Distillers Co Bio-Chemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd

Distillers Co Bio-Chemicals (Aust) Pty Ltd (the appellant) appealed to the High Court of Australia against a decision of the Supreme Court of New South Wales, which had dismissed its claim against Ajax Insurance Co Ltd (the respondent). The dispute concerned the interpretation of a policy of insurance and whether it covered certain losses sustained by the appellant.

The High Court was required to determine whether the respondent was liable to indemnify the appellant under the policy for losses arising from the contamination of a batch of penicillin. Specifically, the court had to consider whether the contamination constituted an "accident" within the meaning of the policy and whether the exclusion clause relating to "faulty workmanship" applied to the circumstances.

The court reasoned that the contamination, which occurred during the manufacturing process, was an unforeseen and unintended event, thus falling within the definition of an "accident." Furthermore, the judges held that the exclusion clause for "faulty workmanship" was not applicable because the contamination was not a result of a defect in the workmanship itself, but rather an error in the process that led to the contamination. The principle applied was that insurance policies are to be construed according to the ordinary meaning of the words used, and exclusions are to be interpreted narrowly.

The appeal was allowed, and the High Court ordered that the judgment of the Supreme Court of New South Wales be set aside, with judgment entered for the appellant.