Commercial Union Assurance Company of Australia Ltd v Wayne Robert Webb and Susan Muriel Webb Trading as Webb Housemover and Elders Ltd Trading as Elders Insurance Agencies No. SCGRG 95/2717 Judgment No. 5717

[1996] SASC 5717

COURT IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA DOYLE CJ(1), BOLLEN(2) AND NYLAND(3) JJ

CWDS
Insurance - insurance contract - scope of clause covering business of insured - activities not within that scope not covered.

HRNG ADELAIDE, 11 July 1996 #DATE 1:8:1996

Counsel for appellant:             Mr S Walsh QC with him Mr P Salu

Solicitors for appellant:         Lawson Downs

Counsel for respondent Webb:     Mr D Greenwell

Solicitors for respondent Webb:    Wallace Westley and Co

Counsel for respondent Elders:     Mr C Mccarthy

Solicitors for respondent Elders: Grope Hamilton

ORDER
Appeal allowed.

JUDGE1 DOYLE CJ
1. The facts in this matter are set out in the judgment of Bollen J, which I have had the advantage of reading in draft form.

2. I am in substantial agreement with the reasons of His Honour.

3. This is a case in which the task confronting the trial judge was a matter of the construction of the insurance policy, in order to determine whether the relevant activity was covered by the policy.

4. The insurance proposal of 16 August 1987 referred to the business of the first respondents as "Transportable House and Shed Transporters". The insurance contract indemnified the first respondents in respect of damages in respect of an occurrence in connection with the business of the first respondents. The case was apparently conducted on the basis that, for the purpose of interpreting the contract, the business described in the contract was that identified in the proposal. I think this conclusion is clearly correct.

5. Therefore the only question was whether the activity in which the first respondents were engaged (and which caused the damage) is part of that business. As Bollen J has pointed out, this question was correctly identified by the learned trial judge.

6. However, in my respectful opinion the question was incorrectly answered by the trial judge. The activity undertaken was not that of transportation but that of roof removal. The evidence was that this was a new activity and had not been undertaken by the first respondents before. It was work which was therefore both new and different from that normally undertaken by the first respondents and described in the proposal.

7. Even if the activity of removing roofs might have been incidental to the work of transporting houses, the activity in question was not for that purpose and therefore not incidental to that work. It was for quite a different purpose, namely, work as roof removers.

8. Therefore, I think that the trial judge erred in finding that the activity of the first respondents which caused the fire was covered by the insurance contract. The appeal should be allowed, the judgment for the first respondents should be set aside and judgment entered for the appellant.

9. As Bollen J has noted, the appeal did not seek to challenge the judgment in favour of Elders, and on that basis we decided not to hear counsel for Elders at the hearing of the appeal. The judgment in favour of Elders was presumably entered because of the trial judge's finding that the policy covered the first respondents' activity; there was therefore, one assumes, no breach of the duty said to be owed by Elders to the first respondents to ensure that they were properly covered, or indeed any liability under the other pleaded causes of action. Therefore, the judgment in favour of Elders was predicated upon the judgment given in favour of the first respondents against Commercial Union.

10. It is not appropriate to deal with any matters which might arise in relation to this at this stage. As I have noted, the judgment obtained by Elders was not challenged before us and therefore should not be dealt with by us. If necessary, these matters can be dealt with at a later stage.

JUDGE2 BOLLEN J
11. People who carried on business as BC and BG Developments were the registered proprietors of land at 12 Margaret Street, Mount Gambier. There were buildings on the land. One had been used as a room for "cold storage". It had a corrugated asbestos roof. The external walls were clad with weatherboard and timber linings. Cavities were lined with tar paper and filled with sawdust. There was tar paper used as lining on or in the ceiling. There was more sawdust in the ceiling.

12. The first respondents (Mr and Mrs Webb) carried on business under the name of "Webb Housemover".

13. On 6 March 1994 the registered proprietors of the land entered into a contract with Webb Housemover whereby Webb Housemover (now the first respondent) was required to remove the asbestos roof of the building. The first respondent began work under the contract on 28 March 1994. Work continued on 29 March 1994. On 29 March 1994 a fire broke out in the ceiling. The building was destroyed. The registered proprietors blamed Webb Housemover for the fire. The registered proprietors issued proceedings in the District Court. Webb Housemover filed a defence. It joined the appellant by third party notice. The appellant is an insurance company. Webb Housemover was the insured under a policy of insurance issued to it by the appellant in relation to its building. Webb Housemover (now the defendants) claimed indemnity for any amount which it was held liable to pay by way of damages to the registered proprietors. Pleadings were exchanged. The appellant acknowledged the existence of a policy. It denied that it "covered the fire". The appellant relied also on points of "non-disclosure".

14. Elders Insurance Agencies, as agent for the first respondent, arranged the issue of the policy. Put very broadly the first respondent claimed against Elders (whom it joined), claiming that Elders was in breach of its contract. It said that Elders did not arrange for the issue of an appropriate policy. Elders denied liability. Pleadings were exchanged between those parties.

15. The action came on in the District Court of Mount Gambier. The registered proprietors were the plaintiff. The Webbs (or Housemover) were the defendants. Commercial Unions was a third party. Elders was another third party.

16. During the trial the plaintiffs and defendants settled the claim made by the plaintiffs against the defendants. Judgment was entered, therefore, by consent in the sum of $30,000 in favour of the plaintiffs against the defendants. The issues that remained for determination by the learned judge were those between the defendants and the two third parties.

17. The learned trial judge held that the circumstances of the fire and the involvements of the defendants in work which caused the fire did attract and fall within the terms of the policy of insurance. Put roughly, the court held that the policy covered the risk (which had become not merely a risk but a fact) of fire. The appellants' defence failed. That meant that there was no basis for a judgment in favour of the defendants in the action against Elders. Judgment was entered for Elders against the defendants.

18. The appellant appealed against the finding and judgment against it in favour of the first respondents.

19. Mr McCarthy appeared as counsel before us for Elders. But there was no issue before us as between Elders and any other party. Elders had a judgment in its favour against the first respondents. There was no appeal about that before us. There was nothing before us about the position of the second respondent. We could make no order for or against Elders. We held that Mr McCarthy had no standing before us.

20. As I have said, against vigorous opposition, the learned trial judge held that the policy between the appellant and the first respondents did cover the fire and its consequences.

21. The learned trial judge set out the circumstances of the issue of the policy, spoke of some of the work which the first respondent did to the building and spoke of the relevant term of the policy. His Honour wrote:
    "For over 20 years, the plaintiffs have carried on business in the
    south-eastern part of the State as business, house and shed
    transporters. They have moved all types of buildings. Depending on
    the size of the building, at times, it would be necessary to
    dismantle the building before transferring it to its new site and
    then re-erect it on the new site. In about 40% of cases, the
    buildings transported by the defendants were constructed, at least
    in part, of asbestos, which meant that the defendants were required
    to handle asbestos; for example, it was necessary for them from time
    to time to remove the asbestos roof of a building for the purpose of
    transporting the building. For this purpose, an oxy-acetylene torch
    was sometimes used to knock off the heads of bolts holding the
    sheets of asbestos in place. As the years passed, the manner in
    which the defendants handled asbestos changed. For the purpose
    of carrying on their business, the defendants held a restricted
    building licence from about 1980. In 1988 Mr Webb was issued with a
    licence pursuant to the Builders Licensing Act 1986 which was
    restricted to 'Removal and Relocation of Transportable Buildings and
    Auxiliary Building Work'. As the years passed, and the knowledge of
    the health risks associated with the handling of asbestos grew, the
    defendants decided, for the protection of themselves and their
    employees, to do whatever was necessary for the obtaining of a
    licence to remove asbestos, because their business involved them in
    handling asbestos. On 16 December 1992, pursuant to the provisions
    of the Occupational Health, Safety and Welfare Act 1986, the male
    plaintiff, Mr Webb, was issued with a limited asbestos removal
    licence. The defendants purchased the equipment necessary to comply
    with the terms of that licence.

On 16 August 1987, the defendants met with a man called Golding, an
    employee of Elders and, in turn, an agent of Commercial Union. In a
    conversation between Mr Webb and Golding, Mr Webb explained to
    Golding the nature of the business in which they were involved, what
    it involved and the sort of insurance cover they were interested in
    for the purpose of the business.

On 4 August 1987, Commercial Union issued a cover note to the
    defendants signed by Golding. The period of cover was from 4 August
    1987 to 4 August 1988. The type of policy was described as
    'Liability' and the interest insured was described as 'Legal
    Liability to $1 Million Dollars, plus all Legal Costs excluding
    Goods in Legal or Physical Control for business of transporting
    portable housing'.

On 16 August 1987, the defendants signed a proposal for 'Liability
    Insurance' with Commercial Union; their business being described in
    the proposal as being 'Transportable House and Shed Transporters'.
    Subsequently, a contract of insurance was entered into and a policy
    issued. Pursuant to the contract of insurance, Commercial Union
    agreed to indemnify the defendants 'in respect of damages... which
    the insured becomes liable to pay in respect of an Occurrence
    happening... in Australia in connection with... the business of the'
    defendants. The policy of insurance was renewed from time to time.

In the proposal for the insurance, I mention that there appears a
    question numbered 8 in the questionnaire which forms part of the
    proposal. Question 8 is:    'Are you a builder or contractor?'
    The question was answered 'Yes.'

Question 9 asked: 'Do you in the course of your business engage
    in welding operations, either directly or through a sub-contractor?'
    The answer to that was 'Yes.' I mention also, although I think in
    the circumstances nothing really turns on it, that there is no
    mention in the proposal of asbestos."

Mr Walsh QC, for the appellants, took us through the circumstances
    of the issue of the policy. He referred to the cover note, to the
    proposal and to the policy. Mr Walsh, amongst other things, said:
    "MR WALSH: The commencement to the insurance was the cover note,
    which appears at p.391 of the appeal book. And that was entered
    into on 4 August of 1987. It provided cover, at that time, for Webb
    House Removers and legal liability. And then the next step in the
    process was at p.385 when a proposal was entered into with respect
    to the same period and that was dated or signed on 16 August 1987 as
    appears at p.387. And, in that proposal, the business of the
    insured was said to be:    'Transportable house and shed
    transporters.'

And a little above:    'Business or occupation. House and shed
    transporters.'

There were various other things referred to in this policy. In
    particular, my learned friend would wish me to point out, no doubt,
    that there was reference to welding, for example.

If one looks at p.386 and item No.9: 'Do you, in the course of
    your business, engage in welding operations?'

And the response to that was: 'Yes.'
    DOYLE CJ: And 'Are you a builder or contractor?'
    MR WALSH: Yes, I suppose that is ambiguous as to what that might
    mean, but the answer was 'Yes' to that question.

And then:    'Do you ensure subcontractors... liability insurance?
    Yes.'

The next step in the chain is that the policy conditions appear at
    p.397.

And, at p.398, there is reference to the duty of disclosure.

And then, at p.399, the insurance that is provided. And I can
    indicate to the court that, although there is reference to a
    schedule, no schedule has ever been found or produced even though
    enquired. And I understand that this is a micro film copy
    ultimately what we have before us, but the cover that is provided
    appears at p.401 under 'General Liability', and it is in connection
    with the business of the insured. The business of the insured was
    accepted by all the parties at trial as being that of house and shed
    removers or transporters along the lines of the description given in
    the proposal and previously in the cover note and the trial
    proceeded on that basis. So that, although one searches in vain for
    a connection between the liability policy conditions, as appears at
    p.397 and the proposal itself, it would seem that everybody has
    accepted that the business of the insured, that is referred to in
    the policy terms and conditions, is the business that has been
    described in the policy and no point has ever been taken about
    that."

22. Although questions of non-disclosure were not abandoned the real issue before us was whether the policy did cover the risk and the loss. Was the learned trial judge correct in holding that it did?

23. Much was made of the fact that the first respondents were builders and contractors as they said in the proposal and that, as they said, they engaged in welding operations sometimes. I think these matters not to the point. The learned trial judge put the point at issue correctly thus:
    "Commercial Union has refused to indemnify the defendants against
    the plaintiffs claim because, it is said, the fire was not an
    occurrence happening in the business of the defendants; saying, in
    effect, that, in performing the work of removing the asbestos roof,
    the defendants were not doing something incidental to their business
    of transportable home and shed transporters."

24. The fact that they were builders, the fact that they did welding sometimes does not matter if the policy did not cover the fire and its consequences. And those facts, too, could not help in determining whether the policy did cover the fire. One must look at the terms of the policy and see whether the "facts of the fire" come under the umbrella of indemnity provided in the policy.

25. In the proposal the business of the first respondent was stated as "Transportable house and shed transporters" and elsewhere "Business or occupation. House and shed transporters". Then in the policy itself, the place where it matters, the "cover" is, so far as is relevant, stated thus:
    "COVER

The Company will indemnify the Insured in respect of damages (other
    than aggravated, exemplary or punitive damages) which the Insured
    becomes liable to pay in respect of an Occurrence happening -
    (a) in Australia in connection with -
     (1) the business of the Insured."

26. So, indemnity is promised in respect of something happening in connection with the business of the insured. That is the promise. Did the fire come within the promise? Was the fire something happening (some occurrence) in connection with the business of the insured. The business stated in the proposal was, I repeat, transporter of house and sheds. Not builders in general. Not demolishers of parts of houses or sheds. But transporters. No doubt they were, in the circumstances of this case, taking away the asbestos roof. But that is not transporting a house or shed. It is taking down and taking away some part of a building. No doubt a building must be taken down part by part but if the sole work is merely taking away some part of the building then there is no transporting of the building.

27. The learned trial judge concentrated on the correct question. He wrote:
    "In my view, on the facts, the fire occurred in the conduct by the
    defendants of their business as described in the proposal for
    insurance. It was not the sort of work which they habitually did,
    but it was certainly work which was incidental to their business.
    The description of the business in the proposal is brief; and I say
    in parenthesis that there is no description of the business in the
    contract of insurance. The substantial nature of the business of
    the defendants conformed with that description and, on the material
    before me, the defendants have not changed the nature of their
    business. They had not, for example, become asbestos removers,
    although handling of asbestos by way of dismantling it and re-
    erecting it was, and always had been, incidental to their business.
    That is not altered, it seems to me, merely because they became more
    sophisticated in the way they dealt with asbestos and occasionally
    removed an asbestos roof otherwise than for transportation or re-
    erection, but, as perceptions changed, simply to enable someone to
    be rid of it."

28. I regret that, with all respect to the most experienced judge, I cannot agree. The substantial nature of the business did not conform with the description in the proposal. The work of removing asbestos was not here incidental to the business. If taking away (transporting) the whole building including the roof had been the task required by the contract between the parties the removal of asbestos may have been incidental to transportation. Here it was not. It was the only task. The contract between registered proprietors and the first respondent was a contract for the removal of asbestos and that only. Let me quote part of the exchange between bench and bar during the hearing:
    "BOLLEN J: What exactly was the job they were doing?

MR GREENWELL: The job they were doing was removing asbestos sheeting
    from the roof of a building and in so doing, they were using
    oxyacetylene equipment.

BOLLEN J: Not moving the house.

MR GREENWELL: No, they were not moving the house.

BOLLEN J: Taking off the roof and putting on a new roof?

MR GREENWELL: No.

BOLLEN J: Not doing any transporting?

MR GREENWELL: No, they were not.

DOYLE CJ: It is hard to see this is part of the business of
    transportable house and shed transporters, because there was nothing
    to do with removing or transporting the house or shed. Indeed, if
    it matters, probably it doesn't, nothing to do as I understand it
    with the transportable shed, I mean granted they are using
    oxyacetylene and granted they said they have to have a general
    builders licence, the problem you have to face is, was this an
    activity which is part and parcel, as a matter of ordinary language,
    of transportable house and shed transporters.

MR GREENWELL: That's the description that the agent for Commercial
    Union has used in the proposal form.

DOYLE CJ: Your clients have signed it.

MR GREENWELL: They have signed it, it is their description. But the
    evidence discloses that they had been engaged in just this sort of
    business for some 20 years and in 1987 they had a claim on the
    insurance company which was initially refused.

DOYLE CJ: Unrelated to transporting.

MR GREENWELL: No, it was related to transporting.

DOYLE CJ: That's the very point. Where's the evidence for 20 years
    they had been doing work unrelated to transporting and they
    disclosed that to Mr Golding?

MR GREENWELL: I will come to that shortly. Could I just finish.

DOYLE CJ: Is there any such evidence? I don't think there is, they
    had been doing work unrelated to transporting.

MR GREENWELL: Their evidence was, that they had been doing work
    involving transporting, but, in addition to that, and moving
    buildings of all sorts and that's at p.382 of the transcript, but,
    in addition to that, they were involved in, at p.314 of the
    transcript, when Golding came to their home to talk about the sort
    of cover that his company could provide, they specifically asked for
    the cover that was going to cover them and I'm using his words,
    'everything that was respective to what we were doing'. At p.314,
    the respondent told Golding the nature of their business, that's at
    line 32 and had a detailed discussion with Golding about the sort of
    work and the description of the work that they did.

DOYLE CJ: Where's the evidence along the way they told him that
    from time to time they would take down parts of buildings or remove
    parts of building unrelated to the removal of the building itself?

MR GREENWELL: There isn't any evidence.

DOYLE CJ: That's a grave difficulty for you, because you can't say
    that because they told him what they were doing, it must follow they
    told him they were doing that, because the tenor of the evidence is
    that, in fact, they weren't doing that at the time - forget the
    tenor - where's the evidence they did tell him that?"

29. The work had nothing to do with the business of the first respondents as described in the proposal and therefore translated to the policy. It had nothing to do with the transporting of buildings (house or shed). The first respondents were working on a building. But not doing the work of transporting it. The occurrence and therefore the loss was not covered by the promise of indemnity given by the policy.

30. Questions of non-disclosure need not be discussed. The appellant succeeds without recourse to non-disclosure.

31. I would allow the appeal, set aside the judgment on the third party proceedings between the first respondent and the appellant and on those proceedings enter judgment for the appellant.

JUDGE3 NYLAND J
32. I agree with the reasons of Bollen J.