Matton Developments Pty Ltd v CGU Insurance Limited (No 2)
[2015] QSC 72
•15 April 2015
SUPREME COURT OF QUEENSLAND
CITATION:
Matton Developments Pty Ltd v CGU Insurance Limited (No 2) [2015] QSC 72
PARTIES:
MATTON DEVELOPMENTS PTY LTD
ACN 100 028 340
(plaintiff)
v
CGU INSURANCE LIMITEDACN 004 478 371
(defendant)FILE NO:
SC No 1704 of 2011
DIVISION:
Trial Division
PROCEEDING:
Trial
DELIVERED ON:
15 April 2015
DELIVERED AT:
Brisbane
HEARING DATES:
24, 25, 26, 27 and 28 November 2014; 1, 2, 3, 4, 5 and 10 December 2014
JUDGE:
Flanagan J
ORDERS:
1. The claim filed 1 March 2011 be dismissed.
2. I will hear the parties as to costs.
CATCHWORDS:
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PERFORMANCE – REPUDIATION – WHAT AMOUNTS TO REPUDIATION – where the defendant provided Contractors and Plant Insurance to the plaintiff in respect of a crane – where the crane was rendered a total loss when the crane’s boom collapsed – where the plaintiff sought indemnity under the insurance policy – where the defendant denied indemnity claiming the crane was operated on a slope in contravention of Australian standards and manufacturer’s guidelines and was therefore excluded from the policy – where the plaintiff denied any contravention and asserted the crane was operated on level ground and the collapse was due to an inherent defect – where the plaintiff alleged the defendant failed to properly investigate the claim and sought only to prove its own version of events – whether a wrongful denial of indemnity pursuant to an insurance policy amounts to a repudiation of the policy – whether the defendant’s alleged conduct amounted to a repudiation of the policy – whether the plaintiff accepted any alleged repudiation
DAMAGES – MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT – REMOTENESS AND CAUSATION – where the defendant provided Contractors and Plant Insurance to the plaintiff in respect of a crane – where the crane was rendered a total loss when the crane’s boom collapsed – where the plaintiff sought indemnity under the insurance policy – where the defendant denied indemnity claiming the crane was operated on a slope in contravention of Australian standards and manufacturer’s guidelines and was therefore excluded from the policy – where the plaintiff denied any contravention and asserted the crane was operated on level ground and the collapse was due to an inherent defect – where the crane had been financed by the plaintiff and default interest was payable by the plaintiff pursuant to its finance – where the policy limited indemnity for loss of revenue – where the plaintiff claimed the defendant’s denial of indemnity amounted to a breach of the policy – where the plaintiff claimed loss of revenue in excess of the policy limit and default interest pursuant to its financial arrangements – whether the damages claimed by the plaintiff for loss of revenue and default interest were too remote
INSURANCE – CLAIMS GENERALLY – REFUSAL – GENERALLY – where the defendant provided Contractors and Plant Insurance to the plaintiff in respect of a crane – where the crane was rendered a total loss when the crane’s boom collapsed – where the plaintiff sought indemnity under the insurance policy – where the defendant denied indemnity claiming the crane was operated on a slope in contravention of Australian standards and manufacturer’s guidelines and was therefore excluded from the policy – where the plaintiff denied any contravention and asserted the crane was operated on level ground and the collapse was due to an inherent defect – whether the policy responds to the claim – whether any exclusion clauses apply to exclude the plaintiff’s claim – whether the defendant breached the policy by refusing to pay the plaintiff’s claim – whether the defendant breached the duty of utmost good faith by refusing to pay the plaintiff’s claim – whether s 54 of the Insurance Contracts Act 1984 (Cth) has any operation so as to prohibit the defendant from refusing the plaintiff’s claim
INSURANCE – THE POLICY – CONDITIONS, WARRANTIES AND EXCEPTIONS – EXCLUSION CLAUSES – where the defendant provided Contractors and Plant Insurance to the plaintiff in respect of a crane – where the crane was rendered a total loss when the crane’s boom collapsed – where the plaintiff sought indemnity under the insurance policy – where the defendant denied indemnity claiming the crane was operated on a slope in contravention of Australian standards and manufacturer’s guidelines and was therefore excluded from the policy – where the plaintiff denied any contravention and asserted the crane was operated on level ground and the collapse was due to an inherent defect – where the policy contained primary cover and additional cover – where the additional cover insured the plaintiff for, inter alia, accidental, sudden and unforeseen damage caused by or resulting from an accidental overload – whether any exclusion clauses applied to exclude the plaintiff’s claim, including a claim for additional cover –whether the additional cover is illusory if the exclusion clauses are applicable – whether the exclusion clauses are required to be read down – whether the additional cover is stand-alone cover and not subject to any exclusion clauses
INSURANCE – THE POLICY – OBLIGATION OF UTMOST GOOD FAITH – where the defendant provided Contractors and Plant Insurance to the plaintiff in respect of a crane – where the crane was rendered a total loss when the crane’s boom collapsed – where the plaintiff sought indemnity under the insurance policy – where the defendant denied indemnity claiming the crane was operated on a slope in contravention of Australian standards and manufacturer’s guidelines and was therefore excluded from the policy – where the plaintiff denied any contravention and asserted the crane was operated on level ground and the collapse was due to an inherent defect – where the plaintiff alleged the defendant failed to properly investigate the claim and sought only to prove its own version of events – where the plaintiff claimed the duty of utmost good faith pursuant to s 13 of the Insurance Contracts Act 1984 (Cth) was a statutory duty the breach of which allows the plaintiff to sue in tort for breach of statutory duty – whether the defendant’s alleged conduct amounted to a breach of the duty of utmost good faith – whether the denial of indemnity amounted to a breach of the duty of utmost good faith – what “utmost good faith” means and requires of an insurer – what conduct does or does not breach the duty of utmost good faith – whether the duty of utmost good faith is a statutory duty – what damages are compensable following a breach of the duty of utmost good faith
INSURANCE – THE POLICY – PRINCIPLES OF CONSTRUCTION – where the defendant provided Contractors and Plant Insurance to the plaintiff in respect of a crane – where the crane was rendered a total loss when the crane’s boom collapsed – where the policy covered accidental, sudden and unforeseen damage to the crane while it was located and in use in the manner in which it was designed to be used – where the policy contained primary cover and additional cover – where the additional cover insured the plaintiff for, inter alia, accidental, sudden and unforeseen damage caused by or resulting from an accidental overload and “owner’s indemnity” – where the policy contained an optional extension of “dry hire” – where the plaintiff sought indemnity under the insurance policy – where the defendant denied indemnity claiming the crane was operated on a slope in contravention of Australian standards and manufacturer’s guidelines and was therefore excluded from the policy – where the plaintiff denied any contravention and asserted the crane was operated on level ground and the collapse was due to an inherent defect – whether the collapse of the crane’s boom was accidental, sudden and unforeseen – whether the crane was located and in use in the manner in which it was designed to be used – whether the collapse of the crane’s boom resulted from an accidental overload of the crane – whether accidental, sudden and unforeseen is from the perspective of the plaintiff or from the operator of the crane – whether the crane was dry-hired at the time of the collapse of the boom – whether the owner’s indemnity additional cover has any application – whether any exclusion clauses apply to exclude the plaintiff’s claim, including a claim for additional cover – whether the additional cover is illusory if the exclusion clauses are applicable – whether the exclusion clauses are required to be read down – whether the additional cover is stand-alone cover and not subject to any exclusion clauses
STATUTES – ACTS OF PARLIAMENT – ENFORCEMENT OF STATUTORY RIGHTS AND REMEDIES – BREACH OF STATUTORY DUTY – GENERALLY – where the defendant provided Contractors and Plant Insurance to the plaintiff in respect of a crane – where the crane was rendered a total loss when the crane’s boom collapsed – where the plaintiff was denied indemnity under the insurance policy – where the plaintiff alleged the defendant failed to properly investigate the claim and sought only to prove its own version of events – where the plaintiff claimed the duty of utmost good faith pursuant to s 13 of the Insurance Contracts Act 1984 (Cth) was a statutory duty the breach of which allows the plaintiff to sue in tort for breach of statutory duty – where the plaintiff claimed damages to put itself in the position it would have been but for the alleged breach of the duty of utmost good faith including damages excluded by the insurance policy – whether the defendant’s alleged conduct amounted to a breach of the duty of utmost good faith – whether the denial of indemnity amounted to a breach of the duty of utmost good faith – whether the duty of utmost good faith is a statutory duty – whether the Commonwealth Parliament intended for the duty of utmost good faith to give rise to a private action for its breach
Insurance Contracts Act 2013 (Cth), s 8(1), s 12, s 13(1), s 13(2), s 14A, s 54, s 55A
ACN 007 838 584 Pty Ltd v Zurich Australia Insurance Ltd (1997) 69 SASR 374, cited
AF & G Robinson v Evans Bros Pty Ltd [1969] VR 855, cited
Alcoa of Australia Ltd v Apache Energy Ltd [2012] WASC 209, considered
Alex Kay Pty Ltd v General Motors Acceptance Corporation [1963] VR 458, cited
Allianz Australia Insurance Ltd v Bluescope Steel Ltd [2014] NSWCA 276, cited
Allianz Australia Insurance Limited v Vitale [2014] NSWSC 364, cited
Arturi v Zupps Motors Pty Ltd (1980) 49 FLR 283; [1980] FCA 164, cited
Australia & New Zealand Banking Group v Rqa Accountants Pty Ltd [2013] NSWSC 165, cited
Australian Casualty Co Limited v Federico (1986) 160 CLR 513; [1986] HCA 32, applied
Australian Iron & Steel v Ryan (1957) 97 CLR 89; [1957] HCA 25, cited
Bridgeman v Allied Mutual Insurance Ltd [2000] 1 NZLR 433, cited
ByrnevAustralian Airlines Ltd (1995) 185 CLR 410; [1995] HCA 24, applied
Camellia Properties Pty Ltd v Wesfarmers General Insurance Ltd [2013] NSWSC 1975, considered
CGU Insurance Limited v AMP Financial Planning Pty Ltd (2007) 235 CLR 1; [2007] HCA 36, applied
CGU Workers Compensation (NSW) Ltd v Garcia(2007) 69 NSWLR 680; [2007] NSWCA 193, considered
DA Constable Syndicate 386 v Auckland District Law Society [2010] 3 NZLR 23; [2010] NZCA 237, cited
De Souza v Home & Overseas Co Ltd [1995] LRLR 453, cited
Dhak v Insurance Co of North America (UK) Ltd [1996] 2 All ER 609, cited
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; [1978] HCA 12, cited
Dunn v Pain; Co-operative Insurance Company Australia (1991) 57 SASR 133, cited
Entwells Pty Ltd v National and General Insurance Co Ltd (1991) 5 ACSR 424, distinguished
FAI General Insurance Co Ltd v Maracorp Financial Services Ltd [1994] 1 VR 455, cited
Fenton v Thorley & Co Ltd [1903] AC 443, applied
Ferrcom Pty Ltd v Commercial Union Assurance Co of Australia Ltd (1993) 176 CLR 332; [1993] HCA 5, cited
Fogarty v CGU Insurance Ltd [2015] ACTSC 44, cited
Fraser v BN Furman (Productions) Ltd [1967] 1 WLR 898, cited
Gibbs Holdings Pty Ltd v Mercantile Mutual Insurance (Australia) Limited [2002] 1 Qd R 17; [2000] QCA 524, cited
Gray v Barr [1971] 2 QB 554, considered
Gutteridge v Commonwealth (Unreported, Supreme Court of Queensland, Ambrose J, 25 June 1993, No 586 of 1993), cited
H L Bolton (Engineering) Co Ltd v T J Graham & Sons Ltd [1957] 1 QB 159, cited
Hawley v Luminar Leisure Ltd & Ors [2006] EWCA Civ 18, distinguished
Hawley v Luminar Leisure Plc & Ors [2005] EWHC 5, distinguished
Highway Hauliers Pty Ltd v Maxwell [2012] WASC 53, considered
Hurley Contractors Ltd v Farmers Mutual Association (1991) 6 ANZ Ins Cases ¶61-076, applied
Judd v Suncorp Insurance & Finance (1988) 5 ANZ Insurance Cases ¶60-832, cited
Kassem v Colonial MutualGeneral Insurance Co Ltd [2001] NSWCA 38, cited
Kelly v New Zealand Insurance Co Ltd (1996) 130 FLR 97, cited
L’Union Des Assurances De Paris Iard v Sun Alliance Insurance Limited (1995) 8 ANZ Insurance Cases ¶61-240, applied
Larratt v Bankers & Traders Insurance Co Ltd (1941) 41 SR (NSW) 215, cited
Linsley v Petrie[1998] 1 VR 427, cited
Lomsargis v National Mutual Life Association of Australasia Limited [2005] 2 Qd R 295; [2005] QSC 199, applied
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69, cited
McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; [2000] HCA 65, cited
Mills v Smith [1964] 1 QB 30, cited
Mount Albert City Council v New Zealand Municipalities Co-operative Insurance Co Ltd [1983] NZLR 190, considered
Moss v Sun Alliance Australia Ltd (1990) 55 SASR 145, cited
National and General Insurance Co Limited v Chick [1984] 2 NSWLR 86, cited
O’Connor v S P Bray Ltd (1937) 56 CLR 464; [1937] HCA 18, cited
Re Zurich Australian Insurance Limited [1999] 2 Qd R 203, applied
Rossi v Westbrook[2013] QCA 102, cited
Russell Young Abalone v Traders Prudent Insurance Company Ltd (1993) 7 ANZ Insurance Cases ¶61-182, cited
S & Y Investments (No 2) Pty Ltd (in liq) v Commercial Union Assurance Co of Australia Ltd (1986) 44 NTR 14, distinguished
Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd (No 2) [2010] FCA 275, cited
Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53, cited
Schiliro v Peppercorn Childcare Centres Pty Ltd (No 2) [2001] 1 Qd R 518; [2000] QCA 018, considered
Slivak v Lurgi (Australia) Pty Ltd (2001) 205 CLR 304; [2001] HCA 6, cited
Sovar v Henry Lane Pty Ltd (1967) 116 CLR 397; [1967] HCA 31, applied
Speno Rail Maintenance Australia Pty Ltd v Metals & Minerals Insurance Pte Ltd (2009) 226 FLR 306; [2009] WASCA 31, cited
Syddall v National Mutual Life Association of Australasia Ltd[2011] QSC 389, cited
Stuart v Guardian Royal Exchange Assurance of NZ Ltd (No 2) (1998) ANZ Insurance Cases ¶60-844, cited
Taylor v J Thomas & Son(a firm) (1983) 2 ANZ Insurance Cases ¶60-524, cited
The Federation Insurance Ltd v R Banks [1984] VR 525, cited
Trim Joint District School Board of Management v Kelly [1914] AC 667, cited
Visy Packaging Pty Ltd v Siegwerk Australia Pty Ltd (2013) 301 ALR 560; [2013] FCA 231, cited
Webber v Mutual Community Ltd (1991) 6 ANZ Ins Cas ¶61-079, cited
Wesfarmers General Insurance Ltd [2013] NSWSC 1975, cited
Westco Australia Pty Ltd v Manufacturer’s Mutual Insurance Limited (Unreported, D M Campbell, Kelly and Derrington JJ, Full Court of the Supreme Court of Queensland, Appeal No 83 of 1983, 22 May 1984), applied
Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17, citedZurich Australian Insurance Ltd v Metals & Minerals Insurance Pte Ltd (2007) 209 FLR 247; [2007] WASC 62, cited
COUNSEL:
D R Cooper QC, with A F Messina, for the plaintiff
G A Thompson QC, with K F Holyoak, for the defendant
SOLICITORS:
Warlow Scott for the plaintiff
Barry.Nilsson for the defendant
Contents
Introduction [1] – [16] Agreed list of issues in dispute [17] The relevant clauses of the Policy [18] – [22] The view and demonstration [23] – [26] The sequence of events and the location of the Crane [27] – [46] Evidence of James Hitaua [47] – [62] Evidence of Gary Sprecak [63] – [69] Evidence of James Strong [70] – [75] Evidence of Stanley Corbett [76] – [81] The plaintiff’s failure to call Steven Clark [82] – [86] The cause of the collapse – the plaintiff’s experts [87] – [103] The cause of the collapse – the defendant’s experts [104] – [120] Factual findings [121] – [122] Does the Policy respond to the plaintiff’s claim? Principles of construction [123] – [127] Material damage cover [128] – [181] Accidental overload [182] – [193] Dry hire cover [194] – [199] Owner’s indemnity [200] – [202] Do any of the exclusion clauses apply? [203] – [207] The operation of section 54 [208] – [214] Did the defendant breach the Policy? [215] – [225] What losses are recoverable by the plaintiff? [226] – [236] The scope of the duty of utmost good faith [237] – [248] Does section 13 impose a statutory duty? [249] – [271] Has the defendant breached the implied duty? [272] – [283] If the defendant breached the implied duty what losses are recoverable? [284] – [288] Disposition [289] – [290]
Introduction
This case concerns a refusal by an insurance company to indemnify the owner of a crane for damage caused to the crane when the boom collapsed.
The plaintiff acquired a 2007 Liebherr LTR100 Telescopic Crawler Crane in May 2007.
Pursuant to a written contract of insurance Policy No CPE20000688, the defendant provided Contractors and Plant Insurance to the plaintiff in respect of the Crane for the period 21 November 2008 to 15 November 2009.
The plaintiff was in the business of providing the Crane and a crane operator to third parties for financial reward.
Prior to 30 January 2009 the plaintiff contracted with Gary Sprecak of G & M Panel Constructions Pty Ltd for the hire of the Crane and a crane operator. The services of the crane operator, James Hitaua, were supplied by Pinjarra Constructions Pty Ltd. Some of the directors and shareholders of the plaintiff were common to Pinjarra.[1]
[1]Mark Kenwood was, for example, a director of both the plaintiff and Pinjarra Constructions.
Between 30 January 2009 and 1 February 2009 the Crane was being used to lift and place about 25 concrete tilt panels, each weighing between approximately 36 and 38 tonnes. The tilt panels were part of the construction of an extension to a factory situated at 58 Perivale Street, Darra in Queensland.
On 1 February 2009, in the course of seeking to lift the second last concrete tilt panel into position (panel 30), the Crane’s boom collapsed effectively damaging the Crane beyond economical repair.
In early February 2009 the plaintiff notified the defendant of the damage to the Crane. On 9 February 2009 the plaintiff submitted a claim to the defendant seeking indemnity under the Policy for the damage to the Crane.
By letter dated 1 April 2009 the defendant informed the plaintiff that it refused to indemnify the plaintiff under the Policy for the damage to the Crane primarily because the damage was:[2]
(a)not “accidental, sudden and unforseen” within the meaning of that expression in the Policy; and
(b)excluded by operation of the exclusions contained in clauses 21, 26 and 27 of the Policy.
[2]Amended defence of the defendant filed 28 October 2014, [20]; exhibit 17, agreed bundle, document 35, letter CGU to Matton Developments, 229-271.
Relevantly the letter of 1 April 2009 stated:[3]
“The policy expressly requires that equipment insured is used ‘in the manner in which it was designed to be used’.
The expert evidence secured to date strongly evidences that the machine was being used well outside of its design specifications and operating manuals and therefore policy exclusion 27 applies to exclude this damage.
…
Solely as a result of the decision to operate the machine well beyond manufacturers’ operational design the crane catastrophically failed and was extensively damaged.”
[3]Agreed Bundle, document 35, letter CGU to Matton Developments, 229-230.
Whilst the parties have identified numerous issues for determination, the resolution of many of these issues flows from identifying the sequence of events and the cause of the collapse.
There are, in essence, two competing hypothesis. The plaintiff’s pleaded case is that the boom of the Crane collapsed because of a failure of the heel weld joints that resulted from a structural pre-existing weakness near the boom heel weld joints on the right-hand side of the boom.[4] At the time of the collapse the Crane was stationary, level and on level ground.[5]
[4]Second further amended reply filed by leave on 4 December 2014, [12](f).
[5]Amended fresh statement of claim filed by leave on 1 December 2014, [16](b).
The defendant’s pleaded case is that the boom of the Crane collapsed due to structural overload as a consequence of a side load induced by the Crane operating on a 7 degree slope.[6]
[6]Amended defendant of the defendant filed 28 October 2014, [12].
It is trite to say that Cranes simply do not collapse. There must have been a cause for the collapse.
For the plaintiff’s hypothesis to be accepted there are three primary factors that are required to be established:
(a)the Crane, at the time of collapse of the boom, was operating on level or near level ground;
(b) the boom of the Crane collapsed because of a pre-existing defect; and
(c)the Crane came to rest in its final position as depicted in the bundle of photographs (exhibits 1 and 12) on an agreed slope of 7 degrees because it was inadvertently driven forward to this position by the operator, James Hitaua.[7]
[7]See [17](c)(i) of the amended fresh statement of claim filed by leave on 1 December 2014.
For the defendant’s hypothesis to be accepted there is really only one factor that requires to be established, namely that at the time the boom collapsed the Crane was being operated from its final position as depicted in the photographs on an agreed 7 degree incline.
Agreed list of issues in dispute
The case proceeded by way of an agreed list of issues (exhibit 44). This list was subsequently amended (exhibit 69). The amended agreed list of issues exceeds seven pages. The issues may be distilled as follows:
(a) What was the sequence of events leading to the collapse of the boom?
(b) At the time of the collapse of the boom what was the location of the Crane? (Was it being operated on level ground or on a 7º slope?)
(c) What caused the collapse of the boom of the Crane?
(d) Does the Policy respond to the plaintiff’s claim?
(e) Do any of the exclusions apply to exclude the plaintiff’s claim?
(f) Does s 54 of the Insurance Contracts Act 1984 (Cth) (“the Act”) operate so as to prohibit the defendant from refusing the plaintiff’s claim?
(g) Has the defendant breached the Policy by refusing to pay the plaintiff’s claim?
(h) If so, what losses are recoverable by the plaintiff?
(i) What is the scope of the duty of utmost good faith implied into the Policy by s 13 of the Act?
(j) Does s 13 of the Act (properly construed) impose a statutory duty of utmost good faith on the defendant over and above the implied duty?
(k) Has the defendant breached either the implied duty or the alleged statutory duty?
(l) If the defendant breached the implied duty what losses are recoverable by the plaintiff?
(m) If the defendant breached the statutory duty what losses are recoverable by the plaintiff?
The relevant clauses of the Policy
The resolution of a number of these issues turns upon a proper construction of the Policy. It is therefore necessary to set out the relevant clauses of the Policy.
The Product Disclosure Statement identifies that the Policy contains two types of cover. Section 1 deals with Material Damage cover. Relevantly, this covers insured damage to plant and machinery subject to the terms, conditions and exclusions of the Policy. Section 2 deals with Third Party Property Damage cover. With each type of cover, a range of additional benefits are included and are shown in the Policy wording under “Additional Benefits – Section 1” on pages 7 and 8; and “Additional Benefits – Section 2” on page 14.
The Policy identifies, inter alia, the following “Words with special meanings”:[8]
[8]Exhibit 17, agreed bundle, document 6, contractors plant and machinery product disclosure statement and policy, 4-5.
“Indemnity period The period:
· beginning with the occurrence of insured damage, and
· ending on the earlier of:
-six (6) months after the insured damage occurred, or
-the date on which the results of the business are no longer affected by the insured damage.
Insured damage Accidental sudden and unforeseen physical loss of or damage to a machine which occurs during the period of insurance and requires immediate repair or replacement to allow continuation of use.
MachineWhere referred to in this Policy either a static machine or a mobile machine.
Market value The cost to buy an equivalent static or mobile machine of the same age, condition, model and make, as assessed by us.
Mobile machine or Any type of machine or vehicle on wheels or self
Your vehicle - laid track made or intended to be propelled by other than manual or animal power, provided they are not used for private and domestic purposes.
Period of Insurance The period shown in the Policy Schedule.
Policy Schedule The schedule of insurance or any endorsement schedule we give you.
Sum Insured The sum specified in the Policy Schedule.”
Section 1 which contains the primary and additional cover and exclusion clauses relevantly provides:[9]
[9]Exhibit 17, agreed bundle, document 6, contractors plant and machinery product disclosure statement and policy, 88-94.
“Material Damage Cover
What you are insured against
Scope of cover
We will cover you for insured damage to a machine while it is located and in use in the manner in which it was designed to be used, or in transit by land, sea or air between locations, anywhere within Australia and whether at work, at rest, or being dismantled for the purpose of cleaning or overhauling, in the course of these operations, or in the course of subsequent re-assembly, but only after successful initial commissioning.
Total loss
Where we in our sole discretion accept that there has been a total loss of a machine, we will pay the lesser of the Sum Insured or the current market value at the time of the loss, for the machine as specified in the Policy ScheduleHowever if the machine was under 2 years of age from the date of original commissioning as a new machine at the time of loss or damage, we will pay you the Sum Insured.
Our liability will not exceed in respect of any loss an amount greater than the Sum Insured stated in the Policy Schedule.
Additional Benefits
Section 1
We give the following additional benefits:Accidental overload
We will pay for insured damage caused by or resulting from accidental overloading which is non-deliberate and clearly unintentional.The onus rests with you to substantiate any claims relating to accidental overload.
Owner’s indemnity
A breach or non-compliance with any provision of this Policy without the knowledge of you or your responsible officer(s) will not affect your right to the cover under this Policy.However, where you or your responsible officer(s) become aware of such breach or non-compliance, you must notify us immediately.
Optional Extensions to Section 1
The following extensions apply where indicated on the Policy Schedule as being operative.Loss of revenue
Scope of cover
If the business carried on by you is interrupted or interfered with as a consequence of insured damage to a machine which is covered under this Policy and for which we have admitted liability, this extension operates to indemnify you during the indemnity period only against loss of revenue and an increase in the cost of working resulting from such interruption or interference. Provided that:(a)our total liability for any one period of insurance will not exceed the amount specified in the Policy Schedule.
(b)our liability under this extension is limited to the loss of revenue and an increase in the cost of working and the amount payable will be limited to the portion of the loss of revenue and an increase in the cost of working affected by the machine which has suffered insured damage.
(e)we will not be liable for loss, damage or costs incurred by you during the time excess.
(f)the amount of each claim otherwise payable will be reduced by the amount of excess shown on the Policy Schedule.
(g)the indemnity period will not exceed six (6) months.
Dry hire
Scope of cover
We will pay for the machines specified in the Policy Schedule for this extension for insured damage to a machine while on hire to another party where you did not supply an operator. We will not pay for claims under this extension:
(a)unless you have taken all reasonable steps to ensure that the hirer, or any other person who will operate the machine, is authorised to do so under any relevant legislation.
(b)unless you have provided the hirer with adequate operating instructions and the loss or damage was caused by incorrect operation.
(c)for theft occasioned by any person to whom your machine is let on hire.
(d)where another policy has been effected for the loss by a party other than you, however, if such cover is not as extensive as this policy we will pay for all losses arising from the difference in the cover and conditions subject to the conditions and exclusions of this Policy.
Exclusions Applying to Section 1
When you are not covered under this Section
This Section does not cover:19. the amount of the excess specified in the Policy Schedule.
21.insured damage occurring while any machine is undergoing a test of any kind or is being used in any manner or for any purpose other than that for which it was designed.
26.insured damage if, at the time of an accident, a machine being used as a crane or lifting device was:
(a)being operated with your knowledge or the knowledge of any of your agents or employees or by any person in contravention of any applicable statutory requirement; or
(b)loaded in excess of the safe working load specified by any relevant statutory authority manufacturer’s specification; or
(c)being used in any raising or lowering operation in which a single load is shared between two or more cranes or lifting devices except when covered under optional extension ‘Dual or multiple lifting’ and that optional extension is noted on the Policy Schedule;
(d)not used in compliance with the relevant Australian standard.
27.insured damage to any machine which is, or has, been operated contrary to the manufacturers guidelines.”
The contractors plant and machinery insurance schedule relevantly states:[10]
[10]Exhibit 17, agreed bundle, document 7, contractors plant and machinery insurance schedule, 103-104.
“INSURED: Matton Developments Pty Ltd
POLICY NUMBER: CPE20000688
PERIOD OF INSURANCE: From: 21/11/2008 To: 15/11/2009
OCCUPATION: Principally Crane Operator
and any other incidental occupation(s).
INTERESTED PARTIES: Nil Advised
SITUATION(S): At and From Willawong, QLD
including Anywhere within Australia
Please note that this Schedule is a brief summary of the cover provided and should be read in conjunction with the Policy Wordings.
POLICY TYPE: Mobile Plant & Machinery Policy
Items Insured: As per Insured Items Schedule
Additional Benefits:
· Recovery costs
· Expediting costs
· Return of machine(s)
· Hired in machines
· Automatic additions and deletions
· Damage to goods lifted - $10,000 (unless extended below)
· Appreciation
· Owner’s indemnity
· Accidental overload
· Emergency travel costs
· Sign writing
Exclusions:Refer to the CPE Mobile Plant & Machinery Policy Wording, underwritten by CGU Insurance Limited.
Excess:1% of sum insured subject to a minimum of:
b) all other $1,000
Operational The following Optional Extensions form part
Extensions: of this Policy where indicated:
d) Loss of revenue $125,000/Excess.”
The view and demonstration
On the morning of the second day of the trial the court viewed a 100 tonne capacity Leibherr LTR1100 Crawler Crane and a precast concrete panel and witnessed a demonstration of the crane lifting the concrete panel.
The crane and concrete panel were of similar dimensions to the actual Crane being operated on 1 February 2009 and panel 30. The general dimensions of the Crane are contained in exhibit 20. The Crane is approximately 13 metres in length. The boom can extend to 52 metres and has a maximum elevation of 82 degrees. The length of the actual tracks of the Crane are approximately 26.4 metres.[11] The weight of an LTR1100 is approximately 100 tonnes. Panel 30 was approximately 14 metres in length. It weighed approximately 39.2 tonnes.
[11]Transcript of proceedings, 3-40, lines 24-43.
The view and the demonstration were conducted in accordance with a protocol.[12] The relevant paragraph of the protocol dealing with the demonstration is [6]. The court did not observe the crane crawling without a load but did observe the crane crawling with a load. The demonstration did not however include the crane slewing the panel 180 degrees or the crane crawling under load for 10 metres as proposed.[13]
[12]Exhibit 14, protocol: view & demonstration.
[13]Exhibit 14, protocol: view & demonstration, [6](d), [6](e).
The hard drive containing a video clip of the view and demonstration was tendered by consent.[14] The hard drive of the video was tendered on the basis that none of the oral commentary accompanying the video constituted evidence in the case.[15]
[14]Exhibit 43, hard drive containing video footage of view and demonstration.
[15]Transcript of proceedings, 8-19, lines 16-18.
The sequence of events and the location of the Crane
James Hitaua was the operator of the Crane. The services of Hitaua as operator were supplied by the plaintiff through Pinjarra. Hitaua explained that the purpose of Pinjarra was to provide to the plaintiff Hitaua’s services as operator of the Crane.[16] The quotation provided to G & M Panel Constructions by the plaintiff dated 7 January 2009 quotes not only hourly rates for the Crane but also quotes overtime rates for the “Driver” showing that the plaintiff was supplying both the Crane and the operator.[17]
[16]Transcript of proceedings, 3-57, lines 1-2.
[17]Exhibit 9, quotation to G & M Panel Constructions from Matton Developments dated 7 January 2009.
Hitaua obtained his licence to operate the Crane in or about February 2008.[18] To obtain this licence (called a C1 licence) Hitaua required a minimum of 300 hours of operating a Crane. He completed those hours over a period of six to seven years with a person who operated a 70 tonne crane.[19] He also received training in the operation of the Crane from a company called Baden Cranes. The training was conducted over a week and covered the functions, operations and capacity of the Crane.[20]
[18]Transcript of proceedings, 2-29, lines 40-46.
[19]Transcript of proceedings, 2-31, lines 37-45.
[20]Transcript of proceedings, 2-32, lines 6-20.
There is a computer display panel in the cabin of the Crane which includes a spirit level indicator that shows the level of the Crane.[21] Hitaua emphasised that in operating the Crane one had to refer to this spirit level “every time” because the Crane must be level.[22]
[21]Transcript of proceedings, 2-36, lines 25-31.
[22]Transcript of proceedings, 2-37, lines 7-19.
There is very little difference between the parties’ positions as to the relevant sequence of events leading to the collapse of the boom of the Crane. The panels were placed into position over the course of three days in accordance with a document described as a “lift plan”.[23] Sprecak of G & M Panel Constructions prepared this plan. The lift plan identified the building to be constructed, the location of each stack of panels and information concerning each panel within a stack (including the panel number and final location).[24]
[23]Exhibit 10, lift plan.
[24]Transcript of proceedings, 1-47, lines 9-12; 39-46; 1-49, lines 1-5.
Between 30 January 2009 and 1 February 2009 Hitaua operated the Crane to lift and erect concrete tilt panels on the project site. On Friday, 30 January 2009, lifting took place towards the back of the factory. Approximately 12 panels were placed on the Friday.[25] Further panels were placed on Saturday, 31 January 2009, leaving approximately five or six panels to be lifted and placed on Sunday, 1 February 2009. The sequence in which the remaining panels were to be erected was 29, 34, 32, 31, 30 and 33.[26] At the time of the collapse of the boom the Crane was loaded with panel 30. Photographs 2 and 23 of exhibit 1 identify the placement positions of panels 29, 31, 32 and 34 prior to the placement of panel 30. Panel 30 was to be placed between panels 29 and 31. For the purposes of lifting the panels the Crane was set up in operating mode 5039. Hitaua referred to code 5039 as the working mode to operate and lift panels.[27] This code, 5039, sets the length of the boom at 26.4 metres at approximately 71 degrees. This operating mode allowed a maximum lateral inclination of 0.3 degrees measured at the pin at the base of the boom. Hitaua readily acknowledged that in the operating mode 5039 one had to operate the Crane on level ground. This was something he had known since receiving his training from Baden Cranes.[28]
[25]Transcript of proceedings, 1-49, lines 20-21; 34-35.
[26]Transcript of proceedings, 3-4, lines 15-16.
[27]Transcript of proceedings, 2-43, lines 21-22.
[28]Transcript of proceedings, 2-43, lines 24-29.
Panel 30 was the second last panel to be placed on the exterior wall facing the road. The placement of panel 30 was more difficult than the previous panels because the Crane could not drive straight towards the placement position. This was because, as evidenced by photograph 6 of exhibit 1, panel 33, which was the bottom panel of the stack to be placed last, was positioned in front of the gap where panel 30 was to be placed between the already erected panels 29 and 31.
Hitaua noticed that the ground along which the Crane had to travel for the purposes of placing panel 30 had deteriorated because of the operation of the Crane. He formed the view that he did not have a level platform in order to “walk on for panel 30”.[29] In order to place panel 30 he had to move the Crane “right up hard” against panel 31.[30] He had one of Sprecak’s workers use a measuring tape to measure the radius from the base of the footing to the centre of the slew. The measured spot was marked with a cross using white spray paint.[31] The white cross indicated the measurement of 6.5 metres radius. It was necessary for Hitaua to crawl the Crane to the centre of his slewing circle onto the white cross in order to have a radius of 6.5 metres for the placement of panel 30.[32] To permit Hitaua to crawl the Crane hard against panel 31 three instead of five props or braces were affixed to panel 31.[33] Only three props were affixed to panel 31 because the intention was to walk the Crane in between the props for the purposes of placing panel 30.[34]
[29]Transcript of proceedings, 3-13, lines 7-46.
[30]Transcript of proceedings, 3-14, lines 10-11.
[31]Transcript of proceedings, 2-45, lines 40-46; 2-46, lines 17-20.
[32]Transcript of proceedings, 3-45, lines 33-46; 2-7, lines 1-16.
[33]Exhibit 1, plaintiff’s bundle of photographs, photograph 2.
[34]Transcript of proceedings, 1-64, lines 15-28; exhibit 8, record of interview – G & M Panel Constructions Pty Ltd dated 9 October 2009, 26-27.
Steps were taken in an attempt to level the ground over which the Crane had to traverse for the purposes of placing panel 30. Sprecak, at the request of Hitaua,[35] instructed one of his workers, Maurice Clark, to place concrete rubble between the stack of panels and the building under construction.[36] Maurice Clark used the excavator to break up the caster beds inside the building on which the stacks of panels had sat.[37] Hitaua referred to this concrete as “sacrificial concrete” which was concrete that had no reinforcing.[38] After Maurice Clark had completed his task Sprecak observed that the ground “looked nice and flat”.[39]
[35]Transcript of proceedings, 2-7, lines 23-24.
[36]Transcript of proceedings, 1-50, lines 36-43; 1-51, lines 1-4.
[37]Transcript of proceedings, 1-53, lines 19-24.
[38]Transcript of proceedings, 3-72, lines 40-47; 3-73, lines 9-10.
[39]Transcript of proceedings, 1-52, line 1.
Hitaua then positioned the Crane against the long edge of panel 30 as it sat on the caster bed on top of panel 33. The front of the tracks of the Crane were facing the building about 2 metres behind the edge of panel 30.[40] Hitaua then slewed the boom of the Crane to about 90 degrees from straight ahead towards the building. The riggers attached the rigging gear to panel 30 and the hook of the Crane. Hitaua then disengaged the slew brake and lifted panel 30 off panel 33 raising it to a vertical position.[41] Panel 30 was then slewed anti-clockwise about 125 degrees and lowered so that the base was on the ground. The Crane held panel 30 in the vertical position while the riggers used an elevated work platform to attach the props to panel 30.[42]
[40]Transcript of proceedings, 3-14, lines 30-36.
[41]Transcript of proceedings, 3-75, lines 5-24.
[42]Transcript of proceedings, 3-75, lines 26-30.
Whilst the props were being affixed to panel 30 Hitaua did something which he had not done in relation to lifting the other panels. He left the cabin of the Crane to work on the rubble platform over which the Crane had to crawl in order to place panel 30 in the footing.[43] According to Hitaua he worked on levelling the rubble for approximately 10 to 15 minutes.[44] Sprecak, however, thought that Hitaua took 30 minutes or maybe a bit longer.[45]
[43]Transcript of proceedings, 3-18, lines 25-27.
[44]Transcript of proceedings, 3-19, lines 21-22.
[45]Transcript of proceedings, 1-52, lines 11 to 13. Paragraph [8](c)(xi)C of the plaintiff’s second further amended reply filed by leave on 4 December 2014 pleads that Hitaua took about 30 to 45 minutes to spread the rubble.
After Hitaua had worked on the rubble he was of the opinion that the ground looked level to him and that it was fine.[46] Sprecak, however, did not share this opinion. He accepted in cross-examination that he questioned Hitaua as to the “ramp” being too high.[47]
[46]Transcript of proceedings, 3-19, lines 4-5.
[47]Transcript of proceedings, 1-58, lines 25-34.
Caution should be exercised in relation to the use of the word “ramp”. In the joint expert report of 16 November 2012, the experts agreed on the following point:[48]
“The use of the term ramp is eschewed. Loose rubble was placed on the ground in front of the crane. The rubble was proud of the surrounding ground surface. The rubble was overfilled deliberately with the intention of it being compressed by the crane.”
My use of the word “ramp” in this judgment should therefore be understood in this context. It is clear from the evidence of both Hitaua and Sprecak that even though the rubble was high, they expected the combined weight of the Crane and panel 30 to compress the rubble ramp which had been created by Hitaua.[49]
[48]Exhibit 33, joint expert report of Patrick Cusack, David Hartigan and Keith Spanswick dated 16 November 2012, 3.
[49]Transcript of proceedings, 1-50, lines 36-43 (Sprecak); 3-72, lines 22-47 (Hitaua).
I accept that Sprecak told Hitaua that the ramp that he had constructed was too high. The statement is consistent with a statutory declaration sworn by Sprecak on 27 February 2009 in which he stated:[50]
“At some point about then, James the crane driver ordered Maurice to get the loose concrete from the broken out voids in the panels and pile it into a ramp or platform for the crane to work on. I questioned James that the ramp was too high.”
[50]Exhibit 7, statutory declaration of Gary Sprecak sworn 27 February 2009, 5.
Sprecak’s evidence is also consistent with his answers given in a record of interview with officers from Workplace Health and Safety Queensland conducted on 23 November 2009:[51]
[51]Exhibit 8, record of interview – G & M Panel Constructions Pty Ltd dated 9 October 2009, 28.
“Gary said: Oh yeah well before we put in before we put as we were going to put 30 panel 30 in yeah then he said he was gunna build ah actually he didn’t tell me that he was gunna build a ramp. I went up to the office and that’s I come back out and that’s when I seen nothing was happening and then yeah he started throwing all this gravel all this rubble in here.
Andrew said: Who was that?
Gary said: Steve um James yeah the crane driver.
Andrew said: How was he doing that?
Gary said: Oh with the bobcat and excavator and that’s when… …
Andrew said: Did you have any conversations then?
Gary said: Yeah and that’s when I said to him I said to him ah don’t you think that’s a little bit high. You know I said you should knock that down cause you don’t need you don’t need that. You know probably only two bits two or three bits of concrete just to keep it level keep your toe of your crane it’s got to be flat on the ground and that’s where you get your troubles if you have your rocking now…”
Hitaua’s denial of this conversation was both unconvincing and equivocal:[52]
[52]Transcript of proceedings, 3-61, lines 34-45.
“Did Mr Sprecak have a conversation with you about building that rubble up?---Yes.
Did he tell you that he thought it was too high?---No.
He didn’t tell you that?---No. He might have but I can’t recall it.
He could have said that?---He could have.
‘Don’t you think that’s a little bit high’ – he could have said that?---I don’t know.
All right. And, ‘you should knock it down because you don’t need that’ – did he say that?---I don’t know. I can’t recall.”
James Strong, who was working on the site as a rigger, accepted in cross-examination that Sprecak said to Hitaua that the ramp he had built was too high.[53] Hitaua did not heed this warning, responding to Sprecak with words to the effect:[54]
“When the red light is flashing, do not listen to Gary [Sprecak].”
[53]Transcript of proceedings, 3-79, lines 31-34.
[54]Transcript of proceedings, 3-79, lines 36-42.
Both Sprecak and Strong in cross-examination were reluctant to accept that Hitaua made such a response. However, when Sprecak recalled this conversation in his statutory declaration of 10 February 2009 and when Strong recalled the conversation in his statutory declaration of 13 May 2009 both refer to this response having been made by Hitaua. Strong ultimately accepted that if the conversation was as recorded in his statutory declaration then “that’s what happened”.[55] Hitaua’s response should not be understood as suggesting that the red light on the Crane was actually flashing. Rather, the response suggests that he as the operator of the Crane was ultimately responsible for ensuring that it was operating on level ground. As the operator of the Crane he had the last say and had to be satisfied with the level of the ground upon which the Crane would be operating.[56] Hitaua knew that if the Crane was operated on a slope it exposed the Crane to a risk that there might be a failure of the boom or other structural members.[57] He knew that if the Crane was to operate at more than 1 degree gradient such a situation had to be separately assessed:[58]
“Definitely. It’s got to be zero level.”
[55]Transcript of proceedings, 3-81, lines 41-42.
[56]Transcript of proceedings, 3-15, lines 39-47.
[57]Transcript of proceedings, 3-41, lines 40-43.
[58]Transcript of proceedings, 3-71, lines 15-16.
Upon completion of the rubble platform, Hitaua returned to the cabin of the Crane. Sprecak was acting as dogman. Under direction from Sprecak, Hitaua slewed the boom of the Crane clockwise from the position where the props had been affixed. The panel was about 600mm to 800mm off the ground and was guided by the two riggers, James Strong and David Pascoe.[59] When panel 30 reached about 90 degrees, Sprecak directed Hitaua to lower panel 30 to be closer to the ground. This was done.
[59]Transcript of proceedings, 3-76, lines 4-34.
It is at this point of the narrative that the parties part company. The three eyewitnesses to the collapse called by the plaintiff, Hitaua, Sprecak and Strong, gave evidence that at the time of the collapse the Crane was being operated on level ground. By reference to a photograph (exhibit 40), Hitaua marked with the letter “B” where he says the front tracks of the Crane were at the time of the collapse of the boom. An eyewitness called by the defendant, Stanley Corbett, identified that the position of the front tracks of the Crane were not in the location marked “B” on exhibit 40 but were in the position as shown in another photograph (exhibit 65). This photograph shows the Crane in its final resting position.
David Hartigan of Field Engineers measured the angle of the Crane’s superstructure shortly after the collapse as 7 degrees from front to rear. There is no dispute as to the correctness of Hartigan’s measurement. It follows that if the Crane was in the final position as shown in exhibit 65 at the time of the collapse of the boom, then it was being operated well outside the manufacturer’s recommended level of 0.3 degrees. In order to determine whether the Crane was being operated on level ground as asserted by the eyewitnesses called by the plaintiff it is necessary to analyse their evidence in some detail.
Hitaua
Hitaua’s evidence was that once he had brought the panel back to 90 degrees over panel 33 he had to slew panel 30 around to his right approximately 45 degrees.[60] Panel 30 was pointing in the direction where it was going to be placed. He commenced to track forward until he came to the rubble which he could see from the cabin.[61] It is this position that Hitaua marked with the letter “B” on exhibit 40.
[60]Transcript of proceedings, 3-22, lines 1-4.
[61]Transcript of proceedings, 3-22, lines 35-39; 3-23, line 4.
Hitaua’s evidence as to the sequence of events thereafter is as follows:[62]
[62]Transcript of proceedings, 3-23, lines 23-47; 3-24, lines 2-43.
“What happened then?---I told Gary I’m going to slew around a wee bit more.
Why was that?---So I can bring the panel - - -
Yep?--- - - - in its right – in its right position so I can place it.
All right?---So I can track forward a wee bit more then I can drop it into place.
As you’re doing this, what functions of the - sorry, are you looking at the functions of the crane on the computer?---Yes.
Which functions are you looking at?---I always look at the - the bubble.
Yep. Which shows you what?---The bubble which shows you the level of the crane.
Right?---And - and I also look at the bar graph.
Which shows what?---It shows the capacity - capacity - if the load decides to move or - move, the bar graph might change.
All right. Now, you were telling his Honour you looked at these two thing?---Yes.
And what did you see? What did you see?---What did I see?
Yes?---What I saw was the - the ground - the bubble was level.
Yep?---Okay? And the bar graph was - was - I think it was below 75 per cent.
Within capacity?---Just on 50 - yes, it was in capacity.
All right. Now, you’ve just told us you’ve got - you’ve told Gary you’re going to move the panel further around?---Yes.
So what did you do then?---Well, I wanted to - I started to slew around. And just when that happened, two or three seconds, I heard two big bangs.
Well, just before you get to that?---Yeah.
As you engaged the - did you engage the slew right motion, is that what you - - -?---Yes.
What happened after you engaged the slew right motion to move it around?---It wouldn’t - all I heard was two big bangs to slew right.
What did you say before that? It wouldn’t? Is that what you said?---Yeah.
It wouldn’t?---Yeah.
What do you mean by that?----It wouldn’t let me slew around.
Have you ever encountered this phenomenon before?---No. No.
Did you know what was happening?---No.
And sorry, and then you said you heard two bangs?---Two big bangs. In three - in between three or four seconds the whole boom come down.
And how did you - what was your first indication that something had gone wrong?---Oh - oh, just - just the windscreen in front of me just came towards me and shattered.
And how did you react when that happened?---Oh, all I could remember is this - this - my hands pushed forward and my - and my head went to the left.
Yes?---Because I - because I got cuts and - and grazes from the glass.
Yes?--- So I [indistinct] I was just shocked.
And you indicated pushing your hands forward; you can recall doing that?---Yes.”
Hitaua denied that he drove the Crane to the position shown in photograph 4 of exhibit 1.[63] In cross-examination Hitaua insisted that the Crane was level at all times.[64] In a further exchange in cross-examination Hitaua not only stated that the Crane was level at all times but further that it was “dead level”:[65]
“… I suggest to you, Mr Hitaua, that the crane was exactly where it’s shown in the photograph [photograph 13 of exhibit 12] when the boom collapsed?---Well, if that’s what you said, just, you’re wrong, mate, because that crane was dead level.”
[63]Transcript of proceedings, 3-25, lines 38-44.
[64]Transcript of proceedings, 3-49, lines 4-7.
[65]Transcript of proceedings, 3-52, lines 40-42.
The plaintiff submitted that I should accept Hitaua’s evidence as to the above outlined sequence of events. Two bases for this submission were identified. First, Hitaua’s denial as to the position of the Crane at the time of the collapse of the boom had been consistent throughout the investigation into the collapse and the trial.[66] Secondly, Hitaua was aware of his obligations to operate the Crane in accordance with the operating manual and in particular on level ground.[67] I do not accept this submission. There are three aspects of Hitaua’s evidence which cannot be accepted. The first is that at the time of the collapse of the boom the Crane was being operated on level ground in the position marked “B” on exhibit 40. Secondly, I do not accept that the Crane came to be in its final position (as evidenced in exhibit 12, photograph 13) by being accidently driven forward by Hitaua. Thirdly, I do not accept that Hitaua was, in the course of operating the Crane, “always” looking at the spirit level.
[66]Plaintiff’s submissions dated 10 December 2014, [123].
[67]Plaintiff’s submissions dated 10 December 2014, [129].
As to the first issue, Hitaua’s evidence that he was operating the Crane on level ground is inconsistent with the photographic evidence which shows the final position of the Crane. The final position of the Crane shown in the photographs is exactly where Hitaua intended to crawl the Crane in order to reach the white cross. This is basically the same position identified by Corbett in exhibit 65. Hitaua’s intention was to crawl the Crane “right up hard” against panel 31. He therefore intended to crawl the Crane over the rubble which he had constructed beyond the final position of the Crane as shown in the photographic evidence.
According to Hitaua after he heard the two bangs the boom collapsed within three or four seconds.[68] If the Crane was in the position as suggested by Hitaua it could not possibly have driven to its final position as shown in the photographs. This is because there was unchallenged expert evidence of Hartigan[69] that it would have taken the Crane 12 seconds to travel from point “B” to the final position of the Crane after the collapse. The defendant, in [14] of its written submissions, identifies a number of factors which support a finding that the Crane was not being operated on level ground at the time the boom collapsed:
[68]Transcript of proceedings, 3-24, lines 29-30.
[69]Exhibit 64, report of David Hartigan dated 27 November 2014, [11].
(a) Hitaua’s account is inconsistent with the location of the counterweights which had fallen directly behind the right hand track of the Crane as shown in its final resting position. The joint expert report by Cusack, Hartigan and Spanswick dated 16 November 2012 (exhibit 33) identified as a point of agreement between Cusack and Hartigan that the counterweight position on the ground indicates that the Crane was in the final position at the time that the counterweights were dislodged by the boom.
(b) If the Crane had been in the position identified by Hitaua at the time of the collapse, one would expect some evidence of drag marks on the concrete slab from the boom being dragged by the Crane if it had moved forward from the position marked by Hitaua as “B”. This absence of drag marks was identified by Hartigan in his report of 27 November 2014.[70] He was not challenged in cross-examination on this point.
[70]Exhibit 64, report of David Hartigan dated 27 November 2014, [14](e).
(c) As is evidenced by photograph 3 of exhibit 12, the hoist rope sheave shaft penetrated the concrete slab and is surrounded by concrete fragments. As submitted by the defendant:[71]
[71]Defendant’s submissions undated, [14](c).
“This suggests that the sheave shaft hit the concrete surface with a high speed (Hartigan, Ex 64 para 14(d)). Mr Hartigan was not challenged on this point in cross-examination. Cusack accepted the boom fell quickly (tp.5-14 ln.5). Even accepting that the Crane (in creeping gear and moving at a maximum speed in that gear of 28 cm per second) could have moved slightly forward during the time the boom was falling if the Crane was crawling forward, the fact that the boom has not been dragged after it struck the ground is powerful evidence the crane was not in the position (position “B” on Ex 40) asserted by Hitaua.”
I accept this submission.
(d) The section of the boom’s side wall that remained connected to the Crane’s superstructure after the collapse did not appear to have been subject to tensile load. This remained the only connection between the boom and the Crane. For the Crane to have travelled forward, it would have had to drag the boom by this section of plate.[72]
(e) Photograph 1 of exhibit 12 shows that the rear right corner of the utility tray of the vehicle damaged during the collapse had been struck from above by the boom tip and remained beneath it. The defendant therefore submits that if the boom had been dragged forward by the Crane the boom tip would be either under the utility tray or pulled up against it.[73] I accept this submission. It is entirely consistent with the photographic evidence and the Crane not moving any further forward after the boom had collapsed.
[72]Exhibit 64, report of David Hartigan dated 27 November 2014, [14](b).
[73]Exhibit 64, report of David Hartigan dated 27 November 2014, [14](c).
I consider the evidence of Sprecak, Strong and Corbett below. For the reasons identified below a consideration of the totality of their evidence is also inconsistent with Hitaua’s assertion that the Crane was operating on level ground at the time the boom collapsed.
The second aspect of Hitaua’s evidence which I reject is the suggestion that by pushing his hands forward after the windscreen of the cabin shattered this caused the Crane to move from position “B” on exhibit 40 to the Crane’s final position. The plaintiff’s case as originally pleaded was that the collapse of the Crane’s boom caused the Crane to lurch forward about 2 metres and onto the rubble. The original source of this information appears to be Hitaua and Steven Clark. Hartigan recorded in his first report dated 18 February 2009 the following:[74]
“During interview with myself and Greg McCosker [a loss adjuster], both the Operator James Hitaua, and the Supervisor, Steven Clark stated that the crane was working on the level ground to the rear of where the crane was seen sitting at the time of site inspection [9 February 2009]. They have stated that the crane was pushed to the final position by the inertia of the tipping boom.”
[74]Exhibit 56, report of David Hartigan dated 18 February 2009, [26].
On the first day of the trial however, Senior Counsel for the plaintiff in opening Hitaua’s evidence stated:[75]
“He will say at this time he then heard in quick succession two bangs and suddenly the boom collapsed without warning. He will say that the windscreen shattered over him and that in terror he turned his head away to avoid being hit in the face with glass and pushed his hands forward quite strenuously. His hands were on the levers which drive the crane at the same time, so he did this motion, and that, of course, meant as the crane was under power it moved forward.”
[75]Transcript of proceedings, 1-19, lines 36-42.
Unsurprisingly objection was taken by Senior Counsel for the defendant on the basis that the evidence as opened was inconsistent with the plaintiff’s pleaded case.[76] I therefore granted leave to the plaintiff to amend its pleading on the first day of trial to amend [17](c) of the amended fresh statement of claim which now pleads:
[76]Transcript of proceedings, 1-31; 1-32; 1-33.
“c) The collapse of the Crane’s boom caused:
i. the Crane to drive
lurchforward about 2 metres and onto the rubble pleaded in paragraph 12(f) due to the action of the operator pushing the handle leavers that were attached to the foot pedals away from his body in a forward motion;”
The change in the plaintiff’s case as to how the Crane came to be in its final resting position may be explained by the fact that the expert evidence did not support any theory that the collapse of the boom would have propelled the Crane forward. To the contrary, the unchallenged expert evidence suggested that the collapse of the boom may have had the contrary effect.[77]
[77]Exhibit 56, report of David Hartigan dated 18 February 2009, [39].
Hitaua in any event, did not give evidence in accordance with the case as opened. He did not in fact say that he pushed the levers of the Crane forward. His evidence, which I have quoted above, goes no further than an assertion that he pushed his hands forward and his head to the left.[78] He did not give evidence that the Crane moved forward up the ramp as a consequence of him pushing the levers forward. In cross-examination Hitaua reverted to a version he originally gave to investigators, namely that the collapse of the boom and panel 30 caused the Crane to be catapulted forward into the rubble and up the ramp.[79]
[78]Transcript of proceedings, 3-24, lines 36-43.
[79]Transcript of proceedings, 3-48, lines 32-45; 3-52, lines 37-38.
On the plaintiff’s case there is no logical explanation as to how the Crane came to be in its final position. The plaintiff expressly abandoned any case based on the Crane being catapulted forward because of the collapse of the boom and panel 30. Hitaua ultimately did not give evidence that the Crane was unintentionally driven forward up the ramp because of him thrusting his hands forward. As I have already observed, such a scenario should not in any event be accepted. Hitaua himself described the crawling speed of the Crane as “real slow”.[80] The crawling speed of the Crane is 27.8 centimetres per second.[81] Given the time lapse of 12 seconds to drive from point “B” to the final position of the Crane, it is improbable that the Crane was inadvertently driven this distance by Hitaua and in such a straight line that it came to rest exactly between the props of panel 31. The probability of such a scenario may be further discounted when one has regard to the lack of any drag marks and the position of the counterweights.
[80]Transcript of proceedings, 2-34, lines 27-29.
[81]Transcript of proceedings, 3-31, lines 40-43.
The third aspect of Hitaua’s evidence which I reject is that he was at all times observing the spirit level on the computer panel in the cabin of the Crane. It is not disputed that the Crane came to rest at a 7 degree angle. I find that Hitaua drove the Crane into this position intending to drive it further to the painted X near panel 31. There is no suggestion that the spirit level was not operating correctly. Hitaua had been warned by Sprecak that the rubble ramp he had constructed was too high. Whilst I accept that Hitaua’s expectation (from previous experience) was that the rubble would crush under the combined weight of the Crane and panel 30, the rubble did not in fact crush as expected. This resulted in Hitaua crawling the Crane up the rubble ramp for approximately 12 seconds. Had he been observing the spirit level it must have been obvious to him that the Crane was not being operated on level ground. His evidence that “the bubble was level”[82] (at all times) must be rejected.
[82]Transcript of proceedings, 3-23, line 47.
There is a fourth contentious aspect of Hitaua’s evidence. This concerns whether he was crawling panel 30 forward with the boom at 90 degrees or 45 degrees. Hitaua’s evidence was that prior to crawling the Crane forward he slewed it around another 45 degrees.[83] The defendant submits that Hitaua’s evidence that the boom was at 45 degrees is inconsistent with previous statements he has made.[84] In particular, the defendant refers to the accounts in the McCosker interview of 18 March 2009[85] and in Cusack’s report of 21 May 2009[86] where it is suggested that the boom was at 90 degrees when the Crane was moved forward. It is not necessary for me to resolve this factual issue. Irrespective of whether the boom was at 90 degrees or 45 degrees, the Crane was not being operated on level ground and the side load induced by the Crane operating on a 7 degree slope was sufficient to cause the collapse of the boom whether it was at 90 degrees or 45 degrees.
[83]Transcript of proceedings, 3-48, lines 21-22.
[84]Defendant’s submissions undated, [11].
[85]Exhibit 17, agreed bundle, document 35, interview of Hitaua and Clark by McCosker, 247.
[86]Exhibit 26, report of Patrick Cusack dated 21 May 2009.
It may however, be accepted that Hitaua, in order to place panel 30 into position tried to “slew around a wee bit more” to the right so he could track forward “a wee bit more”.[87] The Crane would not let him slew and then he heard two big bangs. The language used by Hitaua in his evidence-in-chief is significant. His use of the words “track forward a wee bit more then I can drop it into place” suggests that he was close to his intended final position for the placement of panel 30, which was hard against panel 31. If Hitaua was in the position on level ground as he suggests it would take him approximately 12 seconds to crawl the Crane to the position shown in the photographs. This is hardly tracking forward a “wee bit more” to drop panel 30 into position. What his evidence does suggest is that Hitaua had crawled the Crane to the position shown in the photographs (exhibit 12) and whilst in that position on a 7 degree slope had attempted to slew the panel right, albeit a “wee bit more”. This is when the boom collapsed.
[87]Transcript of proceedings, 3-23, lines 23, 29.
Sprecak’s evidence
Sprecak’s evidence-in-chief was that at the time that the boom collapsed the Crane was on level ground.[88] In cross-examination Sprecak was initially emphatic that the Crane at the time of the collapse was on level ground.[89] When pressed however, Sprecak agreed that the Crane had commenced on the ramp and was “slightly” out of level at the time of the collapse.[90]
[88]Transcript of proceedings, 1-53, lines 12-13.
[89]Transcript of proceedings, 1-61, lines 1-3; 2-15, lines 12-15.
[90]Transcript of proceedings, 2-18, lines 29-45; 2-19, lines 1-2.
Sprecak’s evidence (that at the time of the collapse of the boom the Crane was on level ground) must be rejected. First, it must be rejected for the reasons I have identified above in relation to the evidence of Hitaua. Further, Sprecak’s evidence that the Crane was level is inconsistent with more contemporaneous statements he made after the collapse. In this respect, the defendant tendered the transcript of an interview between Sprecak and Workplace Health and Safety Officers (exhibit 8) and a statutory declaration made by Sprecak on 27 February 2009 (exhibit 7). In the statutory declaration he stated: “[t]he crane was in the position that it was in after the accident.”[91] In the record of interview (exhibit 8) Sprecak stated that the Crane was in the position depicted in the photographs when the boom collapsed and he proffered an opinion that the cause of the collapse was because the Crane was operating on a slope:[92]
[91]Exhibit 7, statutory declaration of Gary Sprecak sworn 27 February 2009, 5.
[92]Exhibit 8, record of interview – G & M Panel Constructions Pty Ltd dated 9 October 2009, 37.
“Andrew [Schostakowski, Workplace Health and Safety Queensland] said: Um from like your experience of operating cranes
and your industry experience I suppose do you know do you have any do you know any of what sort of your opinion as far as um why the boom sort of has collapsed?
Gary said: Well, it’s probably on the angle.
Andrew said: What do you means as?
Gary said: Well, the crane was up on that ramp.
Andrew said: Yep.
Gary said: That’s what I said before you know like if it’s up like that it’s gotta you gotta have it level or within you know you can’t have it too far out of level.
Andrew aid: Yep.
Gary said: And that’s probably why it come down.
Andrew said: Yep okay.
Gary said: Because it’s out of level.”
There is no dispute that Sprecak made those two statements. The statements are in his statutory declaration and record of interview. They are admissible as evidence of the facts stated therein.[93] In determining the weight (if any) to be attached to these statements I am required to have regard to all the circumstances from which an inference can reasonably be drawn as to the accuracy or otherwise of the statement.[94]
[93]Evidence Act 1977 (Qld) s 101(1).
[94]Evidence Act 1977 (Qld) s 102.
Sprecak did not deny making the statements. He sought to explain the inconsistency between his statement in the statutory declaration to which I have referred and his evidence-in-chief:[95]
“MR THOMPSON: I see. Why did you say it was in that position - - -?---Well that – this – back then, my – I went all over the shop. My brain wasn’t good. I lost – I was going through a divorce at the time. Builders – the builder wasn’t going to – didn’t pay me. I paid Matton Developments, so I was losing – I lost a lot of money, and I just – I wasn’t even in my right frame of mind. So I scanned through this. Yes, it’s my fault. I scanned through this statement.”
[95]Transcript of proceedings, 1-61, lines 43-46; 1-62, lines 1-2.
Sprecak’s explanation of the inconsistency between the answers given in his record of interview quoted above and his evidence at trial was equally unconvincing:[96]
“… Now, on a previous occasion, you have said that this crane probably came down because it was out of level. That’s true, isn’t it? That was your opinion at the time?---Well, must – if I said it, I – but I – I don’t know - - -”
[96]Transcript of proceedings, 1-67, lines 29-32.
In re-examination Sprecak sought to explain the inconsistencies by the fact that he was “pretty shaken up” after the incident and he had a lot happening. As to the record of interview of 9 October 2009, Sprecak explained that he had not been given advanced notice of the issues to be discussed.[97]
[97]Transcript of proceedings, 2-21, lines 33-34.
Whilst I accept that the collapse had a considerable impact on Sprecak’s life and business, this does not constitute a sufficient explanation for the clear inconsistencies between his previous statements and his evidence at trial. His contemporaneous statements made in 2009 are consistent with the photographic evidence as to the final position of the Crane. One of the prior inconsistent statements, namely that “the crane was in the position that it was in after the accident” was sworn to in a statutory declaration. Sprecak accepted that a statutory declaration is a serious document and that this was a declaration he made shortly after the event.[98] The contemporaneous statements of Sprecak are of sufficient weight to support a factual finding that at the time of the collapse of the boom the Crane was not being operated on level ground. The contemporaneous statements also support a finding that the Crane at the time of the collapse was on the rubble ramp in the position depicted in the photographic evidence.
[98]Transcript of proceedings, 1-57, lines 41-42.
Strong’s evidence
Strong was an employee of G & M Panel Constructions. On Sunday, 1 November 2009 he was working on the Project site. He was one of the persons responsible for attaching the props to panel 30.[99] It took him approximately half an hour to attach the props. During this time he observed Hitaua building what he referred to as “the ramp”.[100] He states that Hitaua slewed panel 30 to approximately 10 o’clock with 12 o’clock being the building.[101]
[99]Transcript of proceedings, 3-75, lines 26-30.
[100]Transcript of proceedings, 3-75, line 46.
[101]Transcript of proceedings, 3-76, lines 43-46; transcript of proceedings, 3-77, lines 1-6.
In evidence-in-chief Strong was shown exhibit 18 which is a photograph of where the Crane came to rest after the boom had collapsed. He denied that the Crane was in that position at the time of the collapse.[102]
[102]Transcript of proceedings, 3-77, lines 40-45.
Strong’s evidence at trial as to the position of the Crane when the boom collapsed is inconsistent with a statement he made on 24 February 2009 (exhibit 21). In that statement Strong said:[103]
“P30 was on the hook, the props were on, it was being swung around to the north. The panel was about 1m off the ground and Gary directed the crane driver to bring it down to about 20cm from the ground. The boom was fairly square toward the north. The crane base was driven up on the ramp before the panel was slewed around. The crane did not sink on the ground or on the ramp at all. There was a noise and the panel came down the last 20cm and I heard another noise from the crane and new [sic] something was wrong. I heard someone say the boom is crumbling and I ran into the building. I could then see the driver, he was still trying drive it down. Three of us ran into the middle of - …”
This evidence supports a finding that Hitaua had driven up the slope prior to attempting to slew panel 30. It also supports the finding that the rubble ramp did not compress under the combined weight of the Crane and Panel 30 as Hitaua had expected.
[103]Exhibit 21, statutory declaration of James Strong sworn 24 February 2009, 3.
In a statutory declaration made by Strong on 13 May 2009 (exhibit 22) he stated:[104]
“Panel 30 was coming over across the top of panel 33 that was still on the casting bed as the crane crawled forward. As the crane began to crawl up the ramp James [Hitaua] had built the bottom of panel 30 contacted panel 33. I heard a bang and that’s when the crane boom and the panel fell back towards the road. I ran in towards the building. I saw all the glass in the cab smash. I thought there would have been dead people for sure.”
[104]Exhibit 22, statutory declaration of James Strong sworn 13 May 2009, [21].
Strong sought to explain these inconsistencies by suggesting that when he declared those matters in his statutory declaration he was “mistaken”.[105] A further explanation that he proffered for the inconsistencies was that his story had changed because of subsequent discussions he held with others including Sprecak.[106]
[105]Transcript of proceedings, 3-82, lines 5-7.
[106]Transcript of proceedings, 3-82, lines 9-47; 3-83, lines 1-18.
I accept the submission of the defendant that Strong’s oral evidence at trial was of no probative value because his change of story had been influenced by others.[107] The previous statements of Strong are admissible as evidence of any fact stated therein. As to the weight that should be accorded to his previous statements, they are relatively contemporaneous statements. Unlike his testimony at trial, there is no evidence that his contemporaneous recollection was influenced by his discussions with others. His previous statements are of sufficient weight to support the ultimate factual finding that Hitaua had driven the Crane up the ramp prior to the boom collapsing.
[107]Defendant’s submissions undated, [14](i).
Corbett’s evidence
Corbett was called by the defendant. He was, as at 1 February 2009, working for Sprecak. He was an experienced panel construction worker.[108] He witnessed the collapse of the boom on 1 February 2009. The plaintiff’s trial plan (exhibit 46) identified Corbett as a witness originally intended to be called by the plaintiff.
[108]Transcript of proceedings, 10-2, lines 18-20.
By reference to a photograph (exhibit 65), Corbett identified that he was standing in front of the Crane as it approached panel 31. He was in this position to ensure that the track of the Crane came between the two braces.[109] The two braces referred to are two of the props that were supporting panel 31 which had already been placed. Whilst in or about the position shown in exhibit 65 Corbett heard a little crack and then a bigger crack. When he heard the two cracks, he looked up and saw the boom falling. He said the boom came down “pretty quick”.[110] Immediately before he heard the two cracks, the crawler of the Crane was through the line of braces shown in exhibit 65 – “somewhere between two and 300 through – between the braces”, “just through the braces”.[111] The Crane was in the position shown in exhibit 65, not in the position marked “B” on the photograph (exhibit 40) as identified by Hitaua.[112] Corbett stated that immediately before the two bangs the crawler was about a metre away from where he was standing – he could have touched it.[113] Corbett did not move from his position as the boom collapsed. Corbett’s evidence as to his position is also consistent with a contemporaneous drawing (exhibit 11) made by Sprecak on or about 29 March 2009.
[109]Transcript of proceedings, 10-3, lines 19-20.
[110]Transcript of proceedings, 10-4, lines 6-8.
[111]Transcript of proceedings, 10-4, lines 10-16.
[112]Transcript of proceedings, 10-5, lines 26-33.
[113]Transcript of proceedings, 10-4, lines 20-41.
In cross-examination a previous statement made by Corbett on 10 June 2009 was tendered (exhibit 66). On my reading of this statement it is generally consistent with the evidence which he gave at trial. Corbett stated at [15]:
“When they lifted panel 30 I was standing in front of the left crane track which I have marked on photograph F. I was watching that the track was not going to hit the braces. Gary was standing in front of the other track watching it.”
[298]Allianz Australia Insurance Limited v Vitale [2014] NSWSC 364, [125] (Sackar J).
· require an insurer to give an assurance, not required to be given under the policy, that it would indemnify the insured for any further damage resulting from reparations for which liability was accepted;[299]
· prohibit an insurer from relying on an assumption against the interests of the insured after inquiries were made of the insured and no information was received;[300] and
· require an insurer to subjugate its interest to that of another party to a contract of insurance, for example requiring an insurer to refrain to seek contribution from a co-insurer.[301]
[299]Fogarty v CGU Insurance Ltd [2015] ACTSC 44, [65]-[66] (Murrell CJ).
[300]Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd (No 2) [2010] FCA 275, [23] (Rares J); not disturbed on appeal: Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53.
[301]Speno Rail Maintenance Australia Pty Ltd v Metals & Minerals Insurance Pte Ltd (2009) 226 FLR 306, 333 [163] (Beech AJA).
It follows that the duty of utmost good faith will require an insurer to act in accordance with commercial standards of decency and fairness, and with due regard to the insured’s interests,[302] but will not require the insurer to put the interests of the insured above its own.[303] The duty of utmost good faith does not equate to, nor is it synonymous or analogous to, a fiduciary duty.[304] An insurer is legitimately entitled to:
[302]CGU Insurance Limited v AMP Financial Planning Pty Ltd (2007) 235 CLR 1, 12 [15] (Gleeson CJ and Crennan J); Distillers Co Bio-Chemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1, 31 (Stephen J); Linsley v Petrie[1998] 1 VR 427, 440 (Hayne JA).
[303]Zurich Australian Insurance Ltd v Metals & Minerals Insurance Pte Ltd (2007) 209 FLR 247, 312 [297], [300] (Johnson J). Reversed in part on appeal but not on this point by Speno Rail Maintenance Australia Pty Ltd v Metals & Minerals Insurance Pte Ltd (2009) 226 FLR 306.
[304]See, for example, the remarks of Mason P in CGU Workers Compensation (NSW) Ltd v Garcia(2007) 69 NSWLR 680, 693 [60].
· a reasonable period of time to make further inquiries of all the circumstances giving rise to a claim, including inquiries of the insured and those involved in its occurrence;
· put an insured to proof if suspicious of the bona fides of the claim; and
· decline indemnity if the circumstances giving rise to the claim fall outside the insurable interest or an exclusion clause is applicable to the circumstances.
Does section 13 impose a statutory duty?
In its amended fresh statement of claim, the plaintiff pleaded that s 13 imposed, in addition to an implied term, a statutory duty on the defendant requiring it to:[305]
[305]Amended fresh statement of claim filed by leave on 1 December 2014, [7].
“a) in respect of any matter arising under or in relation to the Policy, act towards the Plaintiff with the utmost good faith;
b) apply real and genuine consideration to a claim on the Policy;
c) reach a proper decision in respect of a claim on the Policy on the evidence before it;
d) address the correct question(s) when considering a claim on the Policy;
e) not act unreasonably, arbitrarily or oppressively;
f) have regard to all relevant information;
g) obtain, of its own volition, all relevant evidence to enable it to make a fair and proper assessment of a claim on the Policy;
h) act with fair consideration to the Plaintiff’s interests;
i) provide the Plaintiff procedural fairness in assessing a claim on the Policy;
j) make a prompt admission of liability to meet a sound claim for indemnity;
k) make a prompt payment concerning an accepted claim”
The plaintiff submitted that, as a matter of statutory construction, when considering the clear meaning of the text[306] and the context of the Act, including its purpose, policy and the mischief it is seeking to remedy,[307] a statutory duty of utmost good faith is imposed upon the defendant.[308]
[306]Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27, 46-47 [47] (Hayne, Heydon, Crennan and Kiefel JJ).
[307]Project Blue Sky Inc. v Australian Broadcasting Authority (1998) 194 CLR 355, 381 [69] (McHugh, Gummow, Kirby and Hayne JJ).
[308]Plaintiff’s submissions dated 10 December 2014, [336]-[344].
The context of the Act and the mischief that the duty of utmost good faith sought to remedy is identified in the Australian Law Reform Commission Insurance Contracts Report that gave rise to the enactment of the Act:[309]
Legislation should make it clear that the duty of good faith applies to all aspects of the relationship between the insurer and the insured, including the settlement of claims. An insured should be entitled to recover damages for losses suffered by him as a result of the insurer's breach of the duty of good faith in relation to the settlement of a claim.
[309]Australian Law Reform Commission, Insurance Contracts, Report No 20 (1982) 202 [328].
The provisions of the Act that the plaintiff submitted imposed the statutory duty as a matter of necessary implication include:[310]
· Section 12 which prohibits the limiting or restricting of the duty of utmost good faith “by any other law”; and
· Section 13(2) that deems a breach of the duty of utmost good faith to be a breach of the requirements of the Act as creating an “obligation extending outside the contract”.[311]
[310]Plaintiff’s submissions dated 10 December 2014, [336]-[344].
[311]Transcript of proceedings, 11-47, lines 23-24.
The plaintiff submitted[312] that further support for a statutory duty is found in the judgment of Gleeson CJ and Crennan J in CGU Insurance Limited v AMP Financial PlanningPty Ltd where their Honours stated:[313]
“Conversely, an insurer’s statutory obligation to act with utmost good faith may require an insurer to act, consistently with commercial standards of decency and fairness, with due regard to the interests of the insured.” (emphasis added)
[312]Plaintiff’s submissions dated 10 December 2014, [338]; transcript of proceedings, 11-49, lines 28-38.
[313]CGU Insurance Limited v AMP Financial Planning Pty Ltd (2007) 235 CLR 1, 12 [15] (Gleeson CJ and Crennan J).
As a consequence of the breach of statutory duty, the plaintiff submitted that all damages causally connected to a breach of the statutory duty are compensable[314] and consequently are “assessed akin to tort rather than contract” to put the insured in the position it would have been had the breach not occurred.[315]
[314]Plaintiff’s submissions dated 10 December 2014, [351]-[352], citing: Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494, 509 [34] (McHugh, Hayne and Callinan JJ).
[315]Plaintiff’s submissions dated 10 December 2015, [350], [352], [353], citing Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, 99 (Brennan J).
Ultimately, the plaintiff claimed that a statutory duty of utmost good faith arises on the part of the defendant and that, as a consequence of its breach, it sounds in damages for all causally connected lost, including the default interest on the finance of the Crane from Westpac and then Gallop Reserve Pty Ltd.[316]
[316]Plaintiff’s submissions dated 10 December 2014, [361]-[364].
The defendant submitted that “no authority can be found” for s 13 giving rise to a statutory duty and that such a contention “is a misconception of section 13”.[317] The mischief to which s 13 was directed was to provide a remedy for breach of the term sounding in contractual damages.[318] Further, the imposition of such a statutory duty would be directly contrary to the view expressed by Gleeson CJ and Crennan J in CGU Insurance Limited v AMP Financial Planning Pty Ltd:[319]
“However, the Act does not empower a court to make a finding of liability against an insurer as a punitive sanction for not acting in good faith. If there is found to be a breach of the requirements of s 13 of the Act, there remains the question how that is to form part of some principled process of reasoning leading to a conclusion that the insurer is liable to indemnify the insured under the contract of insurance into which the parties have entered. Let it be assumed, for example, that CGU's failure throughout substantially the whole of the year 2002 to admit or deny liability was a failure to act with the utmost good faith. What follows from that? Most of the settlement amounts were paid during 2001. Again, even if it be said that CGU should have made up its mind about liability before October 2001 (a difficult assertion to sustain having regard to what was said at the meeting of 5 October 2001), what follows? Between a premise that CGU's delay constituted a failure to act with the utmost good faith, and a conclusion that CGU is liable to indemnify AMP in respect of the settlement amounts, there must be at least one other premise. What it might be has never been clearly articulated.”
[317]Defendant’s submissions undated, [242]-[243].
[318]Defendant’s submissions undated, [244]-[246], citing CGU Insurance Limited v AMP Financial Planning Pty Ltd (2007) 235 CLR 1, 41-42 [126]-[127] (Kirby J); Lomsargis v National Mutual Life Association of Australasia Limited [2005] 2 Qd R 295, 309 [39]-[41] (McMurdo J).
[319]CGU Insurance Limited v AMP Financial Planning Pty Ltd (2007) 235 CLR 1, 12-13 [16] (Gleeson CJ and Crennan J).
A tort of bad faith based on the implied term of utmost good faith has been rejected by both this Court and the New South Wales Court of Appeal.[320] The defendant submitted that this shows that there are no other causes of action available to increase the contractual remedies otherwise available.[321]
[320]Lomsargis v National Mutual Life Association of Australasia Limited [2005] 2 Qd R 295, 299 [10]-[14] (McMurdo J); CGU Workers Compensation (NSW) Ltd v Garcia (2007) 69 NSWLR 680, 704 [129] (Mason P with whom Hodgson and Santow JJA agreed).
[321]Defendant’s submissions undated, [248]-[250].
Finally, the defendant submitted that the newly introduced s 13(2) of the Act, deeming a breach of the duty of utmost good faith to be a breach of the requirements of the Act, provides no civil sanctions for its breach but instead provides for regulatory sanctions by the Australian Securities and Investments Commission (“ASIC”).[322]
[322]Insurance Contracts Act 1984 (Cth) s 14A.
ASIC’s powers in this respect are found in s 14A and s 55A of the Act. These sections were introduced by the Insurance Contracts Amendment Act 2013 (Cth). These powers extend to ASIC dealing with an insurer’s failure to comply with the duty of utmost good faith in relation to handling or settlement of claims. ASIC is also empowered to bring, in certain circumstances, a representative action on behalf of insureds.
The Explanatory Memorandum for the Insurance Contracts Amendment Act 2013 (Cth) explains the rationale for the inclusion of these provisions, stating that enforcing compliance of the duty of utmost good faith may present “too great an expense for some parties and does not provide long-term solutions to systemic breaches of utmost good faith committed over time”.[323] Consequently, to remedy this mischief, the newly enacted sections allow ASIC to exercise its Corporations Act 2001 (Cth) powers,[324] such as banning and suspension of financial services licences, and, as mentioned, to undertake representative action on behalf of an insured,[325] and thereby alleviate the expense for an aggrieved insured. The Explanatory Memorandum further states that a breach of the duty is “not an offence against the [Act], nor does it attract any penalty under the [Act].”[326]
[323]Explanatory Memorandum, Insurance Contracts Amendment Bill 2013 (Cth), [1.6].
[324]Insurance Contracts Act 1984 (Cth) s 14A; Explanatory Memorandum, Insurance Contracts Amendment Bill 2013 (Cth), [1.8], [1.11]-[1.14].
[325]Insurance Contracts Act 1984 (Cth) s 55A; Explanatory Memorandum, Insurance Contracts Amendment Bill 2013 (Cth), [1.9].
[326]Explanatory Memorandum, Insurance Contracts Amendment Bill 2013 (Cth), [1.15].
The elements of a civil action for breach of statutory duty are identified in chapter 18 of the 10th edition of Fleming’s “The Law of Torts”[327] and adopted by Le Miere J in Alcoa of Australia Ltd v Apache Energy Ltd:[328]
[327]Neil Foster, ‘The Tort of Breach of Statutory Duty’ in Carloyn Sappideen and Prue Vines (eds), Fleming’s the Law of Torts (Lawbook, 10th ed, 2011), 423.
[328]Alcoa of Australia Ltd v Apache Energy Ltd [2012] WASC 209.
· the intention of Parliament to allow an action;
· the plaintiff must fall within the “limited class” of the public for whose benefit the statutory provision was enacted;
· the damage must also fall within the intended scope of the statute;
· the obligation under the statute was imposed on the defendant;
· the defendant must have breached the statute; and
· that breach must have caused actual damage of some sort to the plaintiff.
In Sovar v Henry Lane Pty Ltd, Kitto J outlined indicia of an intention of Parliament to allow an action:[329]
The legitimate endeavour of the courts is to determine what inference really arises, on a balance of considerations, from the nature, scope and terms of the statute, including the nature of the evil against which it is directed, the nature of the conduct prescribed, the pre-existing state of the law, and, generally, the whole range of circumstances relevant upon a question of statutory interpretation.
[329]Sovar v Henry Lane Pty Ltd (1967) 116 CLR 397, 405 (Kitto J). See also: Australian Iron & Steel v Ryan (1957) 97 CLR 89, 97-98 (Kitto J); ByrnevAustralian Airlines Ltd (1995) 185 CLR 410, 424 (Brennan CJ, Dawson and Toohey JJ).
In determining whether a statutory duty arises the starting point is the words of the relevant provisions of the Act. On an ordinary reading of s 13(1), it does no more than imply into a contract of insurance a provision requiring each party to act towards the other party with the utmost good faith. It takes effect “by a legal fiction … that the parties had made a contract which included the obligation”.[330] Such terms, implied by statute, are common. The breach of which is the breach of “an obligation imposed by the contract itself.”[331] The mere implication of a term into a contract of insurance by statute does not, in itself, give rise to a statutory duty. More is required.
[330]Arturi v Zupps Motors Pty Ltd (1980) 49 FLR 283, 286 (Brennan J).
[331]Arturi v Zupps Motors Pty Ltd (1980) 49 FLR 283, 286 (Brennan J).
The plaintiff placed significant reliance on s 13(2) as providing a basis for the imposition of a statutory duty. This must be rejected. The enactment of s 13(2) was to provide ASIC with wide powers for regulatory action against an insurer and to conduct representative actions on behalf of aggrieved insureds. On a plain and natural reading of the Act, a “breach of the requirements of the Act” simply provides a trigger for ASIC to exercise its powers. It does not provide support for a statutory duty.
A private action for breach of statutory duty is more readily inferred were there is no other adequate or alternative remedy.[332] Although not in the form of a penalty, the Act provides the possibility for regulatory sanction and consequential deterrence as a means for enforcing the statutory obligation other than by private action.[333] A party may also sue in contract for a breach of the implied term.
[332]Sovar v Henry Lane Pty Ltd (1967) 116 CLR 395, 405 (Kitto J). See also: Byrne v Australian Airlines Ltd (1995) 185 CLR 410, 425-426 (Brennan CJ, Dawson and Toohey JJ).
[333]Sovar v Henry Lane Pty Ltd (1967) 116 CLR 395, 405 (Kitto J); Alcoa of Australia Ltd v Apache Energy Ltd [2012] WASC 209, [109] (Le Miere J).
It has also been noted that the generality of the provision in question tends against the inference of a private action for breach of statutory duty.[334] Section 13 has, so far, been incapable of precise definition and the conduct that falls inside or outside of the ambit of the duty of utmost good faith remains undecided.[335]
[334]O’Connor v S P Bray Ltd (1937) 56 CLR 464, 478 (Dixon J); Smith v Macquarie Stevedoring Co (1965) 67 SR (NSW) 32, 44 (Wallace J); X (Minors) v Bedfordshire County Council [1995] 2 AC 633, 732 (Lord Browne-Wilkinson); Schiliro v Peppercorn Childcare Centres Pty Ltd (No 2) [2001] 1 Qd R 518, 526 [23] (McMurdo P, Pincus, Davies and Thomas JJA and Helman J); Alcoa of Australia Ltd v Apache Energy Ltd [2012] WASC 209, [106]-[107] (Le Miere J).
[335]Paragraph [232].
Examination of the historical legislative context of the Act and of recent decisions exploring the effect of the duty of utmost good faith provides further argument against s 13(1) creating a statutory duty. In Re Zurich, Chesterman J held that there was not a separately existing independent duty of good faith.[336] In Lomsargis, McMurdo J, after a thorough examination of English, American, Canadian and Australian decisions, held that there was no separate cause of action in the form of a tort of bad faith if the s 13 duty of utmost good faith is breached.[337] As identified by his Honour, “[a]s a matter of principle and policy, there seem to be good reasons for not recognising a concurrent liability in tort for their breach.”[338] His Honour left open the question of whether exemplary damages may be available for breach of the duty of utmost good faith in contract.[339] A separate “cause of action” by reason of an alleged breach of the duty of utmost good faith was also rejected in ANZ Banking Group v Rqa Accountants Pty Ltd.[340]
[336]Re Zurich Australian Insurance Limited [1999] 2 Qd R 203, 210 [40], 215 [60], 218-219 [82] (Chesterman J).
[337]Lomsargis v National Mutual Life Association of Australasia Limited [2005] 2 Qd R 295, 316 [59] (McMurdo J).
[338]Lomsargis v National Mutual Life Association of Australasia Limited [2005] 2 Qd R 295, 314 [56], 315 [58] (McMurdo J). This was approved in: CGU Workers Compensation (NSW) Ltd v Garcia (2007) 69 NSWLR 680, 704 [129] (Mason P with whom Hodgson and Santow JJA agreed).
[339]Lomsargis v National Mutual Life Association of Australasia Limited [2005] 2 Qd R 295, 311-312 [46], 315 [58] (McMurdo J).
[340]Australia & New Zealand Banking Group v Rqa Accountants Pty Ltd [2013] NSWSC 165, [90]-[95] (Adamson J).
Section 13 of the Act was enacted to fill a significant gap[341] in relation to insurance contracts in clarifying with certainty that the duty of utmost good faith applies to both the insured and the insurer for the life of the policy of insurance. It provides a basis for either party to seek contractual damages for its breach. Further amendments provide regulatory sanctions for its contravention and allow ASIC to provide assistance to aggrieved persons in seeking contractual remedies. These factors do not support the existence of a concurrent liability in tort, whether by way of a statutory duty or a tort of bad faith.
[341]CGU Workers Compensation (NSW) Ltd v Garcia (2007) 69 NSWLR 680, 703 [125] (Mason P).
In Byrne v Australian Airlines Ltd, McHugh and Gummow JJ stated that where the legislation is that of the Commonwealth, and the question is one respecting the creation of new rights and liabilities which will engage Ch III of the Constitution, it is expected that the Parliament would clearly state its will.[342] The difficulties in finding for a private action identified above shows that Parliament has not clearly stated its will as to the existence of a statutory duty.
[342]Byrne v Australian Airlines Ltd (1995) 185 CLR 410, 458 (McHugh and Gummow JJ).
There are two additional considerations which tell against a statutory duty. The first is that s 13(1) applies to all insureds and insurers. The implied duty is mutual and reciprocal and extends to “all contracts of insurance and proposed contracts of insurance”.[343] This is a very wide class; one could easily envisage a very large portion of the community would hold insurance. Any one insured could not be said to belong to a “limited class” of the public for whose benefit s 13(1) was enacted. Secondly, the obligation created by s 13(1) is not solely imposed on insurers. It applies also to insureds. It cannot be said that the provisions are designed to “protect” a class of persons,[344] namely insureds, of which the plaintiff is a member, any more than the provisions are designed to “protect” insurers.
[343]Insurance Contracts Act 1984 (Cth) s 8(1).
[344]Slivak v Lurgi (Australia) Pty Ltd (2001) 205 CLR 304, 315-316 [27] (Gleeson CJ, Gummow and Hayne JJ); Byrne v Australian Airlines Ltd (1995) 185 CLR 410, 424-426 (Brennan CJ, Dawson and Toohey JJ).
Section 13(1) does not therefore create a statutory duty affording the plaintiff a private right of action for its breach.
Has the defendant breached the implied duty?
The plaintiff submitted that the defendant breached its duty of utmost good faith in refusing indemnity. The essence of the alleged breach is that the defendant, in refusing to indemnify, relied on the conclusions drawn by its own experts rather than having a proper regard to the eye witness testimony including that of Hitaua. The plaintiff alleges that the defendant sought to disprove the plaintiff’s version of events.[345] The plaintiff further alleges that the defendant failed to apply any real and genuine consideration to the claim and in refusing the claim acted unreasonably, arbitrarily or oppressively and did not have regard to all relevant information. The defendant therefore, as is alleged, failed to act with fair consideration to the plaintiff’s interest and provide the plaintiff procedural fairness.[346]
[345]Plaintiff’s submissions dated 10 December 2014, [355].
[346]Plaintiff’s submissions dated 10 December 2014, [354].
In considering these alleged breaches it is necessary to first identify the investigative steps taken by the defendant. Most of these steps have been set out in the plaintiff’s submissions.[347] This history is largely drawn from the documents in the Agreed Bundle (exhibit 17). The documentary history was supplemented by the defendant calling Gordon Nichols. Nichols was the former National Technical Claims Manager for the defendant. He was not initially involved in the claim which was notified through a wholesale broker Austagencies. Nichols however, became the relevant claims manager because of his expertise in the construction industry. He is the signatory to the letter of 1 April 2009 refusing indemnity.
[347]Plaintiff’s submissions dated 10 December 2014, [80]-[106].
The day after the collapse of the boom the defendant caused a solicitor to be appointed to act on its behalf. The solicitor was instructed to appoint appropriate experts including a metallurgist to assist with the investigation into the cause of the boom collapse.[348] On 6 February 2009 Hartigan was appointed to investigate the incident. On 9 February 2009 Hartigan, in company with McCosker, attended the site with a representative from Liebherr-Australia Pty Ltd, the manufacturer of the Crane. Hartigan’s preliminary conclusions are contained in his report of 18 February 2009.[349] The executive summary to Hartigan’s first report identified his belief as to how the boom collapsed:[350]
[348]Exhibit 17, agreed bundle, document 11, email Carol Taylor to Colin Wrench dated 2 February 2009, 200.
[349]Exhibit 56, report of David Hartigan dated 18 February 2009.
[350]Exhibit 56, report of David Hartigan dated 18 February 2009, 3.
“ 3. I believe that the crane was driven onto a slope of 7 degrees while lifting a load of 39.2T.
4. Such operation is against the instructions of the manufacturer.
5. I believe that operation on the 7 degree slope is the cause of the boom collapse.”
Hartigan’s preliminary view is consistent with my factual findings. Prior to the letter of refusal of indemnity of 1 April 2009, Hartigan supplied two further reports.[351] In his report of 5 March 2009, Hartigan provided an opinion as to whether the Crane was operated contrary to manufacturer’s guidelines. His preliminary findings in this respect are again consistent with my findings. In his third report of 30 March 2009, Hartigan specifically considered the record of interview of Hitaua and Steven Clark of 18 March 2009.
[351]Exhibit 58, report of David Hartigan dated 5 March 2009; exhibit 59, report of David Hartigan dated 30 March 2009.
Also prior to the letter of refusal, Nichols required a further detailed statement from the Crane manufacturer. He also required Hitaua to be re-interviewed.[352]
[352]Exhibit 17, agreed bundle, document 26, email Gordon Nichols to Carol Taylor dated 12 March 2009, 217.
Nichols had previously arranged for a metallurgical expert, Spanswick, to be appointed. Spanswick provided a report dated 19 February 2009.[353] Spanswick carried out a site investigation specifically for the purpose of determining whether the failure of the boom was due to some pre-existing metallurgical defect. His conclusion was that the boom had failed in response to an overstressed state. No metallurgical defects were detected that were likely to have caused or contributed to the failure. Spanswick further concluded that the Crane had probably been driven to the site of the failure.
[353]Exhibit 45, report of Keith Spanswick dated 19 February 2009.
On 19 March 2009 Nichols also received an email outlining the salient issues arising from the further interview of Hitaua.[354] A statement from Hitaua’s first interview had already been compiled. One of the points made by Hitaua when he was re-interviewed was that he had not started to negotiate the “ramp” at the time of the collapse and that the Crane was thrown to where it came to rest. I note that Hitaua’s suggestion that the Crane was thrown to its final position was a part of the plaintiff’s case that was expressly abandoned.
[354]Exhibit 17, agreed bundle, document 31, email Greg McCosker to Gordon Nichols dated 19 March 2009, 224.
Nichols replied to this email on 19 March 2009.[355] He noted that Hitaua’s assertion that he was not walking the machine at the time of the collapse appeared to be inconsistent with Sprecak’s statement. This is a reference to an unsigned statement of Sprecak which had been provided to Nichols. In that unsigned statement Sprecak at [19] identified that the Crane “was on a bit of a slight angle forwards” and “the crane was not level, but it was not much out of level”.[356]
[355]Exhibit 17, agreed bundle, document 32, email Gordon Nichols to Greg McCosker dated 19 March 2009,
[356]Exhibit 17, agreed bundle, document 35, statement of Gary Sprecak (unsigned and undated), 233.
The last paragraph of Nichols’ letter of 1 April 2009 provided the following opportunity to the plaintiff:[357]
“Should you seek to dispute this decision or consider there is additional information or documentation which may cause us to alter our stance then we invite its early submission. Your further rights and entitlements are spelt out in the attached brochure including your entitlement to seek determination from the FOS should you consider you have been unjustly dealt with however your first step in this process is to seek consideration by CGU’s insurance dispute resolution area.”
[357]Exhibit 17, agreed bundle, document 35, letter CGU to Matton Developments dated 1 April 2009, 230.
The plaintiff took up this invitation and in a letter from Sirius dated 28 May 2009 submitted that the information provided in the reports of Hartigan and Spanswick was fundamentally incorrect. Reports of Cusack and another expert, Jenkins, were enclosed with the letter. The letter restated that the plaintiff maintained that the machine was never operated from its final resting place shown in the photographs. That submission, it was said, was supported by eye witness reports. The letter further submitted that the independent reports from Cusack and Jenkins were supportive of the proposition that the Crane was not being operated from the “ramp”.[358] The defendant continued to refuse indemnity.
[358]Exhibit 17, agreed bundle, document 37, letter Sirius Risk Services Pty Ltd to CGU dated 28 May 2009, 274-276.
Mr Nichols in evidence confirmed that he had regard to the reports of Hartigan, Spanswick and the statements which had been obtained in refusing cover.[359] Upon consideration of that information he formed the view that Hitaua had misconceived where he was actually positioned on the ramp at the time of the collapse.[360] It was forcefully put to Nichols in cross-examination that his agenda was to do everything he could to disprove the way the accident happened according to the plaintiff. Nichols’ response was as follows:[361]
“No, I entirely disagree with you. And that has never been my way in my whole career. I have found ways to pay claims not reject them.”
[359]Transcript of proceedings, 10-21, lines 11-16; 10-22, lines 1-5.
[360]Transcript of proceedings, 10-24, lines 10-15.
[361]Transcript of proceedings, 10-36, lines 19-20.
I found Nichols to be an impressive witness. He was an experienced claims manager who gave detailed consideration to the claim. This detailed consideration included the appointment of loss adjusters and assessors, receiving reports from engineering and metallurgist experts and giving consideration to the eye witness accounts. I accept the defendant’s submission that the decision to decline was one which evolved and was made after careful consideration of the available evidence including the lay evidence. To the extent that Hitaua’s evidence was not accepted by the defendant, an insurer is not obliged to accept the statement of an operator or even an insured, who may be honestly mistaken.[362] On the information that was before the defendant prior to 1 April 2009, it was entitled to refuse cover. The refusal of cover in the circumstances of the present case does not constitute any breach of the defendant’s implied duty of utmost good faith. As stated by Kirby J in CGU Insurance Limited v AMP Financial Planning Pty Ltd:[363]
“An insurer, acting in good faith, is perfectly entitled to deny indemnity. It can put the insured to proof where it rejects a claim, where it is suspicious about it or where it has bona fide reservations concerning its obligations to indemnify the insured. Then, at least, insurer and insured know where they each stand. Each can take appropriate advice. Each can prosecute and defend its legal entitlements …”
[362]Defendant’s submissions undated, [233]-[234].
[363](2007) 235 CLR 1, 27-28 [72].
If the defendant breached the implied duty what losses are recoverable?
If I am wrong in my conclusions that no statutory duty arises and that there was no breach of the implied duty of utmost good faith, it is necessary to consider the assessment of damages.
In its claim for damages the plaintiff did not seek to differentiate between damages arising from a breach of statutory duty and damages arising from a breach of the implied duty. Submissions were only made by the plaintiff in respect of an assessment of damages for breach of the implied duty. The damages identified were the plaintiff’s liability for default interest on the Crane equipment finance agreement and legal costs. The liability to pay default interest on the Westpac loan and the Gallop loan arises in the plaintiff’s submission because of the defendant’s failure to pay the benefit to the plaintiff pursuant to the Policy.[364] This submission however, proceeds on the basis that the measure of damages for breach of the implied duty is not solely based on contractual principles. I have already found above that the claim for default interest under the finance agreement is too remote in respect of the plaintiff’s breach of contract claim. I do not see any reason in principle why a claim for damages based on a breach of the implied term of utmost good faith would not be assessed in accordance with the same contractual principles.
[364]Plaintiff’s submissions dated 10 December 2014, [363].
Re Zurich and Lomsargis support this conclusion. In Re Zurich, Chesterman J questioned whether a breach of the duty of utmost good faith would add anything to damages flowing ordinarily from a contractual breach.[365] Likewise, in Lomsargis, McMurdo J remarked:[366]
“To recover damages for breach of these implied terms, the plaintiff must establish his entitlement to be paid the benefits, but in that event, he will recover the benefits then accrued due together with a further sum for interest under s. 57. The statement of claim does not plead any facts from which he will have suffered some further damage in that event. It is submitted that a plaintiff is entitled to plead his case in the alternative. But the claim for damages for breach of contract is dependent upon proof of the plaintiff's entitlement to payment of the agreed weekly benefits; it [the breach of the duty of utmost good faith] is not an alternative to a claim to that entitlement. And, plainly, he cannot recover both the amounts in paras 27 and 28, together with s. 57 interest, and damages for the losses alleged in para. 32.”
[365]Re Zurich Australian Insurance Limited [1999] 2 Qd R 203, 217 [75], 218 [77] (Chesterman J).
[366]Lomsargis v National Mutual Life Association of Australasia Limited [2005] 2 Qd R 295, 299 [13] (McMurdo J).
A breach of the duty of utmost good faith cannot be an alternative claim to indemnification. A breach “does not empower a court to make a finding of liability against an insurer as a punitive sanction for not acting in good faith.”[367] Contractual damages in the form of indemnification resulting from an alleged breach of the duty of utmost good faith necessarily requires proof of the entitlement to indemnity itself.[368] It follows that a breach of the contract of insurance through a denial of indemnity that collaterally breaches the duty of utmost good faith would simply result in damages to be assessed in accordance with ordinary contractual principles. However McMurdo J left open the question of whether exemplary damages may be awarded for a breach of the implied contractual duty of utmost good faith.[369]
[367]CGU Insurance Limited v AMP Financial Planning Pty Ltd (2007) 235 CLR 1, 12-13 [16] (Gleeson CJ and Crennan J).
[368]Lomsargis v National Mutual Life Association of Australasia Limited [2005] 2 Qd R 295, 299 [13] (McMurdo J). See also: Camellia PropertiesPty Ltd v Wesfarmers General Insurance Ltd [2013] NSWSC 1975, [126] (Sackar J).
[369]Lomsargis v National Mutual Life Association of Australasia Limited [2005] 2 Qd R 295, 311-312 [46], 315 [58] (McMurdo J).
As to any claim for legal costs, whether costs for an action based on a breach of the implied duty warrants the assessment of those costs on a standard or indemnity basis should be determined in the ordinary course and not as an award of damages.
Disposition
I order that the claim filed 1 March 2011 be dismissed.
I will hear the parties as to costs.
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