors in connection with the Contract. Under the Motor Vehicle (Third Party) Insurance Act 1943 (WA) s 4(1), when any motor vehicle is on a road there has to be in force in relation to that vehicle a contract of insurance entered into by its owner under which the owner has insured against any liability which may be incurred by the owner or any person who drives the motor vehicle in respect of the death of or bodily injury to any person directly caused by, or by the driving of, the motor vehicle. Thus, motor vehicle third party liability insurance must be obtained by the owner of the motor vehicle. It follows that par (d)(iii) in effect requires that for on road vehicles owned by sub‑contractors and used in connection with the Contract, the Contractor is obliged to ensure the sub‑contractor is insured against the relevant liability.
As to par (d)(iv), 'Goods' is defined to mean the materials, supplies, plant, equipment and other things intended to form or forming part of the Works. The definition includes goods owned by sub‑contractors. It is clearly intended that those goods also be insured. The entity with the insurable interest in those goods is prima facie the sub‑contractor/owner. The objectively determined common intention of the Company and the Contractor is that the Contractor insure the insurable interests of itself, the Company and the Sub‑contractor in the Goods.
Clause 11(e) is also relevant. That paragraph imposes an obligation on the Contractor to provide the Company with evidence that the 'Contractor and/or its Sub‑contractors are insured in accordance with this clause'. Even in the unamended pre‑contract form of cl 11, the reference to 'this clause' can only be a reference to the insurances listed in cl 11(d). The deleted paragraphs of cl 11 all relate to the Company's obligation to arrange insurance in the names of the Company, the Contractor and any sub-contractor. The reference in cl 11(e) to evidence that its sub‑contractors are insured in accordance with the clause confirms that the insurances in par (d), or some of them, are intended to cover not only the Contractor and the Company but also sub‑contractors. It is also recognition that in some cases the Contractor's obligation to effect and maintain insurance is satisfied by providing evidence that sub‑contractors have obtained insurance that satisfies the Contractor's obligation under the clause. It necessarily follows that the requirements in cl 11(d)(i) and (ii) are not intended to be exclusive and do not prevent a construction that obliges the Contractor to obtain or arrange insurance in its name and that of its sub‑contractors.
Clause 11(d)(v) has to be construed against this background. The express terms of par (d)(v) are wide enough to include relevant claims and liabilities against sub‑contractors. In particular, the Contractor's obligation is to effect insurance covering all claims and liabilities of the specified kind. There are obvious commercial reasons for all parties involved in a construction project to be insured under the same policy, particularly against risks of the kind covered by par (d)(v). There is significant potential for interconnection between claims and liabilities against the various parties. Further, the proprietor and contractor have a commercial interest in the continued financial viability of the project sub‑contractors which is better protected if they are insured against the

relevant risks. In the circumstances, I am satisfied that the objectively determined common intention of the contractual parties is that par (d)(v) impose an obligation on the Contractor to insure the Sub‑contractor against the risks identified therein. Such an outcome is consistent with the objectively determined common intention of the parties in relation to cl 11(d)(iii) and (iv) of the Contract. The parties to the action accept that the insurance required by par (d)(v) would respond to the risk that has eventuated, being damage to the Company's on‑site property.

BUSS JA: On 18 August 1998, the respondent made a contract (the head contract) with Hamersley Iron Pty Ltd (HI), pursuant to which HI engaged the respondent to upgrade the airconditioning and mechanical ventilation system at HI's 7 Mile Railway Workshop rolling stock maintenance offices near Dampier (the site).
On 5 October 1998, the respondent made a contract (the subcontract) with the appellant, pursuant to which the respondent engaged the appellant to carry out certain work which the respondent was obliged to perform under the head contract, namely, installing a stairway and fitting handrails.
On 10 October 1998, HI's offices at the site were damaged by a fire caused by employees of the appellant in the course of carrying out work under the subcontract. The respondent paid HI the cost of repairing the damage, and reimbursed it for associated expenditure.
At all material times, the respondent was insured under a policy of liability insurance (the AXA insurance policy) effected with AXA Colonia Versicherung AG (AXA). AXA indemnified the respondent under the policy for the amount paid to HI.
AXA, purportedly in exercise of a right of subrogation, commenced proceedings in the Supreme Court in the name of the respondent against the appellant. In the proceedings, the respondent claimed damages from the appellant in the amount which the respondent had paid to HI. The respondent alleged that the fire was caused by the appellant's breach of the subcontract, further or alternatively, by the appellant's negligence. The respondent also alleged, further or alternatively, that the appellant was obliged to indemnify it for the amount in question pursuant to an indemnity in cl 9 of certain terms and conditions which, the respondent contended, had been incorporated in the subcontract.
The proceedings were tried before Murray J. The learned judge found that the fire was caused by the appellant's breach of contract and

negligence; in particular, the acts and omissions of its employees in the course of carrying out work under the subcontract. His Honour also found, however, that cl 9 of the terms and conditions relied upon by the respondent for its claim of an indemnity was not part of the subcontract and, in consequence, the claim based on cl 9 failed.

At trial, the respondent conceded that if the appellant was an insured under the AXA insurance policy, then AXA had no right of subrogation and the proceedings against the appellant could not be maintained. The learned judge held, relevantly, that:
(a)the appellant was not an insured under the policy, and AXA was entitled to prosecute the proceedings [138] ‑ [139];
(b)the respondent was obliged under the head contract to obtain insurance for the benefit of itself and HI, but not for its subcontractors [137] ‑ [138], [142]; and
(c)the appellant was liable to pay to the respondent the quantum of damages which had been agreed between them for the purposes of the proceedings [139].
The appellant appeals to this court against the judgment of the learned judge. The respondent has filed a notice of contention in which it seeks to support the judgment on other grounds.

The material terms of the head contract

The head contract includes, relevantly, conditions described as 'General Conditions' and conditions described as 'Special Conditions'. For the purposes of the head contract, HI is 'the Company', the respondent is 'the Contractor' and the appellant is a 'Sub‑contractor'.
Clause 1 of the General Conditions contains various definitions. It provides, relevantly:
In these Conditions and elsewhere in the Contract unless a contrary intention appears:-
…
'Company' means Hamersley Iron Pty Limited its successors and assigns;
…
'Constructional Plant' includes all machinery, plant, equipment, tools, temporary buildings, huts, sheds, appliances and things (including scaffolding and formwork) and the like of whatsoever nature used for or in relation to the performance or maintenance of the Works or the Temporary Works but does not include Goods;
'Contract' means … the Agreement executed by the parties together with the Specification and Drawings, these General Conditions and Appendices hereto, Special Conditions, Schedules and all other documents annexed thereto incorporated by reference or incorporated therein. In particular and without derogating from the foregoing and notwithstanding anything expressed or implied to the contrary, the tender submitted by the Contractor shall not, except to the extent that it, or any part of it, is reproduced in the Contract itself, form part of the Contract unless the Company expressly so agrees in writing;
…
'Contractor' means the person referred to as 'the Contractor' in the Agreement and its successors, permitted assigns and legal personal representatives or if no person is so referred to then it means the person who has undertaken to carry out the Works and includes its successors, permitted assigns and legal personal representatives and, where it is not repugnant to the context, includes also its employees, agents, consultants and invitees. For the purpose of this definition 'permitted assign' means any person who pursuant to an agreement in writing between the Company, the Contractor and that person undertakes to perform the obligations as they then, or may from time to time thereafter, stand under the Contract.
...
'Goods' means the materials, supplies, plant, equipment and other things intended to form or forming part of the Works;
…
'nominated Sub‑contractor' means any specialist, merchant, tradesman, or other person who is nominated by the Engineer or the Company and who is by virtue of the provisions of the Contract to be engaged by the Contractor to perform a portion of the Works under the Contract on behalf of the Contractor, and, where it is not repugnant to the context, includes also its employees, agents, consultants and invitees;
…
'Site' means the Company's premises and any other place designated in the Contract for the performance of the Works;
…
'Sub-contractor' means any person engaged by the Contractor to perform all or any portion of the Works under the Contract on behalf of the Contractor, and includes a nominated Sub‑contractor, and, where it is not repugnant to the context, includes also the Sub‑contractor's employees, agents, consultants and invitees;
…
Clause 11 of the General Conditions, before their amendment by the Special Conditions, provided:
Contract Works and Legal Liability Insurance
(a)The Company shall arrange 'Contract Works and Legal Liability' insurance in the names of the Company and the Contractor and any Sub‑contractors for the Contract Value from time to time. The Company shall accept responsibility for the payment of the premium cost of the 'Contract Works and Legal Liability' insurance, provided however that if the Contractor does not Complete the Works on or before the Completion Date any additional premiums payable by the Company shall be reimbursed to the Company by the Contractor.
The said insurance shall (subject to Sub clause (d) hereof) include cover against liabilities to third parties in respect of bodily injury (including death) and damage to property to the limit of $A10,000,000 for any one occurrence and shall provide that the Company and the Contractor and any Sub‑contractors shall be regarded each as third parties to the other but shall not otherwise cover the Constructional Plant of the Contractor or Sub‑contractors.
Notwithstanding anything contained herein or in any policy of insurance provided by the Company the Contractor shall bear the following excesses: Third party personal claims - nil; third party property damage - $20,000; all other claims or series of claims arising out of one event - $20,000; and the Contractor shall be responsible for and shall indemnify the Company against all losses claims and demands below the amount of such excess. If the Contractor or any Sub‑contractors have any like insurance which covers in whole or in part the risks included in the Company's 'Contract Works and Legal Liability' policy they shall forthwith after the Date of Award arrange for such risks to be excluded from their own policies of insurance and the Contract Price shall be reduced by the amount the Contractor included in its tender price for such insurance as conclusively certified by the Engineer.
A copy of the policy and renewals thereof shall be produced to the Contractor when available at its request. The Contractor shall be and shall ensure that each of its Sub‑contractors is conversant with the terms of the policy and shall do all things necessary or expedient to comply with or enable compliance with the terms and conditions of the policy and shall not do anything or suffer anything to be done which would in any way vitiate the policy or reduce the effectiveness of the cover thereunder.
The Company shall submit to the insurers every report, communication and claim submitted by the Contractor to the Company for transmission to the insurers and shall forward the Contractor a copy of all correspondence and advice to and from the insurers relevant to any matters concerning the said insurance. The Contractor shall have the right to approach the insurers direct on any such matter provided the Contractor forwards to the Company a copy of any correspondence or advice to or from the insurers.
Moneys receivable by Company
(b)(i) In the event of damage to or loss of all or any part of the Works performed at the Site and its immediate environs or of Goods after delivery to the Site all moneys payable in respect thereof under the 'Contract Works and Legal Liability' insurance shall be received by the Company which within fourteen (14) days after receipt shall, subject to any rights which the Company might have to suspend, withhold or set off payments, pay to the Contractor those moneys less any sum already paid by the Company to the Contractor in respect of the repair, restoration or replacement of the Works or Goods damaged or destroyed and less any part of those moneys received in respect of Goods supplied by the Company at its cost.
(ii)The Contractor immediately after the occurrence of the damage or loss shall request authorisation and upon receipt of such authorisation from the Engineer proceed to repair, restore or replace the Works or Goods damaged or destroyed.
Work and Goods off Site not Covered
(c)Work performed by the Contractor off the Site and its immediate environs and Goods whilst they are off the Site or in transit are not covered by the 'Contract Works and Legal Liability' insurance notwithstanding that the Company may have paid for such work or Goods in whole or in part as provided in Clause 39(b).
Additional Insurances
(d)The Contractor shall effect and maintain throughout the term of this Contract, at its own expense, the following insurances, with responsible insurers on terms and conditions acceptable to the Company.
(i)Workers' Compensation and Other Insurances
Workers' Compensation and Employers Liability insurance covering all claims and liabilities in respect of any statute and at common law for the death of or injury to any person employed by the Contractor or Sub‑contractor on or in connection with the Works. These insurances shall be endorsed to indemnify the Company against any and all liability the Company may have either by operation of statute or at common law.
(ii)Contractors Constructional Plant
Insurance covering all loss and damage to the Contractors Constructional Plant used in connection with the Contract for its replacement value.
(iii)Motor Vehicle Third Party Liability Insurance
Motor Vehicle Third Party Liability Insurance in respect of all motor vehicles used in connection with the Contract regardless of whether any motor vehicle is licensed as a motor vehicle pursuant to the provisions of any statute.
(iv)Goods and Transport Insurance
Insurance covering all Goods whilst they are off the Site or in transit to Site notwithstanding that the Company may have paid for the Goods.
Endorsement of Insurances
(e)The insurances required by Sub‑clause (d) shall, unless excused by law, be endorsed to include:
(i)the Company, its officers, employees, agents and representatives as co‑insureds; and
(ii)a cross‑liability clause whereby the insurers waive all express or implied rights of subrogation they may have against the Company, its officers, employees, agents and representatives.
Within twenty one (21) days of the Date of Award and each time the policies are renewed or varied, the Contractor shall provide the Company with such evidence as the Company may require that the Contractor and/or its Sub‑contractors are insured in accordance with this clause. All insurances arranged by the Contractor will not be varied to the detriment of the Company, cancelled or allowed to lapse until thirty (30) days of notice of the intention to so vary, cancel or lapse shall have been given to the Company. In the event that the Contractor fails to take out any of the insurances, the Company may at its sole option:
(i)take out and maintain such insurances and deduct the costs thereof from any moneys due to the Contractor; or
(ii)treat the failure to insure as a default.

Clause 11 of the General Conditions was amended by cl 2 of the Special Conditions. Clause 2(a) deleted cl 11(a), (b) and (c) of the General Conditions. Clause 2(b) inserted the following provision as cl 11(d)(v):
(v)Public Liability and Property Damage Insurance
Insurance covering all claims and liabilities in respect of any injury to or death of any person or any loss damage or destruction to any property (including the Works and the Company's property) howsoever caused. These insurances shall be unlimited as to the number of claims and shall provide cover in respect of each and every claim to an amount of not less than five million dollars ($5 000 000).
Clause 12 of the General Conditions contains an indemnity in these terms:
The Contractor shall indemnify and keep indemnified the Company and its officers, servants, agents and employees (hereinafter called the 'Indemnitees') against all claims, demands, damages, costs, losses, expenses and liabilities caused, whether wholly or in part, directly or indirectly by:
(a)the performance of the Works; or
(b)the presence of the Contractor or any of its officers, servants agents, employees or Sub‑contractors on or about the Site
including, but without limiting the generality of the foregoing, injury to or death of any person (including the Indemnitees) and damage to or destruction of any property (including property of the Indemnitees and the Contractor and the officers, agents and employees or Sub‑contractors of the Contractor) irrespective of any negligence on the party of the Company, its officers, servants, agents and employees except where the claims, demands, damages, costs, losses, expenses or liabilities incurred or suffered are the result of the sole negligence of the Company.
Clause 16 of the General Conditions deals with assignment and subcontracting. Clause 16(a) requires the Contractor to notify the Engineer (being the person for the time being appointed in writing by the Company to act for and on behalf of the Company and as directed by the Company in the administration of the Contract) in writing of all proposed Sub‑contractors, together with details of the work to be performed, prior to the Sub‑contractors commencing work. Clause 16(b) prohibits the Contractor from assigning or sub‑letting the Contract or any substantial part thereof, except with the prior written consent of the Engineer and to a Sub‑contractor approved by the Engineer. By cl 16(c), (d) and (e):
Contractor's Responsibility
(c)No Sub‑contract or assignment (whether with or without the consent of the Engineer) shall in any way relieve the Contractor from full responsibility for the Works and the performance of the Contract or its obligations or liabilities thereunder.
Sub-contractor Agent and Employee of Contractor
(d)As between the Contractor and the Company, the Sub‑contractor shall be considered the agent and employee of the Contractor. The acts and omissions of each Sub‑contractor and of all persons either directly or indirectly acting for it shall be deemed to be the acts and omissions of the Contractor.
Terms and Conditions of Sub‑Contract to be same as Contract
(e)The Contractor shall make all the terms and conditions of the Contract (as far as the same are applicable) terms and conditions of any Sub‑contract and shall not permit any alteration thereof without the prior written consent of the Company and shall enter into a Sub‑contract with the Sub‑contractor accordingly. Without limiting the generality of the foregoing prior to any Sub‑contractor commencing any part of the Works at the Site the Contractor shall ensure that each Sub‑contractor covenants separately with the Contractor in the terms (mutatis mutandis) of Clause 21(h). Until a Sub‑contractor so covenants, the Company may at the cost and expense of the Contractor deny the Sub‑contractor access to the Site and such denial of access shall be without prejudice to the Contractor's responsibility for the Works and for the performance of the Contract and to its obligations and liabilities under the Contract.

The relevant provisions of the AXA insurance policy

The AXA insurance policy was issued in the United States of America. The 'named insured' in the policy is United Technologies Corporation of One Financial Plaza, Hartford, Connecticut. However, by s V of the policy, the class of insureds is extended. Section V provides, relevantly, that:
Each of the following is an Insured under this insurance to the extent set forth below:
A.Any of the following whether now existing or hereafter acquired or constituted: (1) the organization named in the declarations (United Technologies Corporation) and subsidiaries of the Named Insured (including subsidiaries of such Named Insured subsidiaries in any tier), (2) at the election of the Named Insured upon the Occurrence of each loss, any other affiliated or associated company or joint venture owned in whole or in part by entities described under (1), (3) any person, organization or entity to whom the Insured is in writing obliged to provide insurance such as is afforded by this policy and then only to the extent both as to coverage and limits (not to exceed the limits of liability of this policy) that the Insured is obliged to provide such insurance. In the event a person, organization or entity becomes an Insured by reason of (3) herein, that person, organization or entity shall not have the right to add further Insureds, and (4) except with respect to the ownership, maintenance or use, including loading or unloading of Automobiles, any executive officer, director, stockholder or employee of any Insured, while acting on behalf of an Insured;
Section IX of the policy contains various definitions. It provides, relevantly, that 'Insured' means:
any person or organization qualifying as an Insured under [Section V] of this policy. The insurance afforded applies separately to each Insured against whom Claim is made or Lawsuit is brought, except with respect to the limits of the Company's liability;
In s I of the policy, AXA agrees to provide insurance, relevantly, in relation to property damage liability, as follows:
to pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay, as damages to which this insurance applies, caused by Property Damage resulting from an Occurrence.

The reasoning of the learned judge

The learned judge referred to cl 11(d)(v) of the General Conditions of the head contract (as amended by cl 2 of the Special Conditions). His Honour said, in relation to the commercial purpose of this provision:
it seems to me to be self-evident that HI has abandoned the obligation which originally rested on it to provide the necessary insurances governing the position, not only of itself, but also of its contractors and subcontractors, in favour of the transference of an obligation to its contractors to provide specific types of insurance, in relation to property in respect of its loss, damage or destruction which may generate claims and liabilities of any kind. The cover was to be not only in respect of the property comprised in the work the subject of the contract, but any property of HI and howsoever the damage or destruction was caused [134].
The learned judge then noted that it was clear the head contract contemplated that part of the work, at least, may be performed by subcontractors. After referring to cl 16(d) of the General Conditions, his Honour said:
From the point of view of HI, therefore, it can be seen that the contractual scheme was always to give it an avenue of claim against the contractor, the [respondent], by attributing to it the acts and omissions of a subcontractor, such as the [appellant]. The point was reinforced by cl 16(c), which provides that no subcontract or assignment of the work, with or without the consent of the engineer, who is HI's representative, is to relieve the contractor from full responsibility for the works and the performance of the contract and its obligations and liabilities under the contract [135].
The learned judge then construed cl 11(d)(v) of the General Conditions:
It is in that context that the obligation was imposed by cl 11(d)(v) upon the [respondent] to effect and maintain public liability and property damage insurance 'covering all claims and liabilities in respect of … any loss, damage or destruction to any property'. The obligation was imposed on the [respondent] for the benefit of HI to ensure that any claim it might have could be made against the contractor and would be covered by insurance effected by the contractor. To my mind, cl 11(e) reinforces that point by requiring that the insurance effected be endorsed to include HI, its officers, employees, agents and representatives as co-insured persons.
Despite the fact that in cl 11(e), the [respondent] is obliged to provide HI with evidence 'that the Contractor and/or its Sub-contractors are insured in accordance with this clause', I consider that, having regard to the matters to which I have referred above, the intention and effect of the obligation to effect insurance imposed by cl 11(d)(v) is that the [respondent] was obliged to effect insurance at its own expense for its benefit and the benefit of HI so far as property loss or damage or destruction was concerned, however, and no matter by whom, or by whose fault, that was caused [136] ‑ [137].
The learned judge concluded that the head contract did not oblige the respondent to effect insurance for the benefit of a subcontractor such as the appellant for any claims which might be made against the appellant in respect of property damage or personal injury it might cause as a result of its breach of contract or negligence. The appellant was not, therefore, an insured person within the meaning of s V, A(3) of the AXA insurance policy, in that it was not an entity to whom an insured under the policy was, in writing, obliged to provide insurance [138].
The learned judge also concluded:
It was, therefore, not open to the [appellant] to seek to take the benefit of cl 11(d)(v) of the Head Contract under the Property Law Act 1969, s 11(2); nor was it open to the [appellant], in accordance with the principles laid down in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107, to enforce the indemnity provided to an insured against its liability in damages under the policy. AXA is entitled to pursue the claim in the name of the [respondent] by right of subrogation and no circuity of action results [139].

Grounds of appeal

The appellant's grounds of appeal are as follows:
1.The learned trial Judge erred in law in failing to find that under its contract with [HI] the respondent was obliged to obtain insurance against the liability of subcontractors for property damage.
2.The learned trial Judge erred in law in failing to find that the appellant was an insured under the [AXA insurance] policy.
3.If the appellant was not an insured under the [AXA insurance] policy, the learned trial Judge erred in law in failing to find that the appellant was entitled to set off against the respondent's claim the amount of the insurance fund that should have been available if the respondent had complied with its obligation to obtain insurance against the liability of subcontractors for property damage.

Ground 1: the proper approach to the construction of the head contract

The general principles to be applied in the construction of written contracts are set out in the judgment of Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99:
It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate', to use the words from earlier authority cited in Locke v. Dunlop ((1888) 39 Ch. D. 387, at p. 393), which, although spoken in relation to a will, are applicable to the construction of written instruments generally; see also Bottomley's Case ((1880) 16 Ch. D. 681, at p. 686). Further, it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument. Finally, the statement of Lord Wright in Hillas & Co. Ltd. v. Arcos Ltd ((1932) 147 L.T. 503, at p. 514), that the court should construe commercial contracts 'fairly and broadly, without being too astute or subtle in finding defects', should not, in my opinion, be understood as limited to documents drawn by businessmen for themselves and without legal assistance (cf. Upper Hunter County District Council v. Australian Chilling and Freezing Co. Ltd ((1968) 118 C.L.R. 429, at p. 437)) (109) ‑ (110).
The construction of a written contract is concerned with ascertaining what a reasonable person would have understood the parties to mean. Consideration should ordinarily be given not only to the language of the document, but also to the surrounding circumstances known to the parties, and the apparent purpose and object of the transaction. See Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, where Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ said:
This Court, in Pacific Carriers Ltd v BNP Paribas ((2004) 218 CLR 451), has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction (Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461 - 462 [22]) [40].
Also see Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 [11]; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 [22]; Jumbo King Ltd v Faithful Properties Ltd [1999] 3 HKLRD 757, 773 - 774.

Ground 1: the deletion of cl 11(a), (b) and (c) of the General Conditions

As I have mentioned, cl 11 of the General Conditions was amended by cl 2 of the Special Conditions. Clause 2 deleted cl 11(a), (b) and (c) of the General Conditions and inserted a new provision as cl 11(d)(v).
In Centrepoint Custodians Pty Ltd v Lidgerwood Investments Pty Ltd [1990] VR 411, Ormiston J considered whether and, if so, in what circumstances the deletion of words or clauses from a standard or common form contract may be referred to as an aid to construing a clause in the agreement actually entered into by the parties. His Honour said:
Many of the cases deal with the deletion of words or clauses from a standard or common form, such as a charter party, letter of credit or building contract. Perhaps the preponderance of authority favours the view that the court should not take those deleted clauses into account in interpreting a contract: see, eg, Scrutton on Charter Parties (19th ed), p. 21 and compare the many cases in footnotes 47 and 48, but excluding Stanton v Richardson (1874) LR 9 CP 390 and Glynn v Margetson [1892] 1 QB 337; [1893] AC 351: see the useful note by ER Hardy-Ivamy in (1959) 22 MLR 333, at p. 336. An earlier version of the passage in Scrutton (16th ed) has been cited with approval or qualified approval in a number of cases: see, eg, Louis Dreyfus and Cie v Pamaso Cia Naviera SA [1959] 1 QB 498, at p. 513; Building and Engineering Constructions (Aust) Ltd v Property Securities No 1 Pty Ltd [1960] VR 673, at p. 681 and Mobil Oil Australia Ltd v Kosta (1969) 14 FLR 343, at 348, cited in Harrod v Palyaris Construction Pty Ltd (1973) 8 SASR 54, at p. 58. However, as pointed out by Pape J in the Building and Engineering Constructions Case, at p. 681, the passage in the 16th edition of Scrutton on Charter Parties reflected in part the benevolent view of Scrutton LJ in looking at words and clauses stuck out, and even in that edition it was doubted whether the view there expressed was good law. The 19th edition accepts that the weight of authority is now against looking at deletions. Expressions on high authority consistent with that view contained in A and J Inglis v John Buttery and Co (1878) 3 App Cas 552, at p. 569; Ambatielos v Anton Jurgens Margarine Works [1923] AC 175, at p. 185 and in particular in Viscount Sumner's judgment on behalf of the Judicial Committee in MA Sassoon and Sons Ltd v International Banking Corporation [1927] AC 711, at p. 721 were relied upon by Blackburn J, when sitting in the Supreme Court of the Northern Territory, so as to conclude that he should construe an agreement, in the absence of extrinsic evidence, without resort to any words struck out: Mobil Oil Australia Ltd v Kosta, at pp. 348-9. The same view was accepted by Jacobs J in Harrod v Palyaris Construction, at pp. 58-9. On the other hand, courts in recent years have looked, from time to time, at deleted clauses, although few of the dicta contain any analysis of authority: see, eg, Louis Dreyfus and Cie v Pamaso Cia Naviera SA, at pp. 512-13, per Diplock J; TJ Watkins Ltd v Cairns Meat Export Co Pty Ltd [1963] Qd R 21, at p. 27; London and Overseas Freighters Ltd v Timber Shipping Co SA [1972] AC 1, at pp. 15‑16, per Lord Reid and Mottram Consultants Ltd v Bemard Sunley and Sons Ltd [1975] 2 Lloyd's Rep 197, at p. 209, per Lord Cross: cf Odgers on Deeds and Other Instruments (4th ed), pp. 64-5 and Chitty on Contracts (25th ed), para 782.
A distinction drawn in the authorities appears to have been given some significance. On the one hand there is no case of which I am aware in which a court has looked for the purpose of interpretation to a draft contract or term which has been rejected in the course of negotiations, although in several cases, some of which have been cited above, a court has been prepared to look at a clause or words which have appeared on, but which have been struck out of, a standard form contract. This distinction has been justified by saying that evidence of negotiations is always irrelevant to the process of construction, but that a deliberate and mutually agreed deletion of a standard form term may throw light on the parties' intentions in cases of ambiguity: cf City and Westminster Properties (1934) Ltd v Mudd [1959] Ch 129, at pp. 140-1 and London and Overseas Freighters Ltd v Timber Shipping Co SA [1972] AC 1, at pp. 15‑16. In many ways there is robust common sense in looking at terms which undoubtedly all parties have deliberately chosen to strike out, certainly where part of the structure of a conventional or well known form is deleted. The distinction is, however, one which is hard to justify, for in an era of word processors standard agreements take many forms, and it may be just as clear from other extrinsic evidence that both parties have agreed not to include a term normally found in a standard contract or in a contract which the parties have frequently used for earlier transactions, which for brevity I have called 'conventional' contracts.
Moreover, it is unrealistic to assert that the decision to exclude a term in the one case should be characterised only as negotiations but not in the other case, merely because in the latter one it can be seen from the form what the parties rejected in the course of those negotiations. The significance, but essential irrelevance, of negotiations to the process of interpretation has long been accepted, though challenged in the recent work of Greig and Davis, The Law of Contract (1987), Ch 8, especially pp. 404‑10 and 469‑72. It is unfortunate that that chapter, instructive though it is, contains no discussion of the effect of deleted clauses and terms, which in my experience are the most frequent manifestation of the process of negotiation raised for consideration in the courts (421 ‑ 422).

In Australia there is authority to the effect that deleted words or clauses from a standard or common form agreement, such as a building contract, may be taken into account in ascertaining the proper construction of ambiguous words or an ambiguous clause in the agreement actually made. See Postle v Sengstock [1994] 2 Qd R 290, 298 (Macrossan CJ, McPherson JA, Derrington J); Burger King Corp v Hungry Jack's Pty Ltd [2001] NSWCA 187 [137] (Sheller, Beazley and Stein JJA); 260 Oxford Pty Ltd v Premetis [2006] NSWCA 96 (Tobias JA [99], Basten JA [127] and Young CJ in Eq [132] ‑ [134]).
In Burger King Corp, the High Court granted special leave to appeal: Burger King Corp v Hungry Jack's Pty Ltd (2002) 23(7) Leg Rep SL2. Special leave was not granted, however, on the issue of the circumstances in which words or clauses which have been struck out from a standard or common form agreement are admissible as an aid to construction. It appears that the proceedings in the High Court were discontinued in that there is no reported (or, as far as I have been able to ascertain, unreported) decision on an appeal pursuant to the grant of special leave.
It is unnecessary, in this appeal, to determine the precise ambit, having regard to the decisions of the High Court in Pacific Carriers and Toll, of the rule relating to the circumstances in which deleted words or clauses from a standard or common form agreement may be taken into account in ascertaining the proper construction of the agreement actually made. It is sufficient, for present purposes, to note that the rule at least permits the deleted words or clauses to be referred to as an aid to construing ambiguous words or an ambiguous clause in the concluded agreement.

Ground 1: its merits

The General Conditions are contained in a printed document which is headed 'Hamersley Iron Pty Ltd General Conditions for Construction Contracts February 1993'. It is apparent from the form and content of the General Conditions that it is a standard or common form document which sets out the terms and conditions upon which HI has generally been willing, since February 1993, to engage a contractor to undertake specified building, construction or engineering works.
In my opinion, for reasons which I will explain below, cl 11(d) and (e) of the General Conditions (as amended by cl 2 of the Special Conditions) is ambiguous or susceptible of more than one meaning in relation to whether the respondent (as the Contractor) was obliged under cl 11(d) (as amended) and (e) to obtain insurance against the liability of the appellant (as a Sub‑contractor) for property damage. It is therefore permissible to take into account the deletion of cl 11(a), (b) and (c) of the General Conditions, and the terms of those deleted provisions, as an aid in resolving the ambiguity and determining the proper construction of cl 11(d) (as amended) and (e).
The head contract contemplated that at least part of the Works might be performed by Sub‑contractors. See cls 1, 11, 12, 16, 17, 19 and 28. Also, the head contract contemplated that there was a risk that the acts or omissions of Sub‑contractors might cause the death of or personal injury to a person or persons on the Site or damage to HI's property. The perception of this risk explains cls 12 and 16(d) of the head contract. By cl 12, the respondent (as the Contractor) agreed to indemnify HI (as the Company) against, relevantly, all claims, demands, damages, costs, losses, expenses and liabilities caused, whether wholly or in part, and whether directly or indirectly, by the performance of the Works or the presence of Sub‑contractors on or about the Site, including damage to or destruction of any property (including property of HI), irrespective of any negligence (other than sole negligence) on the part of HI. By cl 16(d), as between the respondent (as the Contractor) and HI (as the Company), any Sub‑contractor was, in effect, deemed to be the agent of the respondent, and the acts and omissions of each Sub‑contractor (and all persons, directly or indirectly, acting for each Sub‑contractor) were expressly deemed to be the acts and omissions of the respondent. Accordingly, cl 16(d) made the respondent vicariously liable to HI for the acts and omissions (including negligent acts and omissions) of Sub‑contractors engaged in the performance of any of the Works.
By cl 11(a), HI (as the Company) was obliged, relevantly, to arrange, at its own cost, 'Contract Works and Legal Liability' insurance in the names of HI, the respondent (as the Contractor) and any Sub‑contractors. The subclause specified that, in relation to the Works, the insurance was to be for the 'Contract Value' (a term which is defined in cl 1 of the General Conditions, but which it is unnecessary to reproduce) from time to time. The subclause also specified that, in relation to legal liability, the insurance shall (subject to cl 11(d)) include:
cover against liabilities to third parties in respect of bodily injury (including death) and damage to property to the limit of $A10,000,000 for any one occurrence and shall provide that the Company and the Contractor and any Sub‑contractors shall be regarded each as third parties to the other but shall not otherwise cover the Constructional Plant of the Contractor or Sub‑contractors.
If cl 11(a) had not been deleted by cl 2 of the Special Conditions, each of HI, the respondent and the appellant would have been co‑insureds under a policy which insured the Works and, relevantly, any liability incurred by HI, the respondent and the appellant, or any of them, to third parties (including each other) in respect of negligent acts or omissions.
By cl 11(d), before its amendment by cl 2 of the Special Conditions, the Contractor was obliged to take out, at its own expense, additional insurances (that is, additional to the 'Contract Works and Legal Liability' insurance which HI was required to arrange under cl 11(a)). Clause 2 of the Special Conditions amended cl 11(d) by the addition of par (v), which required the respondent to take out, at its own expense, public liability and property damage insurance.
Clause 11(d) (as amended) imposes on the respondent the obligation to effect and maintain, at its own expense and throughout the term of the head contract, policies of insurance in respect of the risks and property described in pars (i) ‑ (v) of that subclause. The terms and conditions of the insurance must be acceptable to HI.
Paragraph (i) of cl 11(d) refers to workers' compensation and employers' liability insurance. The paragraph stipulates that the insurance policy must cover 'all claims and liabilities' under statute or at common law for the death of or injury' to any person employed by the respondent or a Sub‑contractor on or in connection with the Works. Also, the paragraph stipulates that the insurance policy must indemnify HI against any and all liabilities which HI may incur under statute or at common law in respect of that risk. The insurance in question would include insurance in respect of liability in tort, under the Occupiers' Liability Act1985 (WA) and under the Workers' Compensation and Injury Management Act 1981 (WA) (including liability under s 175 of that Act as a principal). Also see s 160 of the Workers' Compensation and Injury Management Act.
Paragraph (ii) of cl 11(d) specifies that insurance cover must be obtained in respect of any loss or damage to any Contractor's (but not Sub‑contractors') 'Constructional Plant' (as defined in cl 1 of the General Conditions) which is used in connection with the head contract. The insurance must be for the replacement value of any property which is lost or damaged.
Paragraph (iii) of cl 11(d) refers to motor vehicle third party liability insurance in respect of all the motor vehicles used in connection with the head contract. The motor vehicles in question must include all vehicles owned or used by HI, the Contractor or any Sub‑contractor in the performance of any part of the Works.
Paragraph (iv) of cl 11(d) requires that insurance cover be obtained in respect of all 'Goods' (as defined in cl 1 of the General Conditions) while they are not at the 'Site' (as defined in cl 1 of the General Conditions) or are in transit to the Site, even though HI may have paid for them. The Goods in question (defined to mean the materials, supplies, plant, equipment and other things intended to form or forming part of the Works) must include all goods owned or used by HI, the Contractor or any Sub‑contractor and intended to form or forming part of the Works.
Paragraph (v) of cl 11(d) requires that insurance cover be obtained for all claims and liabilities in respect of the death of or injury to any person, and all claims and liabilities in respect of 'any loss, damage or destruction to any property (including the Works and [HI's] property) howsoever caused'. The paragraph then stipulates that the insurance policy must be unlimited as to the number of claims and must provide indemnity for each and every claim in an amount of at least $5,000,000.
Several features of cl 11(d) (as amended), in their application in the present case, should be noted. First, par (v) of the subclause does not expressly identify the persons or entities in respect of whom claims are made or liabilities are incurred arising from any injury to or death of any person. Secondly, par (v) does not expressly state any connection between the claims and liabilities to be insured against on the one hand and the Site or the Works on the other. Thirdly, par (v) does not expressly identify whose property must be insured against the risk of loss, damage or destruction, apart from the Works and HI's property. Fourthly, par (v) does not expressly state any connection between the property to be insured on the one hand and the Site or the Works on the other. Fifthly, the subclause does not expressly identify the persons and entities who are to be the insureds under the policies taken out in compliance with its provisions, apart from specifying in par (i) that the workers' compensation and employers' liability insurance policy must be endorsed to indemnify HI against any and all liabilities which HI may incur under statute or at common law in respect of that risk. Sixthly, the subclause says nothing about the rights of subrogation of the insurers under the policies.
It is essential, of course, that cl 11(d) (as amended) be read and construed together with cl 11(e) and in the context of the head contract as a whole.
By cl 11(e), the insurance policies required to be effected and maintained under cl 11(d) must, relevantly, be endorsed to include:
(a)HI, its officers, employees, agents and representatives as co‑insureds; and
(b)a cross‑liability clause whereby the insurers waive their express and implied rights of subrogation against HI, its officers, employees, agents and representatives.
Clause 11(e) expressly refers to Sub‑contractors in the context of a provision which requires the respondent (as the Contractor) to provide HI with evidence, at specified times, that 'the Contractor and/or its Sub‑contractors are insured in accordance with [cl 11]'.
The concluding provisions of cl 11(e) stipulate that any insurance policies effected by the respondent in accordance with cl 11(d) and (e) must not be varied to the detriment of HI, cancelled or allowed to lapse unless 30 days prior notice of the proposed variation, cancellation or lapse has been given to HI. Also, if the respondent fails to insure in accordance with cl 11(d) and (e), HI may elect either to effect and maintain the requisite insurance itself and deduct the costs it incurs from any moneys due to the respondent or to treat the failure as a default under the head contract.
It is plain that at least HI and the respondent must be co‑insureds under the insurance referred to in cl 11(d) (as amended) to the extent that each of them has an insurable interest for the purposes of the risks and property described in that provision. The subclause expressly requires that HI be an insured. The subclause impliedly requires that the respondent be an insured. The implication arises from the following. First, the respondent has an insurable interest for the purposes of at least some of the risks and property referred to in pars (i) ‑ (v) of the subclause. Secondly, the requirement in cl 11(e) that the respondent provide HI with such evidence as HI may require, at specified times, that 'the Contractor and/or its Sub‑contractors are insured in accordance with [cl 11]' necessarily contemplates that the respondent must be insured in accordance with cl 11(d) (as amended) and (e). Accordingly, cl 11(d) (as amended) and (e) is for the benefit of at least HI and the respondent.
The question raised by ground 1 is whether the respondent was obliged under cl 11(d) (as amended) and (e) to obtain insurance against the liability of the appellant for property damage. In my opinion, the provisions of cl 11 are ambiguous or susceptible of more than one meaning in relation to that question. As I have mentioned, cl 11(d) (as amended) and (e) do not expressly identify the persons and entities who are to be the insureds under the policies taken out in compliance with its requirements, apart from specifying in cl 11(d)(i) and (e) that HI must be an insured. I have concluded that it is implicit in the provisions of cl 11 that the respondent must also be an insured. The critical issue is what implication, if any, is to be made as to whether the appellant must be a co‑insured.
In my opinion, the respondent had a significant interest under the head contract in any Sub‑contractors being insured in accordance with cl 11(d) (as amended) and (e). By cl 16(d) of the General Conditions, the respondent was vicariously liable to HI for, relevantly, the negligent acts and omissions of Sub‑contractors engaged in the performance of any of the Works. This provision is reinforced by cl 12 which requires the respondent to indemnify HI against, relevantly, all claims, demands, damages, costs, losses, expenses and liabilities caused, whether wholly or in part, and whether directly or indirectly, by the performance of the Works or the presence of Sub‑contractors on or about the Site, including damage to or destruction of any property (including property of HI). If a Sub‑contractor's negligent act or omission were to damage HI's property, HI may (as it did in the present case) recover its loss from the respondent. No doubt, in such circumstances, the respondent would have a right of reimbursement against the Sub‑contractor under the subcontract or in tort, but that right may be of limited or no value if the Sub‑contractor is uninsured. It was therefore in the interests of the respondent under the head contract for the insurances taken out in accordance with cl 11(d) (as amended) and (e) to extend cover not only to HI and the respondent, but also to any Sub‑contractors. This significant interest of the respondent was reflected in the requirement of the deleted cl 11(a) that the 'Contract Works and Legal Liability' insurance to be arranged by HI, at its own cost, was to be in the names of HI, the respondent and any Sub‑contractors, with each of them to be regarded as a third party to the others.
HI also had an interest under the head contract in any Sub‑contractors being insured in accordance with cl 11(d) (as amended) and (e). The interest existed for similar reasons to the existence of the respondent's interest, and the deleted cl 11(a) protected HI's interest. It must be acknowledged that HI's interest was of lesser significance than the respondent's interest in that HI would ordinarily be adequately protected by its rights against the respondent under cls 12 and 16(d) of the General Conditions in combination with the respondent having insurance in accordance with cl 11(d) (as amended) and (e).
Like the respondent, any Sub‑contractors have an insurable interest for the purposes of at least some of the risks and property referred to in pars (i) ‑ (v) of cl 11(d) (as amended).
The words 'and/or' in cl 11(e), in the context of the respondent providing HI with evidence that 'the Contractor and/or its Sub‑contractors are insured in accordance with [cl 11]' indicate that HI and the respondent intended that any Sub‑contractors should be insured under cl 11(d) (as amended) and (e). The evident purpose of the words 'and/or' is as follows. First, the relevant words are part of the standard form printed text and, in particular contractual circumstances, there may not be any Sub‑contractors. Secondly, HI may at a particular time require evidence that the Contractor (but not any Sub‑contractors) are insured, at another time it may require evidence that any Sub‑contractors (but not the Contractor) are insured, and at yet another time it may require evidence that the Contractor and any Sub‑contractors are insured.
In Petrofina (UK) Ltd v Magnaload Ltd [1984] QB 127, a sub‑contractor was one of several co‑insureds under a contractor's all risks policy. The sub‑contractor damaged the works being undertaken by the contractor and its sub‑contractors. The insurers indemnified the proprietors for the relevant damage and, in purported exercise of their right of subrogation, brought proceedings against the sub‑contractor for damages for negligence. The sub‑contractor asserted that the claim was not maintainable in that it was fully insured under the policy in respect of the property which it had damaged. Lloyd J held that on a proper construction of the contractor's all risks policy, each co‑insured was insured in respect of the whole of the works, including in respect of property owned by other co‑insureds. His Lordship also held that since the sub‑contractor was entitled to insure the whole of the works, and not merely that part of the works for which it was responsible, the insurers had no right of subrogation against the sub‑contractor. Lloyd J, in the course of his reasons, observed:
In the case of a building or engineering contract, where numerous different sub‑contractors may be engaged, there can be no doubt about the convenience from everybody's point of view, including, I would think, the insurers, of allowing the head contractor to take out a single policy covering the whole risk, that is to say covering all contractors and sub‑contractors in respect of loss of or damage to the entire contract works. Otherwise each sub‑contractor would be compelled to take out his own separate policy. This would mean, at the very least, extra paperwork; at worst it could lead to overlapping claims and cross‑claims in the event of an accident. Furthermore, as Mr Wignall pointed out in the course of his evidence, the cost of insuring his liability might, in the case of a small sub‑contractor, be uneconomic. The premium might be out of all proportion to the value of the sub‑contract. If the sub‑contractor had to insure his liability in respect of the entire works, he might well have to decline the contract (136).
Plainly, his Lordship's observations cannot influence the proper construction of a contractual provision that evinces an intention not to give effect to the commercially convenient and sensible practice which he mentioned. However, in the present case, there is no basis for concluding that HI and the respondent intended, by the amendments which cl 2 of the Special Conditions made to cl 11 of the General Conditions, to reject that practice, which was embodied in cl 11(a). I should note that although Lloyd J's analysis of circuity of action, in the context of subrogated proceedings, was rejected by the House of Lords in Co‑operative Retail Services Ltd v Taylor Young Partnership Ltd [2002] 1 WLR 1419, 1423, 1438, their Lordships did not cast any doubt on the accuracy of the observations of Lloyd J which I have mentioned.
It is difficult to discern any commercially convenient or sensible rationale for imputing to HI and the respondent an intention to abandon the requirement in the deleted cl 11(a) that any Sub‑contractors (in addition to HI and the respondent) be insured in relation to legal liability and, instead, to adopt a clause which confined such insurance to HI and the respondent. The apparent purpose of the deletion of cl 11(a), (b) and (c) and the insertion of cl 11(d)(v) was to impose on the respondent, rather than HI, the obligation and expense of obtaining the insurance described in cl 11(d)(v). Nothing in cl 11(d) (as amended) and (e) precludes the respondent from negotiating with any Sub‑contractor a contribution towards the expense incurred or to be incurred by the respondent in effecting and maintaining the requisite insurance.

I am therefore of the opinion that the preferable construction of cl 11(d) (as amended) and (e) is that the respondent was obliged, under the head contract, to obtain insurance against the liability of Sub‑contractors (including the appellant) for property damage.
I should also state that, in my opinion, cl 11(d)(v), in requiring the respondent to obtain insurance covering all claims and liabilities in respect of, relevantly, any loss, damage or destruction to any property (including the Works and HI's property) howsoever caused, refers, by implication:
(a)to all claims and liabilities made against or incurred by HI, the respondent and the Sub‑contractors (including the appellant), or any of them; and
(b)to the loss, damage or destruction of any property of HI, the respondent and the Sub‑contractors (including the appellant), or any of them, from time to time on the Site.
The basis for these implications is the nature of the work to be carried out under the head contract (that is, construction work involving plant, equipment, materials and a workforce), the location where the Works are to be carried out (that is, on the Site), the relationship between the parties (that is, proprietor, builder and builder's sub‑contractors), the nature of the structures and operations on the Site before and during the carrying out of the Works (that is, an existing building with existing business operations which are to continue while the Works are being undertaken), and the terms of the insurance required under pars (i) ‑ (iv) of cl 11(d) (each of which specifies a connection between the particular insurance it describes and the Site or the Works).
Ground 1 has been made out.

Ground 2: the proper approach to the construction of the AXA insurance policy

An insurance policy is a commercial contract and should be given a businesslike interpretation. See McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 [22] (Gleeson CJ). His Honour added:
Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure (Lake v Simmons [1927] AC 487 at 509, per Viscount Sumner).

Ground 2: its merits

The critical provision of the AXA insurance policy is s V which is, relevantly, in these terms:
Each of the following is an Insured under this insurance to the extent set forth below:
A.Any of the following whether now existing or hereafter acquired or constituted: … (3) any person, organization or entity to whom the Insured is in writing obliged to provide insurance such as is afforded by this policy and then only to the extent both as to coverage and limits (not to exceed the limits of liability of this policy) that the Insured is obliged to provide such insurance.
The insurance afforded by the AXA insurance policy includes insurance against liability for damaging the property of a third party. Also, if, as I have decided, the respondent was obliged under the head contract to provide insurance for the liability of Sub‑contractors for damage to HI's property, no issue arises in the appeal as to whether the insurance which the respondent was obliged to provide exceeds the coverage or limits specified in the policy.
By s V, A(3) of the AXA insurance policy, the appellant will be an insured under the policy only if the appellant is a person, organisation or entity 'to whom [the respondent] is in writing obliged to provide insurance'.
In my opinion, the words 'to whom [the respondent] is in writing obliged to provide insurance' do not require the existence of a contract between the 'person, organization or entity' on the one hand, and the respondent on the other, under which the respondent assumes an obligation to the 'person, organization or entity' to provide the insurance. The words 'to whom' refer to the person, organisation or entity who is to be provided with insurance such as is afforded by the policy, etc. Those words do not import the existence of a contractual relationship between the person, organisation or entity and the respondent. Section V, A(3) will be satisfied if the respondent has assumed an obligation in writing to a third party to provide another person, organisation or entity with insurance such as is afforded by the policy, etc.
The ambit of s V, A(3) is limited by the requirement that the obligation which the respondent has assumed must be 'in writing'. It is likely that this requirement was introduced in the interests of certainty, and also to ensure that a person, organisation or entity would become an insured under s V, A(3) only if the obligation to provide that person, etc, with insurance, etc, was assumed in serious and businesslike circumstances.
In the present case, and for the reasons I have given in the course of examining ground 1, the appellant is an entity to whom the respondent is in writing obliged to provide insurance of the kind specified in s V, A(3). The relevant writing is embodied in cl 11 of the head contract. By cl 11, the obligation to provide insurance for the appellant was imposed on the respondent.
Ground 2 has been made out.

Ground 3

Ground 3 is based on the premise that ground 1, but not ground 2, has been established. I have concluded that grounds 1 and 2 should succeed. It is therefore unnecessary to consider ground 3.

Respondent's notice of contention

The respondent filed an amended notice of contention in, relevantly, these terms:
1.At the hearing of this appeal, the Respondent will contend (in the alternative) that even if the Appellant comes within the definition of an 'Insured' in the AXA Policy, the action is not 'circuitous' and is maintainable.
2.The learned trial judge expressed that opinion, obiter, at [127] of his Reasons, but his decision was based on his conclusion (which, with respect, was clearly correct) that, upon a proper construction of the Head Contract and the definition of 'Insured' in the AXA Policy, the Appellant was not insured under that policy. Hence the question of 'circuity' did not need to be decided.
3.…
4.The Respondent will further contend, in relation to ground 2, that the definition of 'insured' in the AXA policy does not extend to a person, such as the Appellant, to whom no obligation to insure is owed, so that, even if the Respondent had undertaken to [HI], under the head contract, to insure subcontractors, that would not make the Appellant an insured under the AXA policy.
As to pars 1 and 2 of the amended notice of contention, the learned judge appears to have expressed the opinion attributed to him by the respondent. After citing passages from the judgment of Ipp J in Woodside Petroleum Development Pty Ltd v H & R‑E & W Pty Ltd (1999) 20 WAR 380, 402, in relation to circuity of action, his Honour said:
The same comment might be made of the position of the [appellant] in this action [127].
The issue of circuity of action was not, however, pleaded or otherwise raised at trial as an issue. Indeed, as I have mentioned, at trial the respondent conceded that if the appellant was an insured under the AXA insurance policy, then AXA had no right of subrogation and the proceedings against the appellant could not be maintained. Before this court, senior counsel for the respondent frankly acknowledged:
So far as circuity is concerned, we don't intend to linger long on that, but Murray J did raise the point at least that there is some doubt as to whether circuity would apply. I must confess some reservations about this issue.
In my opinion, it was not open at trial and it is not now open for the respondent to resile from its concession and contend that there was no circuity of action and, in consequence, AXA had a right of subrogation and the proceedings against the appellant could be maintained even if the appellant was an insured under the AXA insurance policy.
As to par 4 of the amended notice of contention, I have dealt with this issue in the course of examining ground 2.
The amended notice of contention is without merit.

Conclusion

I would allow the appeal. Counsel should be heard as to the precise form of the orders.