Nicholas v Wesfarmers Curragh Pty Ltd
[2010] QSC 447
•30 November 2010
SUPREME COURT OF QUEENSLAND
CITATION:
Nicholas v Wesfarmers Curragh Pty Ltd & Ors [2010]
QSC 447PARTIES:
JOSEPH IAN NICHOLAS
(plaintiff)
v
WESFARMERS CURRAGH PTY LTD
ACN 009 362 565
(applicant/first defendant)
G & S ENGINEERING SERVICES PTY LTD
ACN 068 146 627
(second defendant)
BRIT SYNDICATES LIMITED
ACN 0824611
(third party)FILE NO/S:
S298 of 2010
DIVISION:
Trial Division
PROCEEDING:
Application
ORIGINATING COURT:
Supreme Court Rockhampton
DELIVERED ON:
30 November 2010
DELIVERED AT:
Rockhampton
HEARING DATE:
15 November 2010
JUDGE:
McMeekin J
ORDER:
Declare that the “Other Insurance” clause (condition 5) in the Brit insurance policy is void.
CATCHWORDS:
PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – OTHER MATTERS – where the first defendant applied for two questions to be determined separately from the other issues in the proceedings pursuant to r 483(1) Uniform Civil Procedures Rules 1999
INSURANCE – THE POLICY – THE INSURED – where the first defendant made claim upon a policy of insurance with the third party for indemnity in respect of the plaintiff’s personal injury claim – where the third party refused the claim – whether “other insurance” provision rendered void by s 45 of Insurance Contracts Act 1984 (Cth) – whether s 45 applied to the provision purporting to limit liability by reason that the insured was named as a beneficiary under another contract of insurance entered into by its parent company – whether insured had “entered into” that contract within the meaning of s 45 – whether parent company acted as agent for its subsidiary – whether necessary that the insured be party to both contracts of insurance
STATUTES – ACTS OF PARLIAMENT – INTERPRETATION – PARTICULAR WORDS AND PHRASES – GENERALLY – Insurance Contracts Act 1984 (Cth) – meaning of “entered into” in s 45 of the Act – whether s 45 renders void the operation of the clause
Insurance Contracts Act 1984 (Cth), s 45(1)
Uniform Civil Procedure Rules 1999, r 483(1)Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552
East End Real Estate Pty Ltd v CE Heath Casualty & General Insurance Ltd (1991) 25 NSWLR 400
Scott v Davis (2000) 204 CLR 333
Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107
Watson v Swann (1862) 11 CB (NS) 756; 142 ER 993
Zurich Australia Insurance Ltd v Metals & Minerals Pty Ltd (2009) 240 CLR 391COUNSEL:
R S Ashton for the applicant/first defendant
G A Thompson SC for the third partySOLICITORS:
Carter Newell Lawyers for the applicant/first defendant
HBM Lawyers for the third party
McMeekin J: This application involves the determination, pursuant to r 483(1) Uniform Civil Procedure Rules 1999, of two questions separately from the other issues in the proceedings.
The two questions concern the indemnification afforded to Wesfarmers Curragh Pty Ltd (“Curragh”) in respect of a claim for damages brought against it by Joseph Ian Nicholas (“the plaintiff”) by two policies of insurance, one in which the third party, Brit Syndicates Limited (“Brit”), is the insurer and the other in which QBE 386 (“QBE”) is the insurer.
QBE is not a party to these proceedings and no claim has, as yet, been made against it.
The Factual Background
The plaintiff commenced these proceedings against Curragh and G & S Engineering Services Pty Ltd (“G & S Engineering”) alleging that he sustained personal injuries on 23 May 2008 while working at the Curragh North Mine near Blackwater and claiming damages for their alleged breach of duties owed to him. Curragh was the operator of the mine and G & S Engineering his employer.
Curragh is insured under a policy of liability insurance with QBE (“QBE 386 policy”[1]) which, subject to its terms and conditions, provides indemnity against the plaintiff’s claim in these proceedings.
[1]Affidavit of Steven Andrew White, exhibit SAW1.
G & S Engineering affected a policy of insurance with Brit (the Brit Policy[2]). The “Insured” is described in the Brit policy as follows:
[2]Affidavit of Steven Andrew White, exhibit SAW2.
“G&S Engineering Services Pty Ltd, G&S Services Electrical Pty Ltd, G&S Mining Services Pty Ltd, Bigmate Monitoring Services Pty Ltd; and
Joint Ventures (incorporated or not) in which the Contractor is co-venturer and is responsible for arranging insurance therefore; and
Principals and owners…”
Curragh claims to be entitled to indemnity as a “Principal” under the Brit policy.
Curragh made claim upon the Brit policy for indemnity in respect of the plaintiff’s claim. Brit has refused the claim. Curragh joined Brit as a third party to the proceedings. Subject to the arguments that are here to be determined Brit accepts that its policy responds to the claim.
The “Other Insurance” Clause
Brit contends that condition 5 of the Brit policy limits its liability. Condition 5 of the Brit Policy provides:
“5. Other Insurance
Where allowable by law, this Policy is excess over and above any other valid and collectable insurance and shall not respond to any loss until such times as the limit of liability under such other primary and valid insurance has been totally exhausted.”
Brit asserts that the QBE 386 policy is “valid and collectible insurance” within the meaning of that condition. It says that its policy, by operation of condition 5, acts as an excess policy above the QBE 386 policy.
Curragh submits that condition 5 of the Brit policy is void because it offends s 45(1) of the Insurance Contracts Act 1984 (Cth) (“the Act”) in that it purports to limit or exclude Brit’s liability by reason that Curragh has entered into the QBE 386 policy.
Section 45 of the Act provides:
“(1) Where a provision included in a contract of general insurance has the effect of limiting or excluding the liability of the insurer under the contract by reason that the insured has entered into some other contract of insurance, not being a contract required to be effected by or under a law, including a law of a State or Territory, the provision is void.
(2) Subsection (1) does not apply in relation to a contract that provides insurance cover in respect of some or all of so much of a loss as is not covered by a contract of insurance that is specified in the first-mentioned contract.”
Brit responds that the QBE 386 policy was not a policy “entered into” by Curragh within the meaning of s 45 of the Act but was a policy entered into by Curragh’s parent company Wesfarmers Limited (“Wesfarmers”), the benefit of which extended, inter alia, to Curragh.
The QBE policy has a like clause to condition 5.
Curragh contends that the debate between the parties can be resolved by the answering of the two questions posed in the application:
1. Is the “Other Insurance” clause (condition 5) in the Brit insurance policy void by reason of the operation of s 45(1) of the Act; and
2. If that said condition is not void:
(i) does it, on its proper construction, exclude the QBE 386 policy from the category of “valid and collectible insurance”;
(ii) should the Brit policy be construed as if the condition did not exist?
Brit submits that the second question does not come before the Court by agreement and that it is not appropriate to consider it unless and until QBE becomes a party to the proceedings and hence can be heard on the question and bound by any decision.
Consideration of the First Question
It can be seen then that the issue between the parties is determined by the answer to the question of which entity entered into the QBE 386 policy of insurance.
Brit contends that Curragh is merely a non-party beneficiary of the QBE policy, a policy entered into by its parent company Wesfarmers, a person not insured by Brit. Curragh contends that it entered into the policy of insurance.
The parties are agreed that if Brit is right then s 45(1) would have no operation, condition 5 would be valid, and Brit’s liability thereby limited in accordance with its terms.
Brit relies heavily on the decision of the High Court of Australia in Zurich Australia Insurance Ltd v Metals & Minerals Pty Ltd,[3] where the Court determined that the ordinary meaning be given to the phrase “entered into” in s 45(1). French CJ, Gummow and Crennan JJ (“the majority reasons”) observed in Zurich at [23] and [26]:
[3](2009) 240 CLR 391.
“[23] ...The first constructional question is whether the words "entered into" limit the application of s 45 to "other insurance" provisions affecting contracts of insurance to which the insured is a party...
…
[26] … The text of the provisions of the Act with which s 45 must be read points inexorably to the conclusion that s 45 is only concerned with "other insurance" provisions affecting double insurance where the insured is a party to the relevant contracts of insurance. It does not allow room for a construction which would include a non-party insured among the ranks of those who have "entered into" the relevant contract. The inclusion of persons not parties to the relevant contract would be inconsistent with the ordinary or any plausibly extended meaning of "entered into" in relation to contracts...”
The decision in Zurich does not supply the answer to the issues raised here. In Zurich it was clear that the party in Curragh’s position here, in that case Hamersley Iron Pty Ltd (“Hamersley”), had not “entered into” the “other contract of insurance” that s 45(1) speaks of in any normal sense of the words. The debate in Zurich centred on whether the meaning of “entered into” ought to be extended to include those who were named as insured persons but who had not entered into the contract.
There, Speno Rail Maintenance Australia Pty Ltd (“Speno”) had entered into the relevant contract of insurance pursuant to a contractual obligation owed to Hamersley. The relevant policy defined “the insured” as including “the insured named in the schedule”. Speno was so named and Hamersley was also so named as an insured, but under an extended definition as a “principal” in respect of the contract between Hamersley and Speno.[4] It was only by reason of the extended definition in the policy that Hamersley was an insured person. It is relevant to one of Brit’s contentions to note that Curragh is in the same position vis-à-vis the Brit policy as Hamersley was to the Speno policy.
[4]See Speno Rail Maintenance Australia Pty Ltd v Hamersley Iron Pty Ltd (2000) 23 WAR 291; [2000] WASCA 408; Speno Rail Maintenance Australia Pty Ltd v Metals & Minerals Insurance Pte Ltd (2009) 226 FLR 306 at 314; [2009] WASCA 31 at [36] per Beech A-JA.
Here, the question involves slightly different considerations to those in Zurich.
It is common ground here that Wesfarmers negotiated the contract of insurance with QBE. Curragh submits that the evidence establishes the following:
1. Wesfarmers Limited is a public company and Curragh is one of its wholly owned subsidiaries;
2. The QBE 386 policy was contracted by Wesfarmers Limited on behalf of Curragh and the other subsidiaries;
3. The insurance is arranged on a “group basis” by the Group Risk Management Department;
4. Each subsidiary identifies its risk areas and reports on those to the Group Risk Management Office which negotiates the appropriate policy and then apportions the premium to and collects it from the subsidiaries. In Curragh’s case it paid $2,756,000 towards the negotiated premium of approximately $6,400,000;
5. This is the process which was followed for procurement of the QBE 386 policy.
As I understood the arguments advanced, Brit accepts the accuracy of that recitation subject only to the qualification that the $2,756,000 paid by Curragh ought not to be characterised as a payment of part of the premium but rather as a fee to its parent company, the amount including an administration component.
Curragh contends that in reality it did enter into the QBE contract of insurance either because that is the true nature of the arrangements or alternatively because Wesfarmers was merely acting as its agent in securing insurance on its behalf, and that is sufficient.
The question, one might think, is of broad application. If a company enters into a contract of insurance on behalf of the group of companies, of which it is the parent company and the others its wholly owned subsidiaries, does it enter the contract of insurance, at least so far as s 45(1) is concerned, on behalf of each company independently, or does it act merely as the subsidiaries’ agent, or is it the only party “entering into” the contract? If the characterisation in either of the first two alternatives was accepted then the method of entering into the contract of insurance would satisfy the precondition triggering the application of s 45(1).
The issue, to use the words of the majority reasons in Zurich, is whether the method of entering into the contract of insurance on behalf of the subsidiaries is consistent “with the ordinary or any plausibly extended meaning of ‘entered into’ in relation to contracts”.
I have come to the view that the applicant’s position is to be preferred – that is that the entry into the contract of insurance with QBE by Wesfarmers should be seen as an entry into that contract by Curragh within the meaning of s 45(1) of the Act. In reaching that conclusion I do not pretend that the decision is straightforward. I have taken that view for the following reasons:
(a) The better characterisation of Wesfarmers’ relationship with Curragh is as principal and agent evidenced principally by the payment by Curragh to Wesfarmers of a significant proportion of the premium paid to QBE after entrusting Wesfarmers with the task of obtaining appropriate insurance to cover the risks inherent in its operations;
(b) Even if I am wrong in that view it would be appropriate in the circumstances to extend the meaning of “enter into” to encompass Wesfarmers actions here because:
(i) if Brit’s approach were to be adopted the mischief that s 45(1) was designed to prevent would be encouraged, and encouraged in respect of a significant class of insurance policies, the approach of Wesfarmers here being not uncommon between principals and subsidiaries in company groups;
(ii) Curragh does not become an insured by some form of extended definition of insured person – it is a “Named Insured” in the QBE contract.
I will say something about each of those reasons.
Agency
Brit’s submission is that Wesfarmers is not shown by the evidence to be Curragh’s agent and that, even if it was, that is not enough – the contract must be entered into by the principal in order to attract the operation of s 45(1).
That latter submission should be rejected. Parliament can hardly have intended to ignore entirely “commercial convenience and practice”.[5] It is commonplace to work through agents when affecting insurance. The Act, in its long title, is described as an Act to reform and modernise the law relating to certain contracts of insurance so that a fair balance is struck between the interests of insurers, the insured, and other members of the public and so that the provisions included in such contracts, and the practices of insurers in relation to such contracts, operate fairly. To adapt the language of Gleeson CJ in East End Real Estate Pty Ltd v CE Heath Casualty & General Insurance Ltd,[6] it would hardly be consistent with the purposes thus described to construe the language of s 45 in such a way as to make its operation depend upon whether one chooses to act through an agent, or on one’s own behalf, when affecting insurance.
[5]Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 113 per Mason CJ and Wilson J summarising the views of McHugh J below: “He considered that the law should allow an intended beneficiary to sue on a policy when commercial convenience and practice demand it”.
[6](1991) 25 NSWLR 400 at 404.
Further it is trite law that there is no legal distinction between acting through an agent and acting on one’s own behalf vis-à-vis third parties. The High Court has said that the word “agency” is used in the law “to connote an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties.”[7] Those legal relations, once created, are as effective as if the principal had acted directly with the third party. As Brennan J explained in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd: “If a putative promisee is merely an agent for a third party, the third party is the promisee and is privy to the contract: Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Aust) Pty Ltd (1978) 139 CLR 231 ; 18 ALR 333 and on appeal to the Privy Council (1980) 144 CLR 231; 30 ALR 588; ITO Ltd v Miida Electronics Inc (1986) 28 DLR (4d) 641.”[8] To a similar effect are the observations of Gummow J in Scott v Davis on the agency relationship:
“[228] Usually the legal relations so created will be contractual in nature. In all these cases, the principal's liability will not be vicarious. The resultant contract is formed directly between the principal and the third party and there is no contract between the agent and the third party which is attributed to the principal….”[9]
[7]International Harvester Co of Australia Pty Ltd v Carrigan's Hazeldene Pastoral Co (1958) 100 CLR 644 at 652; (1958) 32 ALJR 160. See also, Scott v Davis (2000) 204 CLR 333 at [227] per Gummow J.
[8](1988) 165 CLR 107 at 135.
[9](2000) 204 CLR 333; (2000) 175 ALR 217; (2000) 74 ALJR 1410; [2000] HCA 52.
Brit relied on the following passage in the reasons of Hayne and Heydon JJ in Zurich to support their argument:
“[36] … The Zurich contract was insurance effected on behalf of (but not by) Hamersley in respect of a claim for which indemnity was available under the MMI contract. Because Hamersley could be indemnified under the Zurich contract, the Underlying Insurance Terms, on their face, had the effect of limiting MMI's liability, in effect, to excess insurance.
…
[38] The limitation on MMI's liability provided by the Underlying Insurance Terms could apply in two different circumstances. First, the limitation could apply where Hamersley itself effected insurance coverage specific to a particular project, agreement or risk. Secondly, it could apply where another party effected insurance coverage on behalf of Hamersley. In respect of the claim now in question, the second operation of the Underlying Insurance Terms applied.
[39] The second operation of the Underlying Insurance Terms was not a limitation of MMI's liability for the reason identified in s 45(1) of the Act. It was not a limitation "by reason that [Hamersley] has entered into some other contract of insurance". Hamersley had not entered any contract of insurance with Zurich. Speno, not Hamersley, had made the Zurich contract. And as the joint reasons explain, nothing in other provisions of the Act, or in the history of the Act, provides any footing for reading the relevant expression in s 45(1) – "the insured has entered into some other contract of insurance" – otherwise than in accordance with its ordinary meaning.” (underlining added)
The contention was that their Honours were there excluding from the operation of
s 45(1) contracts entered into by an agent “on behalf of” a disclosed principal by reason of the emphasis given to the phrase “on behalf of”. I do not read the passages that way. Their Honours were concerned with the case before them, which was not an agency situation, and their words need to be so confined.
Nor do I think that Brit is on stronger ground in relation to the evidential point. It was common ground that there was no direct evidence of an agency relationship between Curragh and Wesfarmers. That is, no agency contract was produced. Nor did anyone from Curragh or Wesfarmers swear that to be the nature of the relationship between them. That, however, is not determinative – the mere fact that a party swears to the legal effect of a relationship hardly makes it so.[10] But Curragh’s argument was that the arrangement was of such a nature as to be characterised by the law as one of agency, not necessarily one established by an express arrangement. That is perfectly legitimate. Lord Wilberforce explained the applicable principles in Branwhite v Worcester Works Finance Ltd:[11]
[10]Ex Parte Delhasse; Re Megevand (1878) 7 Ch D 511 at 532.
[11][1969] 1 AC 552 at 587.
“In the Garnac[12] case Lord Pearson, with the concurrence of the House, used these words:[13]
[12]A reference to Garnac Grain Co. Inc. v. H. M. F. Faure & Fairclough Ltd [1968] AC 1130.
[13]Ibid at 1137.
‘The relationship of principal and agent can only be established by the consent of the principal and the agent. They will be held to have consented if they have agreed to what amounts in law to such a relationship, even if they do not recognise it themselves and even if they have professed to disclaim it. ... But the consent must have been given by each of them, either expressly or by implication from their words and conduct.’
The significant words, for the present purpose, are "if they have agreed to what amounts in law to such a relationship." These I understand as pointing to the fact that, while agency must ultimately derive from consent, the consent need not necessarily be to the relationship of principal and agent itself (indeed the existence of it may be denied) but may be to a state of fact upon which the law imposes the consequences which result from agency. It is con-sensual, not contractual...”
What then is necessary to establish the existence of an agency relationship? Whilst it has been pointed out that there is no universally accepted definition of agency,[14] a leading text, and one often cited, Bowstead & Reynolds on Agency, provides a useful, and generally accepted, definition in these terms:
“Agency is the fiduciary relationship which exists between two persons, one of whom expressly or impliedly manifests assent that the other should act on his behalf so as to affect his relations with third parties, and the other of whom similarly manifests assent so to act or so acts pursuant to the manifestation… ”[15]
[15]19th ed., 2010 at 1-001.
Here it is plain that Wesfarmers acted with the consent of Curragh in affecting insurance on its behalf. Cogent evidence of that is the fact that Curragh paid a significant sum for the insurance cover affected by Wesfarmers. True it is that the amount paid was not shown by evidence to be related, necessarily, to the risk insured, and the amount paid demonstrably included a fee for the arranging of the insurance, and true it is that the amounts paid were merely debit items in the group books of account, as Brit points out. But none of that, in my view, detracts from the fundamental point that Curragh paid for this insurance and that payment to Wesfarmers is strongly indicative firstly, that Wesfarmers was not acting on its own behalf in procuring the insurance but acting on behalf of, inter alia, Curragh, and, secondly, that there was an arrangement of mutual consent in the affecting of the QBE policy.
The only other indicia of the existence of an agency relationship is said to be the ability in the principal to control the agent: Restatement, Third, Agency § 1.01 defines “agency” as “the fiduciary relationship that arises when one person (a “principal”) manifests assent to another person (an "agent") that the agent shall act on the principal's behalf and subject to the principal's control, and the agent manifests assent or otherwise consents so to act.” Given that an agency relationship can plainly arise by reason of the “principal” ratifying the prior actions of the “agent”, actions undertaken before any agency relationship may have existed, the demonstration of an ability to control or direct would not seem necessarily fundamental. Finn J has pointed out that the need to demonstrate such an ability in the principal to control or direct the agent is largely confined, and to cases not here relevant.[16]
[16]Ibid at [137].
Finally, there is no evidence of any other reason for Wesfarmers to affect insurance indemnifying Curragh – for example, a contractual obligation as was imposed on Speno in Zurich.
Brit argues that the absence of any documentation evidencing the agency relationship and pre-dating the policy is crucial and that the documents that are relied on all post-date the policy and are not admissible to establish the agency arrangement citing Cross on Evidence (7th Australian ed., para [39,290]) for the proposition that “it is impermissible to construe a contract by post contractual conduct”.
What is in issue here is not the terms of any agency agreement but the fact of an agency existing. The principle referred to is a rule of construction and reflects the fundamental principle that the Court is not concerned with the actual intentions of the parties when construing a contract. As the learned authors go on to state in that same paragraph of Cross:
“And where there is a dispute as to the existence of a contract …or there is a question as to how the contract is to be characterised… the parties’ subsequent conduct may be relied upon to establish the existence of that contract...”
Brit argues that a further point against the claimed agency relationship is that for such a relationship to exist there needs to be an ascertainable principal. Brit submits that if Wesfarmers was acting as agent for those subsidiaries named in the policy then each should be ascertainable and in existence as, if they did not exist, how could the agent have authority to act on their behalf in entering into the contract? Brit points out that the “Named Insured” are described in the policy as including those that might come into being at some future time and hence not ascertainable at the time the contract was entered into:
“4. Named Insured
A. The term “Named Insured” wherever used in this Section means the Named Insured stated in this Schedule and any subsidiary company or related company (as defined by the relevant Company’s Legislation for the time being) now or hereafter constituted.
B. The word “Insured” wherever used in this Section means not only the “Named Insured” but also: .... [then follows seven additional categories of persons or entities insured under the policy].”
I note that the Schedule referred to includes a similar reference to “any subsidiary and related companies… appearing now or hereafter existing” in its definition of the “Named Insured”.[17]
[17]See affidavit of Steven Andrew White, exhibit SAW1 at p. 2.
As a general statement of principle, the premise underlying Brit’s argument is correct. In Watson v Swann,[18] Willes J said:
“…The law obviously requires that the person for whom the agent professes to act must be a person capable of being ascertained at the
time. It is not necessary that he should be named; but there must be such
a description of him as shall amount to a reasonable designation of the
person intended to be bound by the contract.”[19]
[18](1862) 11 CB (NS) 756 at 769, 771; 142 ER 993 at 998, 999.
[19]Ibid at 771; 999.
McHugh JA accepted that as a correct exposition of the law in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd.[20] Mason CJ and Wilson J expressed the same conclusion on appeal: “The conclusion that McNiece was not a party to the contract followed from the fact that it was not ascertainable as a principal when the policy issued. To make a contract on behalf of a principal an agent must contract on behalf of a principal who is then ascertainable.”[21]
[20](1987) 8 NSWLR 270 at 276-277.
[21](1988) 165 CLR 107 at 113.
However I think that the short answer to Brit’s submission is that Curragh was an existing subsidiary and plainly ascertainable. That existing relationship is not altered by the circumstance that Wesfarmers purported to act for others who were not ascertainable and could not give it authority. Wesfarmers’ relationship to those
non-existent and proposed parties might well be different – it must be so – and the law would probably characterise that as one of trustee and beneficiary assuming that such an entity came into being at some subsequent time: see A Tomlinson (Hauliers) Ltd v Hepburn[22] and the judgment of McHugh JA in Trident General Insurance:
“But unless the beneficiary is named or ascertainable at the date of policy, the holder of the policy can only be a trustee and not an agent for a principal whether disclosed or undisclosed: Bowstead on Agency, 15th ed (1985) at 62-63.”[23]
[22][1966] AC 451.
[23](1987) 8 NSWLR 270 at 277.
Whatever the character of the relationship to those who are not yet in existence, I cannot see why Wesfarmers cannot act in more than one capacity when arranging insurance.
In my view Wesfarmers’ actions in entering into the QBE 386 policy were undertaken as agent for Curragh, so far as the policy put QBE on risk for Curragh’s potential claims, and hence Curragh has, for present purposes, “entered into” the QBE 386 policy.
A Plausible Extension of “Entered Into”
If I am wrong in that view, nonetheless I would hold that, however one describes the relationship between Curragh and Wesfarmers, for the purposes of s 45(1) of the Act the entering into of a policy by the head company on behalf of itself and its subsidiaries, as was done here, is an entering into the contract of insurance by the subsidiary, so as to attract the operation of the section.
In reaching that conclusion I consider it significant that the majority reasons in Zurich left open the possibility of a more extended meaning to be attributed to the words “entered into” in s 45(1) than the dictionary definition. In Zurich the majority reasons commenced with the proposition that “[t]he ordinary, relevant meaning of ‘enter into’ is ‘take upon oneself (a commitment, duty, relationship, etc); bind oneself by, subscribe to, (an agreement)’”,[24] but their Honours went on to decide that “[t]he inclusion of persons not parties to the relevant contract would be inconsistent with the ordinary or any plausibly extended meaning of ‘entered into’ in relation to contracts.”[25] No doubt the reference to “any plausibly extended meaning” reflected a concern not to unnecessarily confine future cases given the great variety of factual scenarios that might arise.
[24]At [23] and quoting the Shorter Oxford English Dictionary, 6th ed (2007) at 840–841.
[25]At [26] – underlining added.
I consider the present situation to be one where it is appropriate to extend the meaning of “entered into” beyond the party who has been the immediate contracting party, that being the premise on which I proceed here.
I hold this view for two reasons. First, I can draw no distinction between Curragh and Wesfarmers under the terms of the policy. Curragh appears as a “Named Insured” in the Schedule to the policy just as Wesfarmers does. Curragh was not in the category of persons that may or may not become an insured – as might occur in some instances say when contractors are yet to be engaged on a project yet the principal contractor wants all such future possible insureds covered. That factor serves to distinguish this case from the two cited to me in submissions – the decision of Robin QC DCJ in the District Court of Queensland in Austress-PSC Pty Ltd v Zurich Australian Insurance Ltd[26] and the factual situation in Zurich itself.
[26]Unreported, 1 May 1992.
Secondly, the mischief that s 45(1) was designed to meet would inevitably be defeated, if Brit’s submission was accepted, in a very common class of insurance contracts.
That mischief was identified in the Australian Law Reform Commission (ALRC) Report on Insurance Contracts (No 20, 1982), Chapter 11.[27] The provision in question here falls into the third of the classes considered in para 281 of the report – provisions which limit the liability of the insurer to any amount by which the loss exceeds the amount recovered or recoverable from the other insurer. Such a provision converts a policy into an excess policy without appropriate reduction in the premium. The ALRC conclusion and recommendations were that there was no substantial justification for any of the various types of “other insurance” clauses; they may cause the insured's reasonable expectations to be defeated; all forms of such provisions should be rendered ineffective; and where more than one insurance policy was in effect in respect of the same risk, then the insured should be entitled to recover the whole loss from any one of the insurers, which should then be entitled to obtain contribution from the others (para 289). The ALRC recommendations were embodied in cl 46 of a draft Bill appended to the ALRC report which in turn became s 45 of the Act.
[27]The use of such extraneous materials is permitted by s 15AB(2) of the Acts Interpretation Act 1901 (Cth).
I am conscious of the fact that it was urged in Zurich that the generality of the mischief at which s 45 was plainly aimed provided justification for extending the meaning to be attributed to “enter into” in s 45 and that that argument was rejected. But it seems to me that the extension of meaning required in Zurich was significantly greater than here and the mischief much closer to that in contemplation. The entrusting of a parent company with the task of affecting insurance is quite different to becoming the third party beneficiary of a policy affected by a stranger.
Does Curragh need to be a Party to the Brit Policy?
Brit advanced one final reason as to why s 45 had no operation here. Brit contended that for s 45 to have any operation there were two pre-conditions – the first being that Curragh enter into the QBE 386 policy (the point discussed above), the second being that Curragh also be the contracting party to the Brit policy. Curragh is not a contracting party to that latter policy. G & S Engineering entered into that policy.
Thus Brit would construe s 45 as if it read: “Where a provision included in a contract of general insurance [entered into by the insured] has the effect of limiting or excluding the liability of the insurer under the contract by reason that the insured has entered into some other contract of insurance…”
Brit points out that the majority reasons in Zurich make that very assumption when their Honours said at [23]: “The first constructional question is whether the words "entered into" limit the application of s 45 to "other insurance" provisions affecting contracts of insurance to which the insured is a party”; and at [26]: “The text of the provisions of the Act with which s 45 must be read points inexorably to the conclusion that s 45 is only concerned with "other insurance" provisions affecting double insurance where the insured is a party to the relevant contracts of insurance”; and again at [26] in referring to the ALRC report: “The most that can be said is that the Report seems to have proceeded upon the assumption that the problem of ‘other insurance’ clauses arose in cases in which the insured was a party to both contracts”.[28]
[28]Underlining added.
I reject the submission, albeit with some considerable hesitation given those remarks, for these reasons:
(a) Those passages in the majority reasons relied on by Brit are obiter, the question before the Court being restricted to the operation of the words “entered into” in the second part of s 45(1) and not the opening reference to “a contract of general insurance” that I am here concerned with;
(b) Hayne and Heydon JJ in their reasons in Zurich made no such qualification on the applicability of the section;
(c) The section itself does not express that qualification;
(d) The omission by the legislature of the suggested importation “entered into by the insured” qualifying “general insurance” but the express inclusion of it as qualifying “some other contract of insurance” suggests that the proposed importation was not intended;
(e) The provision is a remedial[29] one intended to benefit insureds and the words should be given a liberal interpretation consistent with that characterisation. The words used should be given “the fullest relief which the fair meaning of its language will allow”.[30] It would be inconsistent with that approach to restrict the operation of the section by the implication of a condition not found in the words used; and
(f) There is no reason that I can see that such a condition on the operation of the section ought to be implied into the statute. None was suggested. I take the guiding principle to be that, generally, one should be cautious in reading into statutes words that are not there.[31]
[29]Cf. East End Real Estate Pty Ltd v CE Heath Casualty & General Insurance Ltd (1991) 25 NSWLR 400 at 409 per Gleeson CJ re s 54 of the Act.
[30]Bull v Attorney-General (NSW) (1913) 17 CLR 370 per Isaacs J at 384.
[31]Thompson v Goold & Co [1910] AC 409 at 420 per Lord Mersey.
Conclusion
Given my views on the first question it is not necessary that I address the second.
I conclude that the “Other Insurance” clause (condition 5) in the Brit insurance policy is void by reason of the operation of s 45 of the Act.
Colonial Mutual Life Assurance Society Ltd v Producers and Citizens
Co-operative Assurance Co of Australia Ltd ((1931) 46 CLR 41 at 50) that "[n]o word is more commonly and constantly abused than the word 'agent.'"
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