J J Leech & Sons (Vic) Pty Ltd v Underwriting Agencies of Australia Pty Ltd
[2000] VSCA 219
•23 November 2000
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 5071 of 1999
| J.J. LEECH & SONS (VIC) PTY. LTD. |
| Appellant |
| v. |
| UNDERWRITING AGENCIES OF AUSTRALIA PTY. LTD. |
| Respondent |
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JUDGES: | WINNEKE, P., PHILLIPS and CHARLES, JJ.A. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 13 November 2000 | |
DATE OF JUDGMENT: | 23 November 2000 | |
MEDIUM NEUTRAL CITATION: | [2000] VSCA 219 | |
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Insurance – Lloyds Contractors Plant Insurance Certificate – Insurer denying liability pursuant to clause excluding liability for “overloading” of machinery – Whether “overloading” ambiguous in context of policy.
Practice and Procedure – Appellant contending that trial judge had wrongly taken account of opinion evidence in absence of proof of facts upon which it was based – Appellant precluded from so contending by reason of its conduct at trial – Discussion concerning use of material in Court Books.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr. M.A. Scarfo | Remington & Co. |
For the Respondent | Mr. D. Habersberger Q.C. | Bazzani Brand |
WINNEKE, P.:
On 3 June 1997 the appellant company – which was a contractor and crane operator – was assisting in the felling of a large tree at a property in Kangaroo Flat, near Bendigo. To assist in the felling of the tree, it provided one of its cranes (a Kato N.K. 200H) to take the weight of the tree, via a sling, as it was being cut at its base, and thus to lower the severed tree to the ground. For this purpose the appellant had a crane operator and a sawyer.
The crane was rigged with the boom at 24 metres at 70 degrees, providing a working radius of 8 metres. The tree, which was estimated to weigh some 6 tonnes, came free at its base during the felling operation causing the boom to buckle and, thus, distorting its members. The cost of repair was admitted at $74,000.
At the relevant time, the appellant was covered for property loss by a Lloyds “Contractors Plant Insurance Certificate” (No. 13300V) which, so far as relevant, provided that:
“… if, at any time during the period of insurance …, the Machinery … entered in the Schedule, whilst … in any geographical area mentioned therein, suffers any unforeseen and sudden physical loss or damage from any cause not specifically excluded, in a manner necessitating repair or replacement, the underwriters will indemnify the assured in respect of such loss or damage as hereafter provided … .”
The Kato crane was part of the machinery entered in the Schedule.
The insurance cover, so provided, was expressed to apply whether the Machinery was “at work or at rest, or being dismantled for the purpose of cleaning or overhauling …”.
Clause 2 (c) of the policy specifically excluded liability for loss or damage due to “overloading or incorrect loading of Machinery”.
In the County Court at Bendigo, the appellant claimed the cost of repairs, namely $74,000, against the respondent insurers contending that the loss suffered was within the terms of the policy. The insurers denied liability, inter alia, on the basis that the damage was due to “overloading” of the crane within the meaning of clause 2 (c). No other issue was raised before the judge, whether at law or pursuant to statute.
At the outset of the trial counsel for the appellant (plaintiff) made a submission to the trial judge that because it had been agreed between counsel that liability under the policy was conceded, subject to the exclusion clause, the burden of the dispute between the parties lay with the insurer and that the insurer, accordingly, should present its case first. In the course of making that submission, appellant’s counsel told the trial judge that:
“… the argument in this case in relation to the policy – or the issue before your Honour – will be whether an exclusion clause [i.e. clause 2 (c)] applies to the damage suffered by the plaintiff in this case.”
In support of his submission that the insurer should carry the burden of the case, appellant’s counsel then told his Honour what the facts of the case were; namely that the subject of the claim was the Kato 20 tonne crane; that it was damaged on 3 June 1997 while holding a tree in position as it was cut; that the crane had been hooked onto the tree; that the tree was cut; and that, “unexpectedly the tree lost balance, or fell out of balance and damaged the boom of the crane”. His Honour was told that the tree had “lost balance and started to fall” while the crane was holding it and that, although:
“the intention was that the crane would allow the tree to come to the ground gently … because of the earlier loss of balance of the tree, the crane was caught out a little and it was damaged in the circumstances …”
Appellant’s counsel continued by telling the judge that the insurer was contending that the damage was suffered because the crane was overloaded and that that issue was “the crux of the case”. Counsel went on to submit that “because the claim being put is admitted” then the defendant “should run its case first”.
I have referred to these matters now because of a particular ground of appeal which has been raised in this Court to which I shall have to return. For present purposes, it suffices to say that, in the light of the way in which these matters were put to the trial judge, it appears to have been assumed by both the judge and counsel for the insurer that the facts surrounding the happening of the damage to the crane – which had been referred to by counsel for the appellant – were not in dispute and that the only matter in issue was whether those facts would support the insurer’s contention that its liability for the loss suffered was excluded by clause 2 (c) of the policy. This was an issue upon which experts retained by the respective parties had expressed differing opinions; but in respect of which all experts had relied upon statements (including those made by the crane operator and an investigator of the circumstances in which the damage had occurred) setting out the facts which had been broadly referred to by counsel. Those statements were annexed to the experts’ reports which were before the judge. Indeed counsel for the insurer, having heard the remarks of the plaintiff’s counsel, was constrained to say that it did not matter what procedure was adopted because the “only issue … is whether the crane was overloaded or incorrectly loaded”; that that was a “discrete issue” in respect of which both he and plaintiff’s counsel were proposing to call “a couple of experts”. His Honour responded by saying that “there is only one factual issue here and the onus of proof of that is on the defendant”. He further said that, unless the plaintiff was prepared to “adduce [its] rebuttal evidence” he would require the insurer to first lead its opinion evidence upon the one issue remaining in the trial.
The trial accordingly proceeded in accordance with his Honour’s directions. The insurer went into evidence, accepting that it bore the onus of proving that, in the events which had happened, the clause operated to exclude its liability[1]. To that end the respondent led evidence from its two experts, who testified that the crane had failed because it was overloaded. The appellant called no evidence in rebuttal, notwithstanding that the evidence of the respondent’s experts included their expressed view that a contrary opinion formed by the appellant’s experts (whose reports were available to the respondent) was ill-founded.
[1]Alex Kay Pty. Ltd. v. General Motors Acceptance Corp [1963] V.R. 458 at 461.
Each of the respondent’s witnesses gave evidence that the damage sustained by the crane - in the form of permanent distortion of its structural members – made it obvious that it was occasioned by “over-loading”. But their evidence went further and explained the mechanism of the over-loading which had occurred in this instance. Over-loading of a crane, they said, occurs whenever the circumstances in which the crane is operating impose stresses upon its structural members which are greater than those members were designed to withstand. In this case the manner in which the crane was rigged (namely with 24 metres of boom at 70 degrees providing a working radius of 8 metres) would withstand a static load of 6.3 tonnes if lifted on a vertical plane. However, so the evidence went, tree felling was in the nature of “demolition work” which imposed dynamic loads, or stresses, upon the structure of the crane which were in excess of those imposed where the crane was being operated in circumstances of vertically lifting static weights. Where dynamic loads are being imposed, the evidence was that over-loading would occur if the operator did not make allowances for “safe working load” in accordance with safety standards and regulations which were of universal application. The evidence was that, where “demolition work” imposing dynamic loads or stresses upon the crane was being carried out, one had to make an allowance to the safe working load (“SWL”) applicable in the case of “vertical static load lifting” by reducing that SWL by a factor of 1:1.5 or one third. Thus where, as here, the SWL for a crane rigged as this one was could be calculated from the manufacturer’s “guide chart” as 6.3 tonnes for a static vertical lift, its SWL for the operation in which it was engaged was no more than 4.2 tonnes. Thus it was the view of the respondent’s witnesses that the crane had failed because the loads imposed upon it when taking the full weight of a tree weighing 5 to 6 tonnes were well in excess of its adjusted SWL.
The substantial argument of the appellant, both before the trial judge and this Court, was that the evidence which demonstrated that over-loading could occur, dependent upon the circumstances of operation, rendered the meaning of the word “over-loading” in exclusion clause 2(c) ambiguous. As counsel for the appellant put it to the trial judge:
“… What this case comes down to … is what does the insurance policy mean when it refers to ‘over-loading or incorrect loading’. What has come out in evidence before your Honour from the two witnesses … is that there are different definitions of over-loading and it is trite to say … that in those types of cases where the ambiguity arises with the wording used by the insurer in a policy which the insurer has written … then the contra proferentem rule applies and the … exclusion clause has to be interpreted against the insurer and in favour of the insured.”
The high-water mark of the evidence to which counsel was referring in the above remarks was a passage in the cross-examination of the expert Williams. It was as follows:
Q.“On page 2 of your report, Mr. Williams, you say … ‘The term “overloading” is generally referenced in conjunction with a load in excess of the working load limit or safe working load of a crane which is applied vertically to the crane hoist rope?
A.“Yes.”
…
Q.“The reference on the guide to what is a safe loading under that definition would be the guide provided by the guide chart of the manufacturer?”
A.“That’s correct.”
Q.“So that if one acted in accordance with the guide chart or within the limits set out by the guide chart provided by the manufacturer, one would not be overloading on that definition?”
A.“On that definition, providing they determined what the safe working load is in accordance with the factors involved for a particular procedure …”
Q.“Well, that definition of the term ‘over-loading’, that’s your definition …?”
A.“Yes.”
Q.“… is one, I suggest to you, which means that if you are loading within the guides provided in the guide chart of the manufacturer that you’re not over-loading?”
A.“That’s true.”
Q.“Then you provide a second definition of over-loading where you say: ‘However, a crane or its components can also be over-loaded in directions other than vertical. During the design process, a crane and its components are considered for stress and sheer in a multitude of directions’, that’s another definition?”
A.“That’s right.”
Q.“So you accept that there’s at least two definitions of over-loading?”
A.“Yes.”
Q.“And I suggest to you that the more common definition of overloading is the first of those two?”
A.“Yes.”
In re-examination the witness said that, when the tree came adrift from its base, the crane was required to accept not only the entire weight of the tree but also the dynamic loads imposed by the swinging of the tree to accommodate its centre of gravity. In those circumstances, the witness said, the safe working capacity of the crane was not to be measured on the basis of a vertical lift of a static weight, but on the basis of a reduction of that figure by the factor of one-third.
The other expert witness called by the respondent, Mr. Nicholls, gave evidence that:
“without any doubt … the reason that the crane boom collapsed was it was overloaded.”
He agreed that, when used in tree-felling operations, the crane was engaged in “demolition work” and that the safe working load in those circumstances was not the 6.3 tonnes which the manufacturer’s rating guide calculated for a vertical lift of a static weight, but that figure adjusted downwards by the factor of 1:1.5, in accordance with A.S.2550, to accommodate the dynamic stresses imposed.
In cross-examination, appellant’s counsel put to Mr. Nicholls, as he had to Mr. Williams, that on the basis of the manufacturer’s rating guide, the safe working load was 6.3 tonnes for the crane rigged as it was (namely with the boom extended for 24 metres at an angle of 70 degrees giving a working radius of 8 metres). The witness replied:
“Not for this particular job, because … I mean for demolition jobs you’ve got to down-rate that safe working load chart by 1.5.”
Appellant’s counsel then put to the witness:
“All right. And do you understand that one definition of overload is an overload as described in that chart; that is a lifting of a weight in excess of what’s recommended by the manufacturer as the lifting capacity of the crane?”
The witness replied:
“That is for a standard job where you are not doing demolition work; that would be correct.”
It was submitted by appellant’s counsel to his Honour that the wording of the exclusion clause in the policy was ambiguous because “there are different definitions of overloading” and that because of that ambiguity the “contra proferentem” rule ought to be applied against the interests of the insurer and in favour of the insured. Counsel referred to the answers which he had received from Mr. Williams in cross-examination (and to which I have referred) in the course of which the witness had said that “the more common definition of overloading is one which applies to a loading in excess of that recommended by the manufacturer in its chart”.
The trial judge rejected these submissions, saying that not only was he satisfied on the evidence that the crane was in fact overloaded, but that he was also satisfied that its safe working load in the circumstances in which it was operating was 4.2 tonnes for the reasons given by the experts. His Honour rejected the submission that there was any ambiguity in exclusion clause 2 (c). He said:
“It is attempted to impose upon the words in the exclusion clause a meaning which would restrict ‘overloading’ only to the lifting capacity in the vertical lift set out in the charts and to say that, unless that interpretation is placed upon the exclusion clause, unless read that way, would admit no claim on any occasion when a boom failed because, by definition, it had [not] been overloaded … to cause the failure. I do not agree with that. It seems to me that what is meant by the term in [the] policy is that when the task which is being undertaken commences, the crane is rigged in such a way that the lifting capacity for the work undertaken is not calculated to be excessive. Here on the proper view of the calculations, it seems to me to be indisputable that … for the task actually being undertaken, the rig being used on the crane at that time was inadequate and at the moment it took the weight which was in excess of the adjusted lifting capacity, it was overloaded and at that point failed because it was overloaded.”
Although it does not matter in this case, in one sense his Honour’s expressed view as to the meaning of the exclusion clause might have been generous to the appellant. As I read the clause, liability is excluded if, when the damage accrues, the crane is in fact overloaded – whether or not calculations have been made. The calculations, of which the witnesses spoke, merely explained why the damage, apparent on its face, was due to overloading.
In this Court, appellant’s counsel has challenged his Honour’s findings, contending that his Honour was in error in failing to accept his submission that the word “overloading” where used in the exclusion clause was ambiguous and that the evidence had demonstrated that to be so. For my own part, I am unable to accept that submission. There is, in my view, nothing ambiguous about the word “overloading” when read in the context of this policy. It means that the liability of the insurer for sudden and unforeseen damage to machinery will be excluded where that damage is due to loading the machinery beyond its capacity in the circumstances in which it is being operated. The word “overloading” does not become ambiguous because, in other circumstances, the machinery might have had the capacity to cope with the load which caused it to fail in the circumstances in question. There is nothing inherently ambiguous about the word “overloading” when used in a contract of insurance providing cover for loss or damage to machinery, inter alia, in the course of its operation. Nor is there anything to prevent the word from being given its ordinary grammatical meaning when applied to the circumstances in which the loss or damage occurred (Thomson v. Weems[2]; Clarke v. Insurance Office of Australia Ltd.[3]). Furthermore, as I read it, there is nothing in the context of the policy which requires that the word “overloading” should be given some meaning other than its plain and natural meaning. The appellant contends that the word is ambiguous because Mr. Williams adopted its counsel’s proposition that it had more than “one definition”. But, when one considers the evidence, all Mr. Williams was saying was that a crane will fail through overloading depending upon the stresses imposed upon it by the operation in which it is engaged, even though it may not have failed if it had been engaged in a different form of operation. That is a long way from saying that there are two “definitions” of overloading when applied to the same set of circumstances; or that the term as used in the policy is ambiguous. In this case, as I see it, the appellant is seeking to create an ambiguity by referring to circumstances which find no place in the evidence. The evidence in this case clearly demonstrates that the damage to the crane was due to its overloading, in the sense that the stresses imposed upon it by the operations being conducted caused its boom to buckle and become permanently distorted. That was the finding which his Honour made and one which, in my view, he was bound to make in the light of the undisputed evidence. There was, accordingly, no room for the operation of the contra proferentem rule.
[2](1884) 9 App.Cas.671 at 687 per Lord Watson.
[3][1964] V.R. 773 at 775 per Smith, J.
It is necessary for me now to return to the ground of appeal to which I have already referred in [8]. The appellant contends that the learned trial judge:
“misdirected himself in taking into account expert evidence and opinion when there was no evidence properly before the Court upon which such expert evidence and/or opinion could be based.”
Having regard to the way in which counsel were prepared to conduct this case before the judge, the ground of appeal in my view is not open. Reference to the transcript – to some of which I have previously referred – makes it tolerably clear that the acceptance by both parties of the circumstances in which the damage occurred was the price paid by the appellant to secure the insurer’s concession that, save for the issue of the exclusion clause, liability was admitted. The relevant circumstances touching the crane’s failure were confined and contained largely in the statutory declaration of the crane operator and the statement of the accident investigator. These, in turn, were in two Court Books which were before the court. They were available to both parties, the Judge and the experts who had provided reports to the parties. Indeed, as I have said, they were annexed to the reports of the experts. During the course of the trial the witnesses gave their evidence on the basis that the factual circumstances were accepted, and cross-examination by appellant’s counsel also adopted those factual circumstances. The Court Book contained photographs of the damaged crane and his Honour was invited to view them as part of the material before him.
On this appeal, appellant’s counsel – who was also counsel at the trial – told the Court that he had not intended at trial to concede the factual background upon which the experts had provided their opinions. Whilst I would unhesitatingly accept that he harboured such intention, the appellant must be bound by the way in which its case was conducted at trial. No objection was taken to the witnesses expressing their opinions on the basis of the factual material contained in the Court Book, nor was any suggestion made that such opinions would only become relevant if the respondent called evidence substantiating the factual material upon which they were based. Although appellant’s counsel referred us to certain passages in the transcript which he suggested showed that he regarded the opinion evidence as “provisional”, those passages appear to me to be equivocal; and counsel was constrained to concede that he had never made his intentions clear. It is abundantly obvious, from reading the transcript, that both counsel for the respondent and the trial judge were of the view that the factual circumstances in which the damage had occurred, as expressed in the statements in the Court Book, were accepted and were common ground, and that the only issue to be determined was whether, on the basis of the facts so accepted, the damage was due to overloading within the meaning of the exclusion clause 2 (c). Thus, at the outset of the trial, and when the question of procedure was being discussed, counsel for the insurer (who was junior counsel for the respondent on the appeal) said:
“It really doesn’t matter … who goes first. It is a very discrete question for your Honour – that is, what does this clause mean. The only issue … is whether the crane was overloaded or incorrectly loaded. My friend will call a couple of experts, and so will I, as to what that might mean.”
In giving judgment at the conclusion of the trial, and having briefly recited the facts disclosed in the Court Book, his Honour said:
“In the end, this case came down to, and was conducted on the basis that it revolved around exclusion clause 2 (c) of the policy … . This being the only issue, and that being it, it was one in which the defence was based upon an assertion, to add to the admitted facts, which would have without an exclusion clause … given rise to a liability to pay.”
The matters to which I have referred make it perspicuously clear, no matter what counsel for the plaintiff at trial may have intended, that this case was fought on the basis that the factual circumstances in which the damage occurred – as disclosed in the statements in the Court Book – were common ground. This is a procedure which in this State, and in cases of this kind, is commonly adopted. It is a procedure adopted in the interests of confining the costs of litigation. It is a procedure which, in my view, is not universally appropriate because it obscures basic rules of evidence and tends to give rise to disputes such as the one which has arisen on this appeal. However, my own view of the procedure is of no consequence in this case having regard to the conclusion, to which I have come, that the parties confined their litigation to the one issue, and did so on the basis that the circumstances in which the damage occurred, as disclosed in the Court Book, were common ground between them. I have reached this conclusion notwithstanding the very brief opening remarks made by counsel for the plaintiff when making his final submissions to the judge, during the course of which he said:
“There is no evidence before your Honour as to how the accident happened other than references to what other people may have said.”
However, as I read them, these remarks were not intended to suggest that there was no factual basis for the expert opinion evidence given, but rather to suggest that the weight which the judge should give to those opinions, in determining whether the insurer had discharged its onus of proof, should be modified having regard to the fact that the basis upon which they were expressed was in the form of untested written statements. That this was the meaning of what counsel was submitting is made clear, not only from his Honour’s remarks in giving judgment – to which I have already referred – but also from the thrust of the final submissions made by counsel during the course of which he adopted, at least implicitly, the factual basis upon which the insurer’s experts had expressed their opinions; thus contending that it was their evidence which should lead the judge to the conclusion that the exclusion clause was ambiguous.
For the reasons given, this ground of appeal must be rejected. It is well accepted that the Court will not allow an appeal on a point not taken below where evidence could have been given to prevent the point from proceeding. (Suttor v. Gundowda Pty. Ltd.[4]; Geelong Building Society v. Encel[5].) Particularly is this so where the appellant was content, no doubt for his own good reasons, to join in the procedure adopted at the trial[6].
[4](1950) 81 C.L.R. 418 at 438.
[5][1996] 1 V.R. 594 at 604-6.
[6]cf. Stevedoring Industry Finance Committee v. Estate of Crimmins [2000] VSCA 216 at [6].
The appeal must be dismissed.
PHILLIPS, J.A.:
I agree that this appeal should be dismissed for the reasons given by the President.
CHARLES, J.A.:
I agree with the President.