Insurance Australia Limited t/as CGU Insurance v Capral Limited - [2025] FCAFC 46

FEDERAL COURT OF AUSTRALIA
Insurance Australia Limited t/as CGU Insurance v Capral Limited [2025] FCAFC 46

Appeal from: Capral Limited v Insurance Australia Limited t/as CGU Insurance [2024] FCA 775

File number: NSD 1011 of 2024

Judgment of: THAWLEY, DOWNES AND SHARIFF JJ

Date of judgment: 3 April 2025

Catchwords:
PRACTICE AND PROCEDURE – application for leave to appeal from order answering separate questions – application for leave to appeal granted – appeal dismissed

INSURANCE – general products and liability policy – where applicant supplied defective aluminium plate to customers who incorporated that plate into marine vessels (and a water tank) by welding – where customers claimed the cost of rectification work incurred as a result of incorporating defective plate – whether claims by the customers were claims “for property damage” – meaning of “property damage” – where “property damage” relevantly defined as physical injury to tangible property – customers claims were “for property damage” – no error in primary judge’s answer to separate question or reasons

INSURANCE – construction of exclusion clause – exclusion of indemnity for claims for damages in relation to withdrawal, rectification and repair if product withdrawn from market or from use because of any known or suspected defect or deficiency therein – meaning of “if” – insurer’s liability not excluded – no error in primary judge’s answer to separate question or reasons

Cases cited:
AAI Ltd v The Owners – Strata Plan No 91086 [2025] FCAFC 6
Allianz Australia Ltd v Wentworthville Real Estate Pty Ltd [2004] NSWCA 100; 13 ANZ Ins Cas ¶61–598
Austral Plywoods Pty Ltd v FAI General Insurance Company Ltd [1992] QCA 4; 7 ANZ Ins Cas ¶61–110
Australian Casualty Co Ltd v Federico [1986] HCA 32; 160 CLR 513
Australian Competition and Consumer Commission v Maritime Union of Australia [2001] FCA 1549; 114 FCR 472
Australian Securities and Investments Commission v Narain [2008] FCAFC 120; 169 FCR 211
Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; 129 CLR 99
AXA Global Risks (UK) Ltd v Haskins Contractors Pty Ltd [2004] NSWCA 138
Baralaba Coal Co Pty Ltd v AAI Ltd (t/as Vero Insurance) [2024] FCA 532
Brown v Tasmania [2017] HCA 43; 261 CLR 328
Canadian Equipment Sales & Service Co Ltd v Continental Insurance Co (1975), 59 DLR (3d) 333
Capral Ltd v Insurance Australia Ltd t/as CGU Insurance [2024] FCA 775
Carwald Concrete and Gravel Co Ltd v General Security Insurance Company of Canada (1985), 24 DLR (4^th) 58
CGU Insurance Ltd v Porthouse [2008] HCA 30; 235 CLR 103
Cherry v Steele‑Park [2017] NSWCA 295; 96 NSWLR 548
Dalby Bio-Refinery Ltd v Allianz Australia Insurance Ltd [2019] FCAFC 85
Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; 161 CLR 500
Elco Industries, Inc v Liberty Mutual Insurance Co 90 III App 3d 1106; 414 NE 2d 41 (1980)
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640
Eljer Manufacturing Inc v Liberty Mutual Insurance Co 972 F 2d 805 (7^th Cir 1992)
Entick v Carrington (1765) 19 St. Tr. 1029
Entyce Food Ingredients Pty Ltd v CGU Insurance Ltd [2020] VSC 757
Federation Insurance Ltd v Banks [1984] VR 525
Fitness Equipment Company Inc v Pennsylvania General Insurance Company 493 So 2d 1337 (Supreme Court of Alabama, 1986)
Foodpro National Inc v General Accident Assurance Co of Canada (1986), 33 DLR (4th) 427
Foodpro National Inc v General Accident Assurance Co of Canada (1988), 63 OR (2d) 288
Hamilton Die Cast Inc v United States Fidelity and Guaranty Co 508 F 2d 417 (7^th Cir 1975)
HDI Global Specialty SE v Wonkana No 3 Pty Ltd [2020] NSWCA 296; 104 NSWLR 634
Helvering v Gregory 69 F2d 809 (2^nd Cir 1934)
Hunter v Canary Wharf [1997] AC 655
Joye v Beach Petroleum NL [1996] FCA 502; 67 FCR 275
Kaboko Mining Ltd v Van Heerden (No 3) [2018] FCA 2055
Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; 210 CLR 181
Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184; 89 NSWLR 633
Mallonland Pty Ltd v Advanta Seeds Pty Ltd [2024] HCA 25; 98 ALJR 956; 418 ALR 639
McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; 203 CLR 579
Minister for Home Affairs v DMA18 [2020] HCA 43; 270 CLR 372
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; 256 CLR 104
Newey v Westpac Banking Corporation [2014] NSWCA 319
Ontario (Attorney‑General) v Fatehi [1984] 2 SCR 536; 15 DLR (4^th) 132; 31 CCLT 1
Paper Machinery v Nelson Foundry 108 Wis 2d 614 (1982)
Pilkington United Kingdom Ltd v CGU Insurance Plc [2004] EWCA Civ 23
Plenty v Dillon [1991] HCA 5; 171 CLR 635
Prime Infrastructure (DBCT) Management Pty Ltd v Vero Insurance Ltd [2005] QCA 369; 13 ANZ Ins Cas ¶61–661
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355
Quintano v B W Rose Pty Ltd [2008] NSWSC 793; 15 ANZ Ins Cas ¶61–805
R & B Directional Drilling Pty Ltd (in liq) v CGU Insurance Ltd (No 2) [2019] FCA 458; 369 ALR 137
Ranicar v Frigmobile Pty Ltd; Ranicar v Royal Insurance Pty Ltd [1983] Tas R 113; 2 ANZ Ins Cas ¶60-525
Re Mining Technologies Australia Pty Ltd [1999] 1 Qd R 60
Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989
Siegwerk Australia Pty Ltd v Nuplex Industries (Australia) Pty Ltd [2013] FCAFC 130; 305 ALR 412
Sokol v Atlantic Mutual Insurance Co 430 F 3d 417 (7^th Cir 2005)
Star Entertainment Group Ltd v Chubb Insurance Australia Ltd [2022] FCAFC 16; 400 ALR 25
Switzerland Insurance Australia Ltd v Dundean Distributors Pty Ltd (1998) 10 ANZ Ins Cas 61-388; [1998] 4 VR 692
The Orjula [1995] 2 Lloyd’s Reports 395; CLC 1325
The Owners – Strata Plan No 91086 v Fairview Architectural Pty Ltd (No 3) [2023] FCA 814
Todd Shipyards Corp v Turbine Services Inc 674 F 2d 401 (5^th Cir 1982)
Tooheys Ltd v Commissioner of Stamp Duties (NSW) [1961] HCA 35; 105 CLR 602
Traveler’s Insurance Co v Eljer Manufacturing Inc 197 Ill 2d 278; 757 NE 2d 481 (Illinois Supreme Court, 2001)
Vero Insurance Ltd v Australian Prestressing Services Pty Ltd [2013] NSWCA 181
Visy Packaging Pty Ltd v Siegwerk Australia Pty Ltd [2013] FCA 231; 301 ALR 560
Wilkie v Gordian Runoff Ltd [2005] HCA 17; 221 CLR 522; 79 ALJR 872; 214 ALR 410; 13 ANZ Ins Cas ¶61–641
XL Insurance Company SE, trading as Brooklyn Underwriting v Kerembla Pty Ltd [2023] FCAFC 183
Zhang v ROC Services (NSW) Pty Ltd [2016] NSWCA 370; 93 NSWLR 561
Zurich Australian Insurance Ltd v Regal Pearl Pty Ltd [2006] NSWCA 328; (2007) 14 ANZ Ins Cas ¶61–715

Charles W Browning, “Insurance Coverage Issues Arising from Large Exposure Contaminated Food Claims” (2003) 70 Defense Counsel Journal 206 at 212

Desmond Derrington and Ronald Ashton, The Law of Liability Insurance (1^st ed, 1990)

Halsbury’s Laws of Australia

Herzfeld P and Prince T, Interpretation (3^rd ed, Lawbook Co, 2024)

Heydon JD, Heydon on Contract: The General Part (Lawbook Co, 2019)

Long R, The Law of Liability Insurance (1^st ed, M Bender, 1966)

Division: General Division

Registry: New South Wales

National Practice Area: Commercial and Corporations

Sub-area: Commercial Contracts, Banking, Finance and Insurance

Number of paragraphs: 276

Date of hearing: 21 March 2025

Counsel for applicant: Mr P D Herzfeld SC with Mr D Wong

Solicitor for applicant: Meridian Lawyers

Counsel for respondent: Mr J C Hewitt SC with Mr H R Fielder

Solicitor for respondent: K&L Gates

ORDERS

NSD 1011 of 2024

BETWEEN:
INSURANCE AUSTRALIA LIMITED T/AS CGU INSURANCE

Applicant

AND:
CAPRAL LIMITED

Respondent

ORDER MADE BY:

THAWLEY, DOWNES AND SHARIFF JJ

DATE OF ORDER:

3 APRIL 2025

THE COURT ORDERS THAT:
1.The applicant is granted leave to appeal.
2.The appeal is dismissed.
3.The applicant is to pay the respondent’s costs of the application for leave to appeal and the appeal as agreed or assessed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT
THAWLEY J:
INTRODUCTION

This application for leave to appeal involves two central issues, arising from the insured’s (Capral’s) on‑supply by sale of sub‑standard aluminium plate (Plate) to ten of its customers. The Plate was used by those customers in the construction of ships, boats, barges and a water tank (Vessels). The first issue is whether the amounts Capral became liable to pay to its customers were “Compensation for … Property Damage” within the meaning of Capral’s insurance policy (Policy) with the appellant (CGU). The second issue is whether Capral’s claim was excluded by cl 6.14.2 of the Policy.
These two issues arise from the primary judge’s determination of separate questions concerning the construction of the Policy: Capral Ltd v Insurance Australia Ltd t/as CGU Insurance [2024] FCA 775 (“J”). The questions which remain relevant are:
Question 1:
Whether:
(a)the amounts paid by [Capral] pursuant to deeds of settlement and release in settlement of claims against [Capral] in connection with 5083 H116 aluminium rolled plate purchased by [Capral] and supplied to its customers (the Customer Claims); …
were in respect of a claim for “Property Damage” in respect of an “Occurrence” within the meaning of the contract of insurance dated 6 November 2019 with policy number 10M 4103251 (the Policy) and/or the renewed contract of insurance dated 12 November 2020 (the Renewed Policy).
…
Question 4:
Whether [Capral’s] claim under the Policy or the Renewed Policy is excluded by [cl] 6.14.2 …
The primary judge answered these questions at J[175] in the following way:
(1)(a)Yes, but noting that the quantification of the amount for which [CGU] is liable is reserved for subsequent determination.
…
(4)No.
CGU contends these questions should have been answered No and Yes, respectively.
For the reasons which follow, the primary judge’s decision was correct. The application for leave to appeal should be granted, but the appeal should be dismissed.
FACTS
The central facts were established at trial by affidavits sworn by Mr Hawkins, the Divisional General Manager of Industrial Solutions and Supply at Capral. CGU did not challenge Mr Hawkins’ evidence.
The Plate was “DNV 5083 H116 rolled aluminium plate” imported by Capral from Henan Mingtai AL Industrial Co Ltd in China: J[4]. “H116” is a temper used to increase the corrosion resistance and is designed for marine‑grade use. To be classified as H116 plate, the plate must comply with the ASTM International B928 G‑66 and G‑67 testing standards: J[7]–[8]. DNV AS is a Norwegian company that acts as a classification society and sets standards known as “Rules for Classification” for the design and construction of marine vessels. DNV’s services include certification of manufacturers of marine‑grade material and certification of materials and products: J[5].
From about 29 June 2020 to 19 October 2020, Capral sold the Plate (as DNV‑certified 5083 H116 plate) to its customers. Ten of those customers used the Plate or on‑supplied it as marine_‑grade plate in the construction of the Vessels: J[11]–[12].
In about September 2020, it was discovered that the Plate failed the ASTM G‑66 and G‑67 testing requirements: J[15]. One of Capral’s marine customers, Austal, informed Capral that they had discovered via their own testing of the plate delivered to it, that some batches did not meet the ASTM G‑66 and G‑67 test requirements and therefore the relevant DNV Rules of Classification: Hawkins at [55]. Mr Hawkins became involved in the investigation of the non‑compliant plate. Capral raised the issue with Mingtai and, on 29 October 2020, Mingtai sent an email to Mr Hawkins which identified the production error during manufacture and testing at Mingtai that had led to the batches of plate being non‑compliant with the DNV Rules for Classification: Hawkins at [64].
On 30 October 2020, Capral received an email from Mingtai which advised Capral to “recall the material which is claimed from Austal”.
On 6 November 2020, Capral issued a letter to Austal which identified that the Plate supplied to Austal may have quality issues and that certain identified batches, should be recalled. An equivalent letter was sent to each of Capral’s ten customers. The letter to Austal included:
MINGTAI RECALL NOTICE
1. Quality issue
Capral wishes to advise that it has received notification from Zhengzhou MING TAI that certain plate manufactured by them, and subsequently supplied to Capral, may have quality issues and that the DNV‑GL certificate supplied with this plate is no longer valid and the plate should be recalled …
…
IV. Replacement
If required, Capral will replace any unused plate with new DNV‑GL certified plate. Please contact the Capral representative detailed below to arrange return and replacement.
In the event that any of these plates have already been used in fabrication, the specific circumstances and the potential requirement for replacement or rectification should be discussed with Capral and DNV‑GL …
On this application for leave to appeal, Capral characterised the “recall” as a recall only of used Plate and not of unused Plate. Given the heading of Capral’s letter and the opening paragraph, the preferable characterisation of the events is that Capral issued a “recall notice” for both used and unused Plate and, in relation to used Plate, invited further discussion about what steps should be taken for “replacement or rectification”.
DNV later notified Capral that: (a) it had suspended its certification of Mingtai as an approved manufacturer; (b) rolled plate produced by Mingtai in 2020 and used in DNV‑classed vessels was to be tested in accordance with ASTM G‑66 and G‑67; and (c) if either test failed, DNV’s certificate for that batch would be revoked and the material would be considered by DNV as non‑compliant with its Rules for Classification: J[17]–[18]. DNV also stated that non‑compliant plate should not be used in DNV‑classed vessels: J[19]. The Plate was found not to comply with the H116 standards for corrosion resistance, was not compliant with DNV’s Rules for Classification, and was no longer certified by DNV: J[20].
Mr Hawkins gave unchallenged evidence at [90] of his first affidavit that:
(a)Capral’s customers would not have been able to obtain DNV‑certification of their vessels if the non‑compliant Plate was used in construction.
(b)While the Plate could technically have been used to construct marine vessels, the useful life of the Plate was severely impacted because the Plate did not possess the corrosion resistance qualities required by the relevant testing method standards. It would, for example, have been prone to corrosion far quicker than it should.
Each of the customers concluded that their property could not proceed to market without the Plate being removed: J[149]. Each client elected to remove the Plate or reconstruct the Vessels: J[55(3)]. The customers each made claims against Capral and ultimately entered into a settlement deed that made express mention of compensation for “property damage”: J[55(5)]. Capral paid money pursuant to those agreements and made a claim against CGU: J[55(6)].
The primary judge’s findings on the unchallenged evidence included that:
(a)the Plate was generally used in construction by a process of welding the Plate together with other plate or extrusion material with filler alloy, known as welding wire, so as to attach the Plate to the vessel hulls: J[13], [148];
(b)after the problems with the Plate became apparent, the welded Plate was cut out at suitable points using a saw or oxy‑torch, which involved cutting not only the plate and alloy used in the welding process as a joiner, but also “damaging surrounding plate and extrusion”: J[14], [55];
(c)the claims concerned damage to property which had occurred before any recall: J[171].
FIRST ISSUE
Introduction
The relevant insuring clause was cl 1.1.2 of the Policy: J[58]. Critically for present purposes, cl 1.1.2 provided that the insurer would pay amounts the insured became liable to pay “in respect of: … Compensation for … Property Damage”, subject to the terms of the Policy including its exclusions. Clause 1.1.2 was in the following terms (emphasis in original, signifying defined terms):
1.        The Indemnity
Coverage: In consideration of the Named Insured having paid or agreed to pay the Premium and subject to the terms, Definitions, Exclusions, Conditions, provisions and Limits of Liability set out in this Policy, the Insurer will pay to or on behalf of the Insured, all sums which the Insured shall be legally liable to pay, including for the avoidance of doubt, those assumed under contract or agreement, in respect of:
1.1      Compensation for:
1.1.1    Injury to any person;
1.1.2    Property Damage;
1.1.3    Advertising Injury;
occurring within the Geographical Limits during the Period of Insurance as a result of an Occurrence happening in connection with the Insured’s Business or Products.
The Policy defined “Compensation” in the following way:
[A]ny amount paid or payable at law (including but not limited to amounts owing or liability incurred in respect of or arising out of a claim for recovery or contributions made pursuant to any legislation) by the Insured in respect of any claim for:
4.5.1    Injury;
4.5.2    Property Damage;
4.5.3    Advertising Injury.
Provided that Compensation is only payable in respect of an Occurrence to which this Policy applies.
“Property Damage” was defined in cl 4.21 of the Policy. Capral relied only on the first limb of the definition, contained in cl 4.21.1. Clause 4.21 provided:
4.21 Property Damage means:
4.21.1physical injury or damage to or physical loss of or destruction of tangible property including loss of use at any time resulting therefrom;
4.21.2 loss of use of tangible property which has not been physically injured, damaged or destroyed provided such loss of use is caused by or arises out of physical damage of other tangible property.
The parties’ arguments at trial
Capral’s argument at trial (consistently with this application) was (see J[77] and [78]):
(a)when the Plate was used in construction of the Vessels, it was affixed predominantly by welding the Plate to other material;
(b)the Plate did not have the necessary corrosion resistance qualities and was not suitable for marine‑grade use;
(c)upon incorporation of the plate to the Vessels, the Vessels were physically injured and rendered unsuitable for marine‑grade use;
(d)cost and effort then became necessary to remove the defective and non‑compliant Plate from the Vessels and install compliant plate;
(e)in some instances, the Vessels or parts thereof were discarded completely and built anew;
(f)the resulting settlement amounts were amounts that Capral was legally liable to pay in respect of a claim for “Property Damage” within the meaning of the Policy;
(g)the customers suffered “Property Damage” immediately upon the incorporation of the Plate into the Vessels;
(h)the “Occurrence” which resulted in this “Property Damage” was Capral’s supply of non‑compliant plate; and
(i)An “Occurrence” includes an event which results in “Property Damage” where such Property Damage is neither expected nor intended by the insured.
CGU’s argument at trial (consistently with this application) was relevantly that (see J[79]):
(a)Capral was “attempting to persuade the Court to read a policy responding to ‘any claim for Property Damage’ as one responding to claims that goods sold are not fit for purpose: claims, in substance, that those goods were inferior to that promised”.
(b)While “the remediation of non‑compliant plate may have caused damage to the Customers’ property, that went only to the quantification of the Customers’ claims and, more particularly, formed no part of the basis for those claims”.
The primary judge’s reasoning

The primary judge considered authorities on the meaning of “for” at J[81]–[87]; on the meaning of “property damage” generally at J[88]–[94]; and on the meaning of “for property damage” where a defective product is incorporated into larger tangible property at J[95]–[129].
As to the meaning of the word “for”, the primary judge observed:
(a)The requirement that a claim be “for” property damage raises a question of characterisation: see Allianz Australia Ltd v Wentworthville Real Estate Pty Ltd [2004] NSWCA 100; 13 ANZ Ins Cas ¶61–598 at [38]–[40] (Mason P) (Sheller JA and Pearlman AJA agreeing). It is the facts that determine whether a policy responds to a claim, not how the claim is formally put: Kaboko Mining Ltd v Van Heerden (No 3) [2018] FCA 2055 at [49]–[50] (McKerracher J), quoting Quintano v B W Rose Pty Ltd [2008] NSWSC 793; 15 ANZ Ins Cas ¶61–805 at [9] (Brereton J): at J[81].
(b)The word “for” is protean. In some contexts, it might refer to an immediate relationship between two things. In others, it extends to an indirect relationship between two things, such as is signified by the phrase “with regard or respect to”: Zurich Australian Insurance Ltd v Regal Pearl Pty Ltd [2006] NSWCA 328; (2007) 14 ANZ Ins Cas ¶61–715 at [63] (Spigelman CJ) (Beazley and Hodgson JJA agreeing): at J[82].
As to the meaning of “property damage”, his Honour concluded that property damage involves (a) “a physical alteration or change” that (b) “impairs the value or usefulness of the thing said to have been damaged”: at J[94] and [146]. His Honour endorsed the explanation given by Green CJ in Ranicar v Frigmobile Pty Ltd; Ranicar v Royal Insurance Pty Ltd [1983] Tas R 113; 2 ANZ Ins Cas ¶60-525 at 116:
In my view, the ordinary meaning, and therefore the meaning which I should prima facie give to the phrase “damage to” when used in relation to goods, is a physical alteration or change, not necessarily permanent or irreparable, which impairs the value or usefulness of the thing said to have been damaged. It follows that not every physical change to goods would amount to damage. What amounts to damage will depend upon the nature of the goods.
As to the meaning of “for property damage”, his Honour reviewed relevant cases in Australia, Canada, the United States and the United Kingdom.
The authority most factually analogous was the Queensland Court of Appeal decision in Austral Plywoods Pty Ltd v FAI General Insurance Company Ltd [1992] QCA 4; 7 ANZ Ins Cas ¶61–110 (Fitzgerald, Davies and Thomas JJ). Austral Plywoods involved a claim against a company that supplied defective plywood to a boat builder. The defect became apparent during construction of a boat. The Court of Appeal held that the appellant was entitled to be indemnified in respect of the physical injury to the boat.
The primary judge set out at J[97] the following passages from the decision at 77-524 (primary judge’s emphasis):
The tangible property to which the appellant had to prove physical injury was the hull of the boat in the condition in which it was immediately prior to the affixation of the defective plywood. The question is whether the affixation of that plywood caused physical injury to the hull. If that question is answered in the affirmative it is then necessary to identify that physical injury for it is only that physical injury which is compensable. The measure of that compensation would ordinarily be, and we think here is, the cost of remedying that physical injury.
In one sense any affixation of plywood to a hull by means of screws and glue causes physical injury to the hull. It causes holes to be drilled in the hull for the screws and the glue may also damage the surface of the hull. In order to restore the hull to its original condition, the plywood would have to be removed, the glue chiselled or scraped off and the screw holes filled … But, of course, if the plywood is not defective there is no physical injury which would give rise to a legal liability in the supplier to pay compensation for it.
Upon the permanent affixation of the defective plywood to the hull, the hull was not only physically injured by the screw holes and glue but was rendered unsuitable, or less suitable, for the purpose for which it was constructed. Compare Carwald Concrete and Gravel Co Ltd v General Security Insurance Co of Canada 24 DLR (4th) 58 at 63; Canadian Equipment Sales and Service Co Ltd v Continental Insurance Co 59 DLR (3d) 333 at 336.
To remedy that injury the plywood had to be removed and the hull restored to a state in which new plywood could be affixed.
The primary judge noted that Austral Plywoods has been referred to in subsequent Australian decisions and that its correctness has not been doubted: J[98]. These included R & B Directional Drilling Pty Ltd (in liq) v CGU Insurance Ltd (No 2) [2019] FCA 458; 369 ALR 137 (Allsop CJ) and The Owners – Strata Plan No 91086 v Fairview Architectural Pty Ltd (No 3) [2023] FCA 814 (Wigney J) (an application for leave to appeal was dismissed in AAI Ltd v The Owners – Strata Plan No 91086 [2025] FCAFC 6 (Markovic, Halley and Goodman JJ)). In relation to R & B Directional Drilling the primary judge stated:
[98]… In R & B Directional Drilling at [91], Allsop CJ concluded that the proper reading of Austral Plywoods was that “the physical injury to the hull was the fixing of the defective plywood by physical means of screws and glue making the hull unsuitable or less suitable for its purposes and requiring the restoration of the physical state of the hull upon removal of the plywood”. After undertaking an extensive review of authorities in Canada, the United States, New Zealand, the United Kingdom and Australia, the Chief Justice said at [101] that:
the distinctions that are capable of being drawn in each case do not easily translate into a simple coherent definition or universally applicable rules capable of being applied to varied factual circumstances to reach deduced logical results. To say that there must be physical interference with property is to require facts or circumstances that can be so characterised … [I]n Austral Plywoods, the affixing of the defective plywood physically affected the hull, not just because of screw holes, but also because with such physical change it was unsuitable to use as a hull.
[99]In R & B Directional Drilling itself, the insured was contracted to construct and install a tunnel for the purpose of carrying cables. The insured was near the completion of its works and pumping concrete into the tunnel void. Concrete entered a hole in one of the conduit pipes, rendering it unable to carry a cable. A claim was brought against the insured for the cost of removing grout and conduit pipes from the steel sleeve so that the work could be repeated.
[100]The insurance contract was relevantly identical to the Policy at issue in these proceedings. The insured argued that the tunnel was the relevant tangible property, not the sleeve alone or the conduit pipes. Thus, the dispute between the parties turned upon whether the insured’s actions had caused physical injury to the tunnel.
[101]Chief Justice Allsop concluded that there had been no physical injury, explaining at [135]–[136] that:
the tunnel is not injured; it is and remains sound once the defective work is removed. The tunnel has not been damaged because it can be used again. The cost and consequences of getting to that point again are not meaningfully characterised as the consequences of physical injury to the tunnel, but as the cost and consequences of defective work: the removal of defective work from inside the undamaged sleeve, from inside an otherwise uninjured tunnel. On this view, it can be said that there has been a (temporary) loss of use of tangible property (the tunnel) but that loss of use has not been caused by physical injury to the tunnel, but by the placement of defective work in the tunnel. On this view, there has been no physical injury to the tunnel. It has been filled with concrete and conduit pipes (as it was intended to be), but one of the pipes was defective (as it was not intended to be). The defective work can be, and was, removed, leaving the tunnel in the same physical state that it was in before the placement of the defective work. The position may well have been different had the concrete not been able to be removed, or not been able to be removed without damaging the integrity of the sleeve.
… I would characterise what occurred … as the placement of materials within the tunnel that were defective, requiring their removal from the tunnel. The tunnel itself was not physically injured; its temporary loss of use was not caused by physical injury, but by defective works.
In relation to Fairview Architectural the primary judge stated:
[102]… In that case, the insured had manufactured and supplied Vitrabond panels for incorporation into the façades of buildings. The panels were defective, and this created a fire risk. The owners of the buildings brought a claim for loss or damage arising from the supply of the Vitrabond panels, including the costs of removing the panels and remediating the buildings. The applicable insurance policy provided indemnity for liability to pay compensation in respect of “property damage”, relevantly defined as “physical loss, destruction of or damage to tangible property, including the loss of use thereof at any time resulting therefrom”.
[103]Relying upon Austral Plywoods and R & B Directional Drilling, Wigney J concluded at [150] that “the affixation of the defective Vitrabond panels to Owners’ buildings caused ‘physical damage … to tangible property’, that property being the buildings”. That conclusion was said to follow because:
(a)the means by which the panels were affixed to the buildings caused physical damage to the buildings themselves in the form of nail or screw holes;
(b)the affixation of the panels to the buildings made the buildings less suitable, in a substantial and material way, for their intended purpose of residential housing;
(c)the panels had to be removed; and
(d)the removal of the panels would result in further damage to part of the buildings.
[104]I note that the issue before Wigney J was merely whether the insurer’s liability was arguable, the judgment being ultimately concerned with whether leave to proceed against the insurer should be granted: see [178].
The primary judge noted that, in Austral Plywoods, the Queensland Court of Appeal cited two Canadian decisions: Carwald Concrete and Gravel Co Ltd v General Security Insurance Company of Canada (1985), 24 DLR (4^th) 58 and Canadian Equipment Sales & Service Co Ltd v Continental Insurance Co (1975), 59 DLR (3d) 333: J[105]. His Honour considered the two Canadian decisions at J[106] to [109] and:
(a)authorities from the United States at J[110] to [122]: Eljer Manufacturing Inc v Liberty Mutual Insurance Co972 F 2d 805 (7^th Cir 1992); Traveler’s Insurance Co v Eljer Manufacturing Inc 197 Ill 2d 278; 757 NE 2d 481 (Illinois Supreme Court, 2001); and Hamilton Die Cast Inc v United States Fidelity and Guaranty Co 508 F 2d 417 (7^th Cir 1975);
(b)a decision from the United Kingdom at J[123] to [129]: Pilkington United Kingdom Ltd v CGU Insurance Plc [2004] EWCA Civ 23).
The primary judge recorded that CGU’s position had a certain intuitive appeal, but that this deteriorated once the issue was approached as a question of construction: J[130].
As to the appropriate construction of the Policy terms, his Honour concluded that two issues arose: first, identifying whether there was “Property Damage”; and second, asking whether the claim was “for” such damage. The first issue involved two questions, namely (1) has there been a physical alteration of the tangible property; and (2) has that physical alteration impaired the usefulness or value of the tangible property:
Construction
[131]Capral was entitled to be indemnified in respect of any claim for “Property Damage”, relevantly defined as “physical injury or damage to or physical loss of or destruction of tangible property including loss of use at any time resulting therefrom”.
[132]The critical phrase is “physical injury to tangible property”. In my view, what this requires is a physical alteration of tangible property that impairs its usefulness or value. One must therefore ask two questions: (1) has there been a physical alteration of the tangible property; and (2) has that physical alteration impaired the usefulness or value of the tangible property. Both questions involve comparing the state of the tangible property immediately before the alleged incident of damage with its state immediately thereafter.
[133]This construction accords with the natural meaning of property damage. Compare two hypotheticals. In the first, a clumsy driver leaves a dent in my car. In the second, vandals cover my car with spray paint. Both are obvious instances of property damage. But why is that so? In my view, the answer is that both involve a physical alteration that impairs usefulness or value. The dent and graffiti have physically altered the car, and any willing but not anxious buyer would pay less as a result of those physical alterations. This analysis reflects the approach in Ranicar, which is in turn supported by an unbroken phalanx of intermediate appellate authority.
The second issue involves examining the association between the Property Damage and the claim and determining whether a “payment has Property Damage as its basis” (at J[134]):
If Property Damage is identified, the question then becomes whether the relevant claim is “for” such damage. Consistent with the reasoning in [Regal Pearl] and Siegwerk [Australia Pty Ltd v Nuplex Industries (Australia) Pty Ltd [2013] FCAFC 130; 305 ALR 412], in my view “for” should here be construed as “in respect of” or “on account of”. It suffices that a payment has Property Damage as its basis.
The primary judge then turned to the application of that construction where a defective product is incorporated into larger tangible property, stating:
[135]How does the above construction apply where a defective product is incorporated into larger tangible property? The first step is to ask whether there was a physical alteration of tangible property. This is a question of fact. In Austral Plywoods, the requirement of physical alteration was satisfied by the affixation of plywood to the hull by means of screw and glue. In R & B Directional Drilling, by contrast, there was no physical alteration because concrete had merely been placed into the tunnel.
[136]If a physical alteration is identified, the second step is to ask whether that alteration caused an impairment in the usefulness or value of the tangible property. This involves comparing the usefulness and value of the tangible property immediately before and after the defective product is incorporated. Like the first step, the answer to this second question will depend upon the particular circumstances.
[137]In order to resolve the present dispute, it suffices to say that that a claim will be “for Property Damage” in a case like Austral Plywoods, where:
(1)the incorporation of a defective product into larger tangible property physically alters that property;
(2)the nature of the defect is such that the incorporated product must be removed from the property;
(3)the nature of the physical alteration is that removing the product will come at a substantial cost;
(4)as a result, the usefulness or value of the property immediately after the incorporation of the defective product is less than its value immediately beforehand; and
(5)the customer claims for that difference in usefulness or value.
The primary judge rejected CGU’s submission that, even in the situation just mentioned, the customer’s claim is “for” the relevant non‑conformity, rather than for property damage. Referring to the decision in Siegwerk Australia Pty Ltd v Nuplex Industries (Australia) Pty Ltd [2013] FCAFC 130; 305 ALR 412, the primary judge stated at J[138] that CGU’s submission:
… draws an untenable a priori distinction between non‑conformity and property damage. If I purchase a non‑conforming oven that burns down my house, only a legally‑trained pedant would say that my claim is not for property damage. As in Siegwerk, CGU’s submission reasons by reference to an unstated exclusion and ignores or downplays the significance of money payments having physical damage to tangible property as their basis.
The primary judge also recorded at J[138] that his conclusion was fortified by cl 6.11:
This reasoning is fortified in the present case by the presence of cl 6.11, which excludes liability for loss of use of tangible property which has not been physically injured where such loss results from “the failure of the Products to meet the level of performance, quality, fitness or durability expressly or impliedly warranted or represented by the Insured”. The natural inference is that, absent such exclusion, the Policy responds to Property Damage even in a case involving breach of contractual warranties: see Regal Pearl at [81] …
CGU argued before the primary judge (and on this application) that Austral Plywoods was wrongly decided because there was no meaningful distinction between affixing the plywood by drilling holes and merely slotting the plywood into place. The primary judge rejected this argument stating at J[139]:
… The fundamental problem with that submission is that it overlooks the two essential elements of Property Damage. First, if the plywood had merely been slotted into place, the rest of the hull would have undergone no physical alteration. Second, in the absence of such an alteration, there would have been nothing to relevantly render the hull less useful or valuable. The reasoning in Austral Plywoods is, with respect, perfectly sound.
CGU also argued that Austral Plywoods turns an indemnity for property damage into a guarantee of contractual performance. The primary judge rejected this argument for two reasons:
[142]… First, the supply of a defective product is not property damage in and of itself. It is only once the defective product is physically incorporated into larger tangible property that the possibility of property damage arises.
…
[145]Second, compensation for property damage is not equivalent to compensation for a breach of contract. Whereas contractual damages will put the insured in the position that it would have been in if the product was conforming, property damage will merely put the insured in the position it would have been in if the product was never incorporated. That difference was specifically emphasised in Austral Plywoods, where the insured was only covered for the cost of removing the defective plywood and restoring the hull to a state in which new plywood could be affixed. This was a lesser amount than the customer’s contractual claim, which would also have included the cost of re‑installing the plywood.
The primary judge concluded that “‘Property Damage’ as defined in the Policy means a physical alteration of tangible property that impairs its usefulness or value”; that “[w]hether that requirement is satisfied by the incorporation of a defective product into larger tangible property will depend upon the circumstances of the case”; and that Austral Plywoods was correctly decided so far as it was relevant to the present facts: J[146].
The primary judge concluded that each customer suffered “Property Damage” because there was a physical alteration of tangible property which caused an impairment to its usefulness or value: J[148] and [149]. The primary judge concluded that “the measure of such damage was the cost of reinstating the Vessels to their state immediately prior to the incorporation of the Plate, either by repair or replacement”: J[150].

His Honour concluded that the claims made by the customers were “for Property Damage” because the cost of reinstating the Vessels was substantial and each deed of settlement referred to the relevant customer having made claims for “property damage”: J[151] and [154].
Consideration of First Issue
CGU contended that the primary judge erred in concluding that the claims were made “for Property Damage”, submitting that it “is plain that the substance of Capral’s claim is that it is (or was) liable for its provision of defective goods or goods that were not fit for purpose”: RS[19] (CGU’s emphasis). CGU raised five arguments.
First argument
First, CGU contended that the “text of the Policy compels the contrary conclusion” to that reached by the primary judge: AS[17]. CGU contended that the facts determine that the substance of Capral’s claim is that it was liable for having provided defective goods: AS[18] and [19].
In support of its first argument, CGU referred to a letter of demand from one of Capral’s customers (Austal) which stated that the claim was “a consequence of Capral’s supply … of non‑conforming material”, and stated that Capral had “breached its obligations to Austal by supplying aluminium that was not in accordance with that required by the Purchase Orders, was not fit for the purpose intended and was not free of defects in materials”: Part C, Tab 53. CGU submitted that the substance and basis of the “claim against Capral (and Capral’s claim under the Policy) is that the goods supplied were not fit for purpose, not that property was damaged”: AS[20].
CGU accepted that “the remediation cause[d] damage to property, [but] that went only to the quantification of [the] claim and formed no part of the basis for [the] claim”: AS[20]. According to CGU, the “claim against Capral was not a claim for property damage” (CGU’s emphasis).
The claim which was in fact advanced by Austal was for rectification works which were required by reason of the customer having affixed the Plates to the Vessels under construction. In the letter to which CGU referred, the customer stated that it “had no option but to remove parts and structures containing non‑conforming material, construct new components and incorporate those new structures into the hulls (Remediation Activities)”: at [1.13]. The Remediation Activities were explained in detail at [1.14]:
1.14 The Remediation Activities were complex in nature and took into account the following factors, including but not limited to:
a)Defective Plate affected several marine vessels in various states of construction;
b)Remediation was dependent on state of completion of the affected vessels;
c)The sequence of activities had to be varied dependent on accessibility and availability of the affected vessels, thus a great amount of flexibility was required regarding the sequence of Remediation Activities;
d)Vessels H398 and H398 had already been launched at the time it became necessary to remove selected parts of their structures;
e)access to many sections of the vessels requiring remediation was highly complicated;
f)Ensuring structural integrity was critical;
g)Certain affected areas could only be replaced in smaller parts (not as a whole at once);
h)Specific additional support structure had to be designed, constructed, and welded on in certain areas (and had to be removed after completion of remediation); and
i)Balancing out distortion required individual assessment of each affected section (whilst taking into account the entire structure).
Austal claimed that the Remediation Activities involved “significant direct costs in respect of direct labour and materials (excluding the replacement of the aluminium)” and resulted in delays in delivery of the Vessels. Austal’s demand was for $3,603,300 for labour costs incurred and $411,727 in respect of materials, excluding the replacement of Plate. Austal issued weekly reports to Capral recording the progress of the rectification work being carried out to remove the Plate and rectify the damage caused.
This was a claim for compensation for damage to the Vessels.
The word “for” requires an association or relationship between two things, here the compensation and the “Property Damage”. The word “for” in a clause which provides cover to the insured for its liability for “Compensation for … Property Damage” focusses attention on what the compensation is “for” and, specifically, whether it is for “Property Damage”. This is not necessarily answered by an examination of the competing or most proximate causes of the “Property Damage” or how one should formulate the insured’s liability to pay compensation for that damage.
The customers claimed for the damage to their property. That damage may be said to have been caused by the customers’ use of defective product; but that does not have the necessary consequence that the claim is one for defective product or which has defective product as its basis or only basis. The question is whether the claim fits within the relevant insuring clause (here liability for property damage) and not whether it might also have fitted into a different one (for example, liability for defective product).
CGU’s characterisation of the claim’s “substance and basis” as being “for” the supply of goods which were not fit for purpose does not appear to begin from asking whether the compensation was for property damage, but rather appears to start from an examination of the causes of the property damage and how liability for the damage might be framed. Even if the claim can be so characterised, that does not mean it is not properly characterised as a claim for “Compensation … for Property Damage”. In any event, CGU’s characterisation is not the preferable characterisation of what the customers’ claims for compensation were “for”.
In support of its first argument, CGU gave the example of an imaginary customer who, instead of rectifying the Vessels by removing the aluminium, claimed for the difference in value of the Vessel: AS[21]. CGU submitted that, in this scenario, the claim would be the same as that actually made – the provision of defective goods not fit for purpose – and “yet there would be no property damage”.
CGU’s hypothetical provides no real answer. First, a claim was not made for the difference in value and it is the facts that determine whether the relevant clause of the policy responds to the events which occurred: Kaboko Mining at [49]–[50]. Secondly, the fact that one could characterise a claim as being “for” occurrence A does not lead inexorably to the conclusion that the claim is not also “for” some other occurrence. Whilst obvious, it should be observed that the fact that something has an association with one thing does not mean that it does not have an association with another – see, in a different context: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 at [87]; Minister for Home Affairs v DMA18 [2020] HCA 43; 270 CLR 372 at [43].
The primary judge correctly concluded that the claims made by the customers have physical damage to tangible property as their basis. The work and materials required to rectify the property damage that had occurred formed the basis of the claim for “Compensation for … Property Damage” and how it was quantified. It is true that the property damage was caused by the customers affixing defective Plate, and viable causes of action were available because of a supply of defective product. In this way, it can be said that the claims were “in respect of” defective product; but they were more directly “for” or based in damage to property.
The primary judge gave an example at J[138] of a person who buys a defective oven which malfunctions and burns down a house. His Honour observed that a lawyer might say the claim is for a defective product; but most people would think the claim was for property damage. A closer analogy to the present facts might be a defective oven built into a concrete wall, with the removal of the oven requiring demolition and reinstatement of the wall. Assume the homeowner claims the cost of reinstating the wall (and not resupply of an oven). The claim is open to characterisation in various ways: at one level the claim is for compensation for a defective oven; at another, the claim is for compensation for damage to the wall. The end question (assuming the question is not also relevant to some other issue) is not which is preferable, but whether the facts are such that the Policy responds to provide cover under a relevant insuring clause.
Contrary to CGU’s first argument, the text of the Policy does not compel a conclusion contrary to that reached by the primary judge.
Second and third arguments
CGU’s second and third arguments were allied and it is convenient to address them together.
CGU’s second argument was that “the use of the Plate per se did not damage any property in which it was installed”: AS[24]. Indeed, according to CGU, “affixing the Plate to an incomplete hull improved the incomplete hull: it could now be used as a vessel when previously it could not be” (CGU’s emphasis). CGU accepted that the Vessels were less durable and, by virtue of that, less valuable than had been hoped, but referred to the fact that Mr Hawkins did not say that the installation of the Plate caused any property damage, or that the Vessels became unusable or inherently damaged. CGU emphasised that the claims could have been made even if the Plate was not removed; that the claim was not for the removal as opposed to for contended property damage; and that “what was necessary to sustain his Honour’s conclusion was that the original affixing was damage to the hulls”: T21.
CGU’s third argument was that the primary judge’s articulation of the meaning of the term “Property Damage” derived from the decision of Green CJ in Ranicar – namely a “physical alteration to tangible property that impairs its usefulness or value” – wrongly inserted a “gloss” on the text of the Policy and expanded the terms of its cover: AS[25]. CGU submitted that the concept of “value”, including subjective value, finds no place in the Policy’s text.
Mr and Mrs Ranicar (trading as the Tasmanian Smokehouse) sold a consignment of frozen scallops to a Canadian company. The consignment was rejected for export because the temperature of the scallops had risen to between ‑6°C and ‑12°C, a temperature above the ‑18°C limit allowed by the relevant export regulations. This had occurred whilst the scallops were in the possession of a delivery company, Frigmobile. The consequence of the scallops being warmed above the required temperature was that the scallops could only be sold within the Commonwealth for less than the contract price, rather than exported.
The question was whether the increase in temperature of the scallops was “damage” to the scallops within the meaning of the contract of carriage with Frigmobile and within the policy of insurance with the insurer, Royal Insurance.
After referring to a dictionary definition of the word “damage” which stated: “Injury, harm; esp physical injury to a thing, such as impairs its value or usefulness” (emphasis in original), Green CJ stated at 116:
Although useful, I do not feel able to adopt that definition without qualification because of the use of the word “injury” largely begs the question which I have to determine.
In my view, the ordinary meaning, and therefore the meaning which I should prima facie give to the phrase “damage to” when used in relation to goods, is a physical alteration or change, not necessarily permanent or irrepairable, which impairs the value of [sic] usefulness of the thing said to have been damaged. It follows that not every physical change to goods would amount to damage. What amounts to damage will depend upon the nature of the goods.
CGU emphasised that Green CJ gave a prima facie meaning only and that what amounts to damage will depend on the nature of the goods: T22.18–23. CGU emphasised that Green CJ was not dealing with a case such as the present where one is dealing with a process of construction into which one incorporates, in “exactly the right way”, a defective product.
CGU contended that the “previous hulls or structures went from being not able to be used as marine vessels or tanks to being able to be used in that way”. CGU also submitted that the definition does not work well when one is dealing with a process of manufacture with what turns out to be a defective product, because each of the steps which are taken which constitutes a physical alteration is exactly the same as the steps that would have been taken with non‑defective product.
CGU’s argument that the installation of the defective Plate did not damage the property at all, and in fact “improved” the Vessels, must be rejected.
The Plate was progressively welded into the Vessels, causing physical changes to the Vessels which were detrimental. As soon as the Plate was welded to the hulls, and although it would not be known for a short period, it would be necessary for the Plate to be removed to construct the Vessels according to Capral’s customers’ specifications. The welding of the Plate caused damage because the incomplete hulls were physically altered in a detrimental way, whether one examines the issue at the time the Plate is being welded in, after each piece of Plate is welded in, or once all the relevant Plates have been welded into place. The hulls were being progressively damaged through the process of welding, culminating in a need to repair the damage. The primary judge held, and CGU did not challenge, that Capral’s customers could not proceed to market or sell the Vessels without the Plate being removed and the Vessels being rectified: J[149].
It is not to the point that the hulls could be said to be less incomplete after some Plate was affixed on the basis that more (albeit defective) hull had been installed, or that the water tank had fewer empty spaces for water to pour out, or even that, by the time all the Plate was installed, the hulls and water tank were apparently complete but defective. On no practical commercial view could it be said that incomplete Vessels were “improved” by the affixing of non‑compliant product. The necessary consequence for Capral’s customers, of affixing the Plate, was the need to embark upon expensive and time‑consuming rectification work to the property which had been progressively damaged as the Plate was welded into the Vessels. Indeed, on one view, and in a practical and commercial sense, adding defective product to an incomplete product does not progress it towards completion at all, because it does not progress it towards a finished product having the required characteristics. That is especially so where the defective product will be required to be removed before the product can be sold, in which case on one view it takes it further from completion.
CGU’s argument that the primary judge put a “gloss” on the meaning of “Property Damage” by imported notions of “value” (taken from Ranicar at 116) should also be rejected. The real point is that the alteration to property must involve some negative consequence to the property sufficient for the consequence to be properly characterised as “damage”. Whether there was damage is a question of fact and degree: R & B Directional Drilling at [101]; Fairview Architectural at [132].
Whether changes in physical characteristics of property affect usefulness or value is relevant to determining whether there has been property damage. In Ranicar, changes caused by enzymic activity and chemical oxidation of the fats in the scallops (caused by being transported by Frigmobile at too warm a temperature) did not result “in any significant difference in the edibility, taste, smell, texture or appearance of the scallops”; but the physical “change had the effect of removing one of the primary qualities which the scallops had – their exportability” and it was “plain that their usefulness was impaired and their value reduced”: at 117.
The primary judge did not put an impermissible gloss on the text of the Policy by explaining the meaning of “Property Damage” in the way he did.
In relation to the criticism of Mr Hawkins’ evidence, one would not have expected Mr Hawkins to give the evidence suggested. The contemporaneous documentary evidence established property damage. Mr Hawkins, a lay witness, gave evidence about communications from Capral’s customers. One would not have expected him to give, or have been able to give, admissible evidence about whether the damage to the customers’ property constituted “Property Damage” under the Policy.
Fourth argument
CGU’s fourth argument was that “the Australian authorities referred to and relied upon by the primary judge at J[88] to [94] and [96] to [104] do not compel the conclusion reached by the primary judge”: AS[26] to [32].
Contrary to CGU’s fourth argument, the primary judge did not proceed on the basis that any of the cases he considered “compelled” the conclusion reached. Nor did his Honour treat any of the authorities as setting “down a rule or code” as contended by CGU: AS[26] and [32].
The primary judge noted at J[91] that the understanding of property damage in Ranicar had been applied or cited with approval by intermediate appellate courts, referring to: Switzerland Insurance Australia Ltd v Dundean Distributors Pty Ltd (1998) 10 ANZ Ins Cas 61-388; [1998] 4 VR 692 at 703 (Ormiston JA, Callaway JA agreeing) and 714 (Phillips JA); AXA Global Risks (UK) Ltd v Haskins Contractors Pty Ltd [2004] NSWCA 138 at [41] (Mason P, Bryson JA and Windeyer J agreeing); and Prime Infrastructure (DBCT) Management Pty Ltd v Vero Insurance Ltd [2005] QCA 369; 13 ANZ Ins Cas ¶61–661 at [31] (McMurdo P, Mullins J agreeing).
CGU submitted to the primary judge, as it did on this application, that the Ranicar approach works when one is dealing with damage to fully formed property, but not when one is dealing with the construction of a structure: J[92]. The primary judge observed that this was contrary to the reasoning in Prime Infrastructure, where a fault developed in a weld as a result of faulty workmanship during the original construction of a reclaimer used to lift coal from stockpiles onto conveyer belts. McMurdo P at [31] quoted and applied the explication of property damage in Ranicar.
CGU submitted on this application that it was unnecessary to have concluded in Prime Infrastructure that the welding itself was property damage in order for the proviso to operate and that the Court’s view that the faulty weld was itself property damage was clearly wrong. According to CGU, the initial faulty weld during the process of construction was faulty workmanship and hence was excluded. If it were otherwise, the insured could have recovered under the policy to repair the faulty weld before the collapse, which is precisely the thing intended to be excluded.
The policy in Prime Infrastructure included the following exclusion and proviso:
The Insurer(s) shall not be liable under in respect of:—
…
4. physical loss, destruction or damage occasioned by or happening through:—
…
(e) faulty materials or faulty workmanship
Provided that this Exclusion 4(a) to (e) shall not apply to subsequent loss, destruction of or damage to the Property Insured occasioned by a peril (not otherwise excluded) resulting from any event or peril referred to in this exclusion.
The collapse of the reclaimer was initiated by the final severing of an internal fatigue crack in a defective weld in one of the reclaimer’s undercarriage legs. This was the result of faulty workmanship at the time of the original construction or assembly of the reclaimer. The crack grew progressively over time. At [18], McMurdo P concluded that the exclusion applied unless the damage to the property fell within the proviso:
The faulty weld which ultimately caused the damage to the respondent's reclaimer and conveyor belts was occasioned by faulty workmanship, so that, because of perils exclusions cl 4, the damage to the respondent's property is not covered by the policy unless it is within the proviso to perils exclusions cl 4.

The insurer argued, first, that the faulty workmanship in the weld was not itself damage to the insured property so that there cannot have been “subsequent damage” within the meaning of the proviso: at [30]. It was this argument which McMurdo P rejected at [31] in applying Ranicar. The insurer also argued, secondly, that “subsequent damage” means not only damage later in time but also distinct and separate damage and that any later damage was not distinct and separate: at [32].
McMurdo P’s reasons for rejecting these two arguments included:
Was there subsequent damage to bring into effect the proviso to perils exclusions cl 4?
(a) Did the faulty workmanship cause initial damage to the reclaimer?
[30]The appellants contend that the faulty workmanship in the weld was not itself damage to the insured property so that there can have been no subsequent damage when the reclaimer collapsed.
[31]The Macquarie Dictionary definition of damage includes “injury or harm that impairs value or usefulness” and this is also its ordinary meaning. In R v Zischke [[1983] 1 Qd R 240] this Court held that property is damaged when it is rendered imperfect or inoperative. In Ranicar v Frigmobile Pty Ltd Green CJ considered that damage was “physical alteration or change, not necessarily permanent or irreparable, which impairs the value of [sic] usefulness of the thing said to have been damaged” [at 116]. The faulty weld impaired the value or usefulness of the reclaimer because it weakened it and rendered it more prone to collapse and to damage other adjacent machinery in the collapse process. The faulty weld plainly occasioned damage to the reclaimer within perils exclusions cl 4(e) even though the damage was undetectable by mere external examination.
(b)Was the collapse of the reclaimer subsequent damage?
[32]The appellants contend that “subsequent” damage means not only damage later in time but also distinct and separate damage.
[33]That contention is not consistent with the ordinary meaning of “subsequent”. The Macquarie Dictionary definition of “subsequent” is “occurring or coming later or after; following in order or succession”. Had the proviso been intended to apply only to damage which was both subsequent and also separate and distinct, it can be expected to have stated so in clear terms. It did not.
…
[38]… In my view, the word “subsequent” in the proviso in this case does not require that the damage be not only later in time but also distinct and separate; “subsequent” has its ordinary meaning, namely, causing or occurring later or after or following in order.
[39]… [T]he learned primary judge found that whilst a defective weld occasioned the separation of the diaphragm and flange inside the reclaimer’s leg and this damage was excluded by perils exclusions cl 4, the buckling of the leg structure and the collapse of the reclaimer and damage to the conveyor belts were subsequent in time and effect to the failure of the defective weld so that there was then subsequent damage to which the proviso applied.
[40]This finding was entirely consistent with the agreed facts and the meaning of subsequent damage in the proviso. The fatigue cracking resulting from the faulty workmanship in the weld developed over many years and finally caused the flange and diaphragm in the concealed box in the reclaimer’s leg to separate. … [T]he weld and fatigue cracking could have been repaired and the subsequent rapid ductile (tearing) fracture and collapse of the reclaimer’s leg structure and damage to the two conveyer belts could have been avoided. Contrary to the appellants’ submissions, that subsequent damage was not inevitably occasioned by an inexorable continuum commencing with the cracks resulting from the faulty workmanship in the weld …
Conclusion
[41]There was initial physical damage to the insured property occasioned by or happening through perils exclusions cl 4(e) (faulty workmanship) when the fatigue fracture or fractures developed from the faulty weld … [T]he fractures became rapid ductile (tearing) fractures resulting almost immediately in the failure of the leg structure, the collapse of the reclaimer and the further damage to the two conveyor belts, all of which was subsequent damage to the initial weld damage occasioned by faulty workmanship. The initial damage was excluded under the policy by perils exclusions cl 4. The subsequent damage to the reclaimer and conveyor belts was occasioned by the faulty workmanship in the weld and was also occasioned by a peril not otherwise excluded under the policy, namely the risk or danger that if the faulty weld and subsequent fatigue cracking was not repaired, over time the internal diaphragm connecting the top flange of the leg box could sever and cause a rapid ductile (tearing) fracture, buckling the reclaimer’s leg structure and causing it to collapse on to nearby equipment such as the conveyor belts. This subsequent damage was not inevitable …
Her Honour’s conclusion that the weld caused damage was necessary to address the arguments which had been put by the insurer. Whether or not the initial weld had to constitute damage to property for the proviso to be engaged, her Honour’s reasoning that faulty workmanship in the weld caused damage to property because it impaired the value or usefulness of the reclaimer is sound. The damage to property was caused by faulty workmanship. The property was not better off for having been constructed with a serious fault.
The appellant sought to distinguish Austral Plywoods on the basis that the “evidence in this case does not disclose (contrary to Austral Plywoods) that the installation of the Plate itself caused damage”: AS[29]. CGU observed that “the Plates do not immediately corrode, delaminate or in some way damage other parts of the vessel: the defect is that they are less durable”.
Contrary to CGU’s submission, the evidence did disclose that the installation of the Plate caused damage. The damage occurred upon the welding of each plate into the hulls – see [66] above. As the primary judge found at J[148], the evidence established that the welding of the Plates into the hull resulted in a physical alteration to the property:
The first step is to ask whether there was a physical alteration of tangible property. The answer is “yes”. Mr Hawkins gave unchallenged evidence that Plate is generally used in construction by a process of welding, and CGU accepted that “putting on this defective plate to the ship hulls involves welding them to the hulls”: T84.37–38.
This conclusion was not challenged.
There was also no challenge to the primary judge’s acceptance (at J[21]) of Mr Hawkins’ unchallenged evidence that that Capral’s customers would not be able to obtain DNV‑certification for Vessels containing the Plate (emphasis omitted):
Capral’s customers who required their marine vessels to be DNV‑certified would not have been able to obtain DNV‑certification of their vessels if the non‑compliant Plate was used in construction. Further, while the Plate could have still technically been used to construct marine vessels or other water‑based structures at least in the short term, the useful life of the Plate was severely impacted because the Plate did not possess the corrosion resistance qualities required by the ASTM G‑66 and/or G‑67 testing method standards. For example, the Plate would have been prone to corrosion far quicker than it should.
Nor did Capral challenge the trial judge’s conclusions that (1) each of the Vessels could not proceed to market without the Plate being removed at substantial cost, and (2) each of Capral’s customers would have, if offered, swapped Vessels incorporating Plate with Vessels in the condition they would have been in if the Plate had not been installed. The trial judge stated at J[149]:
The second step is to ask whether the physical alteration identified caused an impairment in the usefulness or value of the tangible property. The answer is again “yes”. Each of the Marine Customers concluded that their property could not proceed to market without the Plate being removed, and the cost of such removal was substantial. Accordingly, I have inferred on the evidence before me that the relevant property was less useful and less valuable to the Customers immediately after affixing the Plate than immediately beforehand. If the Customers had been offered the opportunity to swap their Vessels that had Plate incorporated with the Vessels they had immediately prior to such incorporation, they would have taken the offer. As in Austral Plywoods, the Vessels were rendered unsuitable, or less suitable, for the purpose for which they were constructed.
It is not relevant to the damage which was caused that the Plate does not immediately corrode. What is relevant is that the Plate was progressively welded into the Vessels causing damage.
CGU submitted that Austral Plywoods was, in any event, wrongly decided. CGU submitted that the Queensland Court of Appeal failed to recognise what the compensation was “for”. According to CGU, the claim which had been made was not for the drilling of holes and affixing of glue. There was nothing wrong with those steps. The claim was “for” the fact that the plywood was defective.
In CGU’s submission, the incorrectness of the reasoning in Austral Plywoods “is evident from the fact that a different outcome would have resulted if the plywood had been affixed with glue that could simply be washed off, so [that] there was no ‘physical alteration’, yet the claim would have been substantively the same”: AS[29].
The difficulty with these submissions is that they are based on an alteration of the underlying facts, when – as CGU accepts – it is the facts which determine whether the policy responds. Austral Plywoods did not claim for defective product which could be easily removed from the hull of its boat without causing damage. It claimed for property damage constituting the affixation of defective plywood to its boat which could not be removed without causing damage.
The claims in the present case were not, for example, for a resupply of conforming product. No doubt, if the defective product had not been welded into the Vessels such that no damage was caused and no rectification works were needed (and so no physical alteration to the surrounding Vessel occurred), then any claim may have been for defective product and not for property damage. The primary judge was correct in observing that “the supply of a defective product is not property damage in and of itself” and that it is “only once the defective product is physically incorporated into larger tangible property that the possibility of property damage arises”: at J[142]. As his Honour observed at J[143], there is good commercial sense in this distinction:
… Before a defective product is incorporated into other tangible property, an insured’s liability is relatively stable. The insured can remedy the breach by supplying a replacement. Once a defective product is so incorporated, however, liability depends upon the nature of the property with which the product has come into contact. As Clifford J observed in Weedo v Stone‑E‑Brick 405 A 2d 788 (1979) (Supreme Court of New Jersey) at 791:
The consequence of not performing well is part of every business venture; the replacement or repair of faulty goods and works is a business expense, to be born by the insured‑contractor in order to satisfy customers.
There exists another form of risk in the insured‑contractor’s line of work, that is, injury to people and damage to property caused by faulty workmanship. Unlike business risks of the sort described above, where the tradesman commonly absorbs the cost attendant upon the repair of his faulty work, the accidental injury to property or persons substantially caused by his unworkmanlike performance exposes the contractor to almost limitless liabilities. While it may be true that the same neglectful craftsmanship can be the cause of both a business expense of repair and a loss represented by damage to persons and property, the two consequences are vastly different in relation to sharing the cost of such risks as a matter of insurance underwriting.
Fifth argument
CGU’s fifth and final argument was that the authorities from Canada, the United States and the United Kingdon referred to at J[105]–[129] were of limited assistance: AS[33]. As has been mentioned, the various cases were analysed by the primary judge. There is no need to repeat all of that analysis.
The following observations address CGU’s arguments on this application.
Canada
CGU submitted that the two Canadian cases relied upon by the Queensland Court of Appeal in Austral Plywoods were either wrongly decided or provided no assistance: at [35] and [36].
The first case was Carwald. Carwald was contracted to supply and pour a concrete pad as part of the construction of a gas processing plant. The concrete was to be poured over rebar and reinforcing steel. The purpose of this was to add strength by reversing the tendency of the concrete to expand and crack. Electrical ducting, grounding wire and plumbing was also to be embedded in the concrete, as well as anchor bolts for positioning equipment on the pad. Subsequent testing revealed that the concrete that was poured did not possess the required strength, meaning that it had to be removed. Carwald’s policy provided coverage for “all sums which the Insured shall become legally obligated to pay as compensatory damages because of … property damage”, relevantly defined as “physical injury to or destruction of tangible property”: Carwald at 62.
The Alberta Court of Appeal held that Carwald’s liability arising from the need to remove and repour the concrete pad was based on damage to property. After referring to three Canadian cases, including the decision of the Supreme Court of Canada in Ontario (Attorney‑General) v Fatehi [1984] 2 SCR 536; 15 DLR (4^th) 132; 31 CCLT 1, the Court stated at 63:
In my opinion the above cases support the conclusion that where, as here, the pouring of defective concrete made the rebars, reinforcing steel, ducting, wiring, plumbing and anchor bolts useless for the purpose for which they were installed as the pad could not be used, this constituted physical injury to tangible property.
The Court then considered two United States cases, which it distinguished on the basis that those cases did not involve any damage to other property. The Court stated at 65:
Our facts are not the same as the last two cases as the pouring of the defective cement did cause damage to other property of Phoenix: see preceding discussion of Fatehi. If other property had not been damaged the last two cases would have applied.
CGU observed that the decision of the Canadian Supreme Court in Fatehi was at the centre of the Court’s reasoning in Carwald. In Fatehi, the Ontario Attorney‑General claimed the cost of cleaning up a highway which had become impassable because of debris and gasoline strewn along it because of an accident caused by the respondent’s negligence.
Of Fatehi, the Court in Carwald stated (at 62–3, emphasis in original):
Mr Justice Estey in the course of his judgment [in Fatehi] discussed the distinction between a claim for a pure economic loss and a claim for damage to property. In delivering the unanimous judgment of the court, Estey J stated at pp 136–7 DLR, p 7 CCLT:
It is said by the respondent, and by the majority below, that the appellant must fail as its loss was pure economic loss, thus far unrecoverable at law. Whether that is so depends upon questions of both fact and law. On the facts as agreed, the road was blocked by the negligent actions of the respondent. It ceased to be a road in the sense of a traffic-carrying facility. Whether the respondent achieved this result by deliberately tearing up a section of the surface, or by negligently operating his vehicle so as to drop a large load of rocks on the road, or so as to strew broken auto parts, debris and gasoline on the road, as was here the case, makes no difference in fact. The road, by reason of the respondent’s wrongful acts, ceased to be a road.
The appellant as the owner of the road has thereby suffered damage to its property. The appellant suffered this direct damage in the same manner as any other property owner, and unless there is some disqualifying law operating in these circumstances (which will be discussed later), the appellant would be entitled to recover for these direct damages so suffered. The appellant restored the road to its prior existence and condition. The cost of so doing was the measure of its loss. Two considerations must be examined. The appellant did not “repair” the road in the sense of making good, ordinary wear and tear to the roadway. Rather, the appellant was required to expend its resources in order to make whole its property which had been significantly degraded by the actions of the respondent.
(Emphasis added.) And at p 137 DLR, p 8 CCLT:
In contrast to this direct injury to the property of the appellant, is the instance of what·in law is sometimes called “pure economic loss”. All pecuniary damage incurred with reference to property of a plaintiff is economic loss which entitles the plaintiff to be made whole so far as a monetary award can do. However, in the case of pure economic loss the courts have historically taken a different approach. By “pure economic loss” the courts have usually been taken to refer to a dimunition [sic] of worth incurred without any physical injury to any asset of the plaintiff.
The damage to the road was loss or injury to tangible property: the road itself.
The question in Fatehi was whether, for the purposes of the law of negligence, there was “direct injury to the property of the appellant” or whether the claim was for pure economic loss, not consequent upon any physical damage.
As the High Court observed in Mallonland Pty Ltd v Advanta Seeds Pty Ltd [2024] HCA 25; 98 ALJR 956; 418 ALR 639 at [30] to [34], damages are not generally recoverable in negligence for pure economic loss, being loss that is not consequential upon injury to person or property and, absent an assumption of responsibility, a person does not ordinarily owe a duty to take reasonable care to avoid causing reasonably foreseeable pure economic loss to another.
In Fatehi, Estey J concluded that the case was not one “of [pure] economic loss but of direct damage to property of the plaintiff occasioned by the negligence of the respondent”.
CGU submitted that Carwald rests on “fundamentally infirm foundations” and that the Court took a “fundamentally wrong turning” by importing the reasoning of the Canadian Supreme Court in Fatehi: T27. CGU submitted that the reason that the Supreme Court in Fatehi held that there “was property damage … is that damage to real property for the law of tort includes interference with the use or possession of the property, even if [that interference] includes no physical damage to the land”: T27.13–17.
It is true that certain torts involving property are actionable without proof of actual damage. That is not because “damage … for the law of tort includes interference with the use or possession of … property”: T27.15–16. It is because certain torts are actionable without proof of damage, which is a reflection of the strong protection afforded by the common law to property rights – see: for example, Entick v Carrington (1765) 19 St Tr 1029 at 1066, referred to with approval in Plenty v Dillon [1991] HCA 5; 171 CLR 635 at 639 (Mason CJ, Brennan and Toohey JJ). In an action for trespass to land there must be direct interference with possession, either intentional or negligent; the gist of the action is interference with possession (and damage is not necessary): Brown v Tasmania [2017] HCA 43; 261 CLR 328 at [383].
On the other hand, damage is an essential ingredient in the cause of action in negligence. The central issue in Fatehi was whether there was direct damage to property. Estey J concluded that there was direct damage to property, the appellant needing to “[restore] the road to its prior existence and condition”. The reasoning in Fatehi did not rest, either expressly or implicitly, on any proposition that an interference with property was actionable per se in negligence without proof of damage to property.

Indeed, even if CGU’s construction were the only literal construction, it would not necessarily be the correct construction. In Australian Casualty Co Ltd v Federico [1986] HCA 32; 160 CLR 513 at 520, cited in McCann at [197] (Callinan J), Gibbs CJ observed:
As in the case of any other commercial contract, a court may depart from the strictly literal meaning of a particular expression to place upon it an alternative construction which is more reasonable and more in accord with the probable intention of the parties if the words will bear that construction.
In my view, CGU’s approach places too great an emphasis on what it contends is the literal meaning of the words used, at the expense of ascertaining the objectively intended meaning of the words used having regard to context and purpose. Ultimately, the task is one of determining objectively what the parties intended by the words used, not one of recording that, on one literal construction of the text, the parties would have missed their target.
In my view, the primary judge correctly concluded that the exclusion clause did not apply to exclude indemnity for a liability of the insured for property damage which was caused by a defective product before the defective product was withdrawn from the market.
The parties referred to a number of United States cases in which similar clauses have been addressed. It is not necessary to address them individually.
CGU submitted that each of the cases which supported Capral’s construction and the “sistership” purpose or origin of the exclusion concerned clauses with different wording. That submission may be accepted. There are numerous differences, some of more significance than others.
CGU also submitted that there was no clear answer provided by those cases, referring by way of example to Sokol v Atlantic Mutual Insurance Co 430 F 3d 417 (7^th Cir 2005). Sokol concerned the provision of spoiled peanut butter for inclusion in boxes of cookie mix which was then recalled after discovery of the spoilage. The Court of Appeals, Seventh Circuit, held that exclusion n “applies straightforwardly to the facts” so as to exclude cover: at [8].
The Court’s reasoning on this issue was contained in a single paragraph (at 424):
Exclusion n applies straightforwardly to the facts of this case. As we have noted, Sokol's peanut butter paste qualifies as “your product” under the policy. The peanut butter was withdrawn from the market, replaced, and disposed of after Continental discovered it was rancid or “off taste,” an obvious “inadequacy” (if not worse). Even if the Insuring Agreement provided coverage here, Exclusion n applies to knock it out.
Three observations should be made about that case. First, as is made clear in the passage above, the conclusion was by way of obiter. Secondly, what was being sought was reimbursement from Sokol for the costs associated with the replacement of the product, not a loss for damage to property. Thirdly, the Court did not refer to Todd Shipyards or other cases in which similar exclusions have been considered and it does not appear to have been argued that the exclusion was a “sistership” exclusion.
As mentioned, it is unnecessary to address each of the United States cases. The primary judge’s conclusion did not rest on overseas cases. The damage occurred to the Vessels as the Plate was progressively welded into the Vessels. All the damage to the Vessels occurred before withdrawal of the Plate (or withdrawal of the Vessels to the extent that event was relied upon by CGU as engaging the exclusion).
The primary judge was correct to conclude, on the basis of the text of cl 6.14.2 and without resort to overseas authority, that the exclusion did not apply in the circumstances. The primary judge answered question 4 correctly.
CONCLUSION
Leave to appeal should be granted but the appeal should be dismissed with costs.

I certify that the preceding two-hundred and twenty-nine (229) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Thawley.
Associate:
Dated: 3 April 2025

REASONS FOR JUDGMENT
DOWNES J:

I agree with the reasons of Thawley J and with his proposed orders.

I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice Downes.
Associate:
Dated: 3 April 2025
REASONS FOR JUDGMENT
SHARIFF J:

I have had the considerable advantage of reading Thawley J’s reasons in draft. I agree with his Honour’s reasons in relation to the First Issue. I also agree with his Honour as to the outcome of the Second Issue. I wish to set out, briefly, why I have reached the same conclusions as Thawley J on the Second Issue. For convenience, I have gratefully adopted the definitions contained in Thawley J’s reasons and I do not repeat any of the background set out in his Honour’s reasons other than where necessary to express my separate reasons.
It is uncontroversial that, as the primary judge stated at J[63], an insurance policy is a kind of commercial contract which should be construed according to the principles of businesslike interpretation, citing CGU Insurance Ltd v Porthouse [2008] HCA 30; 235 CLR 103 at [43] (Gummow, Kirby, Heydon, Crennan and Kiefel JJ) (which, in turn, cited, McCann at [22] (Gleeson CJ)); referring also to the principles drawn from Mount Bruce at [46], [47] and [51] (French CJ, Nettle and Gordon JJ).
As the primary judge further stated, “the rights and liabilities of parties under a provision of a contract are determined objectively by reference to its text, context (being the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose”: J[63(a)]. And, in determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean and “that enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract”: J[63(b)].
It is important that the Policy in question here was a General and Products Liability Policy: J[1]. Clause 4.4 defined the “Business” of Capral by reference to the Policy Schedule as follows:
Principally:
Principally but not limited to manufacturing, marketing and distribution of fabricated and semi-fabricated aluminium products to the transport, building, manufacturing and engineering industries and all other activities incidental thereto for which the Insured may be or may become engaged.
and any other activities incidental thereto.
Clause 1.1.2 of the Policy stated that the coverage of the Policy provided for indemnity as follows (emphasis in original, referencing defined terms contained in the Policy):
1. The Indemnity
Coverage: In consideration of the Named Insured having paid or agreed to pay the Premium and subject to the terms, Definitions, Exclusions, Conditions, provisions and Limits of Liability set out in this Policy, the Insurer will pay to or on behalf of the Insured, all sums which the Insured shall be legally liable to pay, including for the avoidance of doubt, those assumed under contract or agreement, in respect of:
1.1Compensation for:
1.1.1Injury to any person;
1.1.2 Property Damage;
1.1.3Advertising Injury;
occurring within the Geographical Limits during the Period of Insurance as a result of an Occurrence happening in connection with the Insured’s Business or Products.
As set out in Thawley J’s reasons, the definition of “Products” was broad and encompassed the Plate which was supplied to Capral’s customers.
Relevantly, the exclusions to the cover included the one at the centre of attention in this appeal, being cl 6.14.2, which provided as follows (emphasis omitted):
6.Exclusions
The liability of the Insurer to pay any benefit or to indemnify the Insured pursuant to Clause 1.1, 1.2 or to any Endorsement incorporated into the Policy shall not extend to any of the following:
…
6.14Products and Work Performed
Liability for:
…
6.14.2the cost of or damages claimed in relation to the withdrawal, recall, inspection, repair, replacement or loss of use of the Products or any property of which such Products form a part, if such Products or property are withdrawn from the market or from use because of any known or suspected defect or deficiency therein;
…
There was a dispute between the parties as to whether the claims here were for Property Damage. For the reasons set out by Thawley J, I agree that there was no error in the primary judge’s conclusion at J[148]–[150] that there was a physical alteration of tangible property at the time the Plate was affixed to the relevant Vessels by a process of welding, and that this caused an impairment to the usefulness or value of the tangible property with the result being that Capral’s customers had suffered Property Damage at the time that the Plates were affixed.
Critical for present purposes as to the application of the exclusion contained in cl 6.14.2 is that the relevant damage was occasioned at the time of the affixation of the Plate to the Vessels. Further critical for those purposes is that this damage had been occasioned before there had been any withdrawal, recall, inspection, replacement or loss of use of either the Plate or the Vessels.
Viewed this way, and in context, the question that arose was whether the exclusion contained in cl 6.14.2 applied to these specific facts.
CGU’s submission adopted what it urged was a textual construction of cl 6.14.2. This textual construction was that there were two syntactical components of cl 6.14.2: the first being whether indemnity was being sought for the cost of and damages claimed in relation to a withdrawal, recall, inspection, repair, replacement or loss of use of the Product, being the Plate, and, the second being that that Product had been withdrawn from the market or from use because of a known defect or deficiency therein. CGU contended that it made no difference whether it was the Plate or the Vessels that were being withdrawn from the market or from use.
CGU submitted that its textual approach to the construction of the clause was consistent with the decision of the Full Court in Siegwerk. There the relevant clause was worded as follows (at [118]):
This Policy does not cover liability in respect of:
…
3.17 Product Recall
Claims arising out of or resulting from any loss, cost or expense incurred by You for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of Your Products or of any property of which they form a part, if such Products or property are withdrawn from the market or from use because of any known or suspected defect, deficiency, inadequacy or dangerous condition in them.
Robertson J (with whom Perram and Dodds‑Streeton JJ agreed) stated at [179]–[180] that:
It seems to me that the correct analysis is to ask: first, what is the property, if any, of which Nuplex’s products formed a part; second, whether such property had been withdrawn from use, or the market, because of any suspected defect or deficiency in them; third, whether there was any loss incurred by Nuplex for loss of use or withdrawal or disposal of the property of which Nuplex’s products form a part; and, fourth, were there claims arising out of or resulting from such loss?
In my opinion, the answers to these questions are as follows. First, there was property of which Nuplex’s products formed a part and that property was the cans of tuna. Second, the cans of tuna were withdrawn from use or from the market because of a suspected defect or deficiency in them. Third, on the present hypothesis, there was loss incurred by Nuplex for the loss of use or withdrawal from use or disposal of the cans of tuna. Fourth, there were claims (by Nuplex) arising out of or resulting from such loss.
CGU submitted that this analysis reflected a textual approach which it urged should be followed in the present case. In aid of its submissions, CGU relied upon the facts leading to the customer claims made against Capral that there had been a recall of both the used and unused Plate. By way of example, CGU relied upon the letter dated 6 November 2020 that Capral sent to Austal which stated (emphasis added):
MINGTAI RECALL NOTICE
1. Quality issue
Capral wishes to advise that it has received notification from Zhengzhou MING TAI that certain plate manufactured by them, and subsequently supplied to Capral, may have quality issues and that the DNV-GL certificate supplied with this plate is no longer valid and the plate should be recalled …
…
IV. Replacement
If required, Capral will replace any unused plate with new DNV-GL certified plate. Please contact the Capral representative detailed below to arrange return and replacement.
In the event that any of these plates have already been used in fabrication, the specific circumstances and the potential requirement for replacement or rectification should be discussed with Capral and DNV-GL …
CGU submitted that the letter plainly called for a recall or withdrawal of both the used and unused Plate and, in respect of the latter, invited discussions about what steps should be taken for “replacement or rectification” where the Plate had already been used in fabrication. I accept (contrary to Capral’s submissions before us) that Capral’s notice applied both in respect of used and unused Plate.
Implicit, if not explicit, within CGU’s submissions was the assumption that its textual construction was the only available one. Yet, the primary judge identified another. At J[172]–[173] the primary judge reasoned that the word “if”, as contained in the text of the cl 6.14.2, when read in context, required not only a causal but also a temporal connection between the cost or damages claimed and the relevant withdrawal from the market or from use. What this reveals is that there is another construction that is available which focusses upon the word “if”, especially when that word is read both within the context of cl 6.14.2 and the Policy read as a whole.
It is of course the “primary duty” of a court construing a written contract to ascertain its meaning from the “words of the instrument in which the contract is embodied”: Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; 129 CLR 99 at 109 (Gibbs J). The language used by the parties is the “starting point and the ending point of the construction of a written commercial contract”: Cherry v Steele‑Park [2017] NSWCA 295; 96 NSWLR 548 at [72] (Leeming JA, Gleeson and White JJA agreeing). The “ability of courts to give commercial agreements a commercial and businesslike interpretation is constrained by the language used by the parties”: Newey v Westpac Banking Corporation [2014] NSWCA 319 at [91] (Gleeson JA, Basten and Meagher JJA agreeing).
As Leeming JA has observed, “Very often, there is no dispute as to the ordinary grammatical or literal meaning of a sentence, and no dispute that that is the legal meaning. Very often, nothing in the context will come close to displacing the ordinary grammatical meaning of the legal text”: Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184; 89 NSWLR 633 at [74]. However, “Words do not have a “natural” meaning that can be determined in isolation”: Mainteck at [75].
In relation to the approach to the interpretation of exclusion clauses, the position remains that which was stated in Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; 161 CLR 500 at 510 (Mason, Wilson, Brennan, Deane and Dawson JJ):
…an exclusion clause is to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in case of ambiguity…And the principle, in the form in which we have expressed it, does no more than express the general approach to the interpretation of contracts and it is of sufficient generality to accommodate the different considerations that may arise in the interpretation of a wide variety of exclusion and limitation clauses in formal commercial contracts between business people where no question of the reasonableness or fairness of the clause arises.
More recently, the Full Court in Dalby Bio-Refinery Ltd v Allianz Australia Insurance Ltd [2019] FCAFC 85 (Allsop CJ, Beach and Anastassiou JJ) drew upon Darlington Futures to state at [32]:
…though one needs to be careful with reliance on the contra proferentem rule, especially when there has been an evident degree of negotiation of the policy, if there are two genuinely available alternatives preference should be given to one that limits rather than expands the exclusion. That is not to approach the matter other than as dictated by the Court in Darlington v Delco 161 CLR at 510.
With these principles in mind, it is necessary to again return to the relevant text of cl 6.14.2 (emphasis and additional emphasis added):
6.Exclusions
The liability of the Insurer to pay any benefit or to indemnify the Insured pursuant to Clause 1.1, 1.2 or to any Endorsement incorporated into the Policy shall not extend to any of the following:
…
6.14.2 the cost of or damages claimed in relation to the withdrawal, recall, inspection, repair, replacement or loss of use of the Products or any property of which such Products form a part, if such Products or property are withdrawn from the market or from use because of any known or suspected defect or deficiency therein;
…
It will be apparent from the emphasised words at the commencement of the clause that the exclusion operates in respect of the cost of or damages claimed “in relation to the withdrawal, recall, [etc] of the Products” if such Products are withdrawn. In oral argument before us, Capral submitted that the words “in relation to” in this context created a causal connection between the costs and damages claimed and the actual withdrawal or recall, etc, of the Products or the Vessels: T44.35–45.21. CGU submitted that the words were not naturally causal, and further submitted that they did not attend to the fact that the clause operated not only in respect of withdrawals and recalls but also in respect of inspection, repair, replacement or loss of use irrespective of whether the products were incorporated as components in other products or remained unused (ie, “where the products are just sitting there”): T74–75.
In a statutory context, the words “in relation to” have been held to be of very wide import and their meaning depends on the context: see eg Tooheys Ltd v Commissioner of Stamp Duties (NSW) [1961] HCA 35; 105 CLR 602; Joye v Beach Petroleum NL [1996] FCA 502; 67 FCR 275 at 285 (Beaumont and Lehane JJ); Australian Competition and Consumer Commission v Maritime Union of Australia [2001] FCA 1549; 114 FCR 472 at [68] (Hill J); Australian Securities and Investments Commission v Narain [2008] FCAFC 120; 169 FCR 211 at [66]–[80] (Jacobson and Gordon JJ). It has been held that the words “signify the need for there to be some relationship or correlation between the two subject matters that are specified”: Narain at [69].
It may be accepted that the words “in relation to” do not naturally require a causal relationship. However, in the present contractual context, the words “in relation to” have work to do. And, they should not be given no work to do. The words identify that the indemnity granted under the Policy does not extend to the cost or damages claimed “in relation to” the withdrawal, recall, inspection, repair, replacement or loss of use of the Products. That requires a relationship, association or correlation between the claimed costs and damages and the relevant withdrawal, recall, inspection, repair, replacement or loss of use of the Products or the Vessels. This does not extend to the Property Damage that had already been occasioned to the Vessels prior to the withdrawal, recall, inspection, repair, replacement or loss of use of the Products. The relevant Property Damage had occurred at the time that the defective Plates had been affixed to the Vessels. The damages claimed by the customers, and the indemnity sought by Capral in relation to those claims, were not in relation to the relevant withdrawal, recall, inspection, repair, replacement or loss of use of the Products.

This reading of the clause is cohesive as between the two syntactical components of cl 6.14.2. It may be accepted that the word “if” refers to a conditional relationship between two things. For example, “if” will be conditional where in the event of “X”, “Y” will follow or will arise. In the present case, the effect of CGU’s submission was that “Y” is excluded, if “X” happens at any time. It effectively said that the happening of “X” was not delimited by any causal or temporal relationship to “Y”. Its contention was that “there [was] no warrant” to read a causal relationship into the word “if” and, further, that it did not matter when “X” happened in the sense that it did not matter when the Products were withdrawn from the market or from use. CGU further said that the word “if” is not an expressly causal word by contradistinction to the word “because” (as appeared in the later text of the clause).
However, the word “if” does not appear in isolation. It appears in context. The word may also be read in context as the primary judge did, which was to say that “X” will apply when it is caused by “Y”. For example, “I will pay for an umbrella, if it rains”; or, “I will pay for your umbrella, if it rains”. Although the condition for the payment of the umbrella is “if” it rains, standing back from it, the only reason that payment is to be made for acquiring an umbrella is because it rains. Viewed in this equally ordinary and natural sense, the word “if” contains an inherent causal connection that usually arises upon the occurrence of the condition. This too is a “natural and ordinary reading” of the word: see generally, as to “natural and ordinary” meaning of words, Herzfeld P and Prince T, Interpretation (3^rd ed, Lawbook Co, 2024) at 507 [20.10].
The primary judge’s approach to the interpretation of the word “if” is consistent with the context of the overall clause including the opening words of that clause, to which I have drawn attention above. It fortifies the conclusion that the clause operates in respect of the costs of and damages claimed in relation to the withdrawal or recall, etc, in the sense that it excludes the costs and damages caused or occasioned by that withdrawal or recall.
I do not accept (as contended for by CGU) that reading cl 6.14.2 in this way would not attend to the distinction between the withdrawal, recall, inspection, repair, replacement or loss of use of used and unused products. The costs and damages are excluded where they have not already been occasioned prior to the relevant withdrawal, recall, etc. The clause would exclude cover for the costs of withdrawing and recalling unused Plate, and also used Plate that had not already caused Property Damage.
Thus far, I have examined cl 6.14.2 on a strictly textual approach by looking at the words “in relation to” and “if” in the context in which they appear. The process of construction is not merely one of giving meaning to words, parsed and divorced from their context, but it is a process that seeks to divine the meaning of language used by commercial, businesslike people in the position of the contracting parties. As Judge Learned Hand stated in in Helvering v Gregory 69 F2d 809 (2^nd Cir 1934) at 810–11:
The meaning of a sentence may be more than that of the separate words, as a melody is more than the notes, and no degree of particularity can ever obviate recourse to the setting in which all appear, and which all collectively create.
The meaning that will appear and is collectively created is the end point or outcome of the process of interpretation: Mainteck at [77]. That is a different way of making the point that in attending to that task of construing the words of a contract, the Court must consider the circumstances which the document addresses, and the objects which it is intended to secure: McCann at [22] (Gleeson CJ); Wilkie at [15]–[16] (Gleeson CJ, McHugh, Gummow and Kirby JJ); Mount Bruce at [47] (French CJ, Nettle and Gordon JJ). As observed by Meagher JA and Ball J in HDI Global Specialty SE v Wonkana No 3 Pty Ltd [2020] NSWCA 296; 104 NSWLR 634 at [23], the Court “should know and have regard to the commercial purpose and object of the contract [and this in turn] ‘presupposes knowledge of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’”: citing Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 995–6. All of the points about commercial purpose, context and commercial businesslike interpretations are applicable here, and were applied in a conventional way by the primary judge.
One here can start with the uncontroversial proposition that the purpose of the Policy was to provide indemnity cover in respect of compensation for three classes of injury and damage being “Injury to any person”, “Property Damage” and “Advertising Injury”. The primary judge focussed upon Property Damage as that was the immediately relevant purpose: J[172]. That purpose had to be considered in light of the “Insured’s Business”, which was agreed by the parties to be principally (but not limited to) “…manufacturing, marketing and distribution of fabricated and semi-fabricated aluminium products to the transport, building, manufacturing and engineering industries…”. The distribution of the Plate was clearly within the scope of the “Insured’s Business”.
In the context of the evident purpose of the Policy to provide cover in respect of Property Damage, the primary judge reasoned that it would be an odd result that such cover would be defeated by an exclusion that operated in respect of a recall or withdrawal from the market or use occurring after the damage had already been occasioned to a customer’s tangible property but before any recall. To this, I would add, that it would be all the more an odd result in circumstances where the business in respect of which the cover was provided related to the manufacture, marketing and distribution of fabricated and semi‑fabricated aluminium products to, inter alia, the transport, manufacturing and engineering industries. In practical terms, in a business of this type, supplying component parts, the operation of the exclusion in the way contended for by CGU would indeed lead to odd results.
CGU countered these contentions by submitting that reading cl 6.14.2 without a causal or temporal limitation would not render nugatory the cover provided by the Policy in respect of Property Damage. It posited the following examples in its written submissions (footnotes excluded):
(a)Austal Ships Metal Pty Ltd used the Plate as material for the construction of vessels for the Australian Navy {J [24]}. Assume a vessel containing the Plate is put into service before the defect is discovered. While in service, it is discovered that water has penetrated the hull due to the defective Plate. The water causes corrosion to both the vessel, and vehicles and equipment on the vessel that belong to the Navy. The damage to the vessel is excluded. But the damage to the vehicles and machinery would fall within the insuring clause (being a claim for “physical injury or damage to… tangible property”) and not be excluded by clause 6.14.2 (because the claim for damage to them is not in relation to the withdrawal etc of the Plate or the property into which it forms a part, namely the vessel).
(b)Assume one of Indigo Wave Pty Limited t/as Razerline’s fishing boats {J [30]} sank due to the defective Plate, causing personal injury to an occupant as well as loss of all personal property on the boat. The personal injury and the loss of personal property would both fall within the insuring clause (being, respectively, a claim for “bodily injury” and “physical injury or damage to… tangible property”) and not be excluded by clause 6.14.2 (both not being in relation to the withdrawal etc of the Plate or the fishing boat).
(c)Assume the Plate was used in one of Rocklea Pressed Metal Pty Limited’s water tanks {J [48]}. The water tank is situated in a warehouse. It corrodes due to the defective Plate, causing water to leak and destroy stock. The loss of stock would fall within the insuring clause (being, a claim for “physical injury or damage to… tangible property”) and not be excluded (not being in relation to the withdrawal etc of the Plate or water tank).
It will be evident that in each of these examples, any damage already occasioned to the Vessels would be excluded. The Policy would operate only in respect of damage to property further down the line than the Vessels or damages for personal injury: AS[13]. On each example, indemnity would be excluded in respect of the damage occasioned to the Vessels, even though the damage had been occasioned prior to the identification of any defect and any withdrawal of the product from the market or from use.
CGU submitted in oral argument before us that construing the exclusion from indemnity in this way, ie excluding cover for Property Damage occurring at any time for any product defects discovered at any time leading to withdrawal of products, served a commercial purpose which “from the perspective of the insurer at least, is obvious” being that it is “to exclude what may well be very, very big losses, and the pricing of the policy no doubt reflected that to the benefit of the insured”: T7.32. However, commercial purpose is not a one-sided equation in a bilateral contract. That is particularly the case in the specific example of an insurance contract. When the High Court in Darlington Futures stated at 510 that an exclusion clause is to be construed according to its natural and ordinary meaning in light of the contract as a whole and by giving due weight to the nature and object of the contract, it was not saying that a contract should be so construed by reference to the perspective of an insurer. The nature and object of the contract has to be divined from the contract itself bearing in mind that, in a case such as the present, both the contracting parties were commercial and the subject matter of the contract was the allocation of risk in a business of a particular type.
Reading the text of cl 6.14.2 as the primary judge did as involving both a causal and temporal connection results in an interpretation that does not defeat the purpose of the cover afforded by the Policy for Property Damage. It is a construction that marries the purpose of cover in respect of the damage that is occasioned prior to a recall or withdrawal from the market or use, without exposing the insurer to indemnity for the costs and damage associated with the recall or withdrawal of products recalled after a defect is known or suspected. That is precisely the point the primary judge made at J[174], that cl 6.14.2 is left with “considerable work to do” in respect of the costs of preventative withdrawal. Reading the clause this way also serves the purpose of the insured obtaining cover in respect of Property Damage occasioned by the supply of a (then) unknown defective product, without extending the indemnity in respect of liabilities arising after a recall or withdrawal.
None of this involves, as CGU submitted, a departure from the text of the clause to arrive at a commercially convenient outcome. Rather, it is to accept that what is involved is a process of construction involving reading the text of the clause in context and having regard to the purpose of the clause within the overall purpose of the Policy.
CGU’s reliance on the textual approach taken by Robertson J in Siegwerk is misplaced. First, as Thawley J points out, there were no arguments made before the Full Court of the type that are now raised. Second, and relatedly, as Thawley J also points out, that no arguments were made is understandable in circumstances where, on the facts, no distinction was made in respect of the cans that had been damaged before the recall and those that were more generally recalled. Likewise, for the reasons given by Thawley J, the decision of the Supreme Court of Victoria in Entyce is also not apposite.
Although the primary judge’s reasons at J[171]–[174] were short, they were to the point. There was no error in the primary judge’s reasoning or the correctness of the conclusion that his Honour reached.
As a result of the construction that I prefer, it is unnecessary to decide whether the North American authorities bear upon the meaning and construction of cl 6.14.2 as a “sistership exclusion clause”. The primary judge did not construe cl 6.14.2 on the basis that it was a “sistership exclusion clause” or that it should be given content on the basis that it was such a clause. Capral submitted that cl 6.14.2 was a “sistership exclusion clause” and that the purpose of such a clause is “to exclude from coverage the cost of preventative or curative action by withdrawal of a product in situations in which a danger is to be apprehended … not … to exclude from coverage damages caused by the very product whose failure to perform properly aroused apprehension about the quality of ‘sister’ products”: citing Todd Shipyards at 419 which, in turn, cited Long, Law of Liability Insurance. Capral relied upon a number of other North American authorities which have supported this position.
Capral submitted that where language is employed in an insurance contract that has a settled meaning in one jurisdiction, the courts will ordinarily endeavour to adhere to that settled meaning for substantially similar language used in a substantially similar context: Heydon on Contract at [8.1080], citing McCann at [74] (Kirby J); Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390 at 394 (Kirby P); Federation Insurance Ltd v Banks [1984] VR 525 at 533–4 (Kaye J); see also R & B Directional Drilling at [71] (Allsop CJ); Herzfeld and Prince, Interpretation at [29.270]. As the primary judge recognised at J[69], CGU regarded the principle relied upon by Capral as being contestable in its application to the present case. And, ultimately, the primary judge did not resolve that controversy: J[70].
In the oral argument before us, CGU did not accept that there was any universal principle relating to sistership exclusion clauses: T77.44–47. CGU did accept that there has been a body of North American authorities that have accepted the idea of sistership exclusion but that the results of those cases turned upon the particular drafting of each clause in question and that one could draft a clause that achieved that purpose: T78.1–22. CGU submitted that the text of cl 6.14.2 did not achieve the purpose of a sistership exclusion.
Moreover, CGU submitted that there was an uneven result across the North American authorities in their application to sistership exclusion clauses and cautioned against the application of those authorities in circumstances where the relevant case law took a “very strong contra proferentem approach in insurance cases, which is completely alien to us” and did not adopt “the kind of textually focused approach to construction that, in Australia, we do”: T78.31–39. In support of this submission, reliance was placed on the decision of the Appellate Court of Illinois, in Elco at 45 [2] that:
As we noted in our earlier opinion where there is ambiguity in the insurance policy, all exclusions, conditions, or provisions which tend to limit or defeat liability should be construed most favorably to the insured.
CGU submitted that this passage demonstrated that there was “obviously a strong contra proferentem approach, which does not reflect Australian law. Even in insurance contracts, contra proferentem is a rule of last resort, which applies only when all other principles of construction have been resorted to, to resolve ambiguity and ambiguity remains”: T14.23–28.
Whether the North American authorities adopt a “strong contra proferentem approach”, especially in relation to the interpretation of sistership exclusion clauses, is, in my view, a contestable issue. However, as already mentioned, it is unnecessary to decide in this appeal whether cl 6.14.2 was intended to be a sistership exclusion clause. That is because the construction favoured by the primary judge, and the one which I favour, is arrived at on the application of orthodox principles of construction.
I agree with Thawley J that leave should be granted but the appeal should be dismissed.

I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Shariff.
Associate:
Dated: 3 April 2025

Appeal from:	Capral Limited v Insurance Australia Limited t/as CGU Insurance [2024] FCA 775
File number:	NSD 1011 of 2024
Judgment of:	THAWLEY, DOWNES AND SHARIFF JJ
Date of judgment:	3 April 2025
Catchwords:	PRACTICE AND PROCEDURE – application for leave to appeal from order answering separate questions – application for leave to appeal granted – appeal dismissed INSURANCE – general products and liability policy – where applicant supplied defective aluminium plate to customers who incorporated that plate into marine vessels (and a water tank) by welding – where customers claimed the cost of rectification work incurred as a result of incorporating defective plate – whether claims by the customers were claims “for property damage” – meaning of “property damage” – where “property damage” relevantly defined as physical injury to tangible property – customers claims were “for property damage” – no error in primary judge’s answer to separate question or reasons INSURANCE – construction of exclusion clause – exclusion of indemnity for claims for damages in relation to withdrawal, rectification and repair if product withdrawn from market or from use because of any known or suspected defect or deficiency therein – meaning of “if” – insurer’s liability not excluded – no error in primary judge’s answer to separate question or reasons
Cases cited:	AAI Ltd v The Owners – Strata Plan No 91086 [2025] FCAFC 6 Allianz Australia Ltd v Wentworthville Real Estate Pty Ltd [2004] NSWCA 100; 13 ANZ Ins Cas ¶61–598 Austral Plywoods Pty Ltd v FAI General Insurance Company Ltd [1992] QCA 4; 7 ANZ Ins Cas ¶61–110 Australian Casualty Co Ltd v Federico [1986] HCA 32; 160 CLR 513 Australian Competition and Consumer Commission v Maritime Union of Australia [2001] FCA 1549; 114 FCR 472 Australian Securities and Investments Commission v Narain [2008] FCAFC 120; 169 FCR 211 Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; 129 CLR 99 AXA Global Risks (UK) Ltd v Haskins Contractors Pty Ltd [2004] NSWCA 138 Baralaba Coal Co Pty Ltd v AAI Ltd (t/as Vero Insurance) [2024] FCA 532 Brown v Tasmania [2017] HCA 43; 261 CLR 328 Canadian Equipment Sales & Service Co Ltd v Continental Insurance Co (1975), 59 DLR (3d) 333 Capral Ltd v Insurance Australia Ltd t/as CGU Insurance [2024] FCA 775 Carwald Concrete and Gravel Co Ltd v General Security Insurance Company of Canada (1985), 24 DLR (4^th) 58 CGU Insurance Ltd v Porthouse [2008] HCA 30; 235 CLR 103 Cherry v Steele‑Park [2017] NSWCA 295; 96 NSWLR 548 Dalby Bio-Refinery Ltd v Allianz Australia Insurance Ltd [2019] FCAFC 85 Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; 161 CLR 500 Elco Industries, Inc v Liberty Mutual Insurance Co 90 III App 3d 1106; 414 NE 2d 41 (1980) Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 Eljer Manufacturing Inc v Liberty Mutual Insurance Co 972 F 2d 805 (7^th Cir 1992) Entick v Carrington (1765) 19 St. Tr. 1029 Entyce Food Ingredients Pty Ltd v CGU Insurance Ltd [2020] VSC 757 Federation Insurance Ltd v Banks [1984] VR 525 Fitness Equipment Company Inc v Pennsylvania General Insurance Company 493 So 2d 1337 (Supreme Court of Alabama, 1986) Foodpro National Inc v General Accident Assurance Co of Canada (1986), 33 DLR (4th) 427 Foodpro National Inc v General Accident Assurance Co of Canada (1988), 63 OR (2d) 288 Hamilton Die Cast Inc v United States Fidelity and Guaranty Co 508 F 2d 417 (7^th Cir 1975) HDI Global Specialty SE v Wonkana No 3 Pty Ltd [2020] NSWCA 296; 104 NSWLR 634 Helvering v Gregory 69 F2d 809 (2^nd Cir 1934) Hunter v Canary Wharf [1997] AC 655 Joye v Beach Petroleum NL [1996] FCA 502; 67 FCR 275 Kaboko Mining Ltd v Van Heerden (No 3) [2018] FCA 2055 Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390 Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; 210 CLR 181 Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184; 89 NSWLR 633 Mallonland Pty Ltd v Advanta Seeds Pty Ltd [2024] HCA 25; 98 ALJR 956; 418 ALR 639 McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; 203 CLR 579 Minister for Home Affairs v DMA18 [2020] HCA 43; 270 CLR 372 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; 256 CLR 104 Newey v Westpac Banking Corporation [2014] NSWCA 319 Ontario (Attorney‑General) v Fatehi [1984] 2 SCR 536; 15 DLR (4^th) 132; 31 CCLT 1 Paper Machinery v Nelson Foundry 108 Wis 2d 614 (1982) Pilkington United Kingdom Ltd v CGU Insurance Plc [2004] EWCA Civ 23 Plenty v Dillon [1991] HCA 5; 171 CLR 635 Prime Infrastructure (DBCT) Management Pty Ltd v Vero Insurance Ltd [2005] QCA 369; 13 ANZ Ins Cas ¶61–661 Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 Quintano v B W Rose Pty Ltd [2008] NSWSC 793; 15 ANZ Ins Cas ¶61–805 R & B Directional Drilling Pty Ltd (in liq) v CGU Insurance Ltd (No 2) [2019] FCA 458; 369 ALR 137 Ranicar v Frigmobile Pty Ltd; Ranicar v Royal Insurance Pty Ltd [1983] Tas R 113; 2 ANZ Ins Cas ¶60-525 Re Mining Technologies Australia Pty Ltd [1999] 1 Qd R 60 Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 Siegwerk Australia Pty Ltd v Nuplex Industries (Australia) Pty Ltd [2013] FCAFC 130; 305 ALR 412 Sokol v Atlantic Mutual Insurance Co 430 F 3d 417 (7^th Cir 2005) Star Entertainment Group Ltd v Chubb Insurance Australia Ltd [2022] FCAFC 16; 400 ALR 25 Switzerland Insurance Australia Ltd v Dundean Distributors Pty Ltd (1998) 10 ANZ Ins Cas 61-388; [1998] 4 VR 692 The Orjula [1995] 2 Lloyd’s Reports 395; CLC 1325 The Owners – Strata Plan No 91086 v Fairview Architectural Pty Ltd (No 3) [2023] FCA 814 Todd Shipyards Corp v Turbine Services Inc 674 F 2d 401 (5^th Cir 1982) Tooheys Ltd v Commissioner of Stamp Duties (NSW) [1961] HCA 35; 105 CLR 602 Traveler’s Insurance Co v Eljer Manufacturing Inc 197 Ill 2d 278; 757 NE 2d 481 (Illinois Supreme Court, 2001) Vero Insurance Ltd v Australian Prestressing Services Pty Ltd [2013] NSWCA 181 Visy Packaging Pty Ltd v Siegwerk Australia Pty Ltd [2013] FCA 231; 301 ALR 560 Wilkie v Gordian Runoff Ltd [2005] HCA 17; 221 CLR 522; 79 ALJR 872; 214 ALR 410; 13 ANZ Ins Cas ¶61–641 XL Insurance Company SE, trading as Brooklyn Underwriting v Kerembla Pty Ltd [2023] FCAFC 183 Zhang v ROC Services (NSW) Pty Ltd [2016] NSWCA 370; 93 NSWLR 561 Zurich Australian Insurance Ltd v Regal Pearl Pty Ltd [2006] NSWCA 328; (2007) 14 ANZ Ins Cas ¶61–715
Charles W Browning, “Insurance Coverage Issues Arising from Large Exposure Contaminated Food Claims” (2003) 70 Defense Counsel Journal 206 at 212 Desmond Derrington and Ronald Ashton, The Law of Liability Insurance (1^st ed, 1990) Halsbury’s Laws of Australia Herzfeld P and Prince T, Interpretation (3^rd ed, Lawbook Co, 2024) Heydon JD, Heydon on Contract: The General Part (Lawbook Co, 2019) Long R, The Law of Liability Insurance (1^st ed, M Bender, 1966)
Division:	General Division
Registry:	New South Wales
National Practice Area:	Commercial and Corporations
Sub-area:	Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs:	276
Date of hearing:	21 March 2025
Counsel for applicant:	Mr P D Herzfeld SC with Mr D Wong
Solicitor for applicant:	Meridian Lawyers
Counsel for respondent:	Mr J C Hewitt SC with Mr H R Fielder
Solicitor for respondent:	K&L Gates

ORDER MADE BY:	THAWLEY, DOWNES AND SHARIFF JJ
DATE OF ORDER:	3 APRIL 2025