Heenan v Rowe
[2006] WADC 24
•2 February 2006
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: HEENAN -v- ROWE & ANOR [2006] WADC 24
CORAM: HH JACKSON DCJ
HEARD: 22 NOVEMBER 2005
DELIVERED : 2 FEBRUARY 2006
FILE NO/S: CIV 2470 of 2002
BETWEEN: GABRIELLE MARY HEENAN
Plaintiff
AND
KENNETH ALBERT ROWE
VERONICA MARGARET ROWE
DefendantsTHE UNDERWRITER INSURANCE COMPANY LIMITED
Third Party
Catchwords:
Defendants' application for costs indemnity from third party
Legislation:
Health (Pesticides) Regulations 1956 (WA)
Result:
Order that application be dismissed
Representation:
Counsel:
Plaintiff: Not applicable
Defendants: Mr R E Keen
Third Party : Mr C C Rimmer
Solicitors:
Plaintiff: Not applicable
Defendants: WL & KJ Everett
Third Party : Jarman McKenna
Case(s) referred to in judgment(s):
FAI General Insurance Co Ltd v Gold Coast City Council [1995] 2 Qd R 341
GIO General Ltd v Newcastle City Council (1996) 38 NSWLR 558
Government Insurance Office of New South Wales v Council of the City of Penrith [1999] NSWCA 42
HIH Casualty & General Insurance Ltd v Insurance Australia Ltd [2005] VSC 342
Kim v Cole [2001] QSC 289
Pioneer Road Services Pty Ltd v QBE Insurance Ltd [2002] NSWSC 137
Toomey v Scolaro's Concrete Constructions Pty Ltd [2002] VSC 48
Case(s) also cited:
Alex Kay Pty Ltd v General Motors Acceptance Corporation and Hartford Fire Insurance Company [1963] VR 458
C E Heath Underwriting & Insurance (Aust) Pty Ltd v Edwards Dunlop & Co Ltd (1993) 67 ALJR 395
Distiller Co (BioChemicals) (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1
Karenlee Nominees Pty Ltd v ACN 004 312 234 Ltd (1994) 8 ANZ Insurance Cases 61236
Mayer v Isaac (1840) 151 ER 554
McCann v Switzerland Insurance Australia Ltd & Ors (2000) 203 CLR 579
MGICA Ltd v United City Merchants (Australia) Ltd (1986) 4 ANZ Insurance Cases 60729
Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603
Zurich Australian Insurance Ltd v Fruehauf Finance Corporation Pty Ltd (1993) 7 ANZ Insurance Cases 61177
HH JACKSON DCJ:
Background
The defendants claim indemnity from the third party under an insurance policy for the costs of defending the plaintiff's claim.
It is agreed that the relevant policy documents are exhibits 1A and 1B.
The defendants are in partnership together as pest control operators. The male defendant has been licensed as such an operator since licensing was first required in 1975. Licensing is regulated by the Public Health Department under the Health Pesticide Regulations 1956; (exhibit 2). Licensing involves certain instruction or training courses and examinations.
They employ their son in the business. Both father and son hold licenses and were so licensed at the time of the events involving the plaintiff; (exhibit 3). Essentially licensing requirements involve knowledge of the use of relevant chemicals. Essentially also, the application of such chemicals is done in accordance with the manufacturers' labelling instructions.
The plaintiff's claim arose when she sought the services of the defendants in December 1999 for the removal of a beehive from her premises.
The defendants carried out that work. The work was done by the defendants' son. Essentially the work consisted of spraying pesticide at the plaintiff's home. The plaintiff subsequently sought damages alleging the negligently application of chemicals had caused her injury. The proceedings were defended and the action subsequently settled on 30 June 2005, on the basis that the plaintiff's action was discontinued with no orders as to costs. It is agreed that the settlement was reasonable.
Essentially the plaintiff's allegation was that by negligent application of chemical pesticide or insecticide she had suffered physical and consequential injury. It is not entirely clear however whether the claim is that the defendants' employee exposed the plaintiff to a pesticide or alternatively failed to warn her that she should be away from the premises at the time that the pesticide was sprayed.
The defendants seek to recover the solicitor – client costs of so defending the proceedings, and the costs of the third party proceedings on an indemnity basis, from the third party. As at the date of my hearing of this matter, the defendant claimed by way of quantum of $16,298.72 in respect of solicitor – client costs but that issue was in dispute. It is agreed that in the event of the defendants being successful, the assessment of quantum should be remitted to a Registrar of the court for determination.
Third party claim
By its third party claim the defendants allege that:
"5.By an agreement which commenced on or about 1 October 2001 between the defendants and the first third party or its agent, the first third party agreed to provide insurance cover to the defendants in respect of general liability and professional indemnity insurance.
6.The said agreement incorporated the terms set out in a document entitled 'Policy Wording for Pest Control Operators' which provides, inter alia, as follows:
'SECTION TWO: PROFESSIONAL INDEMNITY INSURANCE
UIC agrees to indemnify the Insured for any Claim first made against the Insured and notified to UIC during the Period of Insurance for breach of Professional Duty on or after the Retroactive date in the conduct of the Business. If during the Period of Insurance, the Insured becomes aware of any fact or circumstance which may subsequently give rise to a Claim under this policy and elects, during the Period of Insurance to give written notice to UIC of such fact or circumstance, then any Claim which subsequently arises from that circumstance will be deemed to have been a claim made during the Period of Insurance. PROVIDED ALWAYS THAT it is a condition precedent to indemnity under the policy that any work carried out is in accordance with the current applicable Australian Standards for Pest Control Operators' ".
That is now agreed.
To that the third party pleads:
"The third party … says that the relevant indemnity extended only to breaches of professional duty and therefore has no application to the plaintiffs claim."
Policy
Exhibit 1A, an invoice rendered to the defendants on behalf of the third party dated 2 October 2001 relevantly reads "Transaction Description New Cover 2001 – 2002 New Pest Control Operators Insurance as per the attached coverage summary." Exhibit 1B is a "Client Coverage Summary" which reads under the heading "Liability":
"Broadform General Liability and Professional Indemnity Insurance
Insured:KA & VM Rowe Trading as Argus Pest Control
Occupation: Property Inspection, Treatment/Reports for Termites Urban Weed Control, Other Pest Control
Turnover:$113,000
Specific Compounds: Arsenic Trioxide
Limits of Indemnity:
Section One – Broadform Liability
Legal liability for personal injury and / or property damage as a result of an occurrence arising our ot [sic ‑ out of] the insured's business and / or products for claims occurring during the period of insurance
Exclusion:‑ Agricultural Spraying
‑ Broadacre Spraying
‑ Crop Spraying
Section Two ‑ Professional Indemnity Insurance
Legal liability for the insured's breach(es) of professional duty on or after the retroactive date in the conduct of the business for claims made during the period of insurance
Limit of Indemnity: $500,000 Each and every claim and in the aggregate
Excess:$2,500 Each and every claim exclusive of costs and expenses
Extensions:Section Two ‑ Run off cover up to 3 years
Automatic
Re‑Instatements: Section Two ‑ One full re‑instatement per Period of Insurance
Retroactive Date: Unlimited, excluding known claims and/or circumstances
Fumigation: Domestic : Excluded
Commercial: Excluded
(Note:Pestigas and Instectigas not excluded)
Special Conditions
It is a condition precedent to indemnity that any work carried out is in accordance with current applicable Australian Standards for pest control operators".
The third party argues that the plaintiff's claim for which the defendant seeks indemnity is properly one which but for matters of time falls within section 1 of the policy as a public liability claim. It is common ground however that the Broadform General Liability section of the policy does not apply, the occurrence, being the injury to the plaintiff, occurring before the policy commenced. The claim is made under the Professional Indemnity section of the policy. The period of insurance is 1 October 2001 to 1 October 2002. The occurrence was on 23 December 1999 but the claim by the plaintiff was notified to the defendants in June 2002, within the relevant period of the policy. The defendants' claim against the third party is therefore made under "Section two – Professional Indemnity Insurance" which relates to legal liability for the defendants' breaches of professional duty on or after the relevant date.
The male defendant agreed that the policy documents (exhibit 1) properly described his business at material times as involving "property inspection, treatment/reports for termites, urban weed control, other pest control". It is common ground that what was done for the plaintiff fell within that description. He also agreed that in providing termite control reports he followed the Australian Standard for Inspection of Buildings, Part 3: Timber pest inspections, AS4349.3 – 1998 (exhibit 8). He gave evidence under cross‑examination thereon.
I note also that in the exclusions to s 1 (at p 8 of the policy) the following appears:
"PROFESSIONAL INDEMNITY
any breach of the duty owed in a professional capacity by the Insured and/or persons for whose breaches of such duty the Insured may be legally liable".
It seems, I agree, that this exclusion is designed to throw such claims into section two of the policy.
A number of other clauses in the documents are relevant to the coverage provided by the policy but not, I think, of assistance in determining the present issue : that of whether the claim in these proceedings is properly categorised as arising within the category of breach of professional duty.
Prior to taking out the policy the subject of these proceedings, that is from May 1998 to October 1998 and from 1 October 1999 to 1 October 2000, the defendants held insurance with another company, which insurance was described as "Combined Professional Indemnity and Public and Product Liability Insurance for Pest Control Operators." The policy was a "claims made" policy rather than an "occurrence based" one.
On the other hand, as far as public liability insurance was concerned the policy issued by the third party was occurrence based and did not cover that time period for the matter concerned.
For the defendants Mr Keen argued that the fact that that change of policy coverage had resulted in the defendants not being so insured for public liability claims was irrelevant. I agree with Mr Keen that the insurance cover held by the defendants prior to taking out the cover here under consideration is essentially irrelevant, whether or not it was typical or otherwise, and whether or not it is the changes in the cover held which have generated the present issue.
Essentially, the matter before me is to construe the contents of exhibits 1A and 1B in light of the claim made by the plaintiff against the defendants. The claim is to be considered in its essential nature. As to that the third party says the pleadings are not definitive.
The concepts of "public liability" and "professional duty" are not defined in the policy documents. I was referred to various judicial authorities as to the scope and meaning of those phrases.
The plaintiff says that while not definitive, consideration can be given both to the pleadings in the claim and to the content of the licensing or regulatory system under which the plaintiffs were licensed, trained and regulated.
It is clear also that the professional indemnity section of the policy is provided for pest control operators. Mr Keen argues that, on the pleadings and in fact, a number of separate issues are raised which go to questions of professional duty: that the plaintiff consulted the defendants as to removal of the beehive; that the defendants recommended (that is gave advice) that the beehive be sprayed with pesticide; that they represented that the pesticide to be used was not harmful to humans; that in reliance upon that recommendation and representation the plaintiff engaged the defendants for the wall to be sprayed that day with pesticide and requested and directed the defendants to wait until the plaintiff and her family had left the home.
The plaintiff argues that the negligence alleged in the present claim was not a collateral negligence falling within section one of the policy but negligence which goes directly to breach of professional duty. Clearly such a breach may involve a breach of a contractual obligation.
These allegations involve, he argues, use of professional experience and expertise. The contract made and the law of torts both involved exercise of a duty of care and skill. "Public liability" involves "collateral negligence" whereas "breach of professional duty" involves negligence arising out of the performance of a duty involving exercise of professional skill.
I accept that the onus is on the insurer to establish that the claim is not covered by its policy and that such a policy should be read contra preferentum in case of ambiguity. It is agreed that the policy must be determined on its wording and the facts and circumstances and in a manner which fulfils the commercial purpose of the policy.
It is not argued on behalf of the third party either that the defendants could not, in appropriate circumstances, be in breach of professional duty or that the policy documents are ambiguous so as to require application of the contra preferentum rule of construction.
I have concluded that in preparing and submitting reports the defendant in fact may be performing what can be categorised as a professional duty. It involves providing advice concerning the condition of the property inspected and as to any necessary remedial or protective action. However that is not the issue here.
It is clear that the term "professional" is not to be narrowly defined. In GIO General Ltd v Newcastle City Council (1996) 38 NSWLR 558 for example Kirby P at p 568 said:
"The relevant activities conducted by the respondent must be examined to see whether, in their nature, they are properly characterised as 'professional'. The source of the respondent's duties to perform the activities, although a relevant circumstances, is not definitive. For the same reason, it does not necessarily matter whether the officers of the respondent who were alleged to have given faulty advice and service were professionally qualified engineers: see also FAI General Insurance Co v Gold Coast City Council (1992) 81 LGERA 374 at 375‑377; 7 ANZ Ins Cas 61‑153 at 77,812. The question is, is the type of service which was provided properly characterised as 'professional service'.
The term 'professional' in the context of professional indemnity insurance today is very broad. This is evidence by the very large range of policies which are written for such insurance: see, eg, D C Jess, The Insurance of Professional Negligence Risks: Law and Practice, 2nd ed (1989), London, Butterworths at 194. The term involves, in the context of a policy written for a local government authority, no more than advice and services of a skilful character according to an established discipline: see Commissioners of Inland Revenue v Maxse [1919] 1 KB 647 at 657; Carr v Inland Revenue Commissioners [1944] 2 All ER 163 at 166‑167."
In Kim v Cole [2001] QSC 289; Byrne J had to consider the situation of a plumber and gas fitter who made an error of judgment in installing a valve. The relevant insurance policy excluded claims arising out of a breach of a duty owed in a professional capacity. His Honour disposed of the issue by saying that "it involves no reflection on Mr Hurst to say that he carries on a trade, not a profession – a conclusion that disposes of this defence". The sentence is footnoted "cf FAI General Insurance Co Ltd v Gold Coast City Council [1995] 2 Qd R 341, 344".
In FAI General Insurance Co Ltd v Gold Coast City Council the Queensland Court of Appeal held a negligent mis‑statement by a council officer, who had no professional qualifications, as to the position of a water main was not in breach of professional duty. The Court said:
"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 Court then used this test to contrast two Canadian decisions.
Their Honours concluded:
"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."
In Toomey v Scolaro's Concrete Constructions Pty Ltd [2002] VSC 48, Eames J considered these authorities so far as relevant here at pars 60 to 70. At par 65 his Honour said:
"Each of those decisions demonstrates that the question must be resolved by an examination of the totality of the circumstances, but with a focus on the actual conduct, by action or omission, of the negligent individual performing the services."
He added, at par 70:
"The categories of 'professions' should not be regarded as being closed, and confined to traditional learned professions. Whether at any moment the actual conduct giving rise to liability would be covered by such a policy would be a matter to be considered on a case by case basis, having regard to the wording and nature of the policy which was under consideration."
Pioneer Road Services Pty Ltd v QBE Insurance Ltd [2002] NSWSC 137 illustrates the need for case by case analysis of the policy and the relevant circumstances. Wood CJ at CL confirmed though that the term "professional" in the context of professional indemnity insurance is very broad.
In HIH Casualty & General Insurance Ltd v Insurance Australia Ltd [2005] VSC 342, Bongiorno J had to consider a situation in which an employee had erected a large scaffold comprised of components hired from a supplier. The scaffolding gave way because the main beam was inadequate to bear the weight it was to hold. The insurance policy excluded liability "… for compensation arising out of any negligent act, error or omission in the professional conduct of the Insured and execution of the Insured's professional activities and/or persons for whom the Insured may be legally liable …".
After considering GIO v Newcastle City Council his Honour concluded:
"Mr Steele was a scaffolder who held an advanced certificate of competency. He acquired this certificate by on‑the‑job training and had since worked as a scaffolder for about 30 years. His evidence was that he could work in charge of scaffolding crews.
The service provided by Mr Steele could not, realistically, be described as 'professional conduct' or 'professional activities'. They were the activities of a tradesman having a particular skill effectively acquired by experience. Extending Kirby P's analysis to its fullest, Mr Steele's activities could not be encompassed within the term 'professional'."
In Government Insurance Office of New South Wales v Council of the City of Penrith [1999] NSWCA 42, an officer or officers of the City made a negligent mis‑statement or mis‑statements by omission in respect of the Council's relation to certain land. The New South Wales Court of Appeal divided on the question whether this constituted a breach of professional duty. At par 9 Mason P concluded:
"The mere provision of information is not itself a professional service."
At pars 18 to 23, Powell JA said:
"Nor, in my view, can it be said that Mitora's claim based on the Town Clerk's letter fell within the indemnifying clause in the policy – it could do so only if the terms of that letter represented a negligent act, error or omission constituting a breach of professional duty in the conduct of a business conducted by the Council in a professional capacity.
The provision of information as to what may, or may not, be ascertained from Council's records is not, without more, the provision of a professional service; nor is it made so by reason of the fact that the person providing the information may have some form of professional qualification (see, for example, FAI General Insurance Co Ltd v Gold Coast City Council (1992) 81 LGERA 374, 375 – 375; 7 ANS Ins Cas 61 – 153; GIO General Ltd v Newcastle City Council (1996) 38 NSWLR 558, 568 per Kirby P … .
The distinction to be drawn between the nature of the advice or service provided – which is the critical question – and the professional or other qualifications of the person providing that advice or service – which, in a particular case, may be irrelevant – may be illustrated by a reference to some of the authorities."
He then referred to two Canadian decisions and to Derrington & Ashton: "The Law of Liability Insurance" (1990) at t546 – 566 and Jess: "The Insurance of Professional Negligence Risks": Law and Practice 2nd ed (1989 at 194.)
On the other hand Beazley JA said after referring to the view of the meaning of "professional services" within the terms of a professional indemnity policy taken by the Court of Appeal of the Supreme Court of Queensland in FAI General Insurance Co Ltd v Gold Coast City Council (supra)
"In my opinion, that is far too narrow an approach and does not accord with modern day notions and commercial practice in relation to professional indemnity policies, as Kirby P so clearly pointed out in GIO General Ltd v Newcastle City Council (1996) 38 NSWLR 558".
After summarising the facts of the case, Beasley JA concluded:
"This brief summary demonstrates, in my opinion, that the administration of the Council, which would necessarily include the co‑ordination of these various functions, involved 'service of a skilful character according to a discipline' and thus fell within the meaning of 'professional' in the insurance policy … .
For these reasons I am of the opinion that the second part of the representation was also advice given in a professional capacity within the meaning of the policy."
It seems clear to me that in the context of the defendants' occupation described expressly in the policy in the present case and to fulfil its commercial purpose, the view of Beazley JA as to the decision in GIO General Ltd v Newcastle City Council must be accepted and the wider approach of Kirby J adopted. That view is expressed also in "The Law of Liability Insurance" 2nd ed Derrington & Ashton, Lexis Nexis Butterworths 2005 at 11.357 – 11.359 where it is said that the term probably involves no more than advice or services of a skilful character according to an established discipline and that it is the nature of the particular activity that generates the insured's liability that is relevant.
I accept the relevant submissions made by Mr Keen in those regards. Indeed, Mr Rimmer does not disagree. However, Mr Rimmer argues, the application of a pesticide and a failure to warn a person to remain out of the way of the pesticide is not an act or service which could be categorised as professional in the context of a claim for breach of professional duty.
I agree with the third party that there is no exercise of any particular skill of a professional nature in the application of the pesticide or in the ensuing failure to warn.
Taking the broadest view of the authorities put to me the application must be dismissed. I do not therefore need to deal with the issues raised by the defendant as to the basis upon which the costs of defending the proceedings.
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6
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