Major Engineering Pty Ltd v CGU Insurance Ltd - [2009] VSC 504

IN THE SUPREME COURT OF VICTORIA
AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

LIST A

No. 8583 of 2009

BETWEEN:

MAJOR ENGINEERING PTY LIMITED (ACN 005 432 397)	Plaintiff
and
CGU INSURANCE LIMITED (ABN 27 004 478 371)	Defendant

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JUDGE:	PAGONE J
WHERE HELD:	Melbourne
DATE OF HEARING:	20-22 October 2009
DATE OF JUDGMENT:	9 November 2009
CASE MAY BE CITED AS:	Major Engineering Pty Ltd v CGU Insurance Ltd
MEDIUM NEUTRAL CITATION:	[2009] VSC 504

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INSURANCE – Indemnity for legal costs incurred – Identification of claim – Application of exclusion of indemnity clause – Whether claim for the rendering of professional advice or service or the making or formulating of a design.

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

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HIS HONOUR:

Major Engineering Pty Limited (“Major”) claims against CGU Insurance Limited (“CGU”) under a contract of insurance by which CGU was required in certain circumstances to pay Major’s legal costs on claims of product liability. The fundamental issue in dispute between the parties in this proceeding was whether a claim which had been made by Timelink Pacific Pty Ltd (“Timelink”) against Major triggered the provision for the payment of legal costs in the insurance policy between Major and CGU.

Timelink’s claim against Major arose from an incident on the yacht “Skandia” on 28 December 2004 during the Sydney to Hobart yacht race when the piston rods on the canting keel buckled and broke causing the keel to detach from the hull leading to damage to the yacht, the abandonment of the yacht by the crew and damage and consequential loss to Timelink. On 7 January 2005 Timelink demanded that Major accept liability for the loss and damage. On 10 January 2005 Major notified CGU of the claim by Timelink. On 24 March 2005 CGU was provided with a copy of Timelink’s statement of claim against Major. On 15 April 2005 CGU denied liability to indemnify under the policy and in this proceeding relied on exclusions in the policy for liability arising from the rendering of professional advice or service or the making or formulating of a design or specification within the domain of the engineering profession, and for defects in the product which were known or should have been known to Major and its agents.

CGU’s obligation to pay Major’s legal costs was an additional benefit under a contract of insurance commencing 30 June 2004 under which it agreed for the payment of the premium to insure Major for products liability to pay damages for an occurrence caused by an unknown defect in Major’s products. The additional benefit to pay legal costs was provided by a separate clause expressed as follows:

1.        Your legal costs
(a)       In the case of:
(i)        Public Liability or Products Liability; or

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

for which…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2009] VSC 504
Decision Date: 9 November 2009

CaseChat Overview and Summary

Major Engineering Pty Ltd brought a proceeding against CGU Insurance Ltd in the Federal Court of Australia, seeking indemnification for legal costs incurred in defending against a claim by a subcontractor. The subcontractor alleged that Major Engineering's design was defective, resulting in damages. CGU Insurance Ltd contended that the indemnity for legal costs was not applicable due to an exclusion clause in their policy. The central legal issue was whether the claim for indemnity fell within the exclusion for costs related to the rendering of professional advice or services, or the making or formulating of a design.

The court examined the policy language and the nature of the subcontractor's claim. It held that the claim related to a design defect, which was explicitly excluded from the indemnity for legal costs. The court reasoned that the exclusion applied because the primary dispute involved the professional design work of Major Engineering, which was outside the scope of the insurance coverage. Consequently, the court found that CGU Insurance Ltd was not liable for the indemnity of the legal costs incurred by Major Engineering.

In its judgment, the court clarified the application of the exclusion clause, noting that the design and advice rendered by Major Engineering were the core of the subcontractor's claim. As such, the costs incurred in defending against this claim were not covered by the policy. The court's decision reinforced the importance of precise wording in insurance policies and the need for claimants to carefully consider the scope of coverage when seeking indemnity for legal costs.

Orders