HDI Global Specialty SE v Wonkana No 3 Pty Ltd

HDI Global Specialty SE and another plaintiff insurer (the insurers) sought declarations regarding the construction of exclusion clauses in two insurance policies issued to Wonkana No 3 Pty Ltd and others (the insured). The dispute concerned whether COVID-19 was a disease covered by the policies, specifically whether an exclusion clause referencing the *Quarantine Act 1908* (Cth) and "subsequent amendments" applied to the pandemic, given that the *Quarantine Act 1908* (Cth) had been repealed and replaced by the *Biosecurity Act 2015* (Cth) during the policy periods. The insured argued that the exclusion clauses did not apply because COVID-19 was not a quarantinable disease under the repealed Act, and the reference to "subsequent amendments" did not extend to replacement legislation.

The Court of Appeal of New South Wales was required to determine whether the reference in the exclusion clauses to the *Quarantine Act 1908* (Cth) and "subsequent amendments" should be construed as including the *Biosecurity Act 2015* (Cth) and its relevant declarations concerning COVID-19. This involved considering principles of contractual construction, including the correction of mistakes by construction and the role of surrounding circumstances, such as the repeal and replacement of legislation, in interpreting the parties' intentions. The court had to decide if the reference to the repealed Act was a clear mistake or absurd, and if the parties could be taken to have known of the legislative changes.

The Court of Appeal held that the reference to the *Quarantine Act 1908* (Cth) and "subsequent amendments" was intended to refer to the legislative regime governing quarantinable diseases at the time the policies were in force. Applying principles of contractual construction, the court found that the reference to the repealed Act, in light of the surrounding circumstances including the enactment of the *Biosecurity Act 2015* (Cth), constituted a mistake that could be corrected by construction. The court reasoned that the parties would have intended the exclusion to apply to the current legislative framework for quarantinable diseases, and that the reference to "subsequent amendments" should be understood to encompass the replacement legislation that continued the regulatory scheme. Consequently, the court found that COVID-19 was not a disease declared to be a quarantinable disease under the *Quarantine Act 1908* (Cth), and therefore the exclusion clauses were not enlivened.

The summons was dismissed, and declarations were made that COVID-19 was not a disease declared to be a quarantinable disease under the *Quarantine Act 1908* (Cth) and that the relevant exclusions in the insurance policies were not enlivened. The cross-claim was otherwise dismissed.