Koolan Iron Ore Pty Ltd v Infrassure Ltd (No 2)

Koolan Iron Ore Pty Ltd, a subsidiary of Mount Gibson Iron, brought an action against Infrassure Ltd, seeking compensation for a failure of a seawall that occurred between the ocean and its iron ore mine on Koolan Island. The dispute primarily involved the interpretation and application of a business interruption insurance policy, specifically regarding whether Koolan would have adopted a revised mine plan (RMP) instead of the existing mine plan (EMP), and the extent to which either plan would have been achieved. The case also addressed subsidiary issues such as increased cost of working, stock on hand, foreign exchange hedging arrangements, redundancies, and interest on the claim. The Federal Court of Australia was tasked with resolving these complex legal and factual issues.

The central legal issues involved interpreting the terms of the insurance policy, particularly the adjustments clause, and determining whether Koolan was entitled to claim for increased costs of working, diminution in value of stock on hand, and losses from foreign exchange hedging arrangements. The court also had to decide if Koolan would have achieved the forecasts and targets in the EMP or the RMP and whether Infrassure was liable for interest on the claim. Additionally, the court needed to consider the implications of redundancy costs and the proper calculation of interest under the Insurance Contracts Act 1984.

The court held that Koolan would have continued operations under the EMP rather than adopting the RMP. The policy did not permit or require adjustments based on the RMP, and the evidence showed Koolan's commitment to the EMP. The court found that Koolan was not entitled to claim for increased costs of working under certain items of the policy, nor for the diminution in value of stock on hand. It also ruled that foreign exchange hedging losses were not to be factored into the indemnity calculation as they were unrelated to the insured peril. Regarding redundancies, Koolan could deduct necessary redundancy costs from savings in employment costs. Lastly, the court determined that Infrassure must pay interest on the claim from a specific date under the Insurance Contracts Act 1984.

The court ordered that the parties file a minute of consent orders reflecting these reasons and dealing with costs by a specified date. The matter was listed for mention on another date, with liberty to apply for further orders. The final orders were to be entered in accordance with Rule 39.32 of the Federal Court Rules 2011.