Direct Engineering Services Pty Ltd v A Goninan & Co Ltd

[2008] HCATrans 380

[2008] HCATrans 380

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P21 of 2008

B e t w e e n -

DIRECT ENGINEERING SERVICES PTY LTD

Applicant

and

A GONINAN & CO LTD

Respondent

Application for special leave to appeal

HAYNE J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

FROM ADELAIDE BY VIDEO LINK TO PERTH

ON THURSDAY, 13 NOVEMBER 2008, AT 12.53 PM

Copyright in the High Court of Australia

MR M.J. McCUSKER, QC:   May it please your Honours, I appear with my learned friend, MS A. RAKOCZY, for the applicant.  (instructed by Clayton Utz)

MR G.R. HANCY:   May it please the Court, I appear for the respondent.  (instructed by Jackson McDonald)

HAYNE J:   Yes.  Mr McCusker.

MR McCUSKER:   Your Honours, this appeal essentially raises questions to do with privity of contract which were considered in the case of Trident v McNiece and, as we have set out in our summary of argument, resulted in differing views between the justices who comprised the Court in that case.  The first question for determination was this ‑ ‑ ‑

HAYNE J:   Just before you go on, was this case run below as a Trident Case?

MR McCUSKER:   Your Honour, in our submissions to the Court of Appeal, which are at page 170 of the applicant’s book of materials, at paragraph 23 it is stated:

Only the parties to a contract are owed obligations under it: Trident General Insurance v McNiece ‑ ‑ ‑

HAYNE J:   Perhaps I have not read it carefully enough, Mr McCusker, but I am just not conscious of the Court of Appeal considering Trident or, indeed, the primary judge doing so.

MR McCUSKER:   No, the Court of Appeal certainly did not do so, your Honour, but the matter was raised fairly and squarely in that submission at paragraph 23 and the point that was there being made is one of the two issues relating to privity.  The first is this.  Under the relevant contract of insurance there was a provision which included in the insured a person “to whom the Insured is in writing obliged to provide insurance”.  That is the provision in the contract of insurance which is at page 178 of the papers.  The question that arose and arose very belatedly – it was about two days before the trial, in fact, in 2006 that this matter was first raised – was whether the respondent to this application fell within that description. 

The respondent was not a party to any contract under which there was an obligation to provide it with insurance.  The respondent’s contention was that under a contract made between the applicant and Hamersley Iron of which the respondent did not claim it had any knowledge at the time it entered into the subcontract, under that contract there was provision which it said, properly interpreted, meant that there was an obligation owed to it under the Hamersley contract and, therefore, in turn, it came within the definition of an “insured” under the insurance contract. 

There are two problems with that.  The first is, can it be said that a person who is not a party to a contract, not named as a party, and there is no suggestion that the parties to the contract in this case were acting, either of them, as an agent or trustee – one of the circumstances that was mooted in Trident v McNiece – can that party be said to be a person to whom the insured in writing was obliged to provide insurance?  That centres on the question of whether, by reason of the doctrine of privity, it – well, having regard to the doctrine of privity it could be said, nevertheless, that there is an obligation owed to someone.  Obligation in the ordinary sense of the term means a contractual liability and an enforceable liability to, in this case, effect insurance.  In our submission, the Court of Appeal has simply disregarded that point, but it is a very important point. 

The second aspect which we raise in relation to this question of whether it fell within the definition of “insured” is this.  The Court, looking at the HI contract, the building contract, opined, as Justice Buss said, that it was ambiguous as to whether there was, in any event, an undertaking as between the two parties to the contract, an undertaking by the applicant to HI to effect insurance or provide insurance for its subcontractors.  In that regard, the Court of Appeal in concluding that the ambiguity should be resolved in favour of the respondent, that is, that the HI contract did provide, in effect, an obligation to provide insurance, relied very heavily on some observations made by Justice Lloyd, a single judge in the Petrofina Case.  We referred to that in paragraph 20 through to paragraph 26 in support of Question 1.3 of our third question of the special leave questions that we seek to have determined. 

It is said against us, well, that is simply the interpretation of a particular contract and not one which is suitable for determination by the High Court.  As to that, we say that in addition to the privity point, the reliance by the Court of Appeal on some observations made in different circumstances by a single judge in the Court of Queen’s Bench in the UK, reliance by the Court of Appeal on that as being a commercially convenient and sensible practice to provide for insurance for subcontractors is likely to be followed in future cases.  In other words, whenever there is a building contract, albeit the subcontractor is not a party to it and has no interest in it and has no knowledge of it, but nevertheless it will be implied, it appears, or may be implied, that the party to the contract is undertaking to insure the subcontractors because that is a commercially convenient practice. 

Now, whether it a commercially convenient practice or not is a moot point because, so far as the parties to the HI contract were concerned, there could be no arguable basis upon which it could be said it was convenient to them.  HI was only concerned to ensure that the applicant had covered itself for all liability.  Whether it also covered the subcontractors was therefore a matter of indifference because all liability of the applicant under the HI contract extended to liability for any contractors or subcontractors.  So, although it may be viewed in one light as being a point relating to one particular contract, in our submission, with respect, it has wider significance. 

The second aspect of the privity point that we wish to raise is this, and in that regard I say straight away that we do face some difficulty by reason of a concession made at the trial.  At the trial it was conceded by counsel for the plaintiff in that case, the present applicant, that if it was established that the respondent was an insured under the policy, then the applicant could not claim under its rights of subrogation.  I think that may be fairly interpreted as being a concession that if the respondent were an insured under the policy, then the claim made against it by virtue of subrogation could not succeed.  We wish to re‑ventilate that. 

We did raise it before the Court of Appeal.  It is a concession relating simply to a point of law and we have set out in our submissions the authority of statements from this Court on occasions that a new point of law may be raised provided it is in the interests of justice to do so.  There is no factual question linked to this.  The question simply is whether, if it was an insured, as defined by the policy, whether it would be entitled to sue on the policy and, of course, there is controversial dicta which we have referred to in the outline of submissions on that point.

CRENNAN J:   The problem, I think, though with that is that potentially the concession covers precisely that point.

MR McCUSKER:   I agree, with respect, your Honour.  Potentially, it does cover that point.  What we say is this, putting aside for one moment the concession.  If the doctrine of privity applies so as to prevent an action by a party who is not a party to the contract of insurance, which is the case here, then it is not possible for that party to raise as a defence an assertion that the applicant who is allegedly a co‑insured, or is the insurer by subrogation, cannot bring an action against it because it says it is met by the fact that there is a policy in place to which sub voce, so under which it is entitled to an indemnity.

The concession that was made was a concession that in the event that the insurance policy did cover the respondent, then the claim under a right of subrogation could not succeed.  I accept that.  But, the primary question relating to privity is whether by virtue of the doctrine of privity, as we contend, it cannot be said that under the HI contract the respondent is a party to whom the insured is in writing obliged to provide insurance and

therefore the other question falls away, the question of whether, in any event, even if it was an insured under the policy, it was entitled to sue under the policy.  That is the issue that we seek to raise in respect of Trident v McNiece.

Before the Court of Appeal, your Honours, we did in the notice of contention raise this issue, but we did not argue it at length and, indeed, I said, as counsel for the respondent there, that I would not linger on that point but I certainly did not, as was said in the judgment, concede the point or abandon it.  So, it was before the Court of Appeal and the court has misinterpreted what was said in relation to it.  Even so, it is our submission that it is such an important point which requires no consideration of any factual matter, simply a question of law, that it is appropriate the Court deal with that issue.  May it please your Honours, they are our submissions.

HAYNE J:   Thank you, Mr McCusker.  We shall not trouble you, Mr Hancy.

Having regard to the course of the litigation in the courts below, this is not a suitable vehicle in which to explore the questions of principle which are now said to arise in connection with privity of contract and the application of this Court’s decision in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107. Rather, the decision in the Court of Appeal of Western Australia turned in critical respects upon the terms of the particular insurance contract in question and whether it applied in the particular facts and circumstances of this case.

We are not persuaded that it is in the interests of justice generally or in this particular case that there be a grant of special leave to appeal in this matter.  Special leave to appeal is accordingly refused.  It must be refused with costs.

The Court will adjourn to tomorrow, 14 November 2008, in Sydney.

AT 1.07 PM THE MATTER WAS CONCLUDED