Australian Prestressing Services Pty Ltd v Vero Insurance Ltd
[2012] NSWDC 239
•09 March 2012
District Court
New South Wales
Medium Neutral Citation: Australian Prestressing Services Pty Ltd v Vero Insurance Ltd [2012] NSWDC 239 Hearing dates: 1-3 August 2011; 5-6 October 2011 Decision date: 09 March 2012 Jurisdiction: Civil Before: Gibson DCJ Decision: (1) Judgment for the first plaintiff (Australian Prestressing Services Pty Ltd).
(2) The parties are to bring in short minutes of order reflecting the agreed quantum of the sums claimed in accordance with the itemised amounts set out at paragraphs 160-165 of this judgment, together with interest if mathematically agreed.
(3) Liberty to restore in relation to interest.
(4) First defendant to pay plaintiffs' costs.
(5) Liberty to restore in relation to costs.
(6) Exhibits retained for 28 days.
Catchwords: INSURANCE - construction of policy of insurance - whether policy covered emergency work carried out to prevent collapse of a coffer dam, following extensive rain and flooding - whether pumping out the flood and storm water fell within the "dewatering" exclusion in the policy Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW), Part 31 r 31.23 Cases Cited: Australian Securities & Investments Commission (ASIC) v Rich (2005) 190 FLR 242; (2005) 53 ACSR 110; (2005) 23 ACLC 430; [2005] NSWSC 149
Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300
Blacktown Workers' Club Ltd v O'Shannessy (2011) 183 LGERA 184; [2011] NSWCA 265
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Darlington Futures Limited v Delco Australia Pty Limited (1986) 161 CLR 500
Dasreef Pty Ltd v Hawchar (2011) 9 DDCR 25; (2011) 243 CLR 588; (2011) 277 ALR 611; (2011) 85 ALJR 694; [2011] HCA 21
Dyson (trading as Pharmacy Plus Tumut) v Pharmacy Board of New South Wales (2000) 50 NSWLR 523
Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; (2009) 264 ALR 15; [2009] NSWCA 407
Gagner Pty Ltd t/as Indochine Cafe v Canturi Corp Pty Ltd (2009) 262 ALR 691; (2009) 236 FLR 401; (2009) 77 ATR 157; [2009] NSWCA 413
Guardian Assurance Co Ltd v Underwood Constructions Pty Ltd (1974) 48 ALJR 307
Hide and Skin Trading Pty Limited v Oceanic Meat Traders Limited (1990) 20 NSWLR 310
Ingham v ACN 000 333 844 Limited [2006] NSWCA 63
Jae Kyung Lee v Bob Chae-Sang Cha [2008] NSWCA 13
Johnson v American Home Assurance Ltd (1998) 192 CLR 266
Jones and Harbour Radio Pty Limited v Trad (No 2) (Eod) [2011] NSWADTAP 62
Legal and General Insurance Australia Limited v Eather (1986) 6 SNWLR 390
Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; (2001) 25 NSWCCR 218
Mandla v Lee [1982] UKHL 7
McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; (2000) 176 ALR 711; (2000) 75 ALJR 325; (2000) 21(20) Leg Rep 24; (2001) 11 ANZ Ins Cas 61-479; [2000] HCA 65
MGICA Limited v United City Merchants (Australia) Limited (1986) 4 ANZ Ins Cas 60 729
Mining Technologies Australia Pty Ltd, Re [1999] 1 Qd R 60; (1997) 10 ANZ Ins Cas 61-389
MLC Limited v O'Neill [2001] NSWCA 161
Prenn v Simmonds [1971] 1 WLR 1381
Provincial Insurance Australia Limited v Consolidated Wood Products Limited (1991) 25 NSWLR 541
R v WR (No 3) [2010] ACTSC 89
Re Mining Technologies (Aust) Pty Ltd (Queensland Supreme Court, White J, 28 November 1996, unreported)
Rouleston Clarke Pty Ltd (In Liq) v FAI General Insurance Co Limited (2000) 11 ANZ Ins Cas 61-473
Taylor Woodrow International Ltd v Minister of Health (1978) 19 SASR 1
The Movie Network Channels Pty Ltd v Optus Vision Pty Ltd [2009] NSWSC 157
Todorovic v Moussa (2001) 53 NSWLR 463; [2001] NSWCA 419
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; (2004) 211 ALR 342; (2004) 79 ALJR 129; (2005) Aust Contract R 90-204; [2004] HCA 52
Traxys Europe SA v Balaji Coke Industry Pty Ltd [2011] FCA 1132
Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45
Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; (2005) 214 ALR 410; (2005) 79 ALJR 872; (2005) 13 ANZ Ins Cas 61-641; [2005] HCA 17Texts Cited: Dorter & Sharkey, Building and Construction Contracts in Australia (2nd ed)
N B Rao, "The Interpretation of Lesser Words in Insurance Contracts: A Matter of Contextual Commonsense?" (2011) 22 ILJ 26
Ritchie's Uniform Civil Procedure NSW (LexisNexis)Category: Principal judgment Parties: First Plaintiff: Australian Prestressing Services Pty Ltd (ACN 082 408 124)
Second Plaintiff: Bedi Enterprises Pty Ltd (ACN 003 295 994)
First Defendant: Vero Insurance Ltd previously known as Royal & Sun Alliance Insurance Australia Ltd (ACN 005 297 807)
Second Defendant: Marsh Pty Ltd (ACN 004 651 512)Representation: Plaintiffs: Mr M Gracie
Defendant: Mr A Martin SC
Plaintiffs: Balmain Lawyers
Defendants: McMahons Lawyers
File Number(s): 2009/334000 Publication restriction: None
Judgment
Background
In May 2003, torrential rain fell on Sydney. Mr Michael O'Neill, a director of the first plaintiff, Australian Prestressing Services Pty Ltd ("APS") had more than the usual reasons for concern when he saw news reports of the extensive floods of the inner eastern suburbs and, in particular, flooding in low-lying areas and natural watercourses in or near Centennial Park (affidavit of Michael O'Neill, 31 March 2010). APS had entered into a Works contract with the Department of Public Works and Services ("DPWS") in January 2003 to carry out extensive remediation work on the Centennial Park lakes in Randwick in New South Wales, for a total lump sum price of just under $3 million. At the time of the torrential rains falling, a temporary construction, called a cofferdam, had been constructed in the Kensington Lake in Centennial Park, to allow for further works on the ponds to be undertaken. Mr O'Neill knew that the integrity of this cofferdam was at risk of being compromised by the torrential downpour.
As soon as Mr O'Neill realised the danger, he called an emergency meeting of all government and contractual parties, including the Police, the New South Wales Fire Brigade and the State Emergency Service. His concern was that, having regard to the quantity of water stored behind the cofferdam, which extended over much of the lower areas in Centennial Park, cofferdam failure would have a disastrous effect not only on the surrounding park grounds but on nearby land and buildings, including Randwick Race Course (which is lower than Kensington Culvert and between Kensington Culvert and Botany Bay). If the cofferdam failed, a wall of water 3-4 metres high would have been released, which would flood the roads, wash away vehicles, damage buildings and lead to potential loss of life.
Everyone at the meeting took the potential catastrophe seriously. Workmen were sent to work on the dam wall to shore it up. John Gan, who was introduced to Mr O'Neill as the DPWS expert on dams, told Mr O'Neill:
"Mike, I can't tell whether the dam wall is saturated but I can see water coming from the base of the wall. This doesn't look good. I believe that it is unsafe for those blokes to be working under the dam wall. They should be ordered to move to a safe place immediately." (Paragraph 112)
The workmen were ordered to move away, and the emergency services took over the job of pumping out the water which had built up and was threatening to burst out from the cofferdam. The New South Wales Fire Brigade and State Emergency Services had already dispatched a substantial number of fire trucks and pumps to the cofferdam to pump out this water, and they shut the roads surrounding the park before starting work. The Fire Brigade Services firemen, according to the invoice later provided for their services, worked for 72 hours straight, pumping water out of the cofferdam. Mr O'Neill instructed his employees that they would be required to work 24 hours 7 days a week if necessary, until the emergency abated (paragraph 113).
Lack of equipment was a big problem. The existing pumps and syphons could not cope with the sheer volume of water. The plaintiffs' employees started calling hire companies in Sydney, calling the closest first, to see if they have large pumps available for hire.
Heavy rain continued to fall and Peter Austin of Bedi Enterprises Pty Ltd ("Bedi"), the second plaintiff, another company working on the site, told Mr O'Neill:
"Mike, we're gonna need more grunt, if we're gonna divert enough water away from this cofferdam to save it. I know a bloke up in the cotton country who's got some syphons that they use to transfer water from one place to another on their properties and they move a hell of a lot of water quickly, what do ya reckon, should I give him a call?"
As a result of this conversation, syphons were brought in from country New South Wales to move large volumes of water and to syphon water out of the area behind the cofferdam and other places around Centennial Park.
The situation was described by Mr O'Neill in his affidavit as an emergency (paragraph 119) and he was not cross-examined about this (although he was cross-examined as to whether an emergency or contingency plan was prepared and whether any costs were passed onto their client: T 77-78).
As pumps were brought to the site, between them, the Fire Brigade Services, State Emergency Services and the employees of the plaintiffs, worked through the night under specially erected floodlights. Over the next few days, they were able to pump enough water out of Kensington Lake and other areas behind Kensington Lake behind the park, into available stormwater channels, pipes and culverts, and to prevent disaster. The water was diverted, through pumps and syphons, away from Kensington Lake and the cofferdam, either out of the Kensington Lake, or out of adjoining areas before the water got into Kensington Lake.
The State Emergency Services Authorities, which had been managing traffic in Alison Road in concert with the Police, were able to open the roads again.
On Sunday 18 May 2003, there was a meeting at which representative of the Fire Brigade, APS's employees, Bedi's employees and others noted with relief that the rain had reduced substantially in its intensity. The fire trucks were withdrawn on the evening of 18 May, although the pumps installed by the first plaintiff, the second plaintiff and the State Emergency Services continued to be in use.
By Monday 19 May 2003, the emergency had ended. According to Mr O'Neill, the danger of the cofferdam failing and releasing water into the surrounding areas had also passed. He continued to observe and direct the continued pumping out of flooded areas of Centennial Park and cleaning up the works and generally dealing with the damage to the works from the flood. He prepared a situation report which is discussed in more detail below.
The subject matter of the plaintiff's claim
The costs incurred by the plaintiffs in carrying out this emergency work were substantial. Both plaintiffs made a claim under a policy of insurance taken out with the first defendant.
Vero Insurance Ltd ("Vero"), the first defendant, rejected a substantial part of the claim, by reason of an exclusion clause in the contract of insurance which provided as follows:
"Special conditions - section 1
Dewatering
1. The company will not indemnify the insured against any costs associated with the installation and operation of any dewatering equipment or any other costs of dewatering operations."
The question of what "dewatering" is, and whether the steps taken by the plaintiffs to remove the excess water following the torrential rains and flooding amounted to "dewatering", are important issues in this case. The dewatering exclusion clause was part of a separate Endorsement dated 20 March 2003 to a policy which was effected by Vero in September 2003, four months after these events. The dewatering exclusion applies to Section 1 of the policy in respect of "material damage" to the works. Section 2 of the policy, in respect of "Public Liability" is not subject to this express exclusion.
In addition, objections have been raised as to the sums claimed on other bases, such as duplication, lack of receipts and claims for GST.
In addition, claims under the policy totalling $67,904.93 have been assessed by the first defendant as payable under the policy, such as road works in the Busby and Randwick Ponds areas. These costs have never been paid.
The issues in this case
The issues of fact and law in this case relate solely to the question of construction of the policy; the plaintiffs' claim for misleading and deceptive conduct has been abandoned (T 385).
For convenience, I have referred to the "plaintiffs", although in reality the claim is made by the first plaintiff, as there has been a resolution of issues in relation to the second plaintiff (T 1). The orders refer only to the first plaintiff.
The court must construe the policy of insurance relating to construction work undertaken by the plaintiffs (APS and Bedi) described above, including the remediation of ponds in the park, culvert repair works at a location adjacent to Kensington Pond, Centennial Park (inundated by flooding during the torrential rainfall) and other related work designed to prevent the cofferdam from overtopping with floodwater which the plaintiffs submit would have not only destroyed the cofferdam itself, as well as the civil works to the culvert, but cause substantial third party property damage and perhaps even loss of life.
The "special conditions" relating to dewatering formed part of a separate Endorsement "attaching to and forming part of" the construction risk policy number CR305008DF ("the CR policy"). This Endorsement was dated 20 March 2003, although the relevant policy covering the period of the contract works was issued by the broker Marsh Pty Ltd on 17 September 2003 (affidavit of R Kurland, 27 January 2011, tab 2, page 37 and tab 3).
I shall first set out the works the subject of the contract.
The works the subject of the contract
The first plaintiff, APS entered into a contract with the Minister for Public Works and Services for the State of New South Wales to carry out remodelling and construction work which may be broadly described as follows:
(1) Remediation of the Busby and Randwick Ponds;
(2) Remodelling of Mission Fields;
(3) Repair and construction of the Kensington Culvert.
The issue in these proceedings relate essentially to the Kensington Culvert works. These are as follows. Repair work to the Kensington Culvert was necessary after it collapsed in heavy rains in February 2002. The Centennial Park ponds formed part of the local area stormwater control system. The conditions of tendering explained this problem as follows:
"Urban stormwater runoff enters Centennial Park from the north-east, west and east and travels between the ponds via pipes and culverts. Stormwater exits the Centennial Park via the Kensington Pond along Alison Road and move south to the Botany Wetlands. During high storm periods, the ponds are subject to high through flows as well as runoff from the parkland. Pond levels rise, overflow the weirs and then slowly recede over a period of days."
This extract is taken from "Project Significance and Environmental Considerations", set out on page 34 of Tab 1 to Mr O'Neill's affidavit. The works to be carried out are described at paragraph 1.4 of this document as including aquatic planting, irrigation works and the like. The irrigation system was to be installed by an irrigation maintenance contractor, Brooks Irrigation. The ponds remediation tenderer was, under clause 3.1 of the tender, to be responsible for controlling the flow of water within, through or around the site throughout the duration of the contract.
It was noted that water flowing into the site may result from the following sources:
(1) Flow within stormwater channels and culverts flowing to the ponds;
(2) Stormwater runoffs from area adjacent to the site; and
(3) Groundwaters from the bed and banks of the ponds.
It was also noted that the lower areas of the upstream stormwater systems were prone to flooding. Clause 3.3 provided that the contractor was responsible for the lowering of pond water levels and the maintenance of water levels at low levels throughout the period of the works, including any necessary pumping of water, delays where sedimentation/flocculation is required prior to discharge of water from the ponds, or delays due to time to draw down the ponds using gravity or pumping methods.
The "Information for tenderers" in respect of the ponds remediation included estimated storm flows and water levels but only in relation to the Randwick and Busby Ponds, the first of the three components of the work listed above.
Counsel for the plaintiffs, in his helpful opening outline of submissions, draws to my attention the notation in the "Information for tenderers" at water levels in the Randwick and Busby Ponds refers to "stormwater inflows as well as groundwater levels in the Botany Sands Aquifer" and that other influences on the pond water level "include runoff base flow from the catchment, evaporation, groundwater inflow/outflow". An estimate was given for the main operating pond water level, with a notation that variation does occur, but that no monitoring of this fluctuation had been undertaken.
There were also outlet structures such as the sluice gates in Randwick Ponds to control the water level in the Busby and Randwick Ponds.
The earthworks in respect to the Randwick and Busby Ponds required the plaintiffs to specify flow diversions and requirements for pond water level lowering for this work to be carried out (see the earthworks clause set out at paragraph 3.4 of the section marked "Section 4 - Earthworks" at page 212 of Tab 1 to Mr O'Neill's affidavit). In much the same way, surface water in the Randwick and Busby Ponds had to be diverted around the outlet structures in Randwick Pond and the use of "sump pumps or other appropriate equipment" had to be used for this purpose (see clause 3.1 at page 266 of Tab 1 to Mr O'Neill's affidavit).
Thus the pond remediation part of the contract works expressly included a requirement for lowering and maintaining a lowered water level "during the earthworks".
These are not the works which have led to the claim in these proceedings, they are the works which were in progress when the torrential rains commenced. This brings me to a consideration of the construction of the cofferdam which APS submits was at risk following the torrential rains.
The construction of a cofferdam
Item 14.4 of the schedule provides for cofferdam, diversion, dewatering and flow protection" (page 376, Tab 4 of Mr O'Neill's affidavit). Clause 1.7 of the Technical Specification which commences at page 335 of Tab 3 to Mr O'Neill's affidavit helpfully sets out the obligations of APS not only in relation to both "Flood Protection" and "Cofferdam, Diversion and Dewatering" as follows:
"1.7 STORMWATER MANAGEMENT DURING CONSTRUCTION & COFFER DAM
Prior to commencement of physical work on site, the Contractor shall submit a soil and water management plan during construction for the approval of Superintendent's Representative. This shall include details of the cofferdam, diversion routes explaining how it could cater for large storm events. The plan shall be prepared in accordance with Managing Urban Stormwater, Soil and Construction, August 1998 (3rd edition) guidelines published by the NSW Department of Housing, the Erosion and Sediment Control Policy.
Flood Protection
The Contractor shall take all necessary measures to keep the works free of stormwater and groundwater through out the construction period. The Contractor shall construct and maintain all the necessary diversion and protective works including sump, pumps and other temporary diversion, or dewatering, and flood protection works.
The Contract shall supply and install all materials and provide, maintain, and operate all necessary pumping and other equipment for dewatering and maintaining the Works free of water if required during progress of the work. This may involve the use of materials which cannot be recovered on completion of the Contract.
Coffer Dam, Diversion and Dewatering
The Contractor shall be responsible for and repair, at no expense to the Superintendent any damage to equipment and to structures, foundations, or any other part of the Works under this Contract caused by water due to the failure or insufficient capacity of any part of the dewatering system or flood protection works provided by the Contractor. It is the Contractor's responsibility to design and construct the coffer dam and maintain throughout the construction period ensuring no damages occur to all existing infrastructure what so ever by flooding.
The contractor is to ensure that the temporary coffer dam or other protection mechanisms will provide the same level of flood protection as the Kensington embankment prior to the culvert collapse.
The Contractor shall not dispose of dirty wash or sluicing water in to the river or into Council's stormwater drainage system. In addition, the Contractor shall prevent deposition of excavated or eroded material from the Works in areas below mean high water surface.
Prevention of Erosion, Sediment Control and Soil Contamination
The Contractor is required provide all that is required to prevent erosion and control sediment movement during construction works. In accordance with the soil and water management practices, the Contractor shall erect siltation fences around the works."
In order to understand the difference between flood protection and dewatering, it is helpful to look at the requirements under "Extent of Work" at paragraph 1.1 which note that on 4 February 2002 the Centennial Park Catchment was inundated by flood water, after heavy and extended rainfall which meant that the ponds and existing drainage conveyance system was unable to cater for the surface runoff from the upstream catchment to convey these flows to the stormwater system. This resulted in the collapse of the control structure at Kensington Ponds located near Alison Road. The collapsed structure needed to be demolished and a new structure completed. The contractor was required to carry out all temporary works required including stormwater management during construction, sediment and erosion controls, cofferdams, as well as shoring and protection of existing trees.
The work to be done, according to the Work Method Statement prepared by APS, was described as follows:
"Following the establishment of the site and the removal of the existing fence and the erection of a site temporary fence, construction of the coffer dam will commence. Material for the dam will consist of rock, clay and mud form the immediate area of the pond. Material will be placed in position using the long reach excavator and will be compacted using the tracks of a smaller excavator.
A high capacity 150mm diesel powered suction pump will be used to pump the water from the pond to the downstream culvert under Alison Street.
Once dewatered, the existing works will be demolished, except the heritage brickwork that will be salvaged and stored.
Compaction of the sub base and installation of the subsequent concrete and pipeworks will progress in an orderly manner. The works will be prepared and executed in such a manner that should there be storm rains, sufficient to cause inundation of the works, then only minimum exposure will be had and minimum effort required to repair any damage to the work in progress..." (Affidavit of P Hiser (PAH2))
The next step in relation to the carrying out of the works, was the January 2003 project meeting.
The project meeting in January 2003
In January 2003, a project meeting was held to discuss, primarily, the culvert which controlled the water out of the ten Centennial Park lakes into the water system. Failure of the culvert to be able to control the flood of this water would mean substantial flowing of this area below the culvert, including the adjoining commercial, residential and industrial areas such as Randwick Racecourse and Moore Park. While the culvert was a simple structure, it had a "very high priority" (page 539 of Tab 15 to the affidavit of Mr O'Neill of 31 March 2010), because it was the central mechanism in the control of the flow of water.
The minutes of the meeting also went on to refer to a secondary spillway in the lake adjacent to Doncaster Avenue, put in place because of its adjacent position to this busy road, so that if there was a "one in 100 year flood", Doncaster Avenue could be used as a spillway into the Randwick Racecourse. The minutes then go on to note:
"15. The engineer for the subcontractor raised the need for the preparation of an emergency plan, that is a contingency plan to be put in place should there be a flood during the time of the work. At the same time he raised the issue in relation to the protection of the works during the work period, and was concerned that having regard to discussions that were taking place around the table, particularly from the superintendent, that in some way the subcontractor or indeed the principal contractor might be responsible for the works in for example a one in 100 year flood.
16. The engineer for the subcontractor indicated clearly to the superintendent the subcontractor and in turn of course the principal contractor saw their responsibility as simply the protection of the works from manageable attacks, and not certainly from for example an act of God in respect of a one in 100 year flood. The superintendent assured all that it was not the intention of the principal to require such protection. Questions then were asked about the position in respect of insurances and discussions took place about that." (pages 540-541 of the affidavit of Mr O'Neill of 31 March 2010)
Mr O'Neill has set out his recollection of the meeting in his affidavit, and it is clear (paragraph 64) that he was concerned that if there was a "one in 100 year flood" he wanted to make sure that insurance was in place. He specifically said at paragraph 66:
"We are going to build a dam across the stormwater channel that has a huge catchment area. If something goes wrong everyone will want to be sure that we are covered, particularly if we have something like a one in 100 year flood."
Mr O'Neill went on to state (paragraph 67) that he was relying on his own long-term experience of visiting the park as a visitor in this regard. Mr O'Neill was told by Mr Thompson that "we are negotiating with Marsh the broker about the insurance". He later received a questionnaire, which is set out behind Tab 17 of his affidavit of 31 March 2010.
The insurance questionnaire
The project managers, Colin Ging & Partners, were responding to a questionnaire received by Mr Geoff Owen of Marsh Pty Ltd, the insurance broker.
Colin Ging & Partners, in their letter of 19 February 2003, identified the Kensington Culvert works (see page 576 of Tab 17 of the affidavit) as:
" - Demolition of existing structure- Construction of new outflow structure including, cut-off wall, piling, pipe laying, culvert head walls, inlet, spillway, stilling basin, fencing, landscaping"
The response to the questionnaire went on to note that pond water levels had been significantly lowered and the upstream Busby and Randwick ponds were at 50% capacity; the cofferdam was described as preventing "premature washouts" of works in the culvert. Section 2.7 to 2.9 concerning water flow details and controls to be exercised by the contractor are as follows:
"2.7 Waterflow Details and Control to be Exercised by the Contractor
See attached DPWS Dams & Civil Unit Report
2.8 Protection of Works from Flood & Stormwater
Pond water levels were already significantly lowered prior to commencement of the works. It should be noted that the ponds upstream of Busby's and Randwick ponds are currently (Feb 02) at about 50% capacity. Therefore there is a considerable 'freeboard' available to absorb storms arising in the eastern and northern catchments.
Weir plates are also installed at all the outlet points to each upstream pond and can be raised to restrict water flow as necessary.
The contractor is responsible for maintaining appropriate water levels throughout the period of the works in order to complete his works.
For works in the culvert a cofferdam wall must be built temporarily to prevent premature washouts. This wall will be 300mm above the base levy bank this will then in time of emergency overflow the water into the general bypass system operating down Doncaster Ave.
2.9 Potential Flood Measures
A cofferdam wall is to be built 300mm above the height of the existing adjacent bank at the Kensington Culvert, this is the discharge point for stormwater into the local Council system. If flood levels were to reach the height of the Alison Road levy bank, the water would backflow into the low parklands then spill over the alternate flood way located to the west of the culvert works and drain into the storm water system via Doncaster Ave." (page 578 behind Tab 17 of Mr O'Neill's affidavit of 31 March 2010)
It is helpful, when considering the difference between dewatering and removal of floodwaters to have regard to the Work Method Statement which this attached to this questionnaire (tab 17, pages 584-586), as this explains the work done and the way in which dewatering formed a part of those works. I particularly note that the remediation of the ponds was to be based upon the expeditious use of two longreach excavators with attachments and other mechanical equipment to minimise the amount of disturbance of the mudflats and ponds environs. The aim was "to gradually release the pore water within the mud, by applying a gradual, but ever increasing, surcharge on the material, until the pore pressure within the interstices of the mud equates to and is able to support the static load". Liquefaction of the mud resulting from vibrations caused by equipment movement and consequent "pumping" of the pore water is noted to be capable of resulting in significant construction problems and delays.
Much of the Work Method Statement relates to how this work is to be done efficiently and there are specific descriptions of the work on the mission fields remodelling and Kensington Culvert. In relation to the Kensington Culvert it is noted:
"A high capacity 150mm, diesel powered suction pump will be used to pump the water from the pond to the downstream culvert under Alison Street.
Once dewatered, the existing works will be demolished, except the heritage brickwork that will be salvaged and stored.
Compaction of the sub-base and installation of the subsequent concrete and pipe works will progress in an orderly manner. The works will be prepared and executed in such a manner that should there be storm rains, sufficient to cause inundation of the works, then only minimum exposure will be had and minimum effort required to repair any damage to the work in progress" [Tab 17, pages 585-586; emphasis added]
The technical specification relating to stormwater management for Kensington Culvert
The technical specification at Section 1.7 "Stormwater management during construction of coffer dam" also contained the following:
"Flood protection
The contractor shall take all necessary measures to keep the works free of stormwater and groundwater throughout the construction period. The contractor shall construct and maintain all the necessary diversion and protective works including sumps, pumps and other temporary diversion, all dewatering, and flood protection works.
The contractor shall supply and install all materials and provide and maintain and operate all necessary pumping and other equipment for dewatering and maintaining the works free of water if required during the progress of the work. This may involve the use of materials which cannot be recovered on completion of the contract.
Coffer dam, diversion and dewatering
The contractor shall be responsible for and repair, at no expense to the superintendent any damage to equipment and to structures, foundations, or any other part of the works under this contract caused by water due to the failure or insufficient capacity of any part of the dewatering system or flood protection works provided by the contractor. It is the contractor's responsibility to design and construct the coffer dam and maintain throughout the construction period ensuring no damages occur to all existing infrastructure whatsoever by flooding.
The contractor is to ensure that the temporary coffer dam or other protection mechanisms will provide the same level of flood protection as the Kensington embankment prior to the culvert collapse.
The contractor shall not dispose of dirty wash or sluicing water into the river or into Council stormwater drainage system...".
As these documents show, there were different sources of water: stormwater, pond water and groundwater. In addition, the work envisaged different ways of dealing with this water: water diversion, removal of flood or rain water caused by storms, and dewatering.
Stormwater, groundwater and dewatering - some general comments
The following should be noted:
(1) The distinction between stormwater and groundwater
In the technical specifications, as elsewhere, there is a distinction made between the terms "stormwater" and "flood" with the water already in the ponds, which Mr Gracie refers to (written submissions paragraph 36) as "groundwater". Mr Gracie submits that this makes clear there is a contractual distinction between the diversion of water, dewatering and flood protection where there is stormwater and flooding. In other words, there is a different conceptual intent, in contractual references, where there are references to a dewatering system and flood protection works.
The purpose of the cofferdam was to provide flood protection to the same level of flood protection as had been the case prior to the culvert collapse during the flood in 2002. The cofferdam had to be higher than the embankment by approximately 300mm (see the affidavit of Vero's assessor Mr McWalter, paragraph 9).
(2) Dewatering
The references to dewatering in the contractual documents relate either to the lowering of the water table level at and around a particular contract worksite to permit the construction of the works, or to the removal groundwater where the works have been excavated below the level of the water table. That is the definition of dewatering which is advanced by APS and Bedi.
When the work carried out by APS is examined, it can be seen that there was no contract work on the northern side of the cofferdam which contained the water in the Kensington Ponds which required any dewatering or lowering of the level of the ponds to enable any construction work to occur on that side of the cofferdam. Dewatering might be required on the southern side of the cofferdam where the culvert and outlet works were being performed if any excavation was required to lower the level of worksite below the water table, which would have permitted groundwater or pond water to intrude into the worksite through the embankment or cofferdam, requiring its removal to enable works to continue. However, as the description of the flooding from the storm and the work carried out to remove the water shows, the diversion of water was on the northern side of the cofferdam in the pond, and this occurred only during the inundation of the park by rain as a flood protection measure to lower the level of the water in the ponds sufficiently to prevent damage to the culvert and outlet works, collapse of the cofferdam itself and, perhaps more importantly, the build up of water pressure which would have led to extensive damage and potential loss of life by flooding across Alison Road if the cofferdam collapsed. It was by reason of concerns that this might occur that the State Emergency Services, Fire Brigade, Police and Council as well as the park authorities closed Alison Road to traffic in the event that the flood water could not be drained away and this event can occur.
(3) Was all water removal dewatering?
The submissions of the defendant are that the plaintiffs' costs are "costs associated with the installation and operation of any dewatering equipment" within the meaning of clause 5 of the Endorsement and that "dewatering" should it be applied, in accordance with its "ordinary English meaning" (written submissions, paragraphs 90-95) to the removal of all water from the property, including the water which accumulated from the torrential rains which fell on the building site.
This includes the cost of Fire Brigade and SES activities to remove water from the property. It is not however necessary for me to determined these costs as due to the effluxion of time since the removal of the flood water, and the somewhat leisurely process of these proceedings, these substantial claims for reimbursement are now statute barred.
The first defendant's arguments in relation to what constitutes "dewatering" are, however, only one of the arguments advanced on behalf of the first defendant in relation to the issue of liability. I shall briefly note the other matters raised by the first defendant in relation to liability:
(1) The first defendant acknowledges that the policy does apply to costs incurred by the plaintiffs to protect the cofferdam identified in Exhibit IJM 22A, 22B and 22C of the affidavit of Ian James McWalter dated 11 June 2010 (Exhibit 4). These costs which amount to $67,904.93 are identified as follows:
(a) IJM 22A - $23,285.70;
(b) IJM 22B - $35,417.25; and
(c) IJM 22C - $9,201.98
(d) Total - $67,904.93
The balance of the plaintiffs' claim of $474,544.16 relates to the removal of water from the large Kensington Pond, for which the first defendant submits it is not liable under the policy to indemnify the plaintiffs.
(2) The first defendant submits that the claim made by the plaintiffs for these amounts, which are costs for the removal of water from the large Kensington Pond, are not "Loss, Destruction of or Damage to Property Insured" within the meaning of the insuring clause.
(3) The first defendant claims that the sum claimed by the plaintiffs does not fall within the temporary protection clause in Section 1 of the Policy for the following reasons:
(a) the Plaintiffs' costs are not for work to "avoid further Loss, Destruction of or Damage to the Property Insured occurring" since no such loss, destruction or damage had previously occurred to the coffer dam;
(b) the Plaintiffs or any professionally qualified representative, had not deemed necessary the work to "avoid further Loss, Destruction of, or Damage to Property Insured occurring";
(c) the Plaintiffs' costs are not "consequent upon" any physical loss, destruction or damage to the property insured being indemnified under the Policy.
(4) The first defendant claims that the Endorsement does attach to and form part of the Policy because:
(a) the Works Contract was a high risk civil engineering contract;
(b) even if it is held that the Works Contract is not a high risk civil engineering contract (contrary to the First Defendant's primary submission), the Endorsement, on its proper construction, still attaches to and forms part of the Policy. The Works Contract is a High Risk Civil Engineering Contract.
(5) The first defendant also makes submissions in relation to quantum of the claim.
The principal issue between the parties is however the question of what amounts to "dewatering".
Having noting these preliminary matters, I now turn to a consideration of the terms of the insurance policy.
The insurance policy
The relevant terms of the contract are as follows:
(1) Under "SECTION 1 - MATERIAL DAMAGE" the Policy relevantly states (p.8):
"INSURING CLAUSE - APPLICABLE TO SECTION 1
1. The insurance by this Policy indemnifies the Insured against Loss, Destruction of or Damage to Property Insured occurring during the Construction Period arising from any cause not hereinafter excluded, wherever the Property Insurance may be located within the Territorial Limits detailed in the Schedule."
(2) The Schedule to the Policy states (p. 4):
"NAMED INSURED:
Clients that the NSW Department of Public Works and Services contract to represent, as well as:
The State of NSW, the Minister for Public Works and Services, the NSW Department of Public Works and Services, other State and/or Local Government Authorities, instrumentalities and/or agencies and/or contractors, subcontractors, workmen, project directors, project managers, construction managers and all like disciplines associated with the Insured Projects.
INSURED PROJECTS:
All works including temporary works under construction contracts awarded by Department Public Works and Services or the Minister for Public Works and Services, or their agents, or any construction work commenced by Department of Public Works and Services itself, during the Duration of Policy, unless excluded by notification from Department of Public Works and Services.
Where any of the following apply to a contract, it is held covered only for 60 days from the date of the award of the contract unless the Insured gives the Insurer any information reasonably requested by the Insurer and the Insurer agrees, on any reasonable terms or conditions, and at any premium, which may be different from that in this policy, to continue the insurance ... Any High Risk Civil Engineering Contract where the Contract Price (excluding GST) at the time of award is greater than $500,000."
(3) Under "DEFINITIONS - APPLICATION TO SECTION 1" to the Policy states (p. 7)
"1. PROPERTY INSURED
"Property Insured" shall mean the following real and personal property:
(a) all materials, goods, equipment and supplies (including owner supplied materials) forming a permanent part of, or which will form a permanent part of, the Insured Projects;
(b) all temporary works and/or structures erected, installed and/or constructed by the Insured for the purpose of completing the Insured Projects, including but not limited to, props, slipform, shuttering, formwork, falsework, hoardings, bunding, bridging and the like;
(c) ...
(d) ...
(e) All buildings used for construction purposes (but not mobile plant and equipment), subject to the limit stated in the schedule;
owned by the Insured, or in the Insured's care, custody or control, or for which the Insured is legally liable or has assumed the responsibility to insure, and which is to be used in the course of construction of, or in connection with, and for the purpose of, the Insured Projects detailed in the Schedule."
2. LOSS, DESTRUCTION OF OR DAMAGE TO PROPERTY INSURED
"Loss, Destruction of or Damage to Property Insured" shall mean physical loss of, physical destruction of, or physical damage to Property Insured.""
(4) Under "BASIS OF SETTLEMENT - APPLICABLE TO SECTION 1" the Policy provides (p. 9):
"1. THE WORKS (AS DEFINED UNDER PROPERTY INSURED (A), (C) AND (D)):
1. The amount payable in respect of Loss, Destruction of or Damage to Property Insured as defined under Property Insured (a), (c) and (d) shall be the cost of reinstatement of the Property Insured at the time of reinstatement.
2. For the purpose of this Basis of Settlement "reinstatement" shall mean:
(a) Where property is lost or destroyed: in the case of a building, the rebuilding thereof or in the case of property other than a building, the replacement thereof by similar property; in either case in a condition equal to, but not better or more extensive than, its condition when new.
(b) Where property is damaged: the repair of the damage and the restoration of the damaged portion of the property to a condition the same as, but not better or more extensive than, its condition when new.
(c) Notwithstanding the provisions of clauses (i) and (ii) above, the cost of reinstatement shall also extend to include the extra cost of reinstatement (including demolition or dismantling) of damaged property necessarily incurred to comply with the requirements of any Act of Parliament or Regulation made thereunder, or any By-Law or Regulation of any Municipal or other Statutory Authority;
Provided always that the amount recoverable shall not include the additional cost incurred in complying with any such Act, Regulation, By-Law or requirement with which the Insured had been required to comply prior to the happening of the Loss, Destruction of or Damage to Property Insured.
2. TEMPORARY WORKS, BUILDINGS AND HAND TOOLS (AS DEFINED UNDER PROPERTY INSURED (B) AND (E)) AND ANY PRE-EXISTING STRUCTURES THAT MAY BE INSURED
1. The amount payable in respect of Loss, Destruction of or Damage to Property Insured as defined under Property Insured (b) and (e) shall be the cost necessary to reinstate the Property Insured to the same condition as existed immediately prior to the Loss, Destruction of or Damage to Property Insured, subject only to the respective Limits of Indemnity."
(5) The insuring clause applicable to Section 1 only indemnifies the Insured against "Loss, Destruction of or Damage to Property Insured". This term is defined to mean "physical loss of, physical destruction of, or physical damage to the Property Insured".
(6) Under "MEMORANDUM - APPLICABLE TO SECTION 1" the Policy relevantly states (p.12):
"4. TEMPORARY PROTECTION AND/OR GOVERNMENT EXPENSES
This insurance automatically extends to cover costs and expenses necessarily and reasonably incurred by or on behalf of the Insured for:
(a) shoring up, propping, underpinning or other temporary protection of the Property Insured, deemed necessary by the Insured or by a professionally qualified person or entity representing the Insured, to avoid further Loss, Destruction of or Damage to Property Insured occurring;
(b) ...
consequent upon any Loss, Destruction of or Damage to Property Insured being indemnified under this Policy and subject to limitations shown in the Schedule."
Some general comments about the policy document
By way of background, the "Conditions of tendering" at Section 2 of the contract of works said that the relevant insurance policy was available for viewing at the offices of DPWS. Section 4 of the contract contained a reference, at clause 18.1, to "basic contractual insurance" as being policy number CTW8749461, which was to be issued through Marsh Pty Ltd as broker and cover not only the first plaintiff but also the DPWS, the contractor, the superintendent and "all subcontractors employed on work under the contract" which would therefore include the second plaintiff, Bedi. For reasons that are unrelated to the facts in this case, the CTW policy contemplated by the contract was not actually in place after the expiry of that policy on 29 August 2003.
During the period of the works and before the policy came into effect on 17 September 2003, there was already a draft policy which was mistakenly believed by some, such as the assessor (Mr Kurland) acting on behalf of the plaintiffs to be the applicable policy under the works. As I have rejected the arguments of the plaintiffs in relation to the existence of an implied term and the relevance of pre-contractual negotiations (Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; (2004) 211 ALR 342; (2004) 79 ALJR 129; (2005) Aust Contract R 90-204; [2004] HCA 52), I will simply note the submissions of the plaintiffs (paragraphs 41-65) in relation to these previous negotiations.
As Section 1 of the policy sets out, the policy covers both the works defined as the insured property as well as temporary works, and there is coverage for loss, destruction or damage to the property insured (see page 46 of the policy). The amount payable in respect of the insured works, or the temporary works, is defined as the cost of reinstatement of the property to the same condition as existed immediately prior to the loss, destruction or damage, subject only to the limits of indemnity. There are in addition provisions for an excess, depending on the nature of the cause of loss.
Temporary works, within the meaning of both the contract of works and the insurance policy, clearly include the cofferdam.
Section 1 of the policy provides:
"This insurance automatically extends to cover costs and expenses necessarily and reasonably incurred by or on behalf of the insured for:
(a) shoring up, propping, underpinning or other temporary protection of the property insured, deemed necessary by the insured by a professionally qualified person or entity representing the insured, to avoid further loss, destruction of or damage to property insured occurring;
(b) any fee, contribution or other imposte (excluding fines an/dor penalties) payable to any government, local government or statutory authority for services rendered or equipment supplied for the purpose of helping the prevent further, mitigate or confine imminent loss, destruction of or damage to property insured at the situation where the property insured is located,
consequent upon any loss, destruction of or damage to property insured being indemnified under this policy and subject to limitations shown in the schedule."
Finally, and most importantly, it should be noted that there was no actual loss or destruction of the works, because the actions of the plaintiffs prevented any loss, destruction or damage.
I shall set out a summary of the relevant issues of law raised by the parties in relation to the interpretation of the policy document.
Claims brought where the costs which arise have prevented the loss or destruction
These costs are costs for successfully preventing the loss, destruction or damage of the property and the surrounding areas. As I have noted in the section of this judgment concerning whether or not there is an implied term to this effect, claims for costs of this kind have been held to be recoverable from an insurer even where no provision is specifically made for them in the contract: Guardian Assurance Co Ltd v Underwood Constructions Pty Ltd (1974) 48 ALJR 307; Mining Technologies Australia Pty Ltd, Re [1999] 1 Qd R 60; (1997) 10 ANZ Ins Cas 61-389 (on appeal from Re Mining Technologies (Aust) Pty Ltd (Queensland Supreme Court, White J, 28 November 1996, unreported)).
As is set out further below, I have referred and accepted the approach of McPherson JA in Mining Technologies Australia Pty Ltd, Re, supra, and have accepted what I considered to be the plaintiffs' primary position, namely that such costs are recoverable, although I have not accepted their argument that no excess should be paid.
This brings me to the question of the correct approach to the interpretation of the words and phrases used to invoke or exclude insurance policy liability.
The interpretation of words and phrases used to invoke or exclude insurance policy liability
The necessity for a link between the loss and the event often requires an interpretation of words in insurance contracts which are sometimes called "lesser words" (N B Rao, "The Interpretation of Lesser Words in Insurance Contracts: A Matter of Contextual Commonsense?" (2011) 22 ILJ 26). These words are invariably words commonly used in the English language such as "directly" or "indirectly"; "arising from" or "out of"; and "in relation to" or "in respect of". Basic principles have been helpfully summarised by Allsop J in Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; (2009) 264 ALR 15; [2009] NSWCA 407 at [14]:
"[14] ... The construction and interpretation of written contracts is to be undertaken by an examination of the text of the document in the context of the surrounding circumstances known to the parties, including the purpose and object of the transaction and by assessing how a reasonable person would have understood the language in that context. There is no place in that structure, so expressed, for a requirement to discern textual, or any other, ambiguity in the words of the document before any resort can be made to such evidence of surrounding circumstances."
Both the plaintiffs (written submissions, at paragraph 66) and the first defendant (written submissions, at paragraph 82) referred me to High Court authority stating that a policy of insurance is a commercial agreement between the parties and should be given a business-like interpretation requiring "attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure" (McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; (2000) 176 ALR 711; (2000) 75 ALJR 325; (2000) 21(20) Leg Rep 24; (2001) 11 ANZ Ins Cas 61-479; [2000] HCA 65 at [22] per Gleeson CJ; see also Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; (2005) 214 ALR 410; (2005) 79 ALJR 872; (2005) 13 ANZ Ins Cas 61-641; [2005] HCA 17 at [15]; see also MGICA Limited v United City Merchants (Australia) Limited (1986) 4 ANZ Ins Cas 60 729 at 74,349 and 74,350; Darlington Futures Limited v Delco Australia Pty Limited (1986) 161 CLR 500 at 510; Prenn v Simmonds [1971] 1 WLR 1381; Legal and General Insurance Australia Limited v Eather (1986) 6 SNWLR 390 at 394).
The first defendant (written submissions, at paragraph 84) refers to the contra proferentum principle as being a "rule of last resort and a principle for construction to remove ambiguities only when other, more rational approaches fail": Rouleston Clarke Pty Ltd (In Liq) v FAI General Insurance Co Limited (2000) 11 ANZ Ins Cas 61-473 at 75,417; McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 at [74]; MLC Limited v O'Neill [2001] NSWCA 161 at [20]; Johnson v American Home Assurance Ltd (1998) 192 CLR 266 at [19]; Ingham v ACN 000 333 844 Limited [2006] NSWCA 63 at [6].
However, as N B Rao explains, evidence may also be adduced to ascertain the meaning of words in a contract in order to determine the purpose and object even where there is no ambiguity to clarify, and the assertion of a requirement for ambiguity in order for surrounding circumstances to be admissible (Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 352) is no longer required.
Both the plaintiffs (referring to Hide and Skin Trading Pty Limited v Oceanic Meat Traders Limited (1990) 20 NSWLR 310 at 313 to 314) and the first defendant (referring to Provincial Insurance Australia Limited v Consolidated Wood Products Limited (1991) 25 NSWLR 541 at 553-554) referred statements by Kirby P about the undesirability of policies of insurance being construed in an artificial and microscopic way and to the need for the court to determine first what is the ordinary or natural meaning of the words used because it is primarily from the intention of the parties that this is to be ascertained: Provincial Insurance Australia Limited v Consolidated Wood Products Limited at 560 per Mahoney JA.
Dictionary definitions and expert evidence - the principles
In Jones and Harbour Radio Pty Limited v Trad (No 2) (Eod) [2011] NSWADTAP 62, the respondent called expert evidence from sociologists as to the development of contemporary ideas of race and ethnicity. The court set out the findings of the tribunal, and its reasons for rejecting them, at [10]-[13] and [15]-[16] as follows:
"[10] Mr Trad called evidence from two apparently well-qualified sociologists. That evidence included the facts and opinions extracted in the Second Appendix to the first decision (see [2011] NSWADTAP 19). The 'evidence' included opinions on legal matters, historical material as to the development of contemporary ideas of race and ethnicity and opinions on relevant sociological matters, as well as sociological, factual matter. Of this material the Tribunal said:
144 Expert evidence was given for the applicant by Professor Humphrey and Dr Celermajer on the subject of the meanings to be attached to the term "Muslims" used by Mr Jones during the broadcasts. Mr Jones and 2GB take issue with much of that evidence and object to one of the reports presented. We accept that "the court does not abdicate its responsibility to an expert; an expert's opinion cannot be determinative, particularly in relation to ultimate facts": Nguyen v Cosmopolitan Homes [2008] NSWCA 246 at [60]. In this case, the tests to be applied are objective and relate to what meanings an ordinary, reasonable listener would give to the broadcasts. Ultimately, when the evidence is considered closely, we consider that the appropriate approach is to give little or no weight to those expert reports and to allow the transcripts to speak for themselves.
[11] We think that, despite Khan et al the Tribunal did not correctly appreciate the meaning of 'ethno-religious ... origin' in the definition of 'race'. In our view, on the preferable view of that expression, but depending on the context, and we stress the importance of the context, verbal abuse aimed at people identified by the abuser as 'Muslims' might indeed be abuse of them as a group of 'ethno-religious origin' without the necessity to show precisely that Muslims of some common ethnicity were targeted. In our view, there was much helpful material that might have been of persuasive value in the experts' report, notwithstanding (with due respect to a discipline that is not our own) that some of the jargon and an occasional problematic scent of post-modernism, and that in parts the report is best seen as submissions.
[12] It would in the present case be a separate question entirely as to whether any such abuse was on the ground of any such ethno-religious origin, or only on the ground of the religious beliefs or religiously determined, supposed attributes of the group.
[13] In our view there is no simple answer to the questions raised by Mr Trad's appeal. As the statutory concepts of race, origin, ethnicity, ethno-religious are notoriously muddy, slippery and (to say the least of it) imprecise, before setting out our reasoning, some examples may clarify our general approach to the matter:
a) Consider the statement 'Muslims leave their brains behind when they enter the mosque. They believe in ludicrous, supernatural events. They are, if anything, even less rational than Christians and Jews'. This abuse is clearly of a religious group only and on religious grounds. It has nothing to do with ethnicity.
b) 'Muslim immigration should be stopped. Islam does not accept a secular state and its attitude to women is medieval'. That is fairly clearly calumniation on the ground of religious affiliation, even if the group might, though we think probably not, be regarded as one of ethno-religious origin.
c) If the insult is however: 'The Muslims here, as in Europe, are a bad lot. They don't want to integrate with us and their first allegiance is to their fellow Muslims, including terrorists such as Al Qaeda', that might (depending on all the evidence) well be seen as an insult to Muslims seen as a group of ethno-religious origin, and on the ground of that origin.
...
[15] As a matter of purely textual interpretation, the 'ethno-religious origin' of a group must be a species or subset of, or practically synonymous with, the religious origin of the group. If the 'ethno-religious origin' of a group were a species or subset of, or practically synonymous with, the ethnic origin of the group, there would be no need of the expression 'ethno-religious' in the definition of 'race'. Words in a statute should not lightly be treated as otiose."
The court noted in [28] states by Lord Fraser in Mandla v Lee [1982] UKHL 7 concerning the factors as to which expert evidence might be useful to determine meanings of words such as "ethnic group".
As the Court of Appeal pointed out in Blacktown Workers' Club Ltd v O'Shannessy (2011) 183 LGERA 184; [2011] NSWCA 265 at [37]:
"[37] ... The value of a dictionary in providing common (and indeed uncommon) uses of words is undeniable; the pitfalls with respect to their use in statutory construction derive from their strengths. A common word may have a core meaning, but it may also be used analogically, figuratively, metaphorically and sometimes merely to raise illuminating associations. The danger was famously identified by Judge Learned Hand in Cabell v Markham (1945) 148 F.2d 737 at 739:
But it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning."
While the court was considering the proper construction of a word in a statute, the warning has some relevance, because there was evidence, in the case for consideration before the Court of Appeal, of expert evidence concerning whether or not mesh screens were "walls". The fact that a word appears in the dictionary is not an invitation to a judge to construe that word without the benefit of expert opinion. This is particularly the case with a word such as "dewater", an uncommon word which appears only in larger dictionaries, as became apparent it would not be found in the shorter dictionary in the court's possession.
The first defendant, urged me to rely upon a dictionary definition for the word "dewater" in support of the contention that "dewater" should be construed broadly, in accordance with the terms of the dictionary definition. The word "dewater" is defined in The Oxford English Dictionary (2nd Ed - 1989 - Clarendon Press) to mean "to remove the water from". A like definition appears in the Shorter Oxford English Dictionary (6th Ed - 2007 - Oxford University Press) which is "remove water from". The Macquarie International English Dictionary - Complete and Unabridged Edition (2nd Ed - 2004, Bloomsbury Publishing Plc) defines it as "to remove water from a substance, especially sewerage or crude oil, or from a place". (first defendant's written submissions, paragraph 92)
However, some caution should be exercised when looking at dictionary definitions of words. As C Mitchell in "Interpretation of Contracts" Routledge-Cavendish 2007 (page 94) notes, it is "rare, and arguably impossible" for a judge to give a completely "acontextual" interpretation to the words of a contract.
While the words "dewater" and "dewatering" appear in dictionaries, the use of these words should have regard both to the context in which the words appear in the policy of insurance and in the evidence of witnesses in the construction industry (as the first defendant notes in written submissions at paragraphs 97-98).
During the trial, I inquired as to the word "from" in the phrase "to remove the water from". This was because the Macquarie International English Dictionary - Complete and Unabridged Edition made it clear that what was involved was the removal of water from a substance, especially sewage or crude oil, or from a place.
"Dewatering" is defined in international electronic dictionaries such as Wikipedia in similar terms. Wikipedia defines "dewatering" as "the removal of water from solid material or soil by wet classification, centrifugation, filtration, or similar solid-liquid separation processes, such as removal of residual liquid from a filter cake by a filter press as part of various industrial processes". Wikipedia goes on to note "Construction dewatering, unwatering, or water control are common terms used to describe removal or draining groundwater or surface water from a riverbed, construction site, caisson, or mine shaft, by pumping or evaporation. On a construction site, this dewatering may be implemented before subsurface excavation for foundations, shoring, or cellar space to lower the water table. This frequently involves the use of submersible "dewatering" pumps, centrifugal ("trash") pumps, eductors, or application of vacuum to well points."
This description is very similar to the evidence given on behalf of the plaintiffs.
However, before I deal with this issue, I need to deal with objections to both the lay and expert evidence concerning the definition of "dewatering".
I shall set each of these out in turn:
(a) Objections to the evidence of Mr O'Neill as to the meaning of the word "dewatering"
In a ruling on Tuesday 2 August 2011, I rejected an objection to the first and third sentences in paragraph 95 of the affidavit of Mr O'Neill dated 31 March and paragraph 34 of his affidavit of 13 September 2010.
The objection was taken on the basis that the word was to be found in an exclusion clause, and it should be considered in its context.
A significant part of the objection related to the circumstances in which persons were seeking to give evidence, whether lay or expert, as to a word which was found in the dictionary. I have dealt with that issue in more detail in the paragraphs above.
A second basis for objection was that the giving of such evidence contravenes the principles set out by the High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; (2004) 211 ALR 342; (2004) 79 ALJR 129; (2005) Aust Contract R 90-204; [2004] HCA 52. However, as is clear from the summary of lay evidence concerning dewatering which is set out below, Mr O'Neill was one of a number of witnesses who described to the court the scope of the works performed and what was involved. That explanation was not an attempt to import meaning by reason of extrinsic facts into the contract, but an explanation of the actual work carried out.
(b) Application to exclude the evidence of Mr Pena
At T 340, I rejected the tender of Mr Pena's affidavit (Exhibit ZZZ), for two reasons. The first was the failure to refer to the Expert's Code of Conduct in his affidavit. The expert witness code is not intended to operate as a formal rule of admissibility, but rather as a code of conduct designed to improve the quality of expert evidence: Australian Securities & Investments Commission (ASIC) v Rich (2005) 190 FLR 242; (2005) 53 ACSR 110; (2005) 23 ACLC 430; [2005] NSWSC 149. However, as Ritchie's Uniform Civil Procedure NSW notes at [31.23.10]:
"An expert witness's evidence, whether oral or written, is inadmissible in the absence of an acknowledge of the code of conduct - unless the court otherwise orders."
The second, more serious, failure, was that, in addition to objections to Mr Pena's qualifications (he being an underwriter), he had failed to expose the information upon which he assumptions of fact were based in that he had merely stated that "based on the information received", he had come to certain conclusions (see also Dasreef Pty Ltd v Hawchar (2011) 9 DDCR 25; (2011) 243 CLR 588; (2011) 277 ALR 611; (2011) 85 ALJR 694; [2011] HCA 21).
These matters were the subject of submissions by the parties: see T 332-340. This was a clear case of failure to comply not only with UCPR Part 31 r 31.23 but, more importantly, with the warnings of the Court of Appeal and the High Court in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; (2001) 25 NSWCCR 218 and Dasreef Pty Ltd v Hawchar, supra.
In the course of submissions on this issue, the first defendant complained that these objections had not been raised until the trial. Subsequent to my ruling (T 340) the plaintiffs sought to tender a letter dated 2 August 2011 from Balmain Lawyers to the first defendant's solicitors which conflicted with this submission.
(c) Ruling on Exhibit O (letter dated 2 August 2011 from Balmain Lawyers)
After the first defendant's claim that the plaintiffs "first objection" to the tender of Mr Pena's report was "yesterday" (Tuesday 4 October 2011), the plaintiffs sought to tender a letter from Balmain Lawyers dated 2 August 2011 to provide "full and proper context to that matter". It was submitted (written submissions dated 12 October 2011) that this letter makes it clear that a copy of the letter of instruction to Mr Pena, which was not attached to his report and which did not give vital information such as his sources for his opinion, had in fact been called for.
Tender of the letter is objected to on the basis that it amounts to a request to reopen the argument or for the court to change or revisit this ruling.
It is submitted that while judges may revise reasons for decision, especially delivered ex tempore, it is not possible to make corrections that alter the substance of the published reasons: Todorovic v Moussa (2001) 53 NSWLR 463; [2001] NSWCA 419 at [46]-[48]. Judges can and do revise their position concerning the admissibility of documents. However, in the present circumstances, that is not really what the plaintiffs are seeking to do.
When I made my ruling, it was in the belief that the first defendant's submission, namely that the plaintiffs had, for forensic advantage, not raised the matter until the day before the submission was made. It now appears that this was incorrect.
There are many examples of judges revisiting their rulings on evidence (for a recent example, see Traxys Europe SA v Balaji Coke Industry Pty Ltd [2011] FCA 1132; see also Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 at 302-303 per Mason CJ). I note that this has included occasions when rulings on expert evidence may be revisited: see for example R v WR (No 3) [2010] ACTSC 89 at [9].
Accordingly, Exhibit O should therefore be admitted.
Lay evidence concerning dewatering
The first defendant's primary position is that the plaintiffs' costs fall outside the terms of the insuring clauses in Section 1 of the policy. However, the issue which dominated the trial was whether or not the plaintiffs' costs related to "dewatering operations" and "dewatering equipments" referred to clause 5 of the Endorsement. I have dealt with this issue first, which is in reverse order to the manner in which the first defendant's written submissions are structured, but is consistent with the flow of the evidence at the trial.
I note that I have set out the relevant authorities as to the appropriate way to interpret words in commercial agreements. Those principles are not in dispute. The issue in dispute is the actual question of what is meant by the word "dewatering".
Mr O'Neill
Mr O'Neill gave evidence at T 51-52 about the need to have pumps available to enable the lowering and maintaining of the lowered water level of the ponds (referred to in the tender), and explained that this was an item which was costed. He went on to explain:
"Q. Well, can I just ask you a general question? Do you recall whether your company in the tender process costed the item of work which is described there at 14.4, that is, stormwater diversion, dewatering and flood protection during construction?
A. We did.
Q. You did. Then if you could go over to page 341, there's technical specification halfway down the page, "Cofferdam diversion and dewatering." Do you have that?
A. Yes.
Q. Did you read that clause at some stage during the tender process?
A. Yes.
Q. And you understood that your company was to be responsible for and repair at no expense to the superintendent any damage to equipment and to structures, foundations or any part of the works under this contract caused by water due to the failure or insufficient capacity of any part of the dewatering system or flood protection works provided by the contractor. You understood that?
A. I understood that, and we didn't claim anything against the client." (T 52-53)
He explained further in cross-examination (T 138 line 31-32):
"The meaning is you remove water from an area where you have to do work to allow you to do work in that area."
He went on to state:
"Q. Mr O'Neill, the term "dewatering equipment", was it a commonly used word in the construction industry at the time this work was performed?
A. Yes.
Q. I want to suggest that the term dewatering was commonly used in the construction industry to mean implements which remove water from an area.
A. Dewatering doesn't mean that.
Q. Just please
A. Could you rephrase the question because I I
Q. I'll repeat it to you. I want to suggest to you that the term dewatering equipment is a commonly used word in the construction industry which means implements which remove water from an area.
A. Dewatering equipment could be used to move water from an area. It could be used for many other reasons and
Q. Sorry.
A. In this case I understand dewatering to mean a specific thing, not a general movement of water.
Q. But you agree that it could mean as used in the construction industry implements which remove water from an area?
A. Dewatering implements, the same as a hammer can be used to bang a nail in and pull a nail out, can be used for a number of different reasons. Dewatering equipment could be used for a number of different applications.
Q. Yes, but just coming back to my question, please, sir, the term dewatering equipment could be used and indeed has been used in the I withdraw that. I want to suggest to you that the term dewatering equipment has been commonly used in your industry to mean implements which remove water from an area.
A. Where there is work to be done, yes.
Q. So it is the context in which the words are to be used?
A. The context of which the equipment is used. It's not considered to be dewatering equipment if it's moving something pumping water in to fill up a dam or some
Q. All right. I want to
A. It's the same equipment.
Q. Yes, thank you. I want to suggest to you that pumps are commonly referred to in the industry as dewatering equipment, aren't they?
A. They're commonly referred to as pumps.
Q. But pumps can also be described and have been commonly described in the industry as dewatering equipment.
A. Where they are dewatering they could be called dewatering equipment." (T 141-142)
Mr O'Neill made confirmatory statements at T 143 lines 16-22 concerning removal of water from a completed basement of an unfinished apartment building.
Mr Daniel Barrow
Mr Daniel Barrow, the former construction manager for the first plaintiff, says in paragraph 44 of his affidavit that dewatering was "the removal of water from the work face to allow the contractor to commence or progress works at that face". He went on to state (paragraph 45) that the work carried out at Centennial Park lakes was not work of this character, but was the work of diverting water out of Kensington Lake in order to protect the integrity of the cofferdam to avoid catastrophic flooding of the park and surrounding areas. It was not the removal of water from a work site to allow works to progress. He went on to state that the Fire Brigade's work did not consist of dewatering the site either.
Mr Barrow stated (T 169) that "dewatering equipment" was equipment such as a pump. However, he did not resile from his assertion that the work carried out was not dewatering.
Mr Michael Russell
Mr Michael Russell, the project manager employed by DPWS, was an impressive witness. As an independent observer, he gave objective and clear evidence as to what "dewatering" was. He stated at paragraphs 7-8 in his affidavit:
"7. During the almost thirty (30) years in working for the DPWS on numerous occasions I have been involved with what is commonly referred to in the construction industry as "dewatering" which has been a part of those works or which became a necessary part of those works because of the entry of water onto those works before the works were to commence or during the currency of those works. On many occasions dewatering is an integral process of a job where, for example, rain falls into an open excavation in the works.
8. Based on my education and experience in the building industry and in having to deal with the dewatering of building sites on many occasions for my job, I use and understand the term 'dewatering' to be where water enters a construction site, dewatering is the process of removing that water to permit work to begin or ongoing work to continue. Dewatering is where it rains in an excavation or on a building or construction site into an excavation or onto those works. Where works can't be commenced or progressed until the water is taken out of the excavation or off the site, the act of removing that water is dewatering."
Mr Russell explained the work defined as "dewatering" in the contract as follows:
"16. As part of the invitation to tender and as part of the Works the contractor was required to undertake dewatering and to charge for those Works in responding to the invitation to tender in the contractor's quotation for that part of the Works.
17. While this is not meant to be an exhaustive description of the dewatering portion of the Works described in the invitation to tender the dewatering related to the drying of material taken from some of the lakes and the removal of water from around the banks of the lakes that were to be remediated."
Mr Russell went on to describe the emergency meeting following the torrential rains and how he noticed what he called a "substantial trickle of water" coming from the base of the cofferdam wall at the bottom of the Kensington culvert. His immediate concern was for the safety of the men who were placing boulders along the outside base of the cofferdam wall and he called them away. He described the situation as a "grave emergency" (paragraph 45) and describes the activities to drain the water from the site, which involved the police closing Alison Road and representatives of the SES, Fire Brigade, Police, the DPWS, the local council and other authorities working together on a 24-hour basis. He concluded by saying at paragraph 64, in relation to the work the subject of the claim in the spreadsheets:
"I can say, having regard to my understanding of the word "dewatering" as it relates to building and construction and having regard to my observations of those activities so referred to in the column headed "Activity" whilst I was at the Works site during the time of the flood and after, that none of those activities I would have described as the "dewatering" of the Works site."
The defendant places emphasis upon acknowledgements by Mr Russell that the word "dewatering" means "the removal of water from an area" at T 181 and "dewatering equipment" at T 182 as amounting to an acceptance that the use of pumps to remove water from one place to another meant that they could be described as "dewatering equipment". However, as Mr Russell stated several times (for example, at T 182 line 27) it depends on what these pumps and other equipments are used for. He stated in re-examination:
"WITNESS: Dewatering in as I understand it is removing water from a construction area to perform construction work and then maintaining it in that condition during construction.
GRACIE
Q. Do you draw a distinction between that and removing water from one area to another?
MARTIN: I object to that, your Honour.
HER HONOUR: I'll allow it.
WITNESS: Absolutely." (T 183)
Mr Bedi
Mr Bedi, a former director of the second plaintiff, stated at paragraph 20 of his affidavit (Exhibit H) that:
"Having regard to my experience in excess 39.5 years as a civil engineer, I understand what dewater is. It is the removal of water that has entered a construction site either before construction if commenced or during construction which interferes with the commencement of that construction or the continuation of it. The water may enter the site through the sub-soil from a water table or may simply enter the site if it is open to the weather by rain on the works. Usually dewatering is effected by use of a submersible pump where the water is pumped out of and away from the potential construction site or the construction site to allow for site access to commence or continue works on that site."
The first defendant placed emphasis on Mr Bedi's acknowledgement that syphons (T 237) and pumps were used for removing water.
The first defendant's witnesses: Mr McWalter
The evidence of Mr McWalter set out in his affidavit of 11 June 2010 at paragraph 31 is that the word "dewatering" has many different interpretations. He considered its meaning would depend on the site, the person and the circumstances of the operation, and gave as an example removal of groundwater by spears. However, he considered that "dewatering" could also refer to the removal of water which runs into an excavation following torrential rain, a burst pipe, a flood or the like (at paragraph 30-34):
"30. I refer to paragraph 10 above. From my experience, the sole purpose of syphon pumps is to remove water from one area and to redirect it to another area. As such I regard them as being dewatering equipment. From my experience as a Loss Adjuster, the common meaning of the term "dewatering operations" in the context of constructions is the removal of water to enable normal site working conditions to be maintained or restored. As such, I regarded the syphon pumps as being dewatering equipment and the act of removing water from the Kensington Pond as being a dewatering operation.
"The costs in respect of item 21 related to the recycling of crushed concrete and brick. This amount includes GST and only 50% should be allowed: [86(xvii)] - I J McWalter's affidavit 11/6/10 (Ex 4)."
The reasons for this inconsistency were not explored in submissions or during the trial. I see no reason why 100% should not be allowed in relation to item 21 as well as to item 20.
(11) Items 22-24: Kobelco excavator, Kingston Plant Hire (Cat 120 Grader) and VTN Komatsu & Cat 325L - This amount was refused on the basis that there was "no detail given as to what this machine was being used for or the dates on which it was being used". This is incorrect. As Mr O'Neill sets out in his comments, the wash away of all access at road and haul roads as well as the fact that most of the area where the men were working was underwater or completely saturated meant that everything had to be moved by a machine with high clearance and four wheel drive performance. This was the reason for hiring a seven tonne excavator. Mr O'Neill was not cross-examined about this. Similarly, he was not cross-examined about the Kensington plant hire, which was hired for the same reasons or the Komatsu (which had a long reach, as well as being able to be used when vehicles could not negotiate the Works due to the water saturation (item 24)).The matters about which Mr O'Neill was cross-examined concerning these invoices were as follows:
"Q. The invoice referred to in item 24, Mr O'Neill, can be found at page 696.
A. Yes.
Q. You agree with me that the only amounts that can be properly made in relation to this invoice are in respect of the period from 12 May through to 21 May.
A. Yes.
Q. That is, you see at page 696, there is a bracket or parenthesis around that particular part of the invoice.
A. Yes.
Q. So the other parts of the invoice that isn't so bracketed should not form part of your claim.
A. I'm not sure.
Q. The other amounts outside that period of 12 May, the 21 May 2003, don't relate to the removal of water from the large Kensington Pond, does it?
A. I don't know the answer to that question without going through the sequence." (T 149)
Mr Gracie pointed out, in the absence of the witness (T 149-150), that Mr O'Neill had in fact done this in his answers to the spreadsheet, as attached to his own affidavit, and that there was no need for him to go through the exercise again in the witness box. After the parties adjourned to discuss the problem, the cross-examination proceeded nevertheless; however, where applicable, I have had regard to Mr O'Neill's answers on the spreadsheet. It is, however, another example of the undesirability of such matters being dealt with in court when it would have been easier to have these costs assessed by a referee, who would have asked these questions if he needed assistance, unlike a judge, who cannot do so.An additional objection not set out in the reasons for refusal is that if the Grader (item 23) was used to maintain the haul roads "then this must have related to dewatering" (first defendant's written submissions, page 41) and only 50% should be allowed for this reason. Even if I have erred in relation to my findings as to dewatering, I consider that the full amount for hire of this equipment was necessary. This was not equipment which was used for the purpose of dewatering, but used for the purpose of safely negotiating flooded roads and other public areas.
Mr Bedi gave evidence about these matters as follows:
"Q. Then if I could move on to item 22 which is the excavator. Was the excavator used in relation to maintaining the haul road into the culvert area?
A. Could you repeat the question, sir?
Q. Was the excavator referred to in item 22 used to maintain the haul road which went into the culvert area?
A. Sir, when - when the excavator is there, I - I didn't make the diary to - to see what it was doing, it was there, so whatever was needed to be done by the excavator, we use that.
Q. An excavator did do maintenance work in relation to the haul road at this time, didn't it?
A. No, there was no maintenance work at that time. We were trying to do - do the work within our scope of work.
...
Q. Mr Bedi, if I could ask you about item number 24, the Komatsu Caterpillar, do you see that?
A. Yes, sir.
...
Q. I want to suggest to you that that Caterpillar was used for work relating to the removal of water from the Kensington Pond for the period from the 12 to 21 May 2003?
A. Yes
Q. And that the hire - I withdraw that - the use of that particular item of plant outside that period that I gave you was unrelated to the removal of water from the Kensington Pond?
A. Could you repeat your question?
Q. You'll see that the Caterpillar was used for periods outside the 12 to 21 May, do you see that?
A. Yeah, from 12th to 21st.
Q. Yes, but I want to ask you for the periods outside the 12th to the 21st. I want to suggest to you that the Caterpillar was used - the use of the Caterpillar during the periods outside the 12th to the 21st had nothing to do with the removal of water from the Kensington Pond, do you agree with that?
A. I think so." (T 214-218)
Doing the best I can with these diffuse grounds for refusal to pay, it appears to me that the use of this equipment, insofar as it relates to dewatering, should be allowed, conformably with my findings on this issue, and the remaining objections of the first defendant should be rejected on the basis that Mr O'Neill's explanation on the spreadsheet should be preferred to the more artificial assessments of Mr McWalter. Complaints about missing invoices are not accepted, for the same reasons dealt with elsewhere in this judgment.
(12) Item 25: Two trucks - It was put to Mr Bedi (T 218-219) that these two trucks were used during the period from 12 May to 20 May 2003 in relation to work relating to the removal of the water from Kensington Pond. He agreed that the use of these trucks outside this period had nothing to do with the removal of water from Kensington Pond (T 219).
Mr O'Neill gave the following evidence concerning the use of trucks:
"Q. Those trucks were used in relation to doing work concerning the removal of water during the period from 12 May to 20 May 2003 I suggest?
A. No. You don't use trucks to move water.
Q. The trucks were used for the purposes of conveying equipment and material that was used in the process of removing water from the Kensington Pond wasn't it?
A. I understand these to be dump trucks which wouldn't be used for conveying equipment, they'd be used for conveying rock or concrete or some material like that." (T 153)
However, according to Mr McWalter's notes in the spreadsheet, the cost in relation to these trucks were rejected on the basis that "no verification has been provided" and the amount has not been proven. This is quite different to the matters about which these witnesses were cross-examined. Yet Mr McWalter's objections are the basis upon which I am asked to reject this claim.
Contrary to Mr McWalter's original complaint, there is no doubt that the trucks were retained, and there is an invoice for $1,650 for their use between 12 and 20 May. The amount claimed is $5,280. If the use of these trucks relates to dewatering to any extent, this should be claimable consistent with my findings as to dewatering. If the complaint is lack of "verification", I reject it.
(13) Item 26: Bedi - Priestman plant - This was a long reach excavator that was used for work in the same way as the Komatsu. Mr McWalter initially rejected the claim for the Komatsu (see the notes to item 24) and in his affidavit, Mr McWalter states that he stands by his original assessment (paragraph 86(xx), page 21). As noted above, the submission now made seems to be that 50% of this amount should be allowed, although the reasons for this have not been explained (see the first defendant's written submissions, paragraph (r), page 41). The submissions in relation to item 26 is that:
"Although no detail has been provided for what this plant was used for or the dates used, only 50% should be allowed: [86(xxii)] - I J McWalter's affidavit 11/6/10 (Ex 4)."
However, Mr McWalter notes at paragraph 86(xxii) that: "I note that O'Neill now agrees with our assessment of $1,500". The work undertaken was the same as the Komatsu (item 24) for which I have noted inconsistent claims that either nothing, or 50%, should be allowed (with no reason explained: see submission (r) on page 41). Mr McWalter notes that he would allow 50% "till further detail provided" and states that the second plaintiff agrees with this.
It was put to Mr Bedi (T 219) that this plant was used in relation to the removal of water from Kensington Pond, and that about half of the use was related to the removal of the water from the Kensington Pond by use of this equipment. This is sufficient information as to what this plant was used for as well as the dates used.
(14) Items 27 and 28: Fuel for pumps and fuel for the small vacuum pump for syphons - Mr Bedi confirmed in his evidence (T 219) that this was fuel for pumps used in the removal of water. In the schedule, both were excluded as dewatering costs. Conformably with my finding that these were not dewatering costs, these costs should be allowed in full.
(15) Item 29: Geofabric - This item was not excluded.
(16) Item 30: Sundry heavy timbers, pump hardstands and culvert blocking - This material was used to shore up the cofferdam face, according to Mr O'Neill's notes. Mr O'Neill gave the following evidence concerning this item:
"Q. Item number 30.
A. 30.
Q. Sundry, heavy timbers, pump hard stands and culvert blocking?
A. Yes.
Q. That material was used for the purpose of the work involved in removing the water from the large Kensington Pond wasn't it?
A. Not necessarily.
Q. Do you know for a fact or not?
A. I suspect that some of it may have been used there. Some of it was probably used on the main ponds themselves where we also had to do work.
Q. I want to suggest to you that that material half of the time was used for the purposes of the work involved in removing water from the Kensington Pond?
A. No.
Q. What percentage of the time was that material used for?
A. I expect a small percentage of the time, if at all." (T 155)
Mr Bedi's evidence was that these items were for the purpose of work relating to the removal of water from the Kensington Pond. Notwithstanding this apparent concession by Mr Bedi, the first defendant submits that only 50% should be allowed. However, conformably with my findings concerning the first defendant's submissions as to dewatering, the whole amount should be allowed.
(17) Item 31: Steel star posts for barricading - According to Mr O'Neill, this was put on the face of the cofferdam to prevent erosion of the new loose materials and to stiffen and strengthen the face of the cofferdam against erosion. Mr O'Neill had the following to say when cross-examined:
"Q. Similarly, the next item, 31--
A. Yes.
Q. --steel star posts for barricading support of geo textile and other ground support?
A. Yes.
Q. What was the purpose of these items?
A. Geo textile and ground support probably for strengthening of the face of the cofferdam.
Q. I want to suggest to you that 50% of the use of that material related to the work concerning the removal of water from the cofferdam?
A. No, that's only an assessment by this Mr McWalter, not by us." (T 155)
Mr McWalter considered that part of this was to support the syphon pumps and allowed only 50%: see also Mr Bedi's evidence (T 220). Conformably with my findings concerning dewatering, the whole of this amount should be allowed.
(18) Items 32 and 33: Supply and delivery of concrete and concrete pumping - Mr O'Neill was cross-examined about item 32:
"Q. Go to page 704 please, exhibit A, volume 2.
A. Yes.
Q. That's a Booral invoice which I think is NC86 to 206, the first invoice referred to in item 32? Do you have that?
A. I have an invoice here, yeah.
Q. It of course includes - the final amount is inclusive of GST, that is the 577?
A. Yes.
Q. And similarly with the other invoices that we see issued by Booral from 70 - all through to 706 is it not?
A. Yes.
Q. And 50% of that material was used in relation to work relating to the removal of water from the large Kensington Pond wasn't it?
A. No.
Q. This material was used partly for that purpose wasn't it?
A. It was used for strengthening the wall of the dam, protecting the wall of the culvert." (T 156)
Only 50% of these costs were allowed on the first defendant's definition of dewatering. The whole of these amounts should be allowed.
(19) Items 34 and 35: Rocks and boulders (1200 tonnes), and broken brick and crusher run (700 tonnes) - These items were not the subject of cross-examination of Mr Bedi. They were rejected on the basis that there were no invoice to support these amounts. Mr O'Neill's spreadsheet notes that these materials were used to create banks and support the cofferdam to create access for machines to go over the site because of the waterlogged state of the park. I propose to allow these amounts. This work would have been necessary whatever the definition of dewatering.
(20) Item 36: Safety equipment and personal protective equipment - Although not referred to in submissions, it was put to Mr Bedi that the cost of this equipment fell within the contractor's margin (T 221 lines 4-5). Mr Bedi replied:
"A. Sir, on the construction side you have got mostly, you know, boots with steel toes so that people toes doesn't get hurt, but you don't require rubber boots, you know, or raincoats. You don't require as part of normal - when you are working in normal conditions, you know." (T 221 lines 6-9)
Mr O'Neill was also asked about item 36:
"Q. If you go down to item 36, the safety equipment and personal protective equipment included wet weather gear?
A. Yes.
Q. I want to suggest to you that these items would be considered part of the normal plant consumables and would be within your margin?
A. No.
Q. You disagree?
A. Yes.
Q. But these are additional items are they?
A. Yes." (T 157)
I accept Mr O'Neill and Mr Bedi's evidence. I note, in addition, Mr O'Neill states in his comments (Tab 26, page 651) that safety equipment was necessary because there was 24 hours attendance at the site. He was prepared to concede that some of these may be part of normal plant consumables and to reduce his claim to 50%. He has accordingly noted the amount claimed as $700. I consider this to be a reasonable compromise. An allowance of $0 on the part of the insurer is, in my view, unreasonable. Similarly, any claim that these items have some "residual value" is impossible to deal with in the absence of evidence as to what that "residual value" would be. Accordingly, I propose to accept the amount claimed in relate to this by the plaintiffs in the sum of $700.
(21) Items 37-48: Labour costs - As these items relate to labour costs, it is convenient to deal with them together.
Mr Bedi was cross-examined about these items at T 221 where it was put to him that these costs related to the removal of water from the Kensington Pond.
It was put to Mr Bedi that item 43, which is the expense of site hoisting to install and removal steel road plates was a cost which had already been claimed under items 11-15. The relevant cross-examination is as follows:
"Q. What I want to suggest to you that the item in relation to the removal of the steel road plates, item 43 in the spreadsheet, is already picked up and claimed in respect of the tax invoice that you have in front of you at page 152, in respect of the item pick up charge?
A. Sir, this pick up cost of $50 is for the hiring contractor for him to come and pick it up, nothing to do with us, but they have given us the invoice $50 cost for their truck to come and pick it up.
Q. Yes?
A. And our handling cost of these plates, once they're delivered ..(not transcribable).. all the handling cost is ours. So it has got that $50. That's got nothing to do with - with - with the - with this what you are trying to reference to me.
Q. Then, if you could then move onto item 45, which is the placing and commissioning of flood lights, and I want to suggest to you that this item has already been claimed for in items 16 and 17 of the spreadsheet?
A. I don't ..(not transcribable)..
Q. Yes?
A. Has been - in which item, sir, you tell me?
Q. It's been claimed in respect of items 16 and 17.
A. Well, sir, you see, once - once these lights or whatever, the plant or equipment is delivered on site, thereafter all the handling, commissioning, handling, decommissioning is - is other cost, it has got nothing to do with the - with the supplier or the rental company.
Q. Could you go to tab 22 of exhibit B? The first page is the hire contract between National Hire and your company, and then the tax invoice is the next page. Sir, you disagree with the proposition that the cost in relation to placing commissioning of the floodlights is included in that tax invoice.
A. No.
Q. If you then go to item number 46 which relates to the place and commissioning of the diesel generator. Is your answer the same that that was not part of the initial charge by the hirer?
A. Yes.
Q. Then in respect of item 47, you've claimed 380 hours for spotter labour, allowing one man for machine 50% at normal time and 50% at overtime rates at an average cost of $45 per hour.
A. Yeah. Yeah.
Q. I want to suggest to you that the appropriate rate should have been allowing for a period during 15 to 21 May 2003 being seven days at 10 hours per day at a rate of $45 per hour.
A. Sir--
Q. I want to suggest to you that that was a reasonable cost for that item of labour being supplied in item 47.
A. You disagree with the - with the quantity.
Q. Yes, with the number of hours that have been charged, I want to suggest to you it shouldn't be 380 hours, it should be reduced to simply seven days at 10 hours per day, that's 70 hours at a rate of $45 per hour.
A. But, sir, when people are working 24 hour a day, then you don't allow 10 hours." (T 222-223)
I note that Mr O'Neill was not cross-examined about many of the items in the spreadsheet; for example, the next item to be cross-examined about after item 36 was item 47 relating to labour costs (T 157):
"Q. So do you agree with Mr McWalter's assessment that this item should be restricted just to the seven days from 15 to 21 May?
A. At one man per machine there were a number of machines operating so are you saying it be restricted to one man for one seven days or ten men for seven days? What are you trying to say?
Q. I'm suggesting to you it should be restricted just to the seven day period from 15 to 21 May.
A. But this this is based on one man per machine, which may equate to 380 man hours. If there's 10 men on one machine for ten hours that's whatever number 100 hours, you know, I I don't know we had this claim from the subcontractor who had put together the claim.
Q. All right, then
A. You can't assume it was one man would have worked for nine and a half weeks. That's not what happened. Which is what Mr McWalter is trying to infer, I think.
Q. Well, how many men do you say worked?
A. I don't know the number." (T 158)
However, Mr O'Neill in his notes sets out that these are not only obvious costs but are separate to other cost in that the plates were used over a number of areas in the park, requiring floodlights in separate areas which in turn required separate generators and machinery. I accept the explanation of Mr Bedi and Mr O'Neill. These are separate costs and should not have been rejected.
In relation to item 48 (traffic management), Mr Bedi gave evidence as follows:
"Q. Can I move on then to item 48 which is traffic management? I want to suggest to you you've claimed 160 hours and I want to suggest to you that the reasonable amount taken in relation to that work was 80 hours.
A. Well, sir - well, sir, traffic management is not carried out during the night, it's only during the day time.
Q. What I want to suggest to you, 160 hours is unreasonably high, and a reasonable period concerning traffic management would be 80 man hours on the basis that--
A. Sir, sir, how do you justify time - time - look, because I was not there and you were not there, how can you justify that it is not right?
Q. I'm suggesting to you that 160 hours is unreasonably high and that a reasonable amount of time for traffic management is 80 hours.
A. Well, sir, it - it depends - it depends upon the ..(not transcribable).. intensity of the traffic, not just my assumption or your assumption.
...
Q. Mr Bedi, what was the margin that your company charged in respect of its cost relating to this job?
A. Sir, I - I can't tell you anything unless I see my old estimate, you know, but it - you know, the margin of profit, it depends upon how much work we have got and what - what is available in the market, you know.
Q. Firstly - I'll go back one step - I take it there was a margin charged by your company in relation to the work performed in respect of this job.
A. How much - how--
Q. No, I'm not asking how much. There was a margin charged. You wouldn't have done it for nothing, would you?
A. No, no, nobody does anything for nothing.
...
Q. Mr Bedi, you charged a margin.
A. Yeah, yeah, yeah, no, yeah.
Q. There was a profit margin in this job for you, wasn't there?
A. Well, sir, you know, I don't want to go back and - and - and talk about to a different matter, but there was a time I could charge up to 35%, but one day I have got no work, I might be working on 10% so - and probably here we charge 10%.
Q. What I'm suggesting to you, that margin that you charged took into account all overheads that you would be otherwise incurring on performing on the job.
A. Well, sir, question is that if the - if this event has not eventuated, then our margin or anything would not have changed, but since the workload increase, the pressure increase, we have to employ - we have to employ extra resources and all those things, so that's why our margin was, you know, it was up, you know." (T 223-226)
Mr O'Neill was also asked about item 48:
"Q. Thank you. In item 48 Mr McWalter has also consider that to be overstated. You've charged 160 hours and he's suggested 80 hours would be the reasonable number of man hours in relation to traffic management to the emergency site. That's a reasonable estimate of the hours worked, isn't it? The 80 hours?
A. No.
Q. Why do you disagree with that?
A. We earlier talked about 24 hour a day work during some of that period. Mr McWalter seems to think we only worked during the eight hour day, which would have been very unlikely in that emergency.
...
MARTIN
Q. There was hardly any traffic at midnight, was there, during
A. If you've got trucks going in and out of Centennial Park they don't like them running around without someone watching them."
The cross-examination of Mr O'Neill ended at Item 48 in the first spreadsheet, which has made my assessment of items in the other two spreadsheets difficult.Mr O'Neill states in his comments concerning this item that the site had to be opened 24 hours a day and these hours were necessary. Road around the site were flooded and water was being pumped onto public places which required management. This is a reasonable expense and it should be allowed.
(22) Items 49-52: Overheads - Mr McWalter stated in his notes concerning this section (and his footnote to item 56) that a total margin of 10% on all allowable items to allow for overhead profit and margins should be permitted even though the contract rate stated 18%. I shall deal with each of them in turn.
Item 49 (contractor site establishment such as sheds, ablutions, phone and fax) - Mr Bedi explained as follows:
"Q. Sir, I want to suggest to you that items such as item 49 maintaining the site establishment including site sheds--
A. Yeah.
Q. --was a matter that was included in your profit margin on the job.
A. No, sir, we had to establish site on the Kensington - Kensington Pond site too, because I didn't have that initially. We had - we had about a kilometre away from the Kensington culvert in the - in the middle of the Centennial Park, we had our site establishment there, we had office, we had lunch - lunch - lunch rooms and other things, so we had to establish on the - on the Kensington site as well." (T 226)
(23) Items 53 and 54: Consultants - The cost for item 53 relate to the cost for Rider Hunt who were engaged to assist in the preparation and assessment of the claim merits and quantum, according to the notes set out in the spreadsheet. The cost in item 54 are for independent loss assessor, Richard Kurland.
I do not have the benefit of any submissions in relation to these items by the plaintiffs. Mr O'Neill's comments consist of stating that these costs were incurred as a result of refusal of the indemnity under the policy and that they should be reimbursed.
In practical terms, whether recoverable under the insurance policy or in the form of costs in relation to the preparation of this claim, these costs would be claimable. I note that no challenge has been made to the quantum of the costs; the objection taken is essentially and simply that these costs do not fall within the ambit of the insurance policy.
Doing the best I can in the absence of more detailed submissions on behalf of the first defendant, and in the absence of any submissions on behalf of the plaintiffs, I propose to allow these costs, on the basis that if they are not covered by the insurance policy, then they would be claimable as costs in relation to this litigation in any event.
(24) Items 55 and 56: Head office overheads - The objection to this is on the basis of quantum. A claim was originally made at 8% of the head contract ($2.7 million) on a projection of a duration of 26 weeks, and the duration effectively lasted a period of four weeks.
In Mr Martin SC's brief summary of the three categories into which the disbursement clam fell (T 386), this was one of several alternative objections which was simply not referred to. In the written submissions, there is a reference to the costs in respect of item 55 relating to head office overheads as being included in the total margin of 10% for overheads profits and margins (see paragraphs 86(l)(i) and (l)(ii) of the affidavit of Mr McWalter of 11 June 2010). The reason for refusal given for item 55 by Mr McWalter in the schedule is "see comments with respect to item 56".
These were costs which were claimed in relation to an emergency lasting for a period of four weeks. It is a substantial claim. Clearly, there must be a total margin of some kind to allow for these events. In the absence of more clearly articulated objections, I propose to allow the claim.
(25) GST: GST totalling $25,925.01 is referred to in the spreadsheet. At page 44 of the first defendant's submissions, it is submitted that the claim for GST was not a recoverable item and should not be allowed (see reference to paragraph 86(l)(iii) of the affidavit of Mr McWalter, which refers to this item).An example of the an amount claimed inclusive of GST appears at T 148-149:
"Q. I want to suggest to you that that's invoice number 67 referred to in item 21 in the document at tab 24, page 628.
A. It's one of the invoices relating to that item possibly.
Q. Well, it's invoice number 67. Do you see that?
A. Yes. Yes.
Q. It's been issued by Building Recyclers (NSW) Pty Ltd. Do you see that?
A. Yes. Yes.
Q. I want to suggest to you that's the invoice that's referred to--
A. Yes.
Q. --in spreadsheet number 1 of item 21. Do you agree with that?
A. It certainly looks like that, yes.
Q. Do you agree that the final amount of $600 includes GST?
A. I don't see it saying that anywhere.
Q. Well, it's a total amount, isn't it, of $600.
A. Yeah - well--
Q. Just look at the invoice please, Mr O'Neill.
A. Total - sorry, yes, it says total including GST, correct
Q. I want to suggest to you that that total is inclusive of GST.
A. Yes, I agree now. Sorry, I didn't notice--
Q. The same applies to invoice number 69, two pages earlier at 688.
A. Yes.
Q. That total of $600 is inclusive of GST isn't it?
A. Yes. "
During the course of the hearing, I drew the attention of the parties to Gagner Pty Ltd t/as Indochine Cafe v Canturi Corp Pty Ltd (2009) 262 ALR 691; (2009) 236 FLR 401; (2009) 77 ATR 157; [2009] NSWCA 413 at [147] where the Court of Appeal held:
"[147] I accept that the consequence of these provisions is that, even though the Respondent might pay out an amount of GST in connection with the goods and services which it acquired for the purpose of making good the damage to its premises, it would be able to recover that amount back, either in the form of a reduction of the net amount it must remit to the Commissioner for the quarter in which the payment was made, or as a refund. Thus the amount of GST component of any payments it made for making good the premises would not ultimately be a loss that it suffered. Given the compensatory purpose of the damages award, it was wrong to include that component in the award of damages."
I did not receive any submissions as to whether or not this principle was applicable.
I propose to exclude claims for GST. Accordingly, when preparing the schedule of damages payable, the parties should note that the first defendant will be entitled to a credit for this sum.
Spreadsheet 22B
This brings me to a consideration of the claims in spreadsheet 22B (Tab 22B to the affidavit of Mr McWalter).
By way of general comment, I note the challenge to the evidence of Mr Bedi, to whom it was put (T 227 line 31-32) that he was unable to comment upon the reasonableness of any of the items made in spreadsheet 22B because he was not there. Mr Bedi replied that he was fully involved and that it was not the case that he did not know what had actually happened. Mr Bedi had a clear recollection of some matters, but in relation to others, such as the work carried out in item 5 of this spreadsheet, had no recollection. Accordingly, where he has been able to recollect, I have taken this into account, but where he has not, I have had real difficulty. Another difficulty that I had, as noted above, is the fact that Mr O'Neill was not cross-examined in relation to this spreadsheet (see T 158).
I shall deal with each of the eight items and the GST individually as follows:
(1) Item 1: Clean and remove ply blocking from culvert pipes - The objection is to the rate of $50 per hour rather than $40 per hour. Mr Bedi was cross-examined at T 227-228 as follows:
"Q. If you deal with item 1, which was clean and remove ply blocking from culvert pipes to allow outflow of water from Busby and Randwick Pond. Do you see that?
A. Yeah.
Q. What's been allowed is four hours at $40 per hour as the reasonable amount in relation to that item of work.
A. Four hours, $50 an hour is $200. That's what is written in this column.
Q. That's your charge. What I want to suggest to you, Mr Bedi, is that four hours at $40 per hour was a reasonable amount for that item of work.
A. Sir, if you're happy with $40, it doesn't make much difference.
Q. I want to suggest to you $40 an hour was a reasonable rate for that item of work.
A. Sorry, it depends - what time of the day when you want the worker is working and what conditions."
(2) Item 2: Repair access road - These costs are allowed in full.
(3) Item 3: Restore and fix Busby Pond banks - This was the subject of challenge on the basis that only two days should be allowed for work in this area. Mr Bedi said in his evidence:
"Q. Mr Bedi, if you could please go down to item 3, which relates to restore and fix Busby bank ponds, bank B. Were you present when that work was being performed?
A. I did mention to you that I was not there all the time. But I - whenever I go, then I go through the whole site and see what has been done, what has - but I can't pinpoint - yes, I was there or not there. But the work was done.
Q. Do you know bank B?
A. Yes, I know bank B. It is - it is - Busby Pond's banks were divided into various lots, lot A, B, C, whatever.
Q. Bank B is the shortest bank, isn't it?
A. Yeah.
Q. I want to suggest to you that two days was a reasonable period for work performed on bank B as stated in item 3.
A. Mm.
Q. You agree with that.
A. Yeah."
Mr Bedi has agreed that two days is reasonable and accordingly the first defendant's estimate on this item should be allowed.
(4) Item 4: Remove and adjust laid turf - Again the objection is to the amount of time for this work to be carried out. Mr Bedi had considerable difficulty with this question and eventually said he did not know (T 234). Mr O'Neill was not cross-examined on his notes. I propose to allow for the sum claimed by the plaintiffs.
(5) Item 5: Rebuilding Bank A - I accept Mr O'Neill's comments in his notes and allow this item.
(6) Item 6: Rebuilding Bank K - The insurer allowed 2.5 days (20 hours) for this, noting that there was no mention in the site diaries of any work to this item. Mr Bedi was unable to remember. Mr O'Neill's notes should be accepted and this sum allowed in full.
(7) Item 7: Contractor's overhead - I note that a maximum of 10% has been allowed and that GST would not be payable as this would be recoverable as an input tax credit. Given the Court of Appeal's decision in Gagner Pty Ltd t/as Indochine Cafe v Canturi Corp Pty Ltd, supra, this appears to be correct and I accept the first defendant's submissions on this issue.
(8) Item 8: Margin and profit risk 8-10% - see item 7 above. Mr Gracie has not addressed me on this issue and I accept the first defendant's submissions on this item.
(9) GST: Conformably with my rulings as set out above, I have not allowed for this sum.
Spreadsheet 22C
This spreadsheet is contained in Tab 22C to the affidavit of Mr McWalter of 11 June 2010. Once again, I note that Mr O'Neill was not cross-examined in relation to items appearing on this spreadsheet.
I will deal with each item separately as follows:
(1) Item 1: New South Wales Fire Brigade pumping charges - This claim is no longer pressed (T 9 lines 38-40).
(2) Item 2: Centennial Parklands costs - These costs are for John Gan of the Department of Commerce, Mark Russell of the Department of Commerce and Colin Ging & Partners. They were rejected on the basis that most of these costs relate to dewatering and, in addition, in relation to Mr Ging's invoice, that it involved discussing insurance claims and preventative measures for future incidents, which are not recoverable under the policy. An allowance of $6,000 was made. This claim should be allowed in full.
(3) Item 3: APS costs, project manager - The first defendant in written submissions submits that an allowance should be made for attendance on the main subcontractor, for which a margin including site overheads profits and attendance of 6% in relation to all other costs, but excluding the subcontractor's margin, should be allowed, for the reasons set out in paragraph 88 of Mr McWalter's affidavit. Mr O'Neill was not asked about this. I prefer to accept Mr O'Neill's estimates, subject to any adjustment for GST (on which I accept the first defendant's submissions) and allow this claim in full.
(4) Item 4: Costs of Mr Lidbury - The same submission is made in relation to the costs of Mr Lidbury, and I make the same findings.
(5) Item 5: Contract Manager costs - The same submission was made in relation to these costs, and I again make the same findings.
(6) Items 6 and 7: APS 6" pumps and APS truck hire for movement of the pumps - No allowance was made for these two items on the basis that these related to dewatering. Conformably with my previous findings, these costs should be allowed.
(7) Item 8: APS site amenities and delay - I make the same findings as items 6 and 7, as I accept Mr O'Neill's evidence.
(8) Item 9: Extra APS attendance and administration delay to contract - These costs, which are a substantial amount, are for delivery costs which the first defendant argues are not recoverable under the policy. An allowance should be made for the attendance of the main subcontractor (which the first defendant acknowledges as $3,201.98) but the full claim is challenged. These are matters on which I would have benefited from hearing Mr O'Neill cross-examined. It propose to allow these items.
Conclusions concerning quantum
Although the plaintiffs have essentially conducted the case on quantum on the basis that if the plaintiffs' arguments are allowed in relation to dewatering all costs claimed should be payable, this is not in fact the case. I have accepted the first defendant's submissions in relation to GST and in relation to some of the labour charges. I have rejected the first defendant's objections to lack of documentation. The orders I have made allow for the parties to bring in short minutes of order reflecting the total of damages in accordance with the findings set out above in relation to each of the three spreadsheets, with an appropriate adjustment for the premium payment, together with interest if this is able to be mathematically agreed. I have granted liberty to restore in relation to issues concerning interest.
Orders
I make orders as follows:
(1) Judgment for the first plaintiff (Australian Prestressing Services Pty Ltd).
(2) The parties are to bring in short minutes of order reflecting the agreed quantum of the sums claimed in accordance with the itemised amounts set out at paragraphs 160-165 of this judgment, together with interest if mathematically agreed.
(3) Liberty to restore in relation to interest.
(4) First defendant to pay plaintiffs' costs.
(5) Liberty to restore in relation to costs.
(6) Exhibits retained for 28 days.
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Decision last updated: 23 January 2013
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