FAI General Insurance Co Ltd v Gold Coast City Council

[1992] QCA 433

IN THE COURT OF APPEAL	[1992] QCA 433
SUPREME COURT OF QUEENSLAND	C.A. No. 83 of 1992

FAI GENERAL INSURANCE CO LTD

Appellant

v.

GOLD COAST CITY COUNCIL

Respondent

Mr Justice McPherson
Mr Justice Davies
Mr Justice Moynihan

Judgment of the Court delivered the day of , 1992

JUDGMENT BELOW FOR THE RESPONDENT AGAINST
THE APPELLANT FOR $130,875 SET ASIDE.

JUDGMENT ENTERED IN LIEU FOR THE RESPONDENT AGAINST THE APPELLANT FOR $55,875.

APPELLANT'S COSTS OF THE APPEAL TO BE
PAID BY THE RESPONDENT TO BE TAXED.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

No. C.A. 83 of 1992

Before the Court of Appeal

Mr. Justice McPherson
Mr. Justice Davies

Mr. Justice Moynihan

BETWEEN:

FAI GENERAL INSURANCE CO LTD

Appellant

- and -

GOLD COAST CITY COUNCIL

Respondent

JUDGMENT - THE COURT

Delivered the day of , 1992

MINUTE OF ORDER:

JUDGMENT BELOW FOR THE RESPONDENT AGAINST THE APPELLANT FOR $130,875 SET ASIDE.

JUDGMENT ENTERED IN LIEU FOR THE RESPONDENT AGAINST THE APPELLANT FOR $55,875.

APPELLANT'S COSTS OF THE APPEAL TO BE PAID BY THE RESPONDENT TO BE TAXED.

CATCHWORDS: 

Insurance
Professional indemnity insurance
Plaintiff successfully sued respondent for
negligent misstatement relating to position of
water main - whether conveyance of factual
information imparts any professional
component to respondent's duty to provide
correct information - whether within terms
of professional indemnity policy.

COUNSEL: 

S Kiefel QC	}
A Stone	} for appellant
C Brabazon QC	}
N McGregor	} for respondent

SOLICITORS: 

McInnes Wilson & Jensen for appellant
Primrose Couper Cronin Rudkin for

respondent

Hearing date: 

21 September, 1992

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

No. 83 of 1992

Before the Court of Appeal

Mr. Justice McPherson
Mr. Justice Davies

Mr. Justice Moynihan

BETWEEN:

FAI GENERAL INSURANCE CO LTD

Appellant

- and -

GOLD COAST CITY COUNCIL

Respondent

JUDGMENT - THE COURT

Delivered the day of , 1992

This appeal is brought in an action in which a Plaintiff (not a

party to the appeal) succeeded in recovering damages for

negligence against the Respondent who was the Defendant in the

action and who had joined the Appellant as a third party. The

negligence found against the Respondent consisted of a mis-

statement by one of the Respondent's servants.

This decision deals with the only one of the four grounds of

appeal; that the learned trial Judge was wrong in law in holding that

the Appellant was liable to indemnify the Respondent under a

professional indemnity policy between them. The other grounds

were not argued.

The negligent mis-statement was to the effect that there was

a water main buried in a trench at a depth of 4 metres some 4

metres from the boundary of land on which the successful Plaintiff

proposed erecting a warehouse. The Respondent's servant added

that the main did not affect the proposed building. The trench line

was in fact closer to the boundary than 4 metres and deeper than 4

metres and as a consequence of its presence, part of the foundation

of the Plaintiff's building subsided. Had the true position of the

trench been known, that risk could have been accommodated in the

foundation design.

The Respondent was the insured under two policies of

insurance issued by the Appellant which were in force at the relevant

time. The first was a general liability or "broad form" policy by

which the Appellant agreed to "indemnify the (Respondent) for all

amounts which the (Respondent) shall become legally liable to pay

by way of compensation... in respect of property damage caused by

an occurrence in connection with the business..." The policy

schedule defined the business as "Local Authority." By exclusion

(k) of the policy it did not apply to "the rendering of or failure to

render professional advice or service by the (Respondent) or any

error or omission connected therewith..."

The second policy was a professional indemnity policy by

which the Appellant agreed to indemnify the Respondent "against

any claim or claims for compensation... for breach of professional

duty in the conduct of the practice as defined and referred to in the schedule by reason of any negligence whether by way of act, error

or omission..." The combined effect of the schedule and the

definition of "the insured's profession" was that the risk insured

against was a breach of professional duty in the conduct of the

practice of "Municipal Authority."

The trial Judge found that the Appellant was liable to

indemnify the Respondent pursuant to both policies of insurance. If

the Respondent was liable for breach of professional duty, it is

entitled to indemnity under the professional indemnity policy. That

would engage exclusion (k) of the public liability policy so as to

exclude indemnity under it.

The Appellant, however, contends that the claim was not

one within the professional indemnity policy but is within the terms of

the broad form policy. The point of the appeal is the excess under

that policy is $100,000 rather than the $25,000 under the

professional indemnity policy. The Respondent did not contend that

if the claim was not within the professional indemnity policy it was

not with the broad form policy.

The Respondent raises an issue as to costs, consideration of

which it is convenient to defer until the matters raised by the

Appellant's appeal are disposed of. It is necessary to turn to the

trial Judge's findings. The Plaintiff had contended for two occasions

of negligent mis-statement, but succeeded in establishing only one.

(That is of course sufficient to sustain the judgment against the

Respondent). His Honour found that the Respondent's servant made "a positive assertion" that there was a main 4 metres from the

boundary at a depth of 4 metres. He found that the Respondent

knew, or ought to have known, that the information would be relied

on and that it was wrong.

The trial Judge, having made the finding just set out, referred

to the Respondent's servant having said that the main did not affect

the proposed building and that as the facts have emerged, clearly it

did. These latter findings founded a conclusion, at least an implied

one, that the wrong information caused the damage of which the

Plaintiff was complaining. The evidence did not disclose the source

of the erroneous information conveyed by the Respondent's servant

to the Plaintiff or how the error occurred. There was no evidence

as to any professional qualification on the part of the servant

conveying information - he seems to have been an inquiry officer.

The definition of risk and the measure of the obligation to

indemnify in a professional indemnity policy in terms of breach of

professional duty in the conduct of the practice of Municipal

Authority requires that effect be given to the word "professional". It

is not every breach of duty in the course of the conduct of the

"practice" or "business" of "Municipal Authority" which will be a

breach of professional duty. The meaning of "professional" will, of

course, vary with context. "Professional", however, connotes

"pertaining or appropriate to a profession", "engaged in one of the

learned professions".

The point is illustrated by the decision of the British
Columbia Court of Appeal in Chemetics International Ltd -v-

Commercial Union Assurance Co of Canada 11 DLR(4th) 754. In

that case the policy excluded liability in respect of the rendering of

"professional services". The relevant failure was to give proper

operating instructions in a manual. The manual was prepared by a

qualified engineer. That was, however, held to be irrelevant to

determining whether the particular instruction in issue was

characterised as a professional service. It was held not to be. The

provision of operating instructions was not the provision of

professional services; the service was not one which could usually

be expected to be provided only by a professional engineer. It was

simply part of a service provided by a vendor to a purchaser of the

particular plant.

This may be contracted with Baltzam -v- Fidelity Insurance

Company of Canada (1932) 3 WWR 140. There the indemnity

was in terms of "in the practice of his profession". An injury to a

patient because an X-ray table was improperly locked by the

doctor was, not surprisingly, held to be within the terms of the

indemnity.

In the present case the Respondent's servant did no more

than convey factual information which was incorrect and upon which

it may be accepted that a professional judgment was exercised by

those responsible for the design of the Plaintiff's building. That,

however, did not impart any "professional" component to the

Respondent's duty to provide correct information in the
circumstances.

It follows that the breach found against the Respondent is

not within the terms of the professional indemnity policy.

The Respondent seeks an order that the Appellants pay the

costs and expenses of defending the claim taxed on a solicitor and

own client basis. In the event the Respondent's submission in this

regard relies on a provision of the broad form policy whereby the

Appellant, with respect to any indemnity afforded by the policy,

agreed to defend suits, pay expenses, reimburse all reasonable

expenses and so on in respect of claims.

The relevant terms of the broad form policy thus provide for

an indemnity, one aspect of the measure of which might prove to be

the Respondent's costs taxed on an appropriate basis. In other

words the right contended for by the Respondent in respect of costs

flows from an alleged breach by the Appellant of the contract of the

indemnity - it was obliged to defend the Plaintiff's action but did not.

It emerged that there were disputed issues of fact bearing on this

alleged breach. The matter was not litigated below - it was not

pleaded nor was evidence led or tested bearing on the issue. The

disputed issues relate to costs incurred because of the dispute

between the Appellant and the Respondent as to whether there was

a liability to indemnify under the professional indemnity policy as

well as the broad form policy in a context in which the Appellant

contemplated settlement on the basis of the broad form policy but

denied its liability under the professional indemnity policy.

As has been said, what is really being sought under the guise

of a costs order is damages for beach of a contract of indemnity. It

is not appropriate that the issues bearing on that are resolved by an

order for costs in these proceedings. It is in any event too late to

raise the matter on this appeal.

In the event the judgment below for the Respondent against

the Appellant for $130,875 should be set aside. There should in

lieu be judgment for $55,875. The order below otherwise stands.

The Appellant should have the costs of the appeal to be taxed.