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Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd

Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd

Case [2008] NSWCA 243 9 October 2008

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New South Wales

Court of Appeal

CITATION: BAULDERSTONE HORNIBROOK ENGINEERING PTY LTD v GORDIAN RUNOFF LTD & ORS [2008] NSWCA 243
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 2 June 2008 - 6 June 2008

JUDGMENT DATE:
9 October 2008

JUDGMENT OF: Allsop P at 1; Beazley JA at 334; Campbell JA at 335

DECISION: Appeal dismissed with costs.

CATCHWORDS: INSURANCE – professional indemnity insurance – construction of contracts of insurance – whether loss arose out of design fault or construction work – exclusion of liability - INDEMNITY – whether grant of indemnity an admission of liability - whether payment under co-ordinate policy extinguished rights against underlying insurer - WORDS & PHRASES – meaning of “paid” - PRACTICE & PROCEDURE - duty of parties to co-operate and be clear as to issues in litigation, especially in the Commercial List.

LEGISLATION CITED: Civil Procedure Act 2005 (NSW)
Insurance Contracts Act 1984 (Cth)

CATEGORY: Principal judgment

CASES CITED: Albion Insurance Co Limited v Government Insurance Office of New South Wales (NSW) (1969) 121 CLR 342
Arthur Barnett Ltd v National Insurance Co of New Zealand [1965] NZLR 874
Bailey v New South Wales Medical Defence Union Limited (1995) 184 CLR 399
Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (formerly GIO Insurance) & Ors [2006] NSWSC 223
Betts v Whittingslowe (1945) 71 CLR 637
Bonner v Tottenham and Edmonton Permanent Investment Building Society [1899] 1 QB 161
Boyes v Colins [2000] WASCA 344; 23 WAR 123
Burke v LFOT Pty Ltd (2002) 209 CLR 282
Castellain v Preston (1881-83) LR 11 QBD 380
Chappel v Hart (1998) 195 CLR 232
Charter Reinsurance Co Limited v Fagan [1997] AC 313
Chippendale v Holt (1895) 1 Com Cas 197
Cockburn v GIO Finance Ltd (No 2) (2001) 51 NSWLR 624
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Commercial Union Assurance Co of Australia v Ferrcom Pty Ltd (1991) 22 NSWLR 389
Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500
Firma C-Trade SA v Newcastle Protection and Indemnity Association (The Fanti); Socony Mobil Oil Co Inc v West of England Shipowners Mutual Insurance Association (London) Limited (No 2) (The Padre Island) [1991] 2 AC 1
Flounders v Millar [2007] NSWCA 238
Glens Falls Insurance Co v Tom Peters Limited (1957) 10 DLR (2d) 459
Globe & Rutgers Fire Insurance Co v Truedell [1927] 2 DLR 659
Glover v Australian Ultra Concrete Floors Pty Limited [2003] NSWCA 80
GRE Insurance Ltd v QBE Insurance Ltd [1985] VR 83
Hooker v Gilling [2007] NSWCA 99
James Hardie & Co Pty Ltd v Wyong Shire Council (2000) 48 NSWLR 679
Khan v Armaguard Ltd [1994] 1 WLR 1204
Law Society v Sephton & Co [2004] EWHC 544
Lawton v Dartmouth Moving & Storage Limited (1975) 64 DLR (3d) 326
Lord Napier and Ettrick v Hunter [1993] AC 713
Lubovsky v Snelling [1944] KB 44
McCarthy v St Paul International Insurance Co Limited (2007) 157 FCR 402
Mercer v Chief Constable of the Lancashire Constabulary [1991] 1 WLR 367
Morganite Ceramic Fibres Pty Ltd v Sola Basic Australia Ltd (1987) 11 NSWLR 189
Nissho Iwai Australia Ltd v Malaysian International Shipping Corp Berhad (1989) 167 CLR 219
Nowlan v Marson Transport Pty Limited [2001] NSWCA 346; 53 NSWLR 116
Page v Scottish Insurance Group (1929) 140 LT 571
Pine Top Insurance Co Ltd v Unione Italiana Anglo Saxon Reinsurance Co Ltd [1987] 1 Lloyd’s Rep 476
Roads and Traffic Authority v Royal [2008] HCA 19; 245 ALR 653
Santos Ltd v American Home Assurance Co (1987) 4 ANZIC 60-795
Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121
SGIO (Qld) v Brisbane Stevedoring Pty Ltd (1969) 123 CLR 228
Sheridan v Tynes (1971) 19 DLR (3d) 277
Sutton v Erect Safe Scaffolding (Aust) Pty Ltd [2006] NSWCA 265
Sydney Turf Club v Crowley [1971] 1 NSWLR 724
The National Fire Insurance Co v McLaren (1887) 12 OR 682
Thiess Pty Ltd v ERC Frankonia Reinsurance Limited [2007] QSC 4
Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 193 CLR 603
Versicherungs und Transport A/G Daugava v Henderson (1934) 49 Ll L Rep 252
Wayne Tank and Pump Co Ltd v The Employers’ Liability Assurance Corp Ltd [1974] QB 57
White v Overland [2001] FCA 1333

PARTIES: BAULDERSTONE HORNIBROOK ENGINEERING PTY LTD
GORDIAN RUNOFF LTD & ORS
CGU INSURANCE LIMITED
HIH CASUALTY AND GENERAL INSURANCE LIMITED

FILE NUMBER(S): CA 40316/2006

COUNSEL: Appellant: SG Finch SC; AJ McInerney; N Kabilafkas
1st Respondent: RM Smith SC; M Jones
2nd Respondent: SD Robb QC; GP Ellis SC

SOLICITORS: Appellant: Freehills
1st Respondent: Corrs Chambers Westgarth
2nd Respondent: Colins Biggers & Paisley
3rd Respondent: Blake Dawson Waldron

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): SC 50176/2003

LOWER COURT JUDICIAL OFFICER: Einstein J

LOWER COURT DATE OF DECISION: 12 April 2006

LOWER COURT MEDIUM NEUTRAL CITATION: [2006] NSWSC 223

- 1 -

CA 40316/06

ALLSOP P
BEAZLEY JA
CAMPBELL JA
Thursday 9 October 2008

BAULDERSTONE HORNIBROOK ENGINEERING PTY LTD v GORDIAN RUNOFF LTD & Ors

Headnote

A dispute arose between the Federal Airports Corporation (“FAC”), later Sydney Airports Corporation Ltd (“SACL”), and Baulderstone Hornibrook Engineering Pty Ltd (“BHE”) about the adequacy of the construction of the reinforced earth walls forming the perimeter of the third runway at Sydney Airport, and the adjacent area known as the Millstream Channel Diversion.

BHE was engaged as head contractor on the project. BHE engaged subcontractors including, relevantly, Reinforced Earth Pty Ltd (“RE P/L”) in relation to the design of the reinforced earth walls on the project and Connell Wagner NSW Pty Ltd (“CW”) in relation to the provision of engineering services, including the reinforced earth walls.

FAC put in place a program of insurance for the benefit of all consultants undertaking responsibilities in the design and construction of the third runway. HIH Casualty and General Insurance Ltd (In liquidation) (“HIH”) underwrote the bottom layer, insuring the first $20 million. Gordian Runoff Ltd (“Gordian”) provided the next $10 million. QBE Insurance Ltd (“QBE”), Commercial Union Assurance Co of Australia Ltd, later CGU Insurance Ltd (“CGU”), and a syndicate at Lloyd’s provided three further layers of $6 million, $5 million and $9 million respectively. The policies covered professional indemnity risks and not construction risks. BHE had its own policy of professional indemnity insurance underwritten by AMP General Insurance Co Ltd (“AMPG”).

Work commenced in early 1993 with practical completion in August 1994. By late 1996, subsidence of backfill behind the facing panels of the reinforced earth walls was discovered. BHE notified its insurers.

In June 2002, SACL sued BHE for damages in the Building and Construction List of the Equity Division of the Supreme Court of New South Wales. In June 2004, the proceedings were settled, BHE undertaking to rectify the defects at a likely estimated sum exceeding the levels at which both the Gordian and CGU policies would fully respond. BHE sought indemnity from the insurers participating in the professional indemnity programme. In December 2003, BHE commenced proceedings against the insurers. Initially those proceedings did not include AMPG. In January 2005, AMPG agreed to indemnify BHE for $20 million. BHE claimed a further $20 million from AMPG in relation to what was said to be a second claim, joining AMPG to the proceedings seeking to vindicate this assertion of a second claim. This claim against AMPG was dismissed by the primary judge. On appeal, the issues for decision remained only in relation to the policies underwritten by Gordian and CGU.

At first instance, Einstein J concluded that neither the Gordian nor the CGU policies responded because the liability of BHE for SACL’s claim against it under the design and construction contract could be described for the purposes of the policies as arising out of (uninsured) construction risks and not arising out of (insured) professional indemnity risks. BHE appealed.

Held, dismissing the appeal:

(per Allsop P; Beazley and Campbell JJA agreeing)

As to special provision 2 (Grounds 1 and 3)

1. Special provision 2 was not engaged: [266].

2. The claim did not arise out of RE P/L and CW’s act, error or omission for the purpose of special provision 2: [241].

3. The act, error or omission of RE P/L and CW fell within “professional activities or duties” for the purpose of special provision 2: [249].

As to insuring clause 1 (Grounds 4 and 6)

4. Insuring clause 1 was not engaged: [241], [266].

As to insuring clauses 1 and 2

5. The argument put on appeal that the contract and design documents mandated the faulty construction procedure and technique was sufficiently averted to below, was available on appeal, but should be rejected.

As to exclusion 1(p) (Grounds 7 and 9)

6. Exclusion 1(p) was engaged: [266].

7. The failure of BHE to test and employ proper compaction and construction techniques in the hand compaction area fell squarely within exclusion 1(p): [264].

8. A relevant proximate and operative cause of the claim was the construction inadequacy of BHE in its means, methods, techniques and procedures of construction such that the claim arose out of that cause: [264], [265].

9. Where there are two or more causes, one falling within an insuring clause and another falling within the exclusion, an insurance policy will not respond, though the question is a matter of construction: [263].

Wayne Tank and Pump Co Ltd v The Employers’ Liability Assurance Corp Ltd [1974] QB 57
McCarthy v St Paul International Insurance Co Limited (2007) 157 FCR 402

10. The primary judge was entitled to conclude that the liability of BHE did not arise out of RE P/L or CW’s act, error or omission or out of BHE’s co-ordinate responsibility for such acts, errors or omissions: [265].

Grounds 2, 5 and 8

11. The primary judge erred in finding that there was no relevant design involvement of BHE: [266].

12. The claim arose from RE P/L and CW’s acts, errors and omissions: [266].

13. The claim arose from BHE’s construction errors: [266].

The conclusions of the primary judge about the lack of precautionary instructions

14. The primary judge was not in error in concluding that the instructions for construction method and sequence should have contained some precautionary warning: [270].

The proper construction of special provision 2 as a so-called stand alone insuring clause.

15. Special provision 2 was an extension of the indemnity to cover acts, errors and omissions by specialist designers or consultants in the conduct of “professional activities or duties”, acting on the Insured’s behalf and for whom the Insured was responsible. There was not required to be an act, error or omission of BHE: [273].

16. The application of the special provision 2 was not restricted or limited to circumstances where the designer or consultant acted for the third party as agent, for or representative, of the insured: [274].

17. Special provision 2 fitted into the policy fully subject to the terms and conditions without the need for implication of terms: [275].

The Gordian attachment points

Question whether HIH had “paid”

18. If the policy otherwise would respond, clause C of the Gordian policy was satisfied: [293].

19. The word “paid” had its usual or ordinary meaning and meant funds disbursed; here, there was no payment: [282].

Question whether HIH had admitted liability

20. HIH made a recognition or admission of liability under the policy by granting indemnity to BHE: [290].

21. The “grant of indemnity” or admission of liability may be seen, in certain circumstances, to give rise to another agreement: [291].

Lubovsky v Snelling [1944] KB 44
Law Society v Sephton & Co [2004] EWHC 544
Thiess Pty Ltd v ERC Frankonia Reinsurance Limited [2007] QSC 4

Question whether HIH could be held liable to pay

22. HIH could still be held liable. The acceptance of moneys which gave partial reparation to BHE for its whole loss from a full indemnity under the AMPG policy, did not deny BHE the right to sue HIH for indemnity under its policy because there still remained loss to be the subject of reparation or indemnity: [302], [309].

23. Where several insurers have severally insured a risk, the insured can only receive one indemnity for its loss. Upon receipt of that full indemnity from one insurer, the others are discharged against the insured. They remain, however, liable to contribute to the insurer that has paid. They are discharged because the insured can have no claim, because it has received full reparation for its loss: [298].

Albion Insurance Co Limited v Government Insurance Office of New South Wales (NSW) (1969) 121 CLR 342

24. Once an insured’s loss has been the subject of reparation, the insured cannot claim indemnity from another insurer in respect of the same loss, because by then there is nothing to indemnify. Subject to the terms of the policies, if there are several insurers, each is liable under its terms until the insured is provided with full reparation or indemnification for its loss: [299].

GRE Insurance Ltd v QBE Insurance Ltd [1985] VR 83

The “excess point” and the operation of exclusions 1(e), 1(o) and clause 7

25. Settlement of the claim was reasonable upon the information available at the time of settlement: [324], [325], [327].

26. Exclusions 1(e) or 1(o) or clause 7 did not engage. The design requirement of the work that the reinforced earth walls be maintenance free for 50 years was not a warranty or guarantee and did not amount to assumed contractual liability but was an inherent part of the design. BHE’s liability arose by reference to the task it undertook: [328].

CA 40316/06

ALLSOP P
BEAZLEY JA
CAMPBELL JA
Thursday 9 October 2008

BAULDERSTONE HORNIBROOK ENGINEERING PTY LTD v GORDIAN RUNOFF LTD & Ors

JUDGMENT

ALLSOP P:

1 Contents

Introduction [2]

The nature of reinforced earth wall building technique [15]

The judgment below, the approach of the primary judge
and the arguments below – a brief introduction [26]

The insurance policies [31]

The primary judge’s reasons [43]
• The primary judge’s “overview findings” [46]
• The primary judge’s findings in relation to witnesses [47]
• The primary judge’s comments on the course of
the hearing [56]
• The width of the hand compaction zone [59]
• The evidence of Mr Price [60]
• The primary judge’s detailed analysis of the reasons
for sand loss [61]
• Insurance and the causal mechanics [95]
• Other aspects of the judgment below [122]

The argument of BHE on appeal [123]

Whether BHE’s arguments on appeal were run below [136]

The assessment of BHE’s argument on appeal [171]
• The contractual documents – the head contract [174]
• The contractual documents – the subcontracts [192]
• The design documents [199]
• Conclusions as to the argument of mandated compaction
technique [225]
• The questions of design and construction and the
the operation of the policies – why the appeal should
be dismissed [228]

Other matters argued [268]

the default of RE P/L and CW as to the precautionary

instructions should be set aside [269]
• The proper construction of special provision 2 as
a so-called stand alone insuring clause [272]
• The so-called Gordian attachment points [276]
• The so-called “excess point” and the operation
of exclusions 1(e), and 1(o) and cl 7 [311]
• The lack of separate treatment of RE P/L and CW [330]

Orders [333]

Introduction

2 This is an appeal from orders made by a Judge of the Court (Einstein J) dismissing a claim made by the appellant, Baulderstone Hornibrook Engineering Pty Ltd (“BHE”), for recovery under two polices of insurance held by it, which policies were underwritten by the first and second respondents, GIO Insurance Ltd, now known as Gordian Runoff Ltd (“Gordian”) and Commercial Union Assurance Co of Australia Ltd, now known as CGU Insurance Ltd (“CGU”). (For the reasons of the primary judge, see Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (formerly GIO Insurance) & Ors [2006] NSWSC 223.) The third respondent, HIH Casualty and General Insurance Ltd (In liquidation) (“HIH”) was an insurer under a policy in the programme of insurance of which the Gordian and CGU policies were also part.

3 Gordian and CGU were two of the excess of loss primary insurers in a professional indemnity programme of insurance under which HIH underwrote the bottom layer, insuring the first $20 million. Gordian provided the next $10 million above that $20 million. Thereafter, three insurers, QBE Insurance Ltd (“QBE”), CGU and a syndicate at Lloyd’s provided three further layers of $6m, $5m and $9m (ie $6 million over $30 million, $5 million over $36 million and $9 million over $41 million, respectively) thereby completing a programme of $50 million of professional indemnity insurance.

4 This programme of insurance was put in place by the principal of the design and construction contract to which BHE was a party as head contractor, originally the Federal Airports Corporation (“FAC”) and later, after the privatisation of Sydney Airport, Sydney Airports Corporation Ltd (“SACL”), for the benefit of all consultants undertaking responsibilities in the project, which was the design and construction of the third runway at Sydney Airport in the 1990s.

5 Speaking broadly, the policies in question were intended to cover professional indemnity risks and not construction risks. That is an inadequate identification of the problem to be solved in this appeal, as it masks some of the more precise difficulties in the resolution of the appeal. It does, however, sufficiently identify the area of discourse and debate at this point.

6 BHE had its own policy of professional indemnity insurance underwritten by AMP General Insurance Co Ltd (“AMPG”). This policy provided for insurance for breach of professional duty up to $20 million for any one claim, and $40 million in the aggregate for more than one claim. Before AMPG was joined to the proceedings that the primary judge disposed of, it agreed to indemnify BHE for $20 million; and this sum was paid in January 2005. BHE claimed a further $20 million from AMPG in relation to what was said to be a second claim. AMPG was joined to the proceedings by BHE seeking to vindicate this assertion of a second claim. This claim against AMPG was dismissed by the primary judge, from which dismissal there was no appeal.

7 BHE was the head contractor. It engaged a number of subcontractors in effecting its responsibilities. Relevantly for these proceedings, these subcontractors included Reinforced Earth Pty Ltd (“RE P/L”), which was retained in relation to the design of the reinforced earth walls on the project and Connell Wagner NSW Pty Ltd (“CW”), which was retained in relation to the provision of engineering services in relation to the third runway, including the reinforced earth walls.

8 A dispute arose between FAC, and later SACL, on the one hand, and BHE, on the other, about the adequacy of the construction of the reinforced earth walls forming the perimeter of the third runway and on an adjacent area known as the Millstream. Work had commenced in early 1993 and practical completion occurred in August 1994. By late 1996, subsidence of backfill behind the facing panels of the reinforced earth walls was discovered. BHE notified its insurers. In June 2002, SACL sued BHE for damages in the Building and Construction List of the Equity Division of the Court. In June 2004, those proceedings were settled, the settlement involving BHE undertaking to rectify the defects at a likely estimated cost of a sum exceeding the levels at which both the Gordian and CGU policies would fully respond. BHE sought indemnity from the insurers participating in the professional indemnity programme to which I have referred. Proceedings were commenced against the insurers in December 2003. Initially those proceedings did not include AMPG, but after Gordian and CGU raised defences that the proceedings by SACL involved two claims, BHE sued AMPG claiming the second $20 million. Issues now remain for decision only in relation to the policies underwritten by Gordian and CGU; though, because of the terms of the Gordian and CGU policies, it is necessary to discuss the terms of the HIH policy.

9 On the evidence before him, the primary judge concluded that neither the Gordian nor the CGU policy responded, because the liability of BHE for SACL’s claim against it under the design and construction contract could be relevantly described for the purposes of the policies as arising out of (uninsured) construction risks and not arising out of (insured) professional indemnity risks.

10 The appellant challenged this conclusion by the primary judge not by an attempted re-litigation of all the factual issues that were before his Honour, but by accepting many (though not all) of the factual findings of the primary judge and the evidence upon which they were based.

11 The essential argument of the appellant was that when one examined the substance of the findings of the primary judge and the substance of the evidence of the expert witness called by Gordian, Professor Leshchinsky, and of the senior officer of RE P/L, Mr Boyd, the only proper conclusion was, and is, that the defaults by BHE, RE P/L and CW, were of a character of engineering or design, as elaborated in the contractual documents and the terms of the policies, and not of a character of construction.

12 In rebutting these claims, Gordian and CGU, asserted that the appellant was putting a case not propounded before the primary judge at the trial, being a case which, if put below, would have led to a different course being taken by them at the trial and which could have been met by evidence that was not called. Thus, it was said that the essential argument of the appellant should not be entertained. In any event, Gordian and CGU submitted that, by reason of the way the case was presented to the primary judge for disposition, his Honour was permitted to make the findings that he did, and, in that context, the findings mandate the conclusion that the relevant insurance policies do not respond, either because the events fall outside the primary insuring clauses, or because they fall within exception clauses within those policies.

13 In my view, the arguments put on appeal by BHE were encompassed in the case put at the trial. Nevertheless, I would dismiss the appeal for the following reasons.

14 At the outset, it is helpful to describe the nature of reinforced earth walls and how that technique was used here.

The nature of reinforced earth wall building technique

15 It is appropriate to begin by explaining the technique employed to build the wall that was placed around the perimeter of the runway to protect it from erosion by the waters of Botany Bay and the wall which was adjacent to a channel diversion just to the north of the runway, called the Millstream Channel Diversion.

16 Reinforced earth walls comprise compacted earth in association with reinforcing materials. Typically, granular earth and linear tensile reinforcements are combined to form a block of reinforced earth which acts monolithically as a mass gravity retaining structure. The technique used by RE P/L was said to be proprietary technology referred to in the contemporaneous documents as “Reinforced Earth”.

17 The first report of Professor Leshchinsky gave an explanation of the subject walls. The reinforced earth walls were constructed using prefabricated concrete panels on the external, marine side of the reinforced compacted earth. The width of the wall measured by the length of the reinforcing strips from the inside of the external facing panels was a little over five metres. The precast panels in the Seawall (that is on the perimeter of the runway) had horizontal and vertical joints about 15-20 mm wide, and were “Double T” type panels. On the Seawall the horizontal joints were sealed. The Millstream walls employed cruciform shaped panels which, when assembled, had vertical and horizontal joints of the same width. Both the vertical and horizontal joints on the Millstream walls were unsealed.

18 The unsealed joints (vertical in the Seawall and horizontal and vertical in the Millstream walls) were covered on the inside of the panels with strips of non-woven needle-punched polyester geotextile material. The geotextile was intended to be semi-permeable, allowing water to flow through (in and out) while retaining the compacted earth. At the Seawall, the geotextile was placed around no-fines blocks that were placed behind the vertical joints.

19 The reinforced earth was placed behind the concrete panel walls. This earth was compacted in a manner to be discussed in due course. For present purposes, it is sufficient to understand that at prescribed heights on the internal face of the panels metal strips were affixed to the panels, and laid over compacted earth. A further layer of earth was placed and compacted over these strips. Thus, by a process of force, tension and friction, the strength of the compacted earth as a mass gravity retaining structure was increased by this reinforcement.

20 The compaction of the reinforced earth was an important aspect of the integrity of the structure. It is important to understand that compaction took place, relevantly, in two areas and by two different methods. First, in the area not immediately adjacent to the inside face of the concrete panels, a heavy motorised roller was used to compact the earth. The use of such equipment too close to the panels might have placed sideways force on the panels and thereby threatened their integrity. So, in the area adjacent to the inside face of the panels, hand-held compaction equipment was used to compact the earth.

21 The configuration of structures inside the concrete panels also necessitated compaction close to the panels. There were buttresses behind the Seawall panels. Also, no-fines blocks were placed behind the vertical joints in the Seawall. Thus the compaction that was required had to be effected around these structures which broke the straight line of the inside of the concrete panels.

22 The adequacy of the compaction in this latter area (to which I will sometimes refer as the hand compaction zone or area, and sometimes as the one metre zone or area) and the adequacy (or more relevantly, inadequacy) of any testing of compaction immediately adjacent to the inside face of the panels were issues central to the resolution of the case at trial. The method of compaction in this area and the relationship between construction and design responsibilities insofar as they bear on that method of compaction were issues central to the resolution of the appeal.

23 This introduction about the technique of constructing reinforced earth walls can be helpfully supplemented by reference, first, to the so-called “Recommendations and Rules of the Art” for reinforced earth structures issued (in translation) by the French Ministry of Transport, upon which RE P/L’s proprietary technology was based; and, secondly, to RE P/L’s “Reinforced Earth Wall Construction Manual”. In the former document, the construction process was described as follows:

The construction process of the reinforced earth is quite similar to the construction of the classical embankments, it is realized by successive layers. It includes the following stages:

- Placing of the facing elements (fig 1.1.1)

- Backfilling with the soil layer, eventually under compaction (fig 1-2)

- Placing of the reinforcement strips and their attachment to the facing by the bolts (fig 1-3)

- This construction can be entirely realized from the internal side of the facing and therefore it does not require any scaffolding or any external arrangement.

The reinforced earth mass is thus constituted from soil layers placed between the uniformly spaced horizontal layers of the reinforcement strips. It is generally, externally limited by the vertical facing (fig 1-4).

24 In the latter, the following introduction was given:

Reinforced Earth is a composite material formed by the association of a frictional soil and reinforcing strips. In concept, it is like reinforcing concrete; that is, it is an economical means of improving the mechanical properties of a basic material, earth, by reinforcing that material with another, steel.

Stresses produced within the soil mass are resisted by the strips. The stresses are transferred to the strips by friction.

…

Concrete facing panels are used at the face of the reinforced volume to prevent erosion of the backfill and to provide an attractive, finished appearance.

25 Before concluding this introduction to the reinforced earth technique, it should be noted that the structure had three vertical zones: the deepest or lowest zone which was always submerged (sometimes referred to as zone 1); an intermediate zone which was regularly submerged by the operation of the tide, swell and waves (sometimes referred to as zone 2 or tidal zone 2); and a higher zone which was only intermittently subjected to water by wave action (sometimes referred to as zone 3).

The judgment below, the approach of the primary judge and the arguments below – a brief introduction

26 It is important to appreciate that the primary judge heard the case for 46 days from 11 October 2005 to 3 March 2006. Thirty five of those days were consumed by the opening and the evidence and 11 by final addresses. I remark on these matters, not merely to pay tribute to the primary judge’s despatch in the resolution of a long, complex, hard-fought technical case, but to emphasise that the way the trial was fought and the arguments that were put (including their clarity or obscurity) were fresh to the mind of the primary judge, who plainly exerted considerable effort to produce a judgment as promptly and as meticulously as he could.

27 In his introduction to the judgment, the primary judge identified the central issue as the true cause of the sand loss behind the walls. Once one understood the cause of that loss, one could characterise the claims made for indemnity under the policies. No complaint was made about this approach. His Honour identified BHE’s contentions as containing three elements: (1) that the excessive sand loss was caused by defects in the design of the walls; (2) that the construction work was not defective in any way, in particular the specified degree of compaction to 80% Density Index, (to which I will refer as “80% DI”) was attained in the area one metre from the panel walls; and (3) the construction conformed with a flawed design. The primary case of BHE was that it had compacted the earth behind the walls to the requisite degree of compaction. It identified the cause of the sand loss as the inappropriately specified geotextile material that was placed over the unsealed joints. This geotextile material was said to have holes that were too large, such that water was permitted not only to enter and leave (as intended), but also sand was permitted to escape (not as intended). This primary case was supported by an expert, Professor Ingold. The various directional changes and iterations of Professor Ingold’s evidence were dealt with by the primary judge.

28 In contrast, Gordian and CGU contended that there was no design defect; that the cause of excessive sand loss was the failure of BHE properly to construct the walls by its failure to compact uniformly to 80% DI and by its failure to test and certify that fact; that in the alternative, if inadequate compaction was not the sole cause of the sand loss, it was a substantial contributing cause, which alone would have been sufficient to have caused the need to undertake the rectification of the work; and, further in the alternative, that the sand loss was caused by defective affixation (in construction) of the geotextile material, permitting sand to be trapped between the panel wall and the geotextile creating a path for sand to escape.

29 These contentions were supported by Professor Leshchinsky. The main thrust of his views were ultimately accepted by the primary judge as a reliable explanation for the loss of sand. To a degree, however, Professor Leshchinsky’s views developed as the hearing progressed (though not to the degree that those of Professor Ingold did).

30 It is important to appreciate that the above contentions are a summary of the issues that were in contest at the commencement and during a significant part of the course of the trial. The causal mechanisms identified by Professor Leshchinsky in his reports and cross-examination, came to form the foundation of an alternative case propounded by BHE. It is the extent to which this alternative case of BHE, as run at the trial, can be seen to encompass the argument put by BHE on appeal that lies at the heart of the debate about the legitimacy of the approach BHE has taken on appeal.

The insurance policies

31 Before examining the primary judge’s reasons, it is appropriate to identify the relevant clauses of the insurance policies in question. Each of the Gordian and CGU policies adopted the terms of the HIH underlying policy, to the extent the HIH wording was not inconsistent with their respective wordings. Thus, it is convenient to begin with the HIH policy.

32 The named insureds in the HIH policy included BHE and CW (being specifically named) and RE P/L (as falling within the class described as “all consultants”). The “profession” was stated in the policy Schedule to be “engineers and as defined herein”. The primary insuring clause (to which I will refer as “insuring clause 1” or “the insuring clause”) was in the following terms:

To indemnify the Insured against any claim or claims which may be made against them or any of them and which are notified to the Company during the period specified in the Schedule, for breach of professional duty in the profession stated in the Schedule, by reason of any act, error or omission whenever committed unless limited by the retroactive date stated in the Schedule or wherever the same was or may have been committed or alleged to have been committed on the part of the Insured in the conduct and execution of the Professional Activities and Duties as defined herein.

33 The “Professional Activities and Duties” were defined in the policy and endorsement as follows:

The Professional Activities and Duties in respect of which coverage is provided is deemed to be those services as set out in the Schedule as well as those defined hereunder.

This form of the clause was found in the endorsement which deleted a paragraph in the standard terms, and substituted the above clause. In the standard terms, after the clause that was replaced, there appeared three numbered paragraphs entitled “1. Advisory Services”, “2. Predesign and Feasibility Studies” and “3. Miscellaneous Services (ancillary to the main design criteria) Related to the Design and Construction Phases” . Each of these had various sub-paragraphs. Under the third paragraph ( “3. Miscellaneous Services” etc) the following sub-paragraphs were included:

(i) Checking of designs and plans prepared by others

(j) Preparing detail drawings

…

Engineering, project management, surveying, designing, geotechnical, environmental monitoring, construction management, certification and as defined in the policy wording.

34 Thus, the HIH policy can be seen to relate to engineers and the professional activities and duties described above.

35 The second (and presently irrelevant) insuring clause dealt with defence costs.

36 A number of clauses were then set out under the heading “Exclusions”. Relevantly, the following appeared:

1. This Policy shall not indemnify the Insured in respect of any claim made against them:

…

(e) for any liability of whatsoever nature imposed upon the Insured pursuant to the Law of Contract but only when such legal liability would not have been imposed upon the Insured pursuant to the Law of Tort.

…

(o) arising out of the provision by the Insured of any express warranty or guarantee which increases the Insured’s measure of liability but this exclusion shall not apply to liability which would have attached to the Insured in the absence of such express warranty or guarantee to the extent that such is attributable breach of professional duty otherwise insured hereby.

(p) arising out of construction work performed involving the means, methods, techniques, sequences, procedures and use of equipment, of any nature whatsoever which are employed by the Insured’s contracting staff or others in executing any phase of any Project.

2. There shall be no liability hereunder in respect of any claim for which the insured is entitled to indemnity under any other insurance required to be effected by or under any law or indemnity or under any statutory fund or fidelity fund, except in respect of any amount beyond that which is payable or would have been payable under such other insurance, statutory fund or fidelity fund, had this policy not been effected.

…

7. This policy shall not indemnify the Insured in respect of any claim made against them which relates to any contractual or other duty or obligation assumed by the Insured which is not assumed in the normal conduct of the Insured’s profession as stated in the Schedule.

37 After the section entitled “Exclusions”, there was a section headed “Special Provisions” under which the following two provisions appeared (the second having been altered by the deletion of a paragraph by a clause of the endorsement):

1. It is understood and agreed that, where the Insured act in more than one capacity in the same project that is where they are, at the same time:

(a) Building or Project Owners and Contractors and Designers, or

(b) Contractors and Designers, or

(c) Building or Project Owners and Designers

and the Insured in any of these capacities incur loss, damage or expense arising from any act, error or omission in connection with the professional activities as defined herein, the Company agrees to consider it as if a claim had been made against the Insured provided that such loss, damage or expense is not insured by any other policy.

“Designers” in the above context shall extend to include all those professional activities and duties defined in and insured by this policy.

2. The coverage provided by this Policy is extended to indemnify the Insured, subject to the Policy’s terms and conditions, against their legal liability for claims (and/or against loss, damage or expense as defined in Special Provision 1) arising out of any act, error or omission in the conduct of professional activities or duties committed by specialist designers or consultants acting on the Insured’s behalf pursuant to any contract for service and for whom the insured are responsible.

The Company’s total liability for all claims under this Policy including this Special Provision, shall not exceed the sum stated on the Certificate representing the limit of indemnity.

38 There then followed a section entitled “Conditions” containing six clauses which included a claims notification clause (condition 4), in the following terms:

If during the subsistence hereof the Insured shall become aware of any circumstance which may subsequently give rise to a claim against them for breach of professional duty as specified in the Schedule by reason of any act, error or omission and shall during the subsistence hereof give written notice to the Company of such occurrence, then any such claim which may subsequently be made against the Insured arising out of that act, error or omission shall for the purposes this policy be deemed to have been made during the subsistence hereof.

39 There was a trade practices and related legislation extension.

40 In the Gordian policy, the following appeared as clause C:

The GIO shall only be liable in respect of the indemnity herein given after the Underlying Insurers have paid or have admitted liability or have been held liable to pay the full amount of their indemnity provided always that the liability of the GIO under the indemnity herein given shall be limited to the amount in respect of any one claim and in the period of insurance stated in the Policy Schedule. It is a condition of this Policy that the Underlying Insurances shall be maintained in full effect during the currency of this Policy.

41 It is unnecessary to set out any of the separate CGU policy wording.

42 As will be discussed more fully in due course, the principal insurance issues that arose on appeal from these policies were:

(a) Was insuring clause 1 engaged so as to indemnify BHE against SACL’s claim against it?

(b) Was special provision 2 engaged so as to indemnify BHE against SACL’s claim against it?

(c) Was exclusion 1(p) operative to deny indemnity?

(d) Was Gordian clause C, dealing with attachment of the Gordian policy, satisfied?

The primary judge’s reasons

43 It is necessary to examine the primary judge’s reasons in some detail. From time to time, for convenience and as an aid to comprehension, reference will be made in this part of these reasons to some of the evidence and arguments, though these will be dealt with more fully later.

44 The primary judge commented upon the difficulty of making factual findings in what he described as a “very complex environment”. This was a reference to the changes in approach of the witnesses (in particular Professor Ingold), the changes in direction of BHE (in particular after Professor Ingold’s cross-examination), the difficulty caused by BHE’s late assertion of the width of the hand compaction area as 1.5m, the technical complexity of the issues and the volume of material placed before the court in evidence. In the light of the debate about what was, and was not, run at the trial these (entirely legitimate) comments of the primary judge should be borne in mind.

45 Also, it is unnecessary to deal with many of the issues resolved by the primary judge.

The primary judge’s

“overview findings”

46 The primary judge commenced by making what he referred to as “overview findings”. Relevantly for understanding the issues in the appeal, these were:

(a) The hand compaction zone extended one metre from the back of the Seawall and the Millstream walls.

(b) The requisite compaction density of 80% was not achieved in the zone one metre from the back of the Seawall.

(c) There were no records of any testing within the one metre zone from the back of the Seawall and no testing took place there.

(d) There were some records of testing in the one metre zone behind the Millstream walls early in the work. After this testing in the early stage of the Millstream walls work a conscientious approach to testing by BHE fell away.

(e) The requisite compaction density of 80% was also not achieved in the zone one metre from the back of the Millstream walls, except in a few positions.

(f) There was no particular appreciation by BHE of the significance of achieving the 80% compaction (implicitly in the one metre zone, see heading above [76] of the reasons).

i. the first being that if the fill had not, when originally laid, been compacted to the 80% Density Index, it would tend to settle under the influence of tide in the area adjacent to the joints to a distance of 100mm…

ii. the second being that if the sand was originally compacted to the 80% Density Index in 660mm layer lifts, the compactive forces involved would induce stresses into the geotextile causing it to be stretched and possibly fold.

The primary judge’s findings in relation to witnesses

47 The opinions of Professor Leshchinsky were preferred to those of Professor Ingold whose opinions were found to be unreliable. Professor Ingold was found not to be objective as a witness.

48 The primary judge discussed in detail lay witnesses who were called: Mr Caretti, a project-based BHE site engineer from late 1992 to mid 1994; Mr Ashton, a civil engineer employed by BHE on the job from 1992 to 1994 who was, from June 1993 until August/September 1994, the section manager responsible for overseeing construction of the Millstream walls; Mr Moore, who was a project manager at BHE and who had no involvement in the construction of either the Seawall or the Millstream walls; Mr Scott, a project-based BHE site engineer from late 1992 to early 1994.

Mr Caretti

49 Mr Caretti was relevantly involved in the project on the Millstream walls as part of a team of foremen and engineers responsible for supervising the construction of the reinforced earth structure. His responsibilities included placement of the geotextile over the joints and compaction of the backfill. He had no involvement in, or knowledge of, the compaction in relation to the Seawall.

50 The primary judge reviewed Mr Caretti’s evidence in detail, in particular that relating to compaction. The primary judge noted that the burden of an extensive cross-examination was as to Mr Caretti’s assertion of testing of compaction in the one metre zone. The primary judge rejected Mr Caretti’s evidence about adequacy of compaction and in particular that the references to “1m” in testing documents could be understood as within one metre; but he was prepared to accept “a deal of matters which Mr Caretti recalled having occurred”.

Mr Ashton

51 Mr Ashton’s role as section manager responsible for overseeing construction of the Millstream walls was a management role which gave him responsibility for, amongst other things, the quality of works and the achievement of the construction plan.

52 The primary judge referred to the cross-examination directed to the geotextile and its placement and the importance of the 80% compaction. The primary judge accepted Mr Ashton as reliable, his early noticing of sinkholes and his view that they were not matters revealing any significant problem.

Mr Moore

53 Mr Moore investigated defects in the project including sand loss and was in 2003 Project Manager for the rectification work. Mr Moore’s investigations gave substantial support to the primary judge’s findings that (apart from early in the Millstream walls’ construction) there was no record of, and so no testing for, compaction in the hand compaction zone. Importantly, Mr Moore said that in his investigations he had asked site engineers, including Mr Scott, whether there had been testing in the one metre zone and that they (including Mr Scott) had said that they did not recall the requirement to test each layer in the one metre zone.

Mr Scott

54 Mr Scott, who was a recently graduated engineer, was involved in the Seawall construction for the first 22 (out of 77) lots – 2km (out of 7km). His evidence concerned, amongst other things, compaction in the hand compaction zone, and compaction testing in that area.

55 The primary judge rejected Mr Scott’s evidence as unreliable, in particular that given by him that satisfactory compaction testing was done in the one metre zone and that the hand compaction zone was 1.5 metres. The primary judge found that the hand compaction zone was one metre from the base of the internal wall of the panels.

The primary judge’s comments on the course of the hearing

56 Shortly after dealing with this evidence from Mr Scott and others about the width of the hand compaction zone, the primary judge made some comments as to how BHE had run the trial. For many weeks of the hearing, BHE held back its important contention that the hand compaction zone was 1.5 metres from the back of the Seawall in the knowledge that the other parties to the litigation were proceeding on the assumption that the hand compaction zone was one metre. Inferentially at least, the primary judge’s findings in this respect were that BHE not only knew that the other parties were under a misconception as to its (BHE’s) case, but that BHE knew that they (the other parties) assumed it was common ground that the hand compaction zone was one metre.

57 The primary judge said the following at [238] of his reasons:

… the litigious process is not furthered but is hindered where a crucial issue is not highlighted

as such

at an early stage in the proceedings, so as to permit the matter to be properly tested through appropriate witnesses, in the full light of day. Here BHE stepped perilously close to, but did not

overstep

the relevant line.

58 No occasion arises on the appeal to consider the correctness of this conclusion, including in particular, his Honour’s conclusions in the last sentence quoted. It will, however, be necessary to deal with a similar issue as to how BHE now puts its case on appeal.

The width of the hand compaction zone

59 After an exhaustive review of the evidence, the primary judge concluded that on the Seawall the hand compaction zone was one metre from the back of the wall. There was no issue about this with the Millstream walls which had no buttresses and no no-fines blocks. No challenge to these conclusions was made on appeal.

The evidence of Mr Price

60 Mr Price was the solicitor on the record for BHE until May 2004. He conducted a detailed investigation and gave detailed evidence of the claim and its history. This was particularly relevant to the assertions and counter assertions by BHE and the insurers of a lack of good faith of the other. It is unnecessary to discuss at length his Honour’s treatment of Mr Price’s evidence. Two aspects are, however, relevant. First, it became obvious to Mr Price in the course of his investigations that BHE had conducted no compaction testing close to the back of the panels. Secondly, Mr Price gave evidence about his advice to BHE in the settlement of the proceedings brought by SACL. This evidence formed the basis of his Honour’s conclusion that the settlement was reasonable.

The primary judge’s detailed analysis of the reasons for sand loss

61 After dealing with the making of the claim and the resolution of the underlying dispute with SACL, the primary judge, over more than 80 pages, examined the evidence about the reasons for the sand loss. He treated this (and there is no argument about this) as an immediately antecedently relevant question to the issues of design and construction and so as relevant to the response of the Gordian and CGU policies.

62 After explaining necessary terms and concepts, the primary judge turned first to Professor Ingold’s evidence. His Honour noted that Professor Ingold’s first proposition was that geotextile should never have been used and that all joints should have been sealed. At the heart of this theory was that the pores of the geotextile used (indeed of any geotextile that could have been used) were too large. This led to sand loss, the formation of cavities and, by one of two ways, the geotextile coming away from the wall and large quantities of sand then escaping.

63 Compaction was not irrelevant to Professor Ingold’s first theory, as the better compacted the sand the greater the resistance to being washed away. He also expressed the view that if there were folds in the geotextile, the loosely compacted sand might settle against the geotextile pressing it against the wall.

64 The terms of Professor Ingold’s theory, as applied to the Millstream walls and the Seawall, were carefully set out by the primary judge. Early in his analysis of Professor Ingold’s theory, the primary judge rejected one operative element of it – the growth of cavities from behind the centre of the geotextile to the edge of the geotextile. This left as the operative element of the theory the cavity formation causing a pulsation effect on the geotextile, pulling the geotextile away from the wall.

65 The primary judge found Professor Ingold to lack objectivity and his Honour was unwilling to place any trust in his evidence. He rejected Professor Ingold’s theory.

66 The primary judge noted the various developments in the views of Professor Ingold, in particular as he was cross-examined. The first such development (made early in his oral evidence) was that the designers should only have chosen the geotextile if “laminar flow” marine conditions were present. Professor Ingold said that only “turbulent flow” conditions were present at the walls. This assertion (not in his reports) required the primary judge (and counsel and witnesses at the trial) to deal with this issue. His Honour did so. The primary judge concluded that the flow was laminar and so rejected Professor Ingold’s criticism of the use of the geotextile in this regard.

67 The primary judge also rejected Professor Ingold’s view that the formula used by the designers to assess the geotextile was inappropriate.

68 The primary judge then considered what he called Professor Ingold’s second development, being his statement, on the last morning of cross-examination by Mr Smith, that cavities would not grow from the joint to the edge of the textile. This was not a development of his hitherto expressed views, but a view contradictory to that which he had hitherto espoused. This then placed all the weight for his theory on the likelihood of the oscillation of the geotextile pulling it away from the wall. This development required the analysis of tests conducted by the Water Research Laboratory of the University of NSW.

69 The primary judge then considered what he called Professor Ingold’s third development, his revision of the size of the smallest sand particle. On this revision, a much larger proportion of particles would be lost before the sand loss mechanism based on cavities came into play. The primary judge rejected this view.

70 The primary judge then dealt with Professor Leshchinsky’s evidence. His Honour identified Professor Leshchinsky’s two theories (or mechanisms, as they came to be called) of sand loss as set out earlier.

71 The primary judge noted that Professor Leshchinsky expressed the view that the two mechanisms (set out earlier) could combine and together be responsible for folding deformation of the geotextile, allowing a path for escape of sand.

72 The primary judge then examined each of these mechanisms. The first mechanism was that the fill behind the walls was not adequately compacted and the geotextile during sand laying and compacting remained against the wall, not displaced by folds or wrinkles. Professor Leshchinsky’s view on mechanism one can be seen from [7.9] of his report of 5 September 2005:

The combination of the absence of records demonstrating that in the 1m zone immediately behind the sea wall the required density was met, together with the circumstance that the compaction method was not mechanical but hand held, causes me to conclude that the fill (as each 660mm layer was placed) did not meet the required density requirement through the entirety of each layer. I am confident that this is the case.

73 The primary judge recorded the vigorous attack made on this conclusion by BHE, in furtherance of BHE’s case that the 80% DI compaction requirement was achieved.

74 It is necessary to understand how the first mechanism was said to operate. In particular, this is so in connection with the central debate on appeal as to whether BHE raised below what it argued on appeal. The following explanation of mechanism one was set out at [728] of the primary judge’s reasons:

a. Water flows through the joints, past the geotextile and into the sand;

b. In the second zone, as the sand is loose, it will become more dense as it becomes submerged in water. This will occur also in the first zone when the temporary dams are first removed, where this sand is also not properly compacted;

c. This loose sand, being submerged in water, will compact and settle. One might imagine settlement as being represented by the overall height of the submerged sand decreasing. As the sand compacts, it will exert a force against the geotextile and the wall;

d. This increased pressure against the geotextile will cause it to stretch;

e. As the tide rises, water flows into the sand;

f. As the pressure exerted by the water is acting in a direction opposite to the directions of the pressure which the sand is exerting, the pressure holding the geotextile against the wall is temporarily decreased;

g. The pressure, which earlier caused the geotextile to stretch, decreases, while the pressure pushing the geotextile into the body of sand increases. This allows the geotextile to relax by forming a fold;

h. Sand is allowed to enter this fold, and as the tide decreases, and water starts flowing out into the sea, sand is carries

through this fold and out into Botany Bay.

75 Thus, once the inadequately compacted sand settles, forces are set up with the entry of water, in particular in the tidal zone 2, causing folds in the geotextile.

76 The primary judge noted that Professor Ingold agreed that compression of sand vertically by tidal forces could induce drag on the geotextile and produce folds, that it was elementary to any engineer that a function of compacting earth is to reduce settlement as much as possible, and that if the sand had not originally been compacted to 80% then tidal forces could lead to the creation of folds.

77 In this context of Professor Leshchinsky’s mechanism one, the primary judge then resolved the factual issue about compaction in the hand compaction zone. His Honour found that in the one metre zone behind the walls the sand had not been compacted to 80% DI and that to the extent that there was compaction it had been compacted only to a Density Index which permitted settlement to occur. This finding was based on a number of matters set out by the primary judge at [747] of his reasons which included the findings:

(a) that it would have been “extraordinarily difficult” to achieve 80% DI density by compacting layers of backfill of 660mm with hand-held devices;

(b) that the BHE testing records were not a reliable indication of compaction (implicitly because they were not in relation to the hand compaction zone); and

78 The primary judge then analysed Professor Leshchinsky’s reasoning in detail, to which it is unnecessary to descend here. In doing so, however, his Honour made a number of factual observations that are relevant to the appeal. In rejecting a line of attack on Professor Leshchinsky in cross-examination by Mr Finch, senior counsel for BHE at the trial and on appeal, the primary judge said that photographic evidence showed that the sand was not placed uniformly before compaction was applied. The primary judge also found that compaction testing did not take place across the vast bulk of the Millstream walls and Seawall in respect of the hand compaction zone. At [758] of his reasons, the primary judge set out a number of facts relevant to this conclusion (at [761]) that Professor Leshchinsky’s “first mechanism” had been shown to be one of the mechanisms by which sand loss occurred. It is unnecessary to recount all of these, but the following should be noted:

i. in the Millstream the layer lifts in the 1m zone were 375mm … and in the seawall compaction was undertaken in 660mm layer lifts.

ii. the Millstream wall involved compacting a 375mm layer lift with a self-propelled compactor and in the case of the seawalls, a 660mm layer lift with the same machine and a jumping jack/whacker in between the buttresses.

iii. Compacting a 660mm layer lift to 80% DI is “very difficult” as Mr Moore said …; or “impossible” as Professor Leshchinsky said. Mr Moore said up to 100 passes may be necessary…

iv. Each agreed that it would be necessary to undertake a test program to demonstrate that a 660mm layer lift could be compacted with a whacker. So did Mr Scott.

v. BHE has no results of testing whether a 660mm layer lift could be compacted in the 1m zone.

vi. BHE’s engineering change proposal of 13 May 1993 included test results to support the change from compacting 330mm layer lifts to 660mm layer lifts. But none of those were at a point closer to the wall than 1m. Nothing in those tests indicates whether or not the compaction devices used in the 1m zone would achieve an 80% DI on a 660mm layer lift.

vii. In terms of contemporaneous records of tests carried out within the first metre from the walls, twenty-five records exist in regard to the Millstream walls (accounting for the first approximate 300 metres of it), and no records in regard to the Seawall.

viii. The October 1997 SMEC results which Mr Adler obtained, the BHP ground radar penetration tests which preceded those results and the SMEC tests of 38 holes between the buttresses obtained in September 2000, all point to

loose zones of sand behind the walls

at depth remote from the vertical joints. All of those reports indicate that a potential cause of that looseness was inadequate compaction when the fill was laid, as a number of witnesses agreed.

ix. BHE has called no witness to say that it was possible to compact a 660mm layer lift with the self-propelled compactor or the jumping jack in the case of the buttresses in the seawall to 80% DI. It was open to it to do so if it thought it could establish that the compaction techniques which were adopted in the 1m zone, would result in the fill being compacted by using the self propelled roller in the case of the Millstream wall and the self propelled roller and the jumping jack in the case of the seawalls to achieve the required 80% density.

x. BHE

itself

thought that the sand loss was caused by inadequate compaction (amongst other things). It instructed Mr Peck to proceed on that basis.

(emphasis in original)

“layer lift”

required

permitted

“compaction techniques which were adopted in the 1m zone”

79 Having found that mechanism one was one of the mechanisms of sand loss, the primary judge turned to Professor Leshchinsky’s second mechanism. This mechanism involved two elements or assumptions: first, that compaction to 80% DI level was achieved; and, secondly, that the process of compaction used to achieve that 80% DI created folds in the geotextile and thus passages for the escape of sand. This second element was not limited to circumstances where 80% DI compaction was achieved. The folds in the geotextile caused during the compaction process could occur during compaction to less than 80% DI.

80 The primary judge found the second mechanism also to be an operative cause of sand loss.

81 At the foundation of this finding was the following encapsulation of evidence at [769] of the primary judge’s reasons:

As already observed, both Professor Ingold and Professor Leshchinsky state, to varying degrees, that it would have been difficult to compact the sand immediately behind the walls without adversely affecting the geotextile. Mr Boyd gave evidence that the application of compacting effort to a “significant” height of backfill would also likely induce folds and wrinkles.

82 Though his Honour was dealing with the second mechanism, for the purposes of the appeal it is important to understand this evidence, since BHE says it contains the elements of its design case touching mechanism one said to have been overlooked by the primary judge.

83 The primary judge examined Professor Ingold’s evidence. It contained, as his Honour described (at [770]), some prevarication and variation. The primary judge at [770] took from Professor Ingold the following:

… whilst it would be possible for the inducement of wrinkles and folds to have been avoided, it would have been of the highest order of difficulty to do so; indeed, so difficult that measures additional to those actually adopted, would be required [transcript 1016.4-15].

“measures additional to those already adopted”

“normal practice”

Q. And if you had men with whackers trying to meet this 80 per cent density index with a 660 millimetre layer lift that is correct was a big ask, would you agree?

A. The only thing I would say is that normally in compacting something like that, when the fill is actually brought onto the site what happens is that is then tipped in a pile and then spread quite often with a dozer actually towing the roller. That could not be compacted – that could not be spread in that one metre wide zone. That would have been shovelled across, and usually what happens is the man with the whacker is walking up and down with that all the time the material is being shovelled in. So I don’t think it is the case that a 660 millimetre loose layer would have been placed and then the whacker would have been put on top. A man would be pushing that along all the time.

Q. Well, you don’t know one way or the other, do you?

A. No, I don’t, but I am saying is normal practice.

84 As is discussed elsewhere, the evidence appears to indicate that BHE placed layers of uncompacted backfill in the order of 660mm (at the Seawall) and 375mm (at the Millstream walls) for compaction. The question as to whether this was required by the documents provided to BHE for construction, or whether another technique for hand compaction could have been used was not discussed in the primary judge’s reasons. It is central to the resolution of the appeal.

85 Mr Boyd, the managing director of RE P/L, was responsible for the development of the design of the reinforced earth wall structures. The primary judge at [772] of his reasons stated the following about his evidence (in this section of the reasons on the second mechanism):

Mr Boyd’s evidence is that performing compaction on layer lifts of “significant” height would induce folds and wrinkles [Ex D3(iv) at [59]], however, it was possible to avoid such problems if the constructor had experimented with its techniques and layer lifts [Ex D3(iv) at [61]]. His evidence that experimentation would have been required stems from his stated opinion that “the choice of optimum layer depth is not a theoretical question and requires on-site experimentation and testing” [Ex D3(iv) at [61]].

86 The references to Ex D3(iv) were to a statement of Mr Boyd dated 9 December 2005. In this statement, Mr Boyd was dealing (in advance) with the matters in the proposed Second Further Amended Summons (about which argument took place, and judgment was handed down, on 15 December 2005). In that statement Mr Boyd dealt with the following:

(a) He recognised that the subcontract required design and specification as to, amongst other things, construction method.

(b) He understood that this encompassed the steps necessary to be taken in the construction and erection of the reinforced earth walls and the manner and sequence of those steps to ensure the structure would perform in accordance with the design.

(c) He recounted what Mr Burns, the BHE project manager with prior experience of reinforced earth walls, had said to the effect that BHE was comfortable with the construction of reinforced earth walls, had experience in such work, and would not require involvement of RE P/L, except to review any documents produced relating to construction.

(d) He recounted what Mr Jean-Louis Betbeder, BHE’s project director, told him during the tender process to the effect that he (Mr Betbeder) was aware of the techniques of reinforced earth walls and was involved in the construction of one at Réunion Island (in the Indian Ocean, south west of Mauritius).

(e) He dealt with methods of compaction and achieving the specified density. He said that BHE never asked for assistance about compaction or methods of construction, and that when he asked Mr Ashton how the compaction was going “close to the walls” , he was told “No problem, we are achieving the fill density over the full depth” . He expressed the view that compaction of uniform sand as on this job could be difficult and the appropriate technique involved experimentation and depended on such matters as the nature, weight and method of operation of the equipment, the layer thickness of backfill, and the use of water with mechanical compaction. He said that he thought it obvious that achieving 80% DI would be more difficult in the hand compaction zone than in the zone where the motorised roller was used and that he understood that an appropriate construction technique would be evolved by BHE to “match the depth of the layer carefully with the capacity of the equipment which had been selected to compact it” .

(f) He dealt with the BHE engineering change proposal of May 1993 concerning the proposal to allow backfill to be compacted using a 660mm layer of backfill. In his statement, he noted that in the double layer trial, which referred to a single layer of 660mm being pushed out with a dozer and being compacted with vertical rammers between the buttresses and a “walk behind plate” in the one metre zone, there was nothing said about the construction technique used with this equipment.

(g) He stated that he, as an experienced engineer, understood that applying compaction effort to a “significant height” of backfill directly behind a geotextile could cause it to fold or wrinkle. He expressed the view (as recounted by the primary judge at [772]) that it was a matter for on site experimentation by the constructor to take care in the choice of layers of uncompacted backfill to use with the particular equipment employed close to the panels.

87 The evidence of Mr Boyd in this regard raised a distinction that was important – being that between construction method and construction technique. His evidence was that “construction method” meant specification of steps necessary to be taken in construction and erection of the walls and the manner and sequence of such steps necessary to ensure that the reinforced earth walls were constructed in the right order so that the structure would perform in accordance with its design. His understanding was that specification of construction method required a statement as to how each element in the construction and erection process had to be incorporated in the right place and in the correct sequence. Construction technique concerned the matters left to the builder to develop and employ using, if necessary, trial and error and testing. It was not appropriate for a designer to pre-empt the constructor in these respects. It depended on equipment and personnel. These were views gained from his experience as an engineer. They lay at the foundation of the primary judge’s approach. In circumstances where it was clear that BHE had significant experience in building reinforced earth walls and where it had told RE P/L that it did not need advice as to technique, the placing of responsibility on BHE’s inadequate construction technique and lack of testing is to be regarded as firmly anchored in that evidence. In cross-examination, Professor Leshchinsky supported the proposition that some aspects of construction technique were matters for the constructor in empirical testing, not for design.

88 Mr Boyd’s statement was directed to the adequacy of the specification for which RE P/L was responsible as to compaction and causing folds, that is Professor Leshchinsky’s second mechanism. It contained, implicitly, however, the proposition that BHE was not required to use layers of uncompacted backfill of 660mm near the panels and that good construction practice would have involved experimentation with shallower layers of fill with the hand-held equipment. Together with appropriate testing, such experimentation would have led BHE to being able to compact to 80% DI and without disturbing the geotextile.

89 Mr Boyd was cross-examined immediately prior to the debate on 15 December 2005 about the Second Further Amended Summons, including the debate which then took place about the so-called new case of BHE. It is sufficient for present purposes to observe that Mr Boyd’s evidence was directed in part to the inadequacy of BHE’s compaction methods in the hand compaction area.

90 On appeal, Mr Boyd’s evidence was accepted by BHE, though subject to its argument about characterisation and proper weight being given to the contract and design documents.

91 The primary judge also referred to Professor Leshchinsky’s opinion that it would have been difficult to compact to 80% DI without inducing folds and wrinkles. The process of attempting to achieve 80% DI compaction using thick layers of backfill to compact would have produced the folds and wrinkles. It is this opinion which underpins BHE’s argument on appeal.

92 As the primary judge said at [773] of his reasons, implicit in the opinions of Professors Leshchinsky and Ingold and in the evidence Mr Boyd was the fact that BHE applied layer lifts (using that phrase to refer to a layer of uncompacted backfill to be compacted) in excess of 150mm. The primary judge said at [773], referring to layers of uncompacted backfill of over 600mm:

… The evidence of these witnesses is that layer lifts of such a height are too high if one is attempting to compact the whole height of the lifts to 80% while at the same time maintaining the integrity of the geotextile.

93 The primary judge found (at [774]) that BHE did not use layer lifts (meaning, probably, though it is not entirely clear, uncompacted backfill to be compacted) which at the time were considered too high by any of its advisers (RE P/L or CW) or by industry standards. It is not entirely clear what the primary judge meant by this finding. Whatever its precise content, on a reading of the whole of the judgment, it should not be seen as a qualification of his view that BHE exhibited inadequate construction technique. At [775] and [776] of his reasons, the primary judge made some important findings, in which his Honour’s use of the phrase layer lifts continued to be a reference to layers of placed uncompacted backfill. At [775] and [776], he said:

Based on what was said in evidence by the experts, it appears that the use of 600mm layer lifts was inappropriate for the task that BHE was required to achieve. And it was the adoption of layer lifts of this height which likely substantially contributed to the induction of the wrinkles and folds in the geotextiles during the construction process. That is to say, the task facing the workers performing the compaction job within the first metre was already difficult enough. Hence the adoption of 600+mm layer lifts only increased the skill and care that would have been required of the workmen.

The Court’s finding is that it would have been extraordinarily difficult to avoid the inducement of folds and wrinkles

without some additional precautionary or preventative measures

[transcript 1998.28-53]. Both expert’s

readily accepted that it would have been extraordinarily difficult to achieve proper compaction levels without very real difficulties being encountered by way of displacement in the form of folds/wrinkles during the compaction processes. Indeed all of the evidence before the court seemed to me to strongly support these opinions as being correct.

(emphasis in original)

94 The primary judge then turned to the causal relationship between the two mechanisms. At [779] of his reasons, the primary judge accepted Professor Leshchinsky and found that both the first and second mechanisms caused the sand loss and it was not practicable or possible to attribute a share of responsibility to one or the other. At [781] of his reasons, the primary judge said that the sand loss was occasioned by a combination of both the first and second mechanisms. These are findings adequate for the proposition that each mechanism was responsible for the sand loss sufficient to cause the problems that manifested themselves and that founded SACL’s claim against BHE. That is, these findings enable the conclusion that each mechanism was sufficient to give rise to the claim by SACL. The contrary was not asserted on appeal.

Insurance and the causal mechanisms

95 At this point the primary judge turned to the question of insurance.

96 In examining the HIH policy, the primary judge concluded (for the purpose of insuring clause 1) that the activity of carrying out the construction work was not an activity within the field of a consultant engineer.

97 The primary judge introduced the analysis of the operation of the insurance policies by examining how the two found mechanisms of sand loss fell within the operation of the terms of the policies and the arguments of the parties.

98 At [877] of his reasons, the primary judge recorded the following concession of counsel for BHE (Mr Finch) that was important to his Honour:

… BHE accepted that if and to the extent that it had been shown to have failed to compact leading to the operation of the first mechanism as a cause of sand loss, to that extent Exclusion 1 (P) would apply. [transcript 2966.40.]

99 On appeal, counsel for BHE (Mr Finch) submitted that the primary judge had misconstrued, or ignored the context of, the concession that he had made. This error led, it was submitted, to the primary judge ignoring a case that was put to him and failing to address the essential case, being that which was put on appeal.

100 In short, (and I will come to it in more detail later in these reasons) BHE submitted on appeal that it had, and has, a fall back position should it be found (as it was) that it had not compacted adequately. That fall back position was that there was a design error in the documents setting out the construction method, being the stated requirement in the design documents for construction to compact uncompacted backfill layers of a depth of 375mm (at the Millstream walls) and 660mm (at the Seawall). In effect, if compaction was not achieved, it was not achieved because the design documents and method statements required a method that was nigh on impossible to achieve (at least without leading to mechanism two).

291 The “grant of indemnity” or admission of liability may also be seen, in certain circumstances, to give rise to another agreement. For instance, if after some dispute as to coverage, an insurer stated that the parties should now proceed “on the basis of an admission of liability”, a fresh agreement, supported by fresh consideration may come into existence: cf Lubovsky v Snelling [1944] KB 44. See also Law Society v Sephton & Co [2004] EWHC 544 and Thiess Pty Ltd v ERC Frankonia Reinsurance Limited [2007] QSC 4 where Chesterman J said at [38], [40] and [41]:

In my opinion an insurer’s acceptance of an insured’s claim necessarily connotes an agreement. … Put more briefly, to accept a claim is to agree that the claim is valid and to promise, or impliedly promise, to pay it.

…

[A]n insurer’s acceptance of its insured’s claim does away with the potential uncertainties and their capacity to generate costs which the insurer may have to bear, if the claim is litigated, and replaces them with the insurer’s intimation (or promise) that it will pay the claim. There is, in accepting a claim, an element of compromise, or of admission that the insured is entitled as a matter of contractual right to the indemnity contained in the policy. The consideration is the benefit to the insurer that it will not be liable to pay the insured’s, and its own, costs of an action, and the detriment to the insured of forbearing to sue for the proceeds of the policy.

The acceptance of the claim is in form and substance an agreement. Moreover it will normally amount to a contract, legally binding on the parties.

292 Here, the “grant of indemnity” was not expressed to be “without admission” or “without prejudice”. Such qualifications would probably, depending on the full context, not amount to an admission of liability, but to a statement of the position that the insurer was prepared to take pending any acceptance of legal liability or for some other reason. Here, the only qualifications were, first, that the grant was in accordance with the terms of the policy. Save for an abundance of caution, that need not have been said. The second was that the grant was on the facts as then known. Again, caution may require this: but, if facts become known that take the circumstances out of the scope of cover, the insurer may well have a basis to withdraw its admission previously made. Again the prudence of using this clear expression gave the insurers the capacity to seek to alter their position should the known facts materially change. These qualifications may limit the scope of any fresh agreement of the kind contemplated by Chesterman J, but they do not detract from the character of the communication – a recognition of liability (that is an admission) under the terms of the policy and on the basis of what was known.

293 In my view, if the policy otherwise would respond, clause C of the Gordian policy was satisfied.

(iii) The question whether HIH could be held liable to pay

294 The primary judge stated at [1251] of his reasons that this precondition was not satisfied because of his view of the non-response of the policies. It is necessary, however, if this hypothesis be wrong and if the HIH policy otherwise responds, to assess whether this precondition is necessarily satisfied.

295 The argument put forward by Gordian in answer to this was as follows. BHE sought indemnity from AMPG and accepted $20 million payment from AMPG before the commencement of the proceedings. The AMPG policy covered the same risk as the HIH policy, HIH and AMPG being co-insurers under double insurance. By the acceptance of this payment, BHE lost its right (said to be inconsistent) to claim under the HIH policy. Thereafter, HIH could never be liable to BHE. Thus, under the terms of clause C of the Gordian policy, and with particular reference to the temporal element in the word “after”, there would never be a holding of HIH as liable to pay the full amount of their indemnity.

296 Reliance was placed on Sydney Turf Club v Crowley [1971] 1 NSWLR 724 at 730, 734 and 735; Albion Insurance Co Limited v Government Insurance Office of New South Wales (NSW) (1969) 121 CLR 342 at 345 and 349-352; Bonner v Tottenham and Edmonton Permanent Investment Building Society [1899] 1 QB 161 at 176; James Hardie & Co Pty Ltd v Wyong Shire Council (2000) 48 NSWLR 679 at 687-688; Cockburn v GIO Finance Ltd (No 2) (2001) 51 NSWLR 624 at 640 [78]; and Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 299 [38], 300-301 [41] and [42] and 302 [46].

297 The submission is, in my respectful view, misconceived.

298 The basal principles contained in these cases include the proposition that where several insurers have severally insured a risk, the insured can only receive one indemnity for its loss. Upon the receipt of that full indemnity from one insurer, the others are discharged against the insured. They remain, however, liable to contribute to the insurer that has paid. They are discharged because the insured can have no claim, because it has received full reparation for its loss.

299 In Albion Insurance v GIO, Kitto J used the expression “a single reparation for the loss” to identify the entitlement of the insured and the extent of its rights. One must be careful to appreciate that full payment under one policy (in that sense a complete or full indemnity under that policy) may not see the insured fully indemnified for its whole loss. Leaving aside the existence of a substantial excess, under insurance is the most obvious example. Once an insured’s loss has been the subject of reparation, the insured cannot claim indemnity from another insurer in respect of the same loss, because by then there is nothing to indemnify. Subject to the terms of the policies, if there are several insurers, each is liable under its terms until the insured is provided with full reparation or indemnification for its loss.

300 In GRE Insurance Ltd v QBE Insurance Ltd [1985] VR 83, the Full Court of the Victorian Supreme Court was dealing with an argument similar to that (unsuccessfully) put in Sydney Turf Club v Crowley that the paying insurer was entitled to recover through a subrogated action against a second insurer. This was rejected. The applicable principle was contribution, not subrogation. The basis of the absence of a right of subrogation was the full reparation and indemnification of the insured, thereby denying it (and so also the first insurer said to be subrogated) the right to claim an indemnity (against the second insurer) for a fully indemnified loss. At [1985] VR 95, Murray J said:

Upon the narrow basis that there was no right left in the insured to support any claim against the appellant the subrogation claim must fail. Even if the respondent had paid only part of the loss to the insured I think the position would have been no different. Any remaining right in the insured against the appellant would have inured only to the benefit of the insured and any claim in excess of that amount would have failed.

301 Thus, if an insured took out four policies each for $20 million and suffered a loss of $60 million, it could sue three insurers and recover $60 million in total. It cannot sue the fourth for an indemnity, its loss having been fully indemnified. The three insurers who paid can seek contribution against the fourth on the basis of equality. Suit against the first, and receipt of a complete contractual indemnity under the first policy, does not discharge the other three insurers. The insured still has a loss to be indemnified. This is what Murray J was referring to in the second and third sentences above. Here AMPG paid $20 million. BHE was still in a position to require reparation and indemnification. It could still sue HIH. If the balance of its loss were minor, say $1 million, a question of contribution would then arise between AMPG and HIH (leaving aside the latter’s insolvency).

302 Thus, the acceptance of moneys which gave partial reparation to BHE for its whole loss from a full indemnity under the AMPG policy, did not deny BHE the right to sue HIH for indemnity under its policy because there still remained (on this hypothesis) loss to be the subject of reparation or indemnity.

303 There was no “other insurance clause” in the HIH policy which would disturb this analysis. Exclusion 2 set out earlier dealt with compulsory forms of insurance. In any event, the Insurance Contracts Act 1984 (Cth), s45 would make any applicable clause void.

304 It is unnecessary to discuss the permutations and combinations of contribution rights between AMPG, HIH and the upper layers of the HIH-led programme. It is also unnecessary to deal with how BHE’s excess (of $1 million) fits into this analysis.

305 None of the above is directed to the response of policies such as can be characterised as “valued” policies that may not be policies of true indemnity.

306 Similar issues of partial indemnity (by reference to the whole loss suffered) and full indemnity (by reference to the terms of the policy) can arise in relation to the entitlement to take an action concerning which rights of subrogation exist and to the proceeds thereof (where there is no co-insurer). See Page v Scottish Insurance Group (1929) 140 LT 571 at 576. In Canada, there is a long-standing body of authority for the proposition that an enforceable right to sue in the name of the insured does not arise until the insured has been fully indemnified for its loss: see Derham SR Subrogation in Insurance Law (Lawbook Co 1985) at 53ff, and, eg, The National Fire Insurance Co v McLaren (1887) 12 OR 682; Globe & Rutgers Fire Insurance Co v Truedell [1927] 2 DLR 659; Glens Falls Insurance Co v Tom Peters Limited (1957) 10 DLR (2d) 459; Sheridan v Tynes (1971) 19 DLR (3d) 277; and Lawton v Dartmouth Moving & Storage Limited (1975) 64 DLR (3d) 326. See also Halsbury’s Laws of England (4th ed) Vol 25 at 185 [333]. These views are consistent with the views of Palles CB in Andrews v The Patriotic Assurance Co of Ireland (1886) 18 LR I 355 at 365 and Brett LJ in Castellain v Preston (1881-83) LR 11 QBD 380 at 386-389. The view that compliance with the terms of the insurance contract was sufficient to give rise to a right to use the insured’s name by the insurer was expressed by Sir Boyd Merriman in Morley v Moore [1936] 2 KB 259 at 365. See also Welford’s Accident Insurance (2nd ed) at 329. This would now appear to be the preferred view in England: Lord Napier and Ettrick v Hunter [1993] AC 713.

307 The question is one which might arise at two points. The first is whether the insurer can require the name of the insured to be used in an action against a third party. If an under-insured insured refused to allow his name to be used against a third party by an insurer who had paid in full on its policy, on the hypothesis that the first view is correct, a court would not force him to lend his name because the right of subrogation had not become exercisable. In those circumstances, however, if the insured did not itself take action against the third party (and, perhaps, run it as well as the insurer would have) the insured would probably be prejudicing an existing (though not fully crystallised) right of subrogation (which exists from the time of the commencement of the policy and which by the payment of money had accrued into a valuable equitable right) and accordingly he may be liable to compensate the insurer for any loss thereby suffered. The second point at which the question might arise is the destination of recovery funds from any action brought by the insured or insurer against the third party. If an insured had a house worth $100,000, which was insured for $50,000, which latter sum was paid by the insurer and an action was successful against the person responsible for the loss of the house, though less than $100,000 was recovered, what, in those circumstances, would be the appropriate division of the recovery funds? The view preferred by MacGillivray & Parkington on Insurance Law (8th ed) at 490-491 [1180]-[1181] and also Derham op. cit. at 53 is that the right to subrogation (in the sense of receipt of part or all of the proceeds of action against the third party) becomes enforceable upon performance of the contractual terms by the insurer, but that until the insured has been fully indemnified for this total loss he remains entitled to control the litigation as “dominus litis”. See Sutton K Insurance Law in Australia (2nd ed) at 882-889 and Kelly and Ball Principles of Insurance Law (LexisNexis Butterworths) [9.0090]. See also SGIO (Qld) v Brisbane Stevedoring Pty Ltd (1969) 123 CLR 228 at 249-241; Santos Ltd v American Home Assurance Co (1987) 4 ANZIC 60-795 at 74,874-75; Morganite Ceramic Fibres Pty Ltd v Sola Basic Australia Ltd (1987) 11 NSWLR 189; and Arthur Barnett Ltd v National Insurance Co of New Zealand [1965] NZLR 874 at 882 and 885-886.

308 It is unnecessary to resolve these issues or to deal with the important judgment of the House of Lords in Lord Napier v Hunter about the rights of a reinsured (and perhaps an insured) to the proceeds of a subrogated action in competition with a reinsurer (and perhaps insurer) which has paid in full under a policy. What is, however, revealed by this discussion (whoever is entitled to start and control litigation and in whatever order the funds should be distributed) is the entitlement or interest of the insured in proceeding with a claim concerning which rights of subrogation exist until its loss is the subject of full indemnification or reparation. It is the same notion of full indemnification or reparation that destroys the right to claim indemnity under another policy of insurance and so discharges the later insurer. The right to indemnity for a loss under a second policy is not lost by election, by proceeding against another (or first) policy, if that other (or first) policy is an inadequate fund to make good the whole loss. The loss of the right to seek indemnity arises from prior full indemnification of the insured’s loss.

309 Another approach to the third precondition which would see attachment occur, even if the above be incorrect, is to give the operation of the words “after [HIH] … have been held to be liable to pay the full amount” a timeless construction such that if at some time (that is before payment by AMPG) it could have been found liable that would suffice. Given the view expressed above it is unnecessary to resolve this issue.

310 Thus, HIH can still be held liable, and, on this hypothesis, has been held to be liable.

(d) The so-called “excess point” and the operation of exclusions 1(e) and 1(o) and clause 7

311 These submissions were put by Gordian, not CGU.

312 The primary judge concluded that no claim had been made against BHE within the policy period, but that a claim was deemed to have been made within the policy period by operation of condition 4 of the HIH policy: the notification and deemed claim provision. His Honour concluded at [870] of his reasons that the notification was of the acts, errors or omissions giving rise to the sand loss then manifesting itself.

313 There was no notification, however, of any act, error or omission in respect of pre-contract representations by BHE to FAC or any act, error or omission on the part of Airplan-GHD, a joint venture design consultant: see [871] of the primary judge’s reasons. Also, at the trial, BHE abandoned a case that the acts, errors or omissions giving rise to accelerated corrosion of the metal components used in the walls were the subject of notification: see [1229]-[1235] of the primary judge’s reasons.

314 Gordian submitted that the expert evidence established that the sand loss and accelerated corrosion affected the walls independently and in different ways.

315 Gordian submitted that the solution to the sand loss problem was either one based on long term maintenance (filling the holes left by sand loss with coarser sand) or a hybrid solution based partly on a grout curtain wall and maintenance of the kind identified above. Both solutions, it was said, would maintain the stability of the walls. The long term maintenance solution could be effected, it was said the evidence revealed, for under $20 million. The evidence did not reveal a cost of the hybrid solution.

316 Thus, Gordian submitted, since the notified claim could be remedied in these ways, the indemnity was limited to these solutions and did not extend to the significantly more expensive gravity wall solution agreed between BHE and SACL. The precise cost of this solution was found by the primary judge to be over $65 million, a sum sufficient to exhaust the Gordian and CGU policies even taking into account the AMPG payment. The gravity wall solution cured not only the sand loss problem, but also the corrosion problem. It was said that the cost of the solution did not thus “arise out of” the claim notified. It was therefore said that the gravity wall solution was not, and could not be, a reasonable settlement of the notified claim. Also, it was submitted that the gravity wall solution could not be a reasonable settlement at all, unless it was proved that there was an excessive corrosion problem along the entire length of the wall. The primary judge did not decide this issue on the basis that the accelerated corrosion claim was abandoned: [1234] and [1235] of his Honour’s reasons.

317 The primary judge:

(a) accepted BHE’s submissions as to quantum and that the gravity wall solution would cost over $65 million if used over the entirety of the walls: [1127]-[1147];

(b) found the settlement was reasonable, being for all claims, some identified, some not: [1160]-[1164];

(c) accepted that BHE bore the onus of showing that it was a reasonable settlement of the indemnified claims: [1166] and [1167]; and

318 Gordian complained that the last finding was without reasons and in the teeth of evidence of the existence of the solution by way of long term maintenance and the hybrid solution. It also asserted that the primary judge had misdirected himself about its submissions and confused them with the issues in the AMPG case.

319 I do not think that it is necessary to unravel the submissions in the two cases (under the HIH and following policies and under the AMPG policy). It is tolerably clear on the material that, if one works on the hypothesis that it was reasonable for BHE to settle with SACL on a solution which would not require maintenance, the solution accepted in the settlement was reasonable.

320 Gordian submitted that the cost of any cure beyond that of the long term maintenance or hybrid solutions was a cost that:

(a) for the purposes of exclusion 1(e) was a “legal liability … imposed … pursuant to the Law of Contract … when such legal liability would not have been imposed … pursuant to the Law of Tort”;

(b) for the purposes of exclusion 1(o), could be seen as “arising out of the provision by the Insured of any express warranty or guarantee which increases the Insured’s measure of liability …” ; or

“relates to any contractual or other duty or obligation assumed by the Insured which is not assumed in the normal conduct of the Insured’s profession”

321 Gordian also submitted that the evidence before the primary judge was inadequate to conclude that the only way of preventing sand loss on a “maintenance free” basis was to construct at least a grout curtain wall. During the trial, there was a debate as to whether it was technically viable to build a grout curtain which used the existing steel straps. BHE said that this would cause a separate corrosion cell. BHE said that the only solution was a gravity wall solution, which encased the metal straps in concrete and did not rely upon the strength of the remaining lengths of straps. This was more expensive. It was submitted by Gordian that the evidence about this was inconclusive and so BHE had not proved the reasonableness of the preferred solution.

322 I do not accept any of these submissions of Gordian. Taking the last matter first, the evidence of Dr Abel and Dr Sussex was not of a “theoretical” problem, using that term, as Gordian did, to connote not real or substantial. Rather, they both expressed the view that the solution should not be one that had the real capacity to introduce another corrosion problem, this time into the solution to rectify the problems. The lack of precise calculation of the problem is not to the point. Dr Abel said in cross-examination when asked about the lack of calculation:

I did not and nobody attempted to make such a calculation. The possibility of a corrosion cell developing is highly on the agenda. No one would dare to approach this figuratively how severe would be this corrosion and what would be the long term effect.

323 There was ample basis to conclude that the taking of a risk by a method that could well lead to such a problem was unreasonable and to avoid that risk was reasonable.

324 It is also important to appreciate that what BHE was required to prove was that the settlement with SACL was reasonable upon the information available at the time of settlement, provided that BHE had acted reasonably in collecting information: Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 193 CLR 603 at 609 [7], 616-618 [36]-[40] and 653 [130].

325 On the basis of the evidence before BHE at the time of the adoption of the gravity wall solution, I do not think that it is open to challenge the conclusion that it was a reasonable settlement. First Mr Price the solicitor who acted for BHE at the time, who was not cross-examined on his advice, recommended the solution, in part because of a perceived risk of collapse of the walls with continuing sand loss and the necessity for the work, even putting aside the corrosion issue. No cross-examination of him was directed to any asserted unreasonableness of the solution, to the problem of sand loss or that it would not have been adopted but for the accelerated corrosion claim, or to any theoretical corrosion cell issue.

326 Secondly, the sequence of events contained in the evidence of Mr Price included the fact that the grout curtain method actually used was the preferred solution of a conclave of experts. After this expression of view by experts, HIH confirmed that it considered the settlement on the basis of the gravity wall solution to be reasonable.

327 A complete statement of the primary judge’s reasons as to why the settlement was reasonable was set out at [1159] and [1160]. No error is there revealed.

328 I also reject the submission that the design requirement of the work that the reinforced earth walls be maintenance free for 50 years was a warranty or guarantee or amounted to assumed contractual liability. This requirement was an inherent part of the design. The requirement was in the Specification, not the conditions of contract dealing with defects or warranties. Clause E1 (“General Requirements”) of Section E of the Specification dealing with Marine Works provides:

E1.1 General

The work in this portion of the project is for the detailed design and construction of the formation of the reclaimed land on which the new runway and its associated features are sited, for the formation of the Mill Stream outlet diversion channel, for the seawall that contains the formations and for the sea wall along the eastern edge of the existing runway.

E1.2 Essential Design Parameters

The various elements to be constructed under this Contract shall have a maintenance free design life of 50 years, except that the wall panels and reinforced strips in the main reinforced earth sea walls shall have a maintenance free design life of 100 years.

329 The liability of BHE arises by reference to the task it undertook. The task is in part defined by these design parameters. I see no basis for the engagement of exclusions 1(e) or 1(o) or clause 7.

(e) The lack of separate treatment of RE P/L and CW

330 CGU submitted that the primary judge erred in failing to separate RE P/L and CW and in relation to CW in failing to find that it had no case to answer.

331 The primary judge explained early in his reasons at [62] how he proposed to deal with them, as follows:

The approach generally taken in the judgment as a matter of convenience is not to draw any material distinction between the respective positions of Reinforced Earth and Connell Wagner [often referred to as “RE/CW”]. It is common ground that during most of the hearing almost no attention was given to any material difference in the positions of these two companies each of which had entered into subcontracts with BHE. The matter was raised with leading counsel for BHE [transcript 2893] where it was accepted that it seemed appropriate to refer throughout to “Reinforced Earth/ Connell Wagner”. I may not have universally succeeded in adopting that precise practice, but although differentiating between the two companies when it is obviously appropriate to do so [as where documents have been written or received by one or the other], have intended to do so. I now make plain as an internal dictionary, that by and large the sundry references to RE are also to be regarded as shorthand for RE/CW without distinguishing between them. The parties will be given leave at the same time as addressing on short minutes of order and costs, to address on whether there is perceived to be any particular difficulty arising from this internal dictionary exercise, and if so, it may become necessary to expressly differentiate between these companies for some particular special reason. If this ends up requiring some additional findings, so be it. I would doubt that there will be any such problem.

332 Given how the trial was conducted, it is not now appropriate to seek to differentiate the two, especially when even if such differentiation were clearly shown, there would be no effect on the reasoning in the case.

Orders

333 For the above reasons, I would dismiss the appeal with costs.

334 BEAZLEY JA: I agree with Allsop P.

335 CAMPBELL JA: I agree with Allsop P.

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17/10/2008 - The repeating sentences from computer error removed. - Paragraph(s) 1

Details

AGLC: Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243
Case: [2008] NSWCA 243
Decision Date: 9 October 2008

CaseChat Overview and Summary

Baulderstone Hornibrook Engineering Pty Ltd (the appellant) appealed to the Court of Appeal of New South Wales against a decision of the Commercial List concerning a dispute over professional indemnity insurance. The dispute arose from a claim made by Gordian Runoff Ltd (the respondent), which sought indemnity under a professional indemnity insurance policy issued by the appellant. The core of the disagreement concerned whether the loss suffered by the respondent was caused by a design fault or by construction work, and whether certain exclusions in the policy applied.

The Court of Appeal was required to determine several key legal issues. These included the proper construction of the insurance contract, specifically whether the loss fell within the scope of the indemnity provided or was excluded by its terms. The court also had to consider whether the respondent's payment under a co-ordinate policy constituted an admission of liability or extinguished its rights against the appellant as the underlying insurer. Furthermore, the meaning of the word "paid" in the context of the insurance policy and the duty of parties to cooperate and clarify issues in litigation, particularly in the Commercial List, were central to the appeal.

The Court of Appeal upheld the primary judge's decision, finding that the loss was attributable to construction work rather than a design fault, and therefore the exclusion clause did not apply. The court reasoned that the respondent's payment under a co-ordinate policy did not extinguish its rights against the appellant, as the policy was intended to provide indemnity for the loss suffered. The judges applied principles of contractual interpretation to the insurance policy, emphasizing the need to give effect to the plain meaning of the words used. The court also commented on the importance of clarity and cooperation between parties in litigation. The appeal was dismissed with costs.

Orders

Orders of the court

Appeal dismissed with costs.

Background

Background to the litigation

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Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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Citations

Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243

Most Recent Citation

Vilro Pty Ltd v Roads and Traffic Authority of NSW [2010] NSWLEC 141

Cases Citing This Decision

103

Salmon v Albarran [2025] NSWCA 42
Citation 1

…gs Ltd (1990) 169 CLR 279; [1990] HCA 11 Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 Berry v CCL Secure Pty Ltd (2020) 271 CLR 151; [2020] HCA 27 BH Australia Constructions Pty Ltd v Kapeller (…
Brumby v Mt Arthur Coal Pty Ltd; Ready Workforce (A Division of Chandler MacLeod) Pty Ltd v Mt Arthur Coal Pty Ltd [2024] NSWSC 1626
Citation 2 (Para 28)

…rson Transport Pty Ltd (2001) 53 NSWLR 116; [2001] NSWCA 346 at [21]-[32]; and Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd & Ors [2008] NSWCA 243 at [160]-[164].…
Globe Capital Administration Pty Ltd v Cecil Developments Pty Ltd atf the Cecil Developments Unit Trust (Receivers and Managers appointed) (No. 2) [2023] NSWSC 1220
Citation 3 (Para 11)

…e many examples of judicial pronouncements on this subject but see for example Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd & Ors [2008] NSWCA 243 at [160] and [161], see also the classic article D. Ipp, “ Lawyers Duties to the Court ” (1998) 114 Law Quarterly Review 63.…
WSP Structures Pty Ltd v Liberty Mutual Insurance Company t/as Liberty Specialty Markets [2023] FCA 1157
Citation 4 (Para 14)

…Chubb and Tokio Marine also placed reliance upon the following reasoning in Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [298] (Allsop P, Beazley and Campbell JJA agreeing), after referring to established authority stated: The basal principles contained in these cases include…
Moratelli v Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales [2022] NSWSC 1501
Citation 5 (Para 13)

…be the just, quick and cheap resolution of the real issues in the proceedings: Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd & Ors [2008] NSWCA 243 at [161]. The Court is required to seek to give effect to that overriding purpose when it exercises any power it is given by the Rules: s 56(2).…
Skelton v Foggo (No 2) [2022] NSWSC 1289
Citation 6 (Para 161)

…ose to which I have just made reference. As the Court of Appeal noted in Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [161] per Allsop J: “The need for clarity, precision and openness in the conduct of litigation and the responsibility of parties and their legal representativ…
BCEG International (Australia) Pty Ltd v Xiao [2022] NSWSC 972
Citation 7

…y (1874) LR 9 Ch App 244 Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd & Ors [2008] NSWCA 243 BCEG (Australia) v Xiao (No 2) [2020] NSWSC 1403 BCEG International (Australia) Pty Ltd v Xiao [2020] NSWSC 1234 BCEG International (Australia) Pty Ltd v Xiao [2021] NSWSC 1027 BCEG International (Austra…
Blue Mirror Pty Ltd v Pegasus Australia Developments Pty Ltd [2021] NSWSC 961
Citation 8 (Para 160)

…tch: see, for example, Dennis v Australian Broadcasting Corporation [2008] NSWCA 37; Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [160]-[161]; Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230; Halpin v Lumley General Insurance Ltd [2009] NSWCA 372; Bi v Mourad [2010]…
Prestage v Barrett [2021] TASSC 27
Citation 9 (Para 2)

…t is an aspect of an available process of drawing of conclusions about causation ': Bauldserstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 per Allsop P (Beazley and Campbell JJA agreeing) at [240]. In Roads and Traffic Authority v Royal (2008) 82 ALJR 870, Kirby J at 888 [88] said that D…
Colombini v De Berigny [2021] NSWSC 374
Citation 10 (Para 71)

…Favelle Favco Holdings Pty Ltd (Supreme Court (NSW), Bryson J, 7 March 1995, unrep); Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [161].…
Technology Swiss Pty Ltd v AAI Limited trading as Vero Insurance [2021] FCA 95
Citation 11 (Para 15)

…who was right about the deed of settlement and its construction and interpretation : Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243; 15 ANZ Insurance Cases 61-780 at [306]–[307] and the cases there cited. Each of the freight forwarder and ocean carrier was likely to have cargo ins…
Xiang bht Cao v Tong [2021] NSWSC 44
Citation 12

…ee in particular Nowlan v Marson Transport Pty Ltd [2001] NSWCA 346; 53 NSWLR 116; Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243; and Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2008] NSWCA 206. As I said in White and Overland [2001] FCA 1333 at [4],…
Brocklands Pty Ltd v Tasmanian Networks Pty Ltd [2020] TASFC 4
Citation 13 (Para 17)

…only "an aspect of an available process of drawing of conclusions about causation": Bauldserstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243, 5 ANZ Insurance Cases 61-780 per Allsop P (Beazley and Campbell JJA agreeing) at [240]. I find that in this case, an ex post facto inference of caus…
Findex Group Ltd v McKay (No 3) [2020] FCA 259
Citation 14 (Para 21)

…annuation Fund [2004] FCA 812 at [19], White v Overland [2001] FCA 1333 at [4] and Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [160]-[163] in support of that submission.…
National Australia Bank Limited v Nautilus Insurance Pte Ltd (No 2) [2019] FCA 1543
Citation 15 (Para 1)

…Ltd (2005) 13 ANZ Insurance Cases ¶61-630, [48]-[52], [62], [66]-[69]; Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243, [324].] The case law on which Reinsurers rely in support of their construction of the expression ‘legally liable to pay’ in GD 40(B) does not address this issue.…
Zantran Pty Limited v Crown Resorts Limited [2019] FCA 641
Citation 16 (Para 4)

…port Pty Ltd (2001) 53 NSWLR 116; 34 MVR 495; [2001] NSWCA 346 ( Nowlan ); Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 ( Baulderstone ); and Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 252 ALR 659; 68 ACSR 595; [2008] NSWCA 206.…
Chelmer NZ Ltd v Financial and Energy Exchange Ltd [2019] NSWDC 25
Citation 17 (Para 160)

…tch: see, for example, Dennis v Australian Broadcasting Corporation [2008] NSWCA 37; Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [160]- [161]; Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230; Halpin v Lumley General Insurance Ltd [2009] NSWCA 372; Bi v Mourad [2010]…
Dalby Bio-Refinery Ltd v Allianz Australia Insurance Limited [2018] FCA 1806
Citation 18 (Para 13)

…was encompassed by the contractual exclusion agreed between the parties: see Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243; (2008) 15 ANZ Insurance Cases 61-780 at 77,008-77,009 [263]-[264]. Subject to an additional argument of Dalby with which I will deal separately below, ultim…
Wiesac Pty Ltd v Insurance Australia Limited [2018] QSC 123
Citation 19 (Para 16)

…ases 61-756 at 76,529 [84], Kyriackou v Ace Insurance Ltd [2013] VSCA 150 [102]; Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 [263].…
Wilson v Certain Underwriters at Lloyds Subscribing to Policy Number B1115T131599 [2018] NSWDC 111
Citation 20 (Para 45)

…In Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243, Allsop P (with whom Beazley and Campbell JJA agreed) stated as follows at [263]:…
Wyzenbeek v Australasian Marine Imports Pty Ltd [2017] FCA 1460
Citation 21 (Para 2)

…ons, see for instance Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116 at [28]; Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [160]. They were referenced by Johnson J in McGuirk v The University of New South Wales [2009] NSWSC 1424 at [26] where his Honour emphasised that…
Mobis Parts Australia Pty Ltd v XL Insurance Company SE (No 7) [2017] NSWSC 1321
Citation 22 (Para 61)

…case is relevantly indistinguishable from that considered by the Court of Appeal in Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243.…
V8 Supercars Holdings Pty Ltd v Sanpoint Pty Ltd [2017] NSWSC 1043
Citation 23

…53 NSWLR 116 (Mason P and Young CJ in Eq agreeing) at [29], 128. [421] Recently, in Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243, Allsop P returned to the topic. His Honour emphasised (at [160] to [165]) the need for clarity, precision and openness in delineating the issues in…
Shaun James Bretherton v Allianz Australia [2017] NTLC 13
Citation 24 (Para 4)

…th by the clarity of their pleadings, and otherwise. This was in the case of Baulderstone Hornibrook Engineering Pty ltd v Gordian Runoff Ltd and Ors [2008] NSWCA 243 .…
Hastie Group Ltd (In Liq) v Bourne [2017] NSWSC 709
Citation 25 (Para 60)

…In Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243, Allsop P, as his Honour then was, emphasised (at [160]-[165]), the need for clarity and precision in delineating the issues in a long and complex trial in the Commercial List and the requirement for there to be a “clear and full e…
Nandutu v The University of Sydney [2017] NSWSC 509
Citation 26

…just, quick and cheap resolution of the real issues in dispute: Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited & Ors [2008] NSWCA 243 at 161. The need for clarity, precision and openness as part of this co-operation has been emphasised in the context of ambush or surprise: White v Overlan…
Glenda Phillips v James Phillips; John Matthew Phillips by his Tutor NSW Trustee and Guardian v James Phillips (No 2) [2017] NSWSC 281
Citation 27 (Para 160)

…h: see, for example, Dennis v Australian Broadcasting Corporation [2008] NSWCA 37; Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [160]- [161]; Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230; Halpin v Lumley General Insurance Ltd [2009] NSWCA 372; Bi v Mourad [2010] N…
Boral Limited v Foley & Bear Pty Ltd trading as J&R Industries [2016] NSWCA 373
Citation 28 (Para 33)

…ure Act . [2] 2. See Benn v State of New South Wales [2016] NSWCA 314 at [62]; Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243; (2008) 15 ANZ Insurance Cases 61-780 at [160]-[162]; see also Boyes v Collins (2000) 23 WAR 123; [2000] WASCA 344.…
National Australia Bank Limited v Skoczek [2016] NSWSC 1765
Citation 29

…just, quick and cheap resolution of the real issues in dispute: Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited & Ors [2008] NSWCA 243 at 161. The need for clarity, precision and openness as part of this co-operation has been emphasised in the context of ambush or surprise: White v Overlan…
Benn v State of New South Wales [2016] NSWCA 314
Citation 30 (Para 62)

…llwork JJ agreeing); White v Overland [2001] FCA 1333 at [4] (Allsop J); and Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [160]-[162] (Allsop P, Beazley and Campbell JJA agreeing). That approach applies just as much to proceedings in the Local Court as it does to long and com…
Mobis Parts Australia Pty Ltd v XL Insurance Company Se [2016] NSWSC 1599
Citation 31 (Para 25)

…rt of the submissions they contended, by reference to the discussion by Allsop P (as his Honour then was) in Baulderstone Hornibrook v Gordian Runoff [2008] NSWCA 243 at [283] to [292], that a grant of indemnity could be both an admission of liability and, of itself, an agreement as to liability under a policy on t…
Angas Securities Ltd v Small Business Consortium Lloyds Consortium No. 9056 [2016] NSWCA 182
Citation 32 (Para 71)

…recovered from the third party. [13] 12. Primary Judgment at [34]. His Honour cited Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [307] (Allsop P) for this proposition. 13. See Insurance Contracts Act 1984 (Cth), s 67(3)(a)(ii). This provision is subject to the terms of the c…
Mobis Parts Australia Pty Ltd v XL Insurance Company SE [2016] NSWSC 912
Citation 33 (Para 20)

…should be rejected. In this regard the plaintiff relied upon the decision in Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd & Ors [2008] NSWCA 243. However it seems to me that this decision also assists the defendant. In that case the insurer had written to the representative of the insured in ter…
McDonald v McDonald [2016] NSWSC 724
Citation 34 (Para 19)

…t to expand the issues defined by the pleadings. Nevertheless, as discussed in Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd & Ors [2008] NSWCA 243 at [160] – [161], the need for co-operation between the parties, is “an essential aspect of modern civil procedure in the running of any civil litiga…
Polo Enterprises Australia Pty Ltd ABN 30117622 v Pinctada Hotels and Resorts Pty Ltd (Costs) [2016] NSWSC 717
Citation 35 (Para 9)

…of Appeal in Nowlan v Marson Transport [2001] NSWCA 346; (2001) 53 NSWLR 116 and Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff [2008] NSWCA 243. In White v Overland [2001] FCA 1333; (2001) 67 ALD 731 per Allsop J as his Honour then was, a commercial case, said, “the parties should take steps to ensur…
Farmwide Pty Ltd v Commonwealth of Australia [2016] ACTSC 17
Citation 36

…he just, quick and cheap resolution of the real issues in dispute: Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited & Ors [2008] NSWCA 243 at 161. The need for clarity, precision and openness as part of this co-operation has been emphasised in the context of ambush or surprise: White v Overl…
Hirshman v Dixon-Smith (No 2) [2015] NSWSC 1958
Citation 37 (Para 103)

…intiffs submitted that the observations made by Allsop P (as his Honour then was) in Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [161] and the earlier observations made by the same judge in White v Overland [2001] FCA 1333 at [4] justify an order that the parties bear their…
Kern v Qantas Airways Limited [2015] NSWSC 1565
Citation 38 (Para 1)

…I have just made reference. As the Court of Appeal noted in Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [161] per Allsop J: ‘The need for clarity, precision and openness in the conduct of litigation and the responsibility of parties and their legal representatives therefore…
Small Business Consortium Lloyd's Consortium No 9056 v Angas Securities Limited [2015] NSWSC 1511
Citation 39 (Para 34)

…he insured is entitled to retain control of the proceedings against the third party: Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [307] per Allsop P. However, if it does so, it will be liable for the costs of the proceedings in the event that they are unsuccessful. On the oth…
Droga v Cannon [2015] NSWSC 1502
Citation 40 (Para 15)

…Marson Transport Pty Ltd [2001] NSWCA 346; (2001) 53 NSWLR 116 at [28] and again in Baulderstone Hornibrook Engineering Pty Ltd V Gordian Runoff Ltd [2008] NSWCA 243 at [160]. The Plaintiff submitted that if ground 4 was not permitted there would be no basis for reliance on those authorities. In any event, the Pla…
TJ (on behalf of the Yindjibarndi People) v State of Western Australia (No 2) [2015] FCA 1358
Citation 41 (Para 8)

…anic Dairy Products Pty Ltd v Wholefoods Pty Ltd [2006] FCA 1361 at [15] per myself; Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [160]-[162] per Allsop P, with whom Beazley and Campbell JJA agreed.…
Lambert Leasing Inc. v QBE Insurance Ltd (No 2) [2015] NSWSC 1196
Citation 42

…enuine compromise Legislation Cited: Uniform Civil Procedure Rules 2005 Cases Cited: Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 Bennette v Cohen (No 2) [2009] NSWCA 162 Calderbank v Calderbank [1975] 3 All ER 333 Charter Reinsurance Co Ltd v Fagan [1997] AC 313 Conohan v Coope…
Johnston v Endeavour Energy [2015] NSWSC 1117
Citation 43

…874 Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 Buckee v The Commonwealth of Australia [2014] FCA 242 Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398 Castellain v Preston (1883) 11 QBD 380 Commercial Union Assurance Co Ltd v Lister (1874) Vol IX LR Chancery Appeals…
Sturesteps v Khoury [2015] NSWSC 1041
Citation 44

…he just, quick and cheap resolution of the real issues in dispute: Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited & Ors [2008] NSWCA 243 at 161. The need for clarity, precision and openness as part of this co-operation has been emphasised in the context of ambush or surprise: White v Overl…
Clarke v State of New South Wales (No 4) [2015] NSWSC 1054
Citation 45 (Para 43)

…ing purpose to which I have just made reference. As the Court of Appeal noted in Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [161] per Allsop J:…
Boland v Dillon; Cush v Dillon [2015] NSWCA 183
Citation 46 (Para 21)

…modern way of litigating matters in all Courts is inconsistent with such a concept: Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 per Allsop P at [160]-[161].…
Boral Ltd v Foley and Bear Pty Ltd trading as J and R Industries; Foley and Bear Pty Ltd trading as J and R Industries v Boral Ltd [2015] NSWDC 240
Citation 47 (Para 46)

…it was an unacceptable ambush. In one of the cases to which Mr Lloyd referred me, Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243, Allsop P (as his Honour then was), made some remarks over [160] – [163] about the conduct of litigation. His Honour emphasised the importance of coope…
Lambert Leasing Inc. v QBE Insurance Ltd [2015] NSWSC 750
Citation 48

…92) 26 NSWLR 170 Bashtannyk v New India Assurance Co Ltd [1968] VR 573 Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 Bradburn v Great Western Railway Co (1874) LR10Exch 1 British Traders' Insurance Co Ltd v Monson (1964) 111 CLR 86 Browne v Dunn (1893) 6 R 67 Caledonia North Sea…
Statewide Secured Investments Pty Ltd v Pearsall,; Statewide Secured Investments Pty Ltd v Frog Swamp Pty Ltd [2015] NSWSC 680
Citation 49 (Para 84)

…the statutory framework set out in ss 56-60 of the Civil Procedure Act 2005. See: Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [160]-[161]; Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230; Bi v Mourad [2010] NSWCA 17.…
The Hancock Family Memorial Foundation Ltd v Lowe [2015] WASCA 38
Citation 50

…dings Pty Ltd v Chief Commissioner of State Revenue [2012] HCA 6; (2012) 245 CLR 338 Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 Bayswater Car Rental Pty Ltd v Hannell [1999] WASCA 34 Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 Crawley v Vero Insurance Ltd (No 2) […

Cases Cited

Statutory Material Cited

Roads and Traffic Authority v Royal [2008] HCA 19
Citation 1

…Top Insurance Co Ltd v Unione Italiana Anglo Saxon Reinsurance Co Ltd [1987] 1 Lloyd’s Rep 476 Roads and Traffic Authority v Royal [2008] HCA 19; 245 ALR 653 Santos Ltd v American Home Assurance Co (1987) 4 ANZIC 60-795 Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121 SGIO (Qld) v Brisbane Stevedoring…
Flounders v Millar [2007] NSWCA 238
Citation 2

…v West of England Shipowners Mutual Insurance Association (London) Limited (No 2) (The Padre Island) [1991] 2 AC 1 Flounders v Millar [2007] NSWCA 238 Glens Falls Insurance Co v Tom Peters Limited (1957) 10 DLR (2d) 459 Globe & Rutgers Fire Insurance Co v Truedell [1927] 2 DLR 659 Glover v Australian Ultra Concrete…
Hooker v Gilling [2007] NSWCA 99
Citation 3

…er v Australian Ultra Concrete Floors Pty Limited [2003] NSWCA 80 GRE Insurance Ltd v QBE Insurance Ltd [1985] VR 83 Hooker v Gilling [2007] NSWCA 99 James Hardie & Co Pty Ltd v Wyong Shire Council (2000) 48 NSWLR 679 Khan v Armaguard Ltd [1994] 1 WLR 1204 Law Society v Sephton & Co [2004] EWHC 544 Lawton v Dartmo…
Thiess Pty Ltd v. ERC Frankona Reinsurance Limited [2007] QSC 4
Citation 4

…ley [1971] 1 NSWLR 724 The National Fire Insurance Co v McLaren (1887) 12 OR 682 Thiess Pty Ltd v ERC Frankonia Reinsurance Limited [2007] QSC 4 Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 193 CLR 603 Versicherungs und Transport A/G Daugava v Henderson (1934) 49 Ll L Rep 252 Wayne Tank and Pu…
Sutton v Erect Safe Scaffolding (Aust) Pty Ltd [2006] NSWCA 265
Citation 5

…sbane Stevedoring Pty Ltd (1969) 123 CLR 228 Sheridan v Tynes (1971) 19 DLR (3d) 277 Sutton v Erect Safe Scaffolding (Aust) Pty Ltd [2006] NSWCA 265 Sydney Turf Club v Crowley [1971] 1 NSWLR 724 The National Fire Insurance Co v McLaren (1887) 12 OR 682 Thiess Pty Ltd v ERC Frankonia Reinsurance Limited [2007] QSC 4…
Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2006] NSWSC 223
Citation 6

…on Limited (1995) 184 CLR 399 Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (formerly GIO Insurance) & Ors [2006] NSWSC 223 Betts v Whittingslowe (1945) 71 CLR 637 Bonner v Tottenham and Edmonton Permanent Investment Building Society [1899] 1 QB 161 Boyes v Colins [2000] WASCA 344; 23 WAR…
Glover v Australian Ultra Concrete Floors Pty Ltd [2003] NSWCA 80
Citation 7

…) 10 DLR (2d) 459 Globe & Rutgers Fire Insurance Co v Truedell [1927] 2 DLR 659 Glover v Australian Ultra Concrete Floors Pty Limited [2003] NSWCA 80 GRE Insurance Ltd v QBE Insurance Ltd [1985] VR 83 Hooker v Gilling [2007] NSWCA 99 James Hardie & Co Pty Ltd v Wyong Shire Council (2000) 48 NSWLR 679 Khan v Armagu…
Burke v LFOT Pty Ltd [2002] HCA 17
Citation 8

…m and Edmonton Permanent Investment Building Society [1899] 1 QB 161 Boyes v Colins [2000] WASCA 344; 23 WAR 123 Burke v LFOT Pty Ltd (2002) 209 CLR 282 Castellain v Preston (1881-83) LR 11 QBD 380 Chappel v Hart (1998) 195 CLR 232 Charter Reinsurance Co Limited v Fagan [1997] AC 313 Chippendale v Holt (1895) 1 Com C…
Nowlan v Marson Transport Pty Ltd [2001] NSWCA 346
Citation 9

…189 Nissho Iwai Australia Ltd v Malaysian International Shipping Corp Berhad (1989) 167 CLR 219 Nowlan v Marson Transport Pty Limited [2001] NSWCA 346; 53 NSWLR 116 Page v Scottish Insurance Group (1929) 140 LT 571 Pine Top Insurance Co Ltd v Unione Italiana Anglo Saxon Reinsurance Co Ltd [1987] 1 Lloyd’s Rep 476 R…
White v Overland [2001] FCA 1333
Citation 10

…son (1934) 49 Ll L Rep 252 Wayne Tank and Pump Co Ltd v The Employers’ Liability Assurance Corp Ltd [1974] QB 57 White v Overland [2001] FCA 1333 PARTIES: BAULDERSTONE HORNIBROOK ENGINEERING PTY LTD GORDIAN RUNOFF LTD & ORS CGU INSURANCE LIMITED HIH CASUALTY AND GENERAL INSURANCE LIMITED FILE NUMBER(S): CA 40316/2…
Cockburn v GIO Finance Ltd (No 2) [2001] NSWCA 177
Citation 11

…LR 232 Charter Reinsurance Co Limited v Fagan [1997] AC 313 Chippendale v Holt (1895) 1 Com Cas 197 Cockburn v GIO Finance Ltd (No 2) (2001) 51 NSWLR 624 Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 Commercial Union Assurance Co of Australia v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Darling…
Boyes v Colins [2000] WASCA 344
Citation 12

…Whittingslowe (1945) 71 CLR 637 Bonner v Tottenham and Edmonton Permanent Investment Building Society [1899] 1 QB 161 Boyes v Colins [2000] WASCA 344; 23 WAR 123 Burke v LFOT Pty Ltd (2002) 209 CLR 282 Castellain v Preston (1881-83) LR 11 QBD 380 Chappel v Hart (1998) 195 CLR 232 Charter Reinsurance Co Limited v F…
James Hardie & Co Pty Ltd v Wyong Shire Council [2000] NSWCA 107
Citation 13

…0 GRE Insurance Ltd v QBE Insurance Ltd [1985] VR 83 Hooker v Gilling [2007] NSWCA 99 James Hardie & Co Pty Ltd v Wyong Shire Council (2000) 48 NSWLR 679 Khan v Armaguard Ltd [1994] 1 WLR 1204 Law Society v Sephton & Co [2004] EWHC 544 Lawton v Dartmouth Moving & Storage Limited (1975) 64 DLR (3d) 326 Lord Napier and…
Schellenberg v Tunnel Holdings Pty Ltd [2000] HCA 18
Citation 14

…yal [2008] HCA 19; 245 ALR 653 Santos Ltd v American Home Assurance Co (1987) 4 ANZIC 60-795 Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121 SGIO (Qld) v Brisbane Stevedoring Pty Ltd (1969) 123 CLR 228 Sheridan v Tynes (1971) 19 DLR (3d) 277 Sutton v Erect Safe Scaffolding (Aust) Pty Ltd [2006] NSWCA 265 Sy…
Boyes v Colins [1999] WADC 111
Citation 15

…45) 71 CLR 637 Bonner v Tottenham and Edmonton Permanent Investment Building Society [1899] 1 QB 161 Boyes v Colins [2000] WASCA 344; 23 WAR 123 Burke v LFOT Pty Ltd (2002) 209 CLR 282 Castellain v Preston (1881-83) LR 11 QBD 380 Chappel v Hart (1998) 195 CLR 232 Charter Reinsurance Co Limited v Fagan [1997]…
Chappel v Hart [1998] HCA 55
Citation 16

…lins [2000] WASCA 344; 23 WAR 123 Burke v LFOT Pty Ltd (2002) 209 CLR 282 Castellain v Preston (1881-83) LR 11 QBD 380 Chappel v Hart (1998) 195 CLR 232 Charter Reinsurance Co Limited v Fagan [1997] AC 313 Chippendale v Holt (1895) 1 Com Cas 197 Cockburn v GIO Finance Ltd (No 2) (2001) 51 NSWLR 624 Codelfa Constructi…
Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38
Citation 17

…) 12 OR 682 Thiess Pty Ltd v ERC Frankonia Reinsurance Limited [2007] QSC 4 Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 193 CLR 603 Versicherungs und Transport A/G Daugava v Henderson (1934) 49 Ll L Rep 252 Wayne Tank and Pump Co Ltd v The Employers’ Liability Assurance Corp Ltd [1974] QB 57 White…
Ferrcom Pty Ltd v Commercial Union Assurance Co of Australia Ltd [1993] HCA 5
Citation 18

…lfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 Commercial Union Assurance Co of Australia v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 Firma C-Trade SA v Newcastle Protection and Indemnity Association (The Fanti); Socony Mobil Oil C…
Nissho Iwai Australia Ltd v Malaysian International Shipping Corp, Berhad [1989] HCA 32
Citation 19

…ibres Pty Ltd v Sola Basic Australia Ltd (1987) 11 NSWLR 189 Nissho Iwai Australia Ltd v Malaysian International Shipping Corp Berhad (1989) 167 CLR 219 Nowlan v Marson Transport Pty Limited [2001] NSWCA 346; 53 NSWLR 116 Page v Scottish Insurance Group (1929) 140 LT 571 Pine Top Insurance Co Ltd v Unione Italiana An…
Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82
Citation 20

…337 Commercial Union Assurance Co of Australia v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 Firma C-Trade SA v Newcastle Protection and Indemnity Association (The Fanti); Socony Mobil Oil Co Inc v West of England Shipowners Mutual Insurance Association (Lon…
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24
Citation 21

…(1895) 1 Com Cas 197 Cockburn v GIO Finance Ltd (No 2) (2001) 51 NSWLR 624 Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 Commercial Union Assurance Co of Australia v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 Firma C-Trade SA…
State Government Insurance Office (Queensland) v Brisbane Stevedoring Pty Ltd [1969] HCA 59
Citation 22

…urance Co (1987) 4 ANZIC 60-795 Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121 SGIO (Qld) v Brisbane Stevedoring Pty Ltd (1969) 123 CLR 228 Sheridan v Tynes (1971) 19 DLR (3d) 277 Sutton v Erect Safe Scaffolding (Aust) Pty Ltd [2006] NSWCA 265 Sydney Turf Club v Crowley [1971] 1 NSWLR 724 The National Fire…
Albion Insurance Co Ltd v Government Insurance Office (NSW) [1969] HCA 55
Citation 23

…84 (Cth) CATEGORY: Principal judgment CASES CITED: Albion Insurance Co Limited v Government Insurance Office of New South Wales (NSW) (1969) 121 CLR 342 Arthur Barnett Ltd v National Insurance Co of New Zealand [1965] NZLR 874 Bailey v New South Wales Medical Defence Union Limited (1995) 184 CLR 399 Baulderstone Horn…
Betts v Whittingslowe [1945] HCA 31
Citation 24

…one Hornibrook Engineering Pty Limited v Gordian Runoff Limited (formerly GIO Insurance) & Ors [2006] NSWSC 223 Betts v Whittingslowe (1945) 71 CLR 637 Bonner v Tottenham and Edmonton Permanent Investment Building Society [1899] 1 QB 161 Boyes v Colins [2000] WASCA 344; 23 WAR 123 Burke v LFOT Pty Ltd (2002) 209 CLR…
Sola Basic Australia Limited v Morganite Ceramic Fibres Pty Limited [1989] HCATrans 216
Citation 25

…Mercer v Chief Constable of the Lancashire Constabulary [1991] 1 WLR 367 Morganite Ceramic Fibres Pty Ltd v Sola Basic Australia Ltd (1987) 11 NSWLR 189 Nissho Iwai Australia Ltd v Malaysian International Shipping Corp Berhad (1989) 167 CLR 219 Nowlan v Marson Transport Pty Limited [2001] NSWCA 346; 53 NSWLR 116 Page…

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CITATION:	BAULDERSTONE HORNIBROOK ENGINEERING PTY LTD v GORDIAN RUNOFF LTD & ORS [2008] NSWCA 243 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	2 June 2008 - 6 June 2008
JUDGMENT DATE:	9 October 2008
JUDGMENT OF:	Allsop P at 1; Beazley JA at 334; Campbell JA at 335
DECISION:	Appeal dismissed with costs.
CATCHWORDS:	INSURANCE – professional indemnity insurance – construction of contracts of insurance – whether loss arose out of design fault or construction work – exclusion of liability - INDEMNITY – whether grant of indemnity an admission of liability - whether payment under co-ordinate policy extinguished rights against underlying insurer - WORDS & PHRASES – meaning of “paid” - PRACTICE & PROCEDURE - duty of parties to co-operate and be clear as to issues in litigation, especially in the Commercial List.
LEGISLATION CITED:	Civil Procedure Act 2005 (NSW) Insurance Contracts Act 1984 (Cth)
CATEGORY:	Principal judgment
CASES CITED:	Albion Insurance Co Limited v Government Insurance Office of New South Wales (NSW) (1969) 121 CLR 342 Arthur Barnett Ltd v National Insurance Co of New Zealand [1965] NZLR 874 Bailey v New South Wales Medical Defence Union Limited (1995) 184 CLR 399 Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (formerly GIO Insurance) & Ors [2006] NSWSC 223 Betts v Whittingslowe (1945) 71 CLR 637 Bonner v Tottenham and Edmonton Permanent Investment Building Society [1899] 1 QB 161 Boyes v Colins [2000] WASCA 344; 23 WAR 123 Burke v LFOT Pty Ltd (2002) 209 CLR 282 Castellain v Preston (1881-83) LR 11 QBD 380 Chappel v Hart (1998) 195 CLR 232 Charter Reinsurance Co Limited v Fagan [1997] AC 313 Chippendale v Holt (1895) 1 Com Cas 197 Cockburn v GIO Finance Ltd (No 2) (2001) 51 NSWLR 624 Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 Commercial Union Assurance Co of Australia v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 Firma C-Trade SA v Newcastle Protection and Indemnity Association (The Fanti); Socony Mobil Oil Co Inc v West of England Shipowners Mutual Insurance Association (London) Limited (No 2) (The Padre Island) [1991] 2 AC 1 Flounders v Millar [2007] NSWCA 238 Glens Falls Insurance Co v Tom Peters Limited (1957) 10 DLR (2d) 459 Globe & Rutgers Fire Insurance Co v Truedell [1927] 2 DLR 659 Glover v Australian Ultra Concrete Floors Pty Limited [2003] NSWCA 80 GRE Insurance Ltd v QBE Insurance Ltd [1985] VR 83 Hooker v Gilling [2007] NSWCA 99 James Hardie & Co Pty Ltd v Wyong Shire Council (2000) 48 NSWLR 679 Khan v Armaguard Ltd [1994] 1 WLR 1204 Law Society v Sephton & Co [2004] EWHC 544 Lawton v Dartmouth Moving & Storage Limited (1975) 64 DLR (3d) 326 Lord Napier and Ettrick v Hunter [1993] AC 713 Lubovsky v Snelling [1944] KB 44 McCarthy v St Paul International Insurance Co Limited (2007) 157 FCR 402 Mercer v Chief Constable of the Lancashire Constabulary [1991] 1 WLR 367 Morganite Ceramic Fibres Pty Ltd v Sola Basic Australia Ltd (1987) 11 NSWLR 189 Nissho Iwai Australia Ltd v Malaysian International Shipping Corp Berhad (1989) 167 CLR 219 Nowlan v Marson Transport Pty Limited [2001] NSWCA 346; 53 NSWLR 116 Page v Scottish Insurance Group (1929) 140 LT 571 Pine Top Insurance Co Ltd v Unione Italiana Anglo Saxon Reinsurance Co Ltd [1987] 1 Lloyd’s Rep 476 Roads and Traffic Authority v Royal [2008] HCA 19; 245 ALR 653 Santos Ltd v American Home Assurance Co (1987) 4 ANZIC 60-795 Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121 SGIO (Qld) v Brisbane Stevedoring Pty Ltd (1969) 123 CLR 228 Sheridan v Tynes (1971) 19 DLR (3d) 277 Sutton v Erect Safe Scaffolding (Aust) Pty Ltd [2006] NSWCA 265 Sydney Turf Club v Crowley [1971] 1 NSWLR 724 The National Fire Insurance Co v McLaren (1887) 12 OR 682 Thiess Pty Ltd v ERC Frankonia Reinsurance Limited [2007] QSC 4 Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 193 CLR 603 Versicherungs und Transport A/G Daugava v Henderson (1934) 49 Ll L Rep 252 Wayne Tank and Pump Co Ltd v The Employers’ Liability Assurance Corp Ltd [1974] QB 57 White v Overland [2001] FCA 1333
PARTIES:	BAULDERSTONE HORNIBROOK ENGINEERING PTY LTD GORDIAN RUNOFF LTD & ORS CGU INSURANCE LIMITED HIH CASUALTY AND GENERAL INSURANCE LIMITED
FILE NUMBER(S):	CA 40316/2006
COUNSEL:	Appellant: SG Finch SC; AJ McInerney; N Kabilafkas 1st Respondent: RM Smith SC; M Jones 2nd Respondent: SD Robb QC; GP Ellis SC
SOLICITORS:	Appellant: Freehills 1st Respondent: Corrs Chambers Westgarth 2nd Respondent: Colins Biggers & Paisley 3rd Respondent: Blake Dawson Waldron
LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	SC 50176/2003
LOWER COURT JUDICIAL OFFICER:	Einstein J
LOWER COURT DATE OF DECISION:	12 April 2006
LOWER COURT MEDIUM NEUTRAL CITATION:	[2006] NSWSC 223