Kvaerner Oil & Gas Australia Pty Limited v Egis Consulting Australia Limited

[2003] NSWSC 19

Reported Decision: (2003) 12 ANZ Insurance Cases 61-556

Supreme Court

CITATION:	Kvaerner Oil & Gas Australia Pty Limited v Egis Consulting Australia Limited [2003] NSWSC 19
HEARING DATE(S):	3/02/03, 4/02/03
JUDGMENT DATE:	4 February 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Einstein J
DECISION:	The second cross-claim fails
CATCHWORDS:	Contract of Insurance - Construction - Identification of the Insured - Joint Venture clause - Extension - Policy extended to "indemnify the Insured in respect of any liability for work undertaken by any Firm, Company or Individual with whom the Insured are operating jointly and any Joint Venture, Joint Company and/or Consortium which includes the insured" - Intention that an insurance cover would be extended to entities other than the named insured should not be readily implied absent there being in the language of the policy or the circumstances, reasons sufficient to justify such a construction.
LEGISLATION CITED:	Contracts Act 1984 (Cth) Fair Trading Act 1987 (NSW) Trade Practices Act 1974 (NSW)
CASES CITED:	Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 Australian Broadcasting Corporation v XIVth Commonwealth Games (1988) 18 NSWLR 540 Germano v Gresham Fire & Accident Insurance Society Ltd [1924] VLR 592 Gissing v Gissing [1971] AC 886 Legal & General Insurance v Eather (1986) 6 NSWLR 390 Petrofina v Magnaload [1983] 3 All ER 35
PARTIES :	Kvaerner Oil & Gas Australia Pty Limited (Plaintiff) Egis Consulting Australia Limited (Defendant) Storebrand Skadeforsikring AS (Second Cross Defendant)
FILE NUMBER(S):	SC 50136/00
COUNSEL:	Mr B Coles QC, Mr M Ashhurst (Plaintiff and Second Cross Defendant) Mr C Gee QC, Mr N J Kidd (Defendant)
SOLICITORS:	Michael Samios (Plaintiff and Second Cross Defendant) Colin Biggers & Paisley (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

EINSTEIN J

Tuesday 4 February 2003 ex tempore
Revised Monday 10 February 2003

50136/00 KVAERNER OIL & GAS AUSTRALIA PTY LIMITED v EGIS CONSULTING AUSTRALIA LIMITED

JUDGMENT

The separate question order

1 A Part 31 Rule 2 order was made for the separate determination of the second cross-claim prior to the determination of any other issues in the proceedings. The question raised by the second cross-claim is essentially one of the proper construction of an insurance policy issued by Storebrand Skadeforsikring AS ["Storebrand"].

Overview

2 Notwithstanding the very limited matters for determination as part of the separate question it seems convenient, if only for the reason that the second cross-claim repeats solely for the purposes of the cross-claim the claims made by Kvaerner in the summons, to briefly sketch out the nature of the whole of the proceedings. In that regard it is appropriate to make quite plain that this overview of the whole of the proceedings is not intended to state any findings of fact or any conclusions of principle which may be thrown up for determination, should the issues thrown up by the balance of the proceedings require their determination in due course. Indeed the overview represents no more than that and may conceivably even be inadvertently internally incorrect in certain respects.

The Joint Venture Agreement

3 The proceedings concern a joint venture agreement entered into between the plaintiff, Kvaerner Oil and Gas Australia Pty Ltd ["Kvaerner"] and the defendant, Egis Consulting Australia Pty Ltd ["Egis"]. The joint venture agreement was entered into for the purpose of providing consulting, engineering and managerial services in relation to the construction of onshore and offshore pipelines and supporting facilities within Australia.

4 The joint venture agreement was constituted by a deed dated 3 February 1986 ["the first joint venture deed"], a further deed dated 15 March 1991 ["the second joint venture deed"] and a further deed dated 15 June 1994 ["the termination deed"]. The first joint venture agreement was for a three-year period which period was extended for a further five years by the second joint venture agreement. The termination deed terminated the joint venture.

Kvaerner

5 Kvaerner is the Australian arm of a large Norwegian based group of companies ["the Kvaerner group"] which operates throughout Europe, the Americas, Asia and the Middle East and which specializes in shipbuilding and oil and gas exploration and production contracting worldwide.

6 Kvaerner was at the time of the first joint venture agreement known as R J Brown & Associates (Australia) Pty Ltd and by the time of the second joint venture agreement had become Kvaerner Oil RJ Brown and Associates Pty Ltd.

Egis

7 Egis was at the time of the first and second joint venture agreements known as Crooks Michell Peacock Stewart Pty Ltd and by the time of the termination deed had become known as CMPS&F Pty Ltd.

Contracts with John Holland Construction and Engineering

8 It is common ground that pursuant to the joint venture agreement, Kvaerner and Egis as joint venturers entered into various contracts with John Holland Construction and Engineering Pty Ltd ["John Holland"] in respect of the design and construction of pipelines and supporting facilities for the Woodside Petroleum Wanea and Cossack projects situated approximately 125 km offshore north-west of Dampier in Western Australia part of the North West Shelf Gas Project. The contracts entailed the detailed design, procurement, fabrication and delivery of mechanical and process skids for a floating production storage and off loading vessel including a pre-bid agreement on or about 1 September 1993 and a design agreement on or about 4 February 1994.

9 Woodside Offshore Petroleum Pty Limited (“Woodside Offshore”) was a company which was the delegated operator acting for and on behalf of joint venturers in the North West Shelf Gas Project. Woodside Offshore entered into a consultancy agreement with John Holland on 5 April 1993 pursuant to which John Holland was to perform the definition phase engineering services to develop the subject oil fields by use of a floating production storage and off loading facility.

10 Definition phase engineering was to form the basis for the detailed design/procurement/application of the process facilities.

11 The joint venture provided to John Holland the definition phase engineering and other design and engineering services ("the pre-bid services") during the 13-week pre-tender period under the John Holland and Woodside Offshore agreement and at the request of John Holland.

12 On approximately 2 July 1993 John Holland submitted a tender for the project to Woodside Petroleum in an amount of $51,332, 395.

13 The joint venture asserted that the pre-bid agreement was entered into upon the common assumption that the terms of the pre-bid agreement did not require the joint venture to provide John Holland with any additional information to that which had been provided prior to 1 September 1993. Clause 4 of the pre-bid agreement had been expressed to have retrospective effect to 5 April 1993 at a time when John Holland and the joint venture first began to collaborate for the purposes of the project.

14 The joint venture at the request of John Holland provided design and engineering services and facilities to John Holland up to December 1994

The dispute with John Holland

15 There was a dispute between John Holland and the joint venture as to what constituted the agreement pursuant to which design services would be provided.

16 John Holland brought proceedings against Kvaerner and Egis as joint venturers ["an unincorporated joint venture"] in the Supreme Court of Victoria [proceedings No. 6844 of 1995] ["the Victorian proceedings"]. John Holland claimed that the joint venture negligently carried out the preliminary engineering such that John Holland's tender price based on it was lower than it would have been if the preliminary engineering had accurately reflected what was necessary for the detailed design, procurement, fabrication and delivery of the process facilities. It was alleged that by reason of the negligence of the joint venture, John Holland became contractually bound to carry out the project for an inadequate price.

17 In those proceedings John Holland made various claims against the joint venture, including claims for damages for breach of the pre bid Agreement and/or the design agreement, and adjustments to the lump sum under the design agreement on account of negative variations, damages for alleged breach of a duty of care said to be owed by the joint venture to John Holland, damages for alleged misleading and deceptive conduct by the joint venture said to have been in breach of the Trade Practices Act, damages for alleged negligent misstatement and interest in the nature of damages.

Progress of the litigation and the settlement reached

18 The joint venture defended the claim by John Holland. Initially it was represented by Marshall Marks and Kennedy. Both joint venture members apparently became concerned with the defence being mounted by this firm and both joint venture partners agreed that the legal representation for the joint venture should be changed. Kvaerner wished to use Mallesons Stephen Jaques. Egis wished to use Ebsworth and Ebsworth.

19 The costs of Marshall Marks and Kennedy were apparently paid equally by or on behalf of Kvaerner and Egis including a final payment to secure release of files to Mallesons.

20 Kvaerner insisted on Mallesons being briefed to represent the joint venture in the proceedings. Egis apparently eventually did not object. Detail of the precise communications between the parties may be relevant to the balance of the proceedings outside of the matters for separate determination but are not presently relevant to the separate determination issues.

21 Mallesons apparently then proceeded to represent the joint venture in the proceedings: both generally in relation to the defence to the primary claim as well as in relation to the joint venture fee claim against John Holland for outstanding fees of $3,300,748.39. As to this latter claim it is claimed that it had been agreed between the joint venture partners that the claim would be pursued at Kvaerner's sole risks (including as to costs), on the basis that any proceeds received would be for the sole benefit of Kvaerner.

22 Mallesons apparently rendered fees in the defence of the Victorian proceedings in the sum of $1,960, 806.93 which are claimed to have been paid on a progressive basis.

23 The proceedings brought by John Holland were settled on or about 30 May 1997 following a mediation conducted before Sir Laurence Street. It is apparently claimed that no agreement was reached between the joint venture members before or at a mediation as to how any settlement moneys would be paid by the joint venture if it was to agree to settle the claim by John Holland other than Egis agreeing that the ultimate settlement figure of $3,745,000 was a reasonable figure.

24 A dispute arose at the mediation between John Holland and Kvaerner as to whether an offer made by John Holland prior to the mediation to pay the sum of $1.2 million in satisfaction of the fee claim was still on foot. The dispute was the subject of further litigation and was subsequently resolved by Kvaerner agreeing to accept the sum of $1 million for the fee claim.

25 It is apparently claimed that the joint venture's liability to John Holland was discharged by payments progressively to John Holland totalling $2.745 million (comprising $2.245 million from Mallesons' trust account and $500,000 from Kvaerner) being the net amount of the liability of the joint venture to John Holland after setting off the entitlements of the joint venture to be paid $1 million by John Holland.

26 Apparently Kvaerner's insurer, Storebrand, on or before 3 July 1997 remitted the sum of $3.745 million to Mallesons' trust account. Apparently on 3 July 1997 Mallesons sent a trust account cheque for $2.245 million to the solicitors for John Holland. The difference between the amount paid to the solicitors for John Holland and the settlement figure was $1.5 million. A contention is put forward that the sum represented the amount which Kvaerner had claimed was the value of the counterclaim agreed to by John Holland.

27 The dispute as to whether the counterclaim had been settled for the amount alleged by Kvaerner is said to have resulted in Kvaerner paying John Holland a further $500,000 of the disputed $1.5 million

The present proceedings

28 These present proceedings concern the rights and liabilities of Kvaerner and of Egis flowing from or in relation to payments which were made:

· In settlement of the proceedings [Kvaerner claims that in settlement of the proceedings it paid the sum of $3,745,000 to John Holland for and on behalf of Kvaerner and Egis];

· In defending and settling the proceedings brought by John Holland [Kvaerner claims that it has paid or is liable to pay $1,960,806.93 on behalf of Kvaerner and Egis].

[The term “the John Holland moneys” is used in the summons and in the second cross claim to refer to both these sums]

29 As explained by Kvaerner in its overview preliminary submissions, it alleges that the payment of $3.745 million to John Holland ($2,245,000 on 3 July 1997, $500,000 on 17 March 1998 and the $1 million allocated to Kvaerner for the counterclaim) and the legal expenses of $1,960,806.93 which were incurred in defending the claim, constitute a liability or expense of the joint venture. Kvaerner contends therefore that Egis is liable for half of that sum.

Express Term

30 There is no issue on the pleadings but that it was an express term of the joint venture agreement that any losses incurred or sustained in and about the performance of the joint venture under any contract or agreement entered into by the joint venture were to be borne equally between Kvaerner and Egis.

The Pleadings

The stance taken by Egis

31 Egis has pleaded the following matters, many of which either overlap or are put as alternatives, in its defence and/or first cross-claim against Kvaerner:

Denial of payment said to have been made by Kvaerner

32 Egis denies that Kvaerner paid to John Holland the sum of $3.745 million in settlement of the John Holland proceedings.

Identity of payer

33 Egis claims that the relevant payment made in settlement of the John Holland proceedings was made by Storebrand, a Norwegian insurance company, pursuant to insurance policy 842-3873 issued on 10 June 1993 under which policy both parties to the joint venture are said to have been indemnified. In consequence Egis claims that "to avoid circuity of action" the Summons requires to be dismissed.

Amount of liability

34 Egis denies that the joint venture had a liability to John Holland in the sum of $3.745 million and asserts that the relevant liability of the joint venture to John Holland was in the sum of $2.745 million which is said to have been the net amount of the liability of the joint venture to John Holland after the setting off of entitlements of the joint venture to be paid $1 million by John Holland

Construction Issues

35 Egis makes a series of claims, again often overlapping or put as alternatives, which rely upon the proper construction and consequential application of the joint venture agreement:

· Egis claims that upon the proper construction of the joint venture agreement the moneys paid to John Holland do not constitute "losses" within Article IX of the joint venture agreement

· Egis claims that on a proper construction of the joint venture agreement it is not possible to determine its liability (if any) to contribute 50% (or any amount) towards payment of the John Holland moneys without first determining whether or not the liability of the joint venture to pay the John Holland moneys was caused by conduct of the plaintiff, its staff, employees, agents or contractors

36 The claim made by Egis is that the joint venture liability to John Holland was caused by the conduct of Kvaerner, its staff, employees, agents or contractors.

37 Alternatively such conduct is said to have constituted either breaches of article XI of the joint venture agreement or to have fallen within article XX(d) of the agreement.

38 The proposition put by Egis is that the effect of the material provisions of the joint venture agreement, namely articles ii(e), XII(b) (c) and/or (e) and XI(a) and (b), XX(a) and (d), is that as between Kvaerner and Egis, where a joint venture liability for damages and costs is caused by the conduct of Kvaerner, its staff, employees, agents or contractors, it is Kvaerner and not Egis which was and remains liable to satisfy that liability, and that if and to the extent that Egis contributed to the joint venture's satisfaction of such liability, Egis is entitled to be indemnified by Kvaerner, or to damages tantamount to indemnity. Hence any claims to have no liability to Kvaerner for the John Holland moneys or alternatively claims to be entitled to a set off by reason of the matters referred to in its cross-claim against Kvaerner.

The first cross-claim

39 Egis cross-claims against Kvaerner relying initially upon its allegation that the joint venture liability to John Holland was caused by the conduct of Kvaerner, its staff, employees, agents or contractors and/or relying upon its allegations that this conduct constituted breaches of articles XI of the joint venture agreement or constituted conduct falling within article XX(d) of that agreement.

40 The claim is that if and to the extent that Egis is liable to contribute 50% or any amount to satisfy the liability of the joint venture for the John Holland moneys, Egis is entitled to be indemnified by Kvaerner or to damages tantamount to indemnity.

Failure to renew a joint professional indemnity insurance policy in or about September 1994

41 There is then a claim that relies upon an allegation that Kvaerner failed to agree to the renewal of a joint venture joint professional indemnity insurance policy in respect of the joint venture activities as a result of which failure that policy was not renewed.

The second cross-claim

It is convenient then to come to the second cross-claim which is the subject of the preliminary question. The cross-claim by Egis:

· Repeats for the purpose only of the cross-claim the plaintiff's claims made in the summons;

· Asserts that Storebrand paid the John Holland moneys as insurer under policy 842-3873 issued on 10 June 1993;

· Asserts that Storebrand has thus been subrogated to the rights of Kvaerner in respect of the claims made by Kvaerner in the summons;

· Refers to certain provisions in the policy including the insuring clause and special provision 3:

· Alleges that the subject joint venture was a "Joint Venture which includes the Insured" for the purpose of special provision 3;

· Claims that in the result Egis is entitled to be indemnified by Storebrand in respect of any liability which Egis may have to pay the John Holland moneys;

· Asserts that to avoid circuity of action, the summons should be dismissed.

Dealing with the separate question for determination

42 A copy of the policy is appended to this judgment as Appendix “A”.

43 Special Provision 3 ["the joint venture clause"] is in the following terms:

"This policy is extended to indemnify the insured in respect of any liability for work undertaken by any Firm, Company or Individual with whom the Insured are operating jointly and any Joint Venture, Joint Company and/or Consortium which includes the Insured
This extension applies also-when agreed in contract between the partners-to indemnify the insured's liability in proportion to the ownership or investment interest."

44 The policy was written in Norway with all moneys expressed in Norwegian Krone and covers the Kvaerner Group worldwide. Kvaerner's global professional indemnity insurance for 1994 covers a number of named companies in what might loosely be described as the Kvaerner Group. The only connection that the policy has with Australia is that one of the named insured companies happens to be an Australian member of the Kvaerner Group. Accordingly the Insurance Contracts Act 1984 (Commonwealth), as is common ground, would not apply to the policy.

45 Mr McGovern gave evidence that Kvaerner Insurance (also sometimes known as Kvaerner Insurance AS) is a separate entity within the Kvaerner group of companies and is an insurer of a certain level of risk incurred by the Kvaerner Group. His evidence was that risk or loss incurred or suffered above that covered by Kvaerner Insurance was insured by Uni Storebrand AS (now Storebrand AS).

46 Clearly enough, as was accepted by both senior counsel in the course of their address, the appropriate approach to construction of the policy is to take the words as a whole in the context of the instrument in question, here an insurance policy, having regard to the purpose which the instrument itself exhibits. Equally clearly, the proper approach to the question of construction is an objective approach - see, for example, Australian Broadcasting Corporation v XIVth Commonwealth Games 18 NSWLR (1988) 540 at 549, per Gleeson CJ in turn citing Diplock LJ in Gissing v Gissing [1971] AC 886 and in Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441.

47 The courts' holding accepts generally the burden of the submissions put by Kvaerner which are in certain respects simply repeated in what follows.

48 There seem to be at least two ways of looking at the proper construction of the joint venture clause:

Reading 1 - propounded by Kvaerner

"This policy is extended to indemnify

the insured

in respect of any liability
for work undertaken :


(1) by any firm, Company or Individual with whom the Insured are operating jointly

(2) by any Joint Venture, Joint Company and /or Consortium which includes the Insured"


Reading 2 - propounded by Egis

"This policy is extended to indemnify
(1) the insured
in respect of any liability for work undertaken
by any firm, Company or Individual with whom the Insured are operating jointly
(2) any Joint venture, Joint Company and/or Consortium
which includes the Insured"

49 Expanding reading 1 this seems to me in essence a submission that the clause be read as follows:

" This policy is extended to indemnify the insured in respect of any liability of the insured for work undertaken by any Firm, Company or Individual with whom the Insured are operating jointly and to indemnify the insured in respect of any liability of the insured for work undertaken by any Joint Venture, Joint Company and/or Consortium which includes the Insured.

50 Expanding reading 2 this seems to me in essence a submission that the clause be read as follows:

"This policy is extended to indemnify
(1) the insured [ meaning personally ]
in respect of any liability for work undertaken
by any firm, Company or Individual with whom the Insured are operating jointly
(2) any Joint venture, Joint Company and/or Consortium [ itself being indemnified as the insured ]

which includes the Insured."

51 In my view reading 1 identifies the proper construction of the joint venture clause. In this regard:

· the subject of the clause is the "insured" who is indemnified in respect of any liability it may have for work undertaken by any firm, Company or individual with whom the insured is operating jointly.

· The indemnification for the insured also extends to any liability it may have for work undertaken by a joint venture, joint Company and/or Consortium which includes the insured.

· The indemnity is limited to that of the insured. Importantly however this is not to say that [positing a joint venture which includes the insured], the indemnity will take into account close questions which may arise in relation to the liability of the joint venture partners inter se, once the joint venture is itself found to be liable to a third party for work it has undertaken. The indemnity is an indemnity of the insured if and insofar as the insured, in its capacity as joint venturer, will be jointly and severally liable to a third party for which work has been undertaken by the joint venture. The same reasoning would apply if the work had been undertaken by a joint company or consortium including the insured.

· The progression of reasoning which appears to have led to the formulation of the extension clause was, I accept, as put by Mr Coles in the course of submission, as follows:

- Kvaerner was intended to obtain professional indemnity cover.

- Without an appropriate extension, Kvaerner's cover for professional activities would be a cover in respect of its own professional activities, resulting in its consequential exposure to liabilities of third parties.

- The circumstance in which Kvaerner became a party to a joint venture or consortium or partnership, would involve potential liability in situations where Kvaerner may become liable for the negligence of others with whom it was associated without its own activities being impugned. The extension was necessary inter alia to cover this circumstance. This was the commercial purpose of the extension.

· Reading 2, if correct, would effectively have meant that Storebrand would have given away contribution rights against the insurers of, for example, joint venture partners of Kvaerner.

· An indication that the clause is not intended to deal with the position of the joint venturers inter se is to be found in the second paragraph of the clause which, albeit limited to particular circumstances of partnership contractual arrangements [qua liability of the insured which has been agreed to be in proportion to ownership or investment interest] does in fact deal with the indemnity of the insured's liability arising by reason of such arrangements. Had it been intended that the first paragraph of the clause would treat with similar circumstances going (in the joint venture circumstance) to the joint venturers' liability inter se arising by reason of contractual arrangements, one may infer that this would have been put in express terms as was the case with the subject matter of the second paragraph: Expressio unius

· The difficulty with the acceptance of reading 2 is:

- That it introduces, as beneficiaries, entities which are not parties to the contract or named in the schedule to the contract - That it means that whilst the indemnification of the insured is said to be for liability for work undertaken by these entities, the indemnification of the entities themselves is not described. In short the second limb of reading 2 does not describe in respect of what activities that form of indemnity is to extend. Further an acceptance of reading 2 means that either there is no (or at least no express ) statement as to what the joint venture is indemnified from or alternatively that its indemnification is limitless. Either possibility is, I should have thought, an unlikely intention of the parties and any interpretation that produces a more reasonable result should have been preferred.

52 Further:

· On the Egis construction of Special Provision 3 the indemnification which is said to be extended to "any joint venture, joint Company and/or Consortium which includes the insured" is unlimited. That is to say it is not confined to "liability for work undertaken" as is the liability for "any firm, Company or individual with whom the Insured are operating jointly".

· This construction offends the principle that the contract should be construed so as to take account of the main or commercial purpose of the contract of insurance: Legal & General Insurance Ltd v Eather (1986) 6 NSWLR 390 at 394. The purpose of this contract of insurance was to provide professional indemnity insurance for the Kvaerner group of companies (see the insurance clause in the schedule to the global professional insurance policy). It is inconsistent with that purpose that an indemnity would be offered to entities which are not part of the Kvaerner group.

(i) as part of this extension to the contract;

(ii) in a manner that the indemnity to the new entities is not limited to claims arising from work being performed.

· Egis clearly attempts to explain this deficiency in its construction on the basis that the phrase "any liability for work undertaken" is necessary when referring to the first part of the clause because of the uncertainty of the expression "with whom the insured are operating jointly" but unnecessary in the latter part of the clause because the phrase "which includes the insured" is far more certain.

· Upon examination, the first part of the clause is not any more likely to produce an inquiry of fact than the latter part. The words "joint venture, joint Company" and in particular "Consortium" create exactly the same type of inquiry of fact that the words "operating jointly" create.

· In any event the words "liability for work undertaken", do not resolve any uncertainty inherent in those words.

· The construction preferred by Egis is inconsistent with the second paragraph of Special Provision 3. That subparagraph provides that the extension will also apply if the insured has contracted with its partner to indemnify in proportion with its interest in the entity. It would be entirely unnecessary, for this extension to apply to that situation if the clause meant, as Egis contends, that both insured and its partner were indemnified.

· The purpose of the "and" which appears after the words "operating jointly" is to join the two sub-groups of entities that the insured may have been operating with. The first sub-group are individual juristic entities whereas the second may not be so recognised by the law. The purpose of the "and" is to make it clear that the insured is protected, whether it is operating jointly with a legally recognised entity, or alternatively, is a party to some other form of association not so recognised. In neither event is there any extension of the cover to include the other entities themselves.

· An intention that the insurance cover would be extended to entities other than the named insured, should not readily be implied absent there being in the language of the policy or the circumstances reasons sufficient to justify such a construction: [Germano v Gresham Fire & Accident Insurance Society Ltd [1924] VLR 592 at 598-599]

53 It is convenient to shortly note the submissions put by Egis in support of its suggested construction:

· The expression "any liability for work undertaken" is confined to one part of the clause because that phrase is required by reason of the uncertainty of the expression "with whom the insured are operating jointly". This is said to be in contrast to the far more definite notion of a Joint Venture, Joint Company and/or Consortium "which includes the insured"

· The word "indemnify" seems itself to be sufficient in an insurance policy to express the notion of coverage for liability which might fall upon a joint venture which includes the insured. The nature of the indemnity is set out in the Insuring Clause on the first page of the policy

· Insertion of the word "by" after the word "jointly" would have made the matter perfectly plain. To regard the proper construction as it were as including this word sub silentio is said effectively to be in no way to change the sense of the clause.

· The common sense of the situation, it is suggested, may be better seen when one considers situations where it may be desirous for a policy to extend to cover entities beyond the named insured:

- as where liability may fall upon the named insured by reason of association with others with whom the insured engaged in joint enterprises.
- as where joint enterprise partners are concerned, for example where the named insured has entered into engagements (for example building contracts) with third parties whereby a named insured my undertaken to ensure both itself and others to be engaged in the work.
- as where the named insured may be a head contractor who enters into some contracts in which the named insured may agree to carry out project insurance.

· It is said to be necessary to dichotomise the first paragraph of the joint venture clause 3 for the reason that the first leg of that dichotomy should be construed as intended to deal with the circumstance in which the named insured are not engaged in the carrying out of the work which is in fact undertaken by others: whereas the second leg of the dichotomy is intended to cover the circumstance in which the insured is not only a member of the joint venture but was in fact engaged in the very work giving rise to the liability.

54 In my view these submissions by Egis, albeit giving some limited support to reading 2, do not ultimately outweigh the reasons earlier given in this judgment for favouring reading 1.

55 Ultimately the matter is one of impression. As I have said, in my view, reading 1 identifies the proper construction of Special Provision 3 in the policy.

56 In terms of the allegation in paragraph 10 of the cross-claim that Egis is entitled to be indemnified by Storebrand in respect of any liability which Egis has to pay the John Holland moneys, the allegation is contrary to the proper construction of the policy. The only insured was Kvaerner, albeit that the amount of the cover extended to the entirety of the liability of the joint venture - Kvaerner being liable to John Holland for the whole of the settlement moneys.

57 Some short attention was given by both counsel to the apparent typographic error insofar as the second paragraph of the joint venture clause in the second line includes a word "til". This is quite obviously a typographic error and both counsel are agreed, as seems to me to clearly be the case, that the Court ought read that as intended to provide the word "the".

58 It is appropriate to make clear that had the Egis interpretation of the policy been correct and had it been upheld, I did not understand there to be any issue at the Bar table but that in order to avoid circuity of litigation, the principles which apply would not permit a subrogation action to proceed against a party having the benefit of the indemnity under the policy: Petrofina v Magnaload [1983] 3 All ER 35.

59 In those circumstances the second cross-claim fails and the separate question will be answered accordingly.

I certify that paragraphs 1 - 59
are a true copy of the reasons
for judgment herein of
the Hon. Justice Einstein
given on Tuesday 4 February 2003
and revised on 10 February 2003

___________________
Susan Piggott
Associate

10 February 2003

Last Modified: 02/21/2003