Major Engineering Pty Ltd v CGU Insurance Ltd

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2009 3891

MAJOR ENGINEERING PTY LIMITED (ACN 005 432 397)
	Appellant
v
CGU INSURANCE LIMITED (ABN 27 004 478 371)	Respondent

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JUDGES	BONGIORNO and HANSEN JJA and KYROU AJA
WHERE HELD	MELBOURNE
DATE OF HEARING	14 and 15 February 2011
DATE OF JUDGMENT	9 August 2011
MEDIUM NEUTRAL CITATION	[2011] VSCA 226
JUDGMENT APPEALED FROM	Major Engineering Pty Ltd v CGU Insurance Limited [2009] VSC 504 (Pagone J)

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INSURANCE – Appellant insured under contract of insurance – Incurred significant legal costs successfully defending claim made against it – Whether appellant entitled to recover costs under costs extension clause – Whether costs extension clause subject to exclusion clauses – Whether exclusion clauses applied – Appellant held to be entitled to recover costs – Appeal allowed.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr P Cawthorn SC with Mr C Madder	Dermenzies Lawyers
For the Respondent	Mr M Thompson SC with Mr M Osborne	Norris Coates

BONGIORNO JA:       

1. The appellant, Major Engineering Pty Ltd (‘Major’), was the insured under a contract of insurance (‘the Policy’) with the respondent, CGU Insurance Ltd (‘CGU’) in respect of certain risks to which it was exposed in the course of its business.  That business was described in the Policy as being:

Principally but not limited to Property Owners, occupiers, importers and exporters, design, manufacture, sales service and installation of heat transfer capital equipment, general engineering fabrication, hydraulic pneumatic and lubrication equipment.

1. The Policy was entitled ‘Liability Insurance — Broadform Policy’ and, in general terms, provided cover to Major in respect of its legal liability to third parties arising out of its business.  That liability was described in the Policy as being either ‘Products Liability’ or ‘Public Liability’, which terms were themselves defined.  However, the Policy also provided, under a heading in a section entitled ‘Additional Benefits’, cover in respect of certain legal costs incurred by the insured.  Such additional cover is commonly referred to as a ‘costs extension’.  As far as is relevant to this judgment, that cover was in the following terms:

1.        Your Legal Costs

(a)       In the case of:

(1)       Public Liability or Products Liability;

or

(2)a claim of Public Liability or Products Liability being made against You;

for which indemnity is, or would be, available under this Policy, We will pay Your Legal Costs.

(b)       Your Legal Costs means:

(1)the legal costs and expenses, that You incur with Our written agreement, in defending a claim of Public Liability or Products Liability made against You;

(2)the legal costs and expenses of any claimant claiming against You for Public Liability or Products Liability that You are liable to pay; and

…

1. This appeal concerns a claim by Major against CGU under the costs extension clause for costs which it incurred in successfully defending a claim brought against it by Timelink Pacific Pty Ltd (‘Timelink’).  Timelink’s claim was for damages arising out of the failure of two hydraulic cylinders that were supplied by Major…