McConnell Dowell Middle East LLC v Royal & Sun Alliance Insurance plc - [2008] VSC 501

IN THE SUPREME COURT OF VICTORIA	Not Restricted
AT MELBOURNE COMMERCIAL AND EQUITY DIVISION

No. 5641 of 2003

McCONNELL DOWELL MIDDLE EAST LLC	Plaintiff
v
ROYAL & SUN ALLIANCE INSURANCE PLC	Defendant

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JUDGE:	HANSEN J
WHERE HELD:	Melbourne
DATE OF HEARING:	19-21 and 26-28 May 2008
DATE OF JUDGMENT:	25 November 2008
CASE MAY BE CITED AS:	McConnell Dowell Middle East LLC v Royal & Sun Alliance Insurance Plc
MEDIUM NEUTRAL CITATION:	[2008] VSC 501

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Insurance – Construction Risks Material Damage policies covering “Occurrence” – Plaintiff operated diamond mine in Central African Republic – Some of plaintiff’s property disappeared from mine in October 2000 (“the first loss”) – Plaintiff left Central African Republic in December 2000, abandoning other property which it never recovered (“the second loss”) – Whether losses an Occurrence - Exclusion not applicable as both losses attributable to theft – Preservation of life extension applicable if necessary – Basis of settlement – Whether insured property “Contract and/or Works” or “Construction Plant and Equipment” – Reinstatement value payable – Meaning of “market value” – Whether relocation costs should be deducted – Associated costs and expenses.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J J Gleeson SC and	Deacons
Mr J J Whelen
For the Defendant	Mr C M Caleo SC and	DLA Phillips Fox
Mr A P Young
HIS HONOUR:

Introduction

McConnell Dowell Middle East LLC[1], a contracting and engineering company incorporated in the United Arab Emirates (who I will call “the plaintiff” or “the insured”), claims an indemnity, alternatively damages, from Royal & Sun Alliance Insurance Plc, an insurance company incorporated in the United Kingdom (who I will call “the defendant” or “the insurer”), under two policies of insurance entered into in October 1999 and July 2000 respectively, in respect of the loss of 132[2] items of plant and equipment which the plaintiff alleges were stolen from a diamond mine it had operated near Carnot in the Central African Republic (“the CAR”). The plaintiff’s claim is divided into two parts, being items 1 to 20 (“the first loss”) and items 21 to 134 (“the second loss”) in the schedule to the plaintiff’s pleading. The plaintiff says that the theft of items 1 to 20 occurred in October 2000, while the theft of items 21 to 134 occurred at some time between December 2000 and September 2002. The plaintiff says that it is entitled to be paid the “Reinstatement Value” of the plant and equipment (US$4,187,432[3]) plus other associated costs and interest.
[1] The plaintiff company is now known as Dutco McConnell Dowell (ME) LLC. At relevant times, the shareholders in the plaintiff were McConnell Dowell Corporation Limited as to 49 per cent, and Dubai Transport Company (“Dutco”) as to 51 per cent.
[2] The Third Further Amended Statement of Claim filed 12 July 2007 (“the plaintiff’s pleading”) lists 134 items, however two of the items are listed twice (items 35 and 86 are one and the same, as are items 37 and 87), hence the…

Grounds of appeal

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

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

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

Consideration

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

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

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Details

AGLC: McConnell Dowell Middle East LLC v Royal & Sun Alliance Insurance plc [2008] VSC 501
Case: [2008] VSC 501
Decision Date: 25 November 2008

CaseChat Overview and Summary

McConnell Dowell Middle East LLC initiated legal proceedings against Royal & Sun Alliance Insurance plc, seeking compensation for losses incurred from two separate events involving the disappearance of property from a diamond mine in the Central African Republic. The first loss occurred in October 2000, when some of the plaintiff's property vanished from the mine site. The second loss involved the plaintiff abandoning additional property when they left the Central African Republic in December 2000, never to recover it. The court was tasked with determining whether these losses constituted an "occurrence" under the insurance policy, considering the exclusions and specific terms of the policy, including whether the losses were attributable to theft and the applicability of the preservation of life extension. Another legal issue was whether the insured property fell under the category of "contract and/or works" or "construction plant and equipment." The court also had to clarify the meaning of "market value" in the context of determining the reinstatement value, and whether relocation costs should be deducted from the payout. Additionally, the court needed to address associated costs and expenses.

The court meticulously examined the policy language and the circumstances surrounding each loss to determine whether they qualified as an "occurrence." It concluded that both losses were indeed attributable to theft and fell within the scope of the insurance coverage. The court found that the preservation of life extension was applicable if necessary, ensuring that the insured's rights were protected. Regarding the classification of the insured property, the court determined that it was "construction plant and equipment." The court ruled that the reinstatement value should be based on the "market value" of the property at the time of the loss, and it rejected the insurer's attempt to deduct relocation costs from the payout. Finally, the court addressed the issue of associated costs and expenses, providing clarity on what could be claimed under the policy.

In its judgment, the court found in favour of McConnell Dowell Middle East LLC. It determined that the insurer was liable to pay the full reinstatement value of the insured property, minus the agreed deductible, along with associated costs and expenses. The court's decision provided much-needed clarity on several contentious issues, ensuring that the plaintiff received the compensation it was entitled to under the insurance policy.

Orders