Noori v Majestic Plumbing Services Pty Ltd & Ors (Third Party Proceeding)
[2021] VSC 63
•17 February 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PERSONAL INJURIES LIST
S ECI 2019 03225
| ZELMAI NOORI | Plaintiff |
| - v - | |
| H & A MAJESTIC PLUMBING PTY LTD & ORS (according to the attached schedule) | Defendants |
| - and - | |
| CERTAIN UNDERWRITERS AT LLOYD’S OF LONDON SUBSCRIBING TO POLICY NUMBER B1294HSGBGH152448 | Third Party |
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JUDGE: | Forbes J |
WHERE HELD: | Melbourne |
DATES OF HEARING: | 10 & 12 February 2021 |
DATE OF JUDGMENT: | 17 February 2021 |
CASE MAY BE CITED AS: | Noori v H & A Majestic Plumbing Pty Ltd & Ors (Third Party Proceeding) |
MEDIUM NEUTRAL CITATION: | [2021] VSC 63 (Second Revision 19 April 2021) |
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WORKPLACE INJURY –INSURANCE – INDEMNITY INSURANCE – Insurance Policy – Terms and conditions of policy – Erection of scaffolding – Personal injury suffered – Construction of policy conditions – Insurer refused indemnity as Insured failed to comply with conditions to take care or comply with statutory requirements – Whether Insured’s conduct was deliberate or reckless or intentional, Fraser v F B Furman [1967] 3 All ER, Hutton v Watling [1948] Ch 398, Pacific Carriers Ltd v BNP Paribas (2004) CLR 451, Wallaby Grip Ltd v QBE Insurance (Australia) Ltd (2010) 240 CLR 444, Albion Insurance Co Ltd v Body Corporate Strata Plan No 4303 [1983] 2 VR 339, Electricity Safety (Installations) Regulations2009, Occupational Health and Safety Act 2004.
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APPEARANCES: | Counsel | Solicitors |
| For the Fourth Defendant | Mr J. Angenent | Hymans Legal |
| For the Third Party | Ms G. Gray | Sparke Helmore Lawyers |
HER HONOUR:
Mr Noori has commenced a claim seeking damages for personal injury suffered by him on 28 October 2015. The statement of claim pleads that while working at a site in Coburg as an apprentice plumber and carrying a length of guttering on a scaffold, the guttering made contact with overhead electrical powerlines and he thereby suffered injury. His claim names four defendants: his employer, the builder and two companies involved in the erection of the scaffold. The fourth defendant, Dhillon Scaffolding Pty Ltd (Dhillon Scaffolding) held a policy of insurance for public liability valid as at 28 October 2015 and has joined as Third Party its insurer who has declined cover under the policy.
In addition to Mr Noori’s claim for damages the Victorian WorkCover Authority (‘VWA’) has commenced a claim pursuant to s 369 of the Workplace Injury Rehabilitation and Compensation Act 2013 (‘WIRCA’) to recover compensation and expenses paid by it in respect to Mr Noori’s WorkCover claim. In that claim Dhillon Scaffolding is named as the third defendant. It has also joined the Insurer as Third Party to this proceeding on the basis that the Insurer has failed to indemnify it.
These reasons deal with the disputes between Dhillon Scaffolding and its insurer, Certain Underwriters at Lloyd’s of London Subscribing to Policy Number B1294HSGBGH152448 (‘Insurer’). On the first day of hearing, all parties were agreed that the resolution of this issue before the commencement of the worker’s hearing would increase the prospects of settlement of the overall proceedings. The workers proceeding, the associated recovery proceeding and the third party proceeding were listed for hearing on an estimate of twenty days. The parties agreed that a timetable for resolving the issue before the commencement of the worker’s action could be accommodated within this time frame.
In accordance with the objects set out in section 9 of the Civil Procedure Act (Vic) 2010, I made timetabling orders for evidence and submissions in the third party proceeding to occur in the first week listed for trial. I heard evidence on 10th February and the Fourth Defendant and Third Party spoke to written submissions on 12th February. On 15th February I advised the parties in summary of the conclusions I had reached and indicated that these written reasons themselves would be delivered shortly.
Mr Sarbjit Dhillon, director of Dhillon Scaffolding gave viva voce evidence and a large number of documents were tendered by the fourth defendant and third party. It was not in contest that there was a contract of insurance in place. The denial of liability was made because it was said that actions and inactions in erecting the scaffolding at the site constituted breaches of conditions of the policy or came within an exclusion clause.
For the reasons that follow I have decided that Dhillon Scaffolding is entitled to be indemnified by the Insurer in respect of its claim on the policy.
I will commence by setting out the relevant parts of the contract of insurance and the basis of the decision to refuse indemnity before turning to the viva voce evidence and documents outlining the relevant actions taken by Dhillon Scaffolding.
The Relevant Contractual Terms
The policy comprised two documents. A standard form document titled ‘Combined Liability NAV 15 – General & Products Liability Insurance’[1] (the Policy Wording) and a New Policy Schedule[2] (the Policy Schedule) which set out the details particular to the insurance provided to Dhillon Scaffolding. The Policy Schedule set out various matters; including the applicable excesses, extensions and major exclusions and endorsements that applied.
[1]Exhibit 4, ASR Underwriting Policy, Combined Liability NAV 15, General and Products Liability Insurance.
[2]Exhibit 3, New Policy schedule.
Relevantly the Policy Schedule identified Coverage as ‘legal liability in respect to scaffolding contractor including property occupiers liability’. The Policy Schedule listed two conditions of cover. One was that the original signed proposal form and remittance be received. This condition was met. The other condition read ‘The Insured must comply with the Australian / New Zealand Guidelines AS/NZ 4576: 1995’. The full title of the document is AS/NZ 4576 is the ‘Australian/New Zealand Standard Guidelines for scaffolding’ (AS/NZ 4576). The insurer alleges breaches of AS/NZ 4576 and relies on those breaches to refuse indemnity.
The Policy Wording document described itself as containing important information telling the entity insured what the Policy does and does not cover, how to make a claim and other conditions. The document identified three Sections of the Policy the first of which, Section A, was Public Liability. It then set out clause 12 ‘General Exclusions applicable to all sections of the Policy’ and clauses 13 to 16 under ‘Conditions’.
For Public Liability the indemnity to be provided was described by clause 6 which reads:
SECTION A - INDEMNITY
The Insured is indemnified by this Section in accordance with the Operative Clause for liability to pay damages for and/or arising out of Personal Injury and/or Property Damage occurring during the Period of Insurance within the Territorial Limits detailed in the Schedule to the Policy….
Under the heading Exclusions, Clause 7 set out a number of things not covered by the Public Liability Section of the Policy, none of which are relied on or relevant to the claim made. The Operative Clause included the statement that ‘This indemnity applies only to such liability as defined by each insured Section of this Policy arising out of the conduct of the Business stated in the Schedule, subject always to the terms, Conditions and Exclusions of such Section and the Policy as a whole’. It was not contested that ‘Personal Injury’ as defined in the Operative Clause covers the claims made on the policy.
The Insurer relies on a number of clauses within the ‘General Exclusions applicable to all sections of the Policy’ and ‘Conditions’ asserting breaches that entitle it to refuse indemnity.
Clause 14, is headed Observance of Terms. It provides:
The Insured must observe and comply with the terms and conditions of this Policy. Any term or condition of this Policy insofar as it relates to anything to be done or complied with by the Assured shall be a condition precedent to the Underwriter’s liability to make any payment under this policy.
Clause 16.1 is headed Reasonable Precautions. It provides:
The insured at its own expense shall:
16.1.1take all reasonable precautions to prevent Personal Injury or Property Damage and cease any activity which may give rise to liability under this Policy;
16.1.2 exercise care in the selection and supervision of employees;
16.1.3as soon as possible after discovery cause any defect or danger to be made good or remedied and in the meantime shall cause such additional precautions to be taken as the circumstances require;
16.1.4comply with all statutory requirements and other safety regulations imposed by any authority.
The insurer asserts that each of 16.1.1 and 16.1.4 have been breached by Dhillon Scaffolding. The insurer says also that the circumstances under which Dhillon Scaffolding erected the scaffold constitutes reckless disregard for the safety of others as required to satisfy clause 16.1.1.
Clause 15 is headed Claims Conditions. Breaches by Dhillon Scaffolding of 15.1 and 15.2 are relied on for refusal of indemnity. They provide:
15.1the Insured must notify the Underwriters in writing as soon as possible of any Occurrence which may give rise to a claim under this Policy.
15.2the Insured shall not admit liability for or negotiate the settlement of any claim, or incur any Defence Costs, without the written consent of the Underwriters. The Insured shall do nothing which may prejudice the rights of the Underwriters, including but not limited to preserving all possible defences, and rights of contribution or indemnity, in respect of a claim.
The insurer asserts the terms of clauses 15 and 16, and AS/NZ4576, when interpreted consistently with clause 14, have been breached by Dhillon Scaffolding.
Clause 12 deals with General Exclusions Applicable to All Sections of the Policy. Relevantly the policy does not cover liability:
…
12.3 arising out of the deliberate, conscious or intentional disregard by the Insured’s technical or administrative management of the need to take all reasonable steps to prevent Personal Injury or Property Damage;
…
The Insurer alleges that this exclusion is enlivened as the Insured’s failure to take care or comply with statutory requirements was deliberate, conscious or intentional within the meaning of the exclusion clause.
Finally, pleaded breaches of the Dispute Resolution clauses in the Policy were not pursued at trial.
Mr Dhillon’s evidence
Mr Dhillon was born in 1986. He gave evidence that having arrived in Australia in 2009 he underwent a five day course for scaffolding and obtained a Worksafe licence to perform high risk work. The class of licence was as a Basic Scaffolder.[3] He had held such a licence from early 2010 on completion of the course. He established Dhillon Scaffolding in order to perform scaffolding work. The company mainly worked contracting with other scaffolding companies in the dismantling and sometimes erection of scaffolding. Mr Dhillon estimated that the majority of work was dismantling although the company also did some set up work. The company worked mostly with one other scaffolder until 2015. In that time Mr Dhillon said that he was provided with drawings of the building and the scaffolding and would work according to the plan provided to him. In about September 2015 a different scaffolding company, Western Scaffold Pty Ltd (‘Western Scaffold’) became the source of work.
[3]Exhibit 1, License to perform high risk work.
Mr Dhillon said that he contacted Western Scaffolding by phone for work and was told they were recruiting subcontractors. He had to fulfil requirements in order to obtain work from them. These requirements included provision of his basic scaffolder licence and proof of public liability insurance. It was in this context he attended an insurance broker that he had dealt with previously, signed a Trade Pack Proposal[4] which was submitted by the broker and led to the issuing of the policy.
[4]Exhibit 5, Trade Pack Proposal.
Mr Dhillon said that the work provided to Dhillon Scaffolding by Western Scaffold was dismantling work but when there were no dismantling jobs Western Scaffold provided some build up jobs as well to keep them in work. For build-up jobs he said that Western Scaffold did not provide ‘proper plans’ but someone called Martin who would come on site and lay tubes or pieces of scaffold on the ground in position to mark where the scaffold was to be built and give verbal instructions which Mr Dhillon would follow.
Dhillon Scaffolding was engaged by text message[5] on 19 October to attend the site in Coburg the next day about an ‘18 bay roof fall build’. He said that attending on 20 October he built scaffolding around one of the two townhouses on the site. That evening by a further text message he was asked to finish the two units and to ring with a gear list two hours before it was needed.[6] Mr Dhillon said he was assisted by two others worked over two further days, 21 and 22 October, to finish the work around both townhouses.
[5]Exhibit 6, Screenshot of texts between Mr Dhillon and Martin Elliot on 19 and 20 October 2015.
[6]Ibid.
As best I understand it one side of the site perimeter, (the southern side), already had scaffolding erected and Dhillon Scaffolding was engaged to erect scaffolding on the remaining three sides.
Mr Dhillon said that on each day he attended the site he was met by a man named Martin Elliott from Western Scaffold who would show him what he wanted them to do. He said that on 21 October he had a concern about the scaffold being close to the overhead powerlines. He said he spoke to a supervisor on site, whose name he didn’t know and ‘I told him that the scaffold is close to the powerlines and you need to talk to Western Scaffold’.[7] He said that in response he was told ‘leave it to me’. He said he got no further response.
[7]Transcript of Proceedings, Noori v H & A Majestic Plumbing Pty Ltd & Ors. and Certain Underwriters at Lloyd’s of London Subscribing to Policy Number B1294HSGBGH152448 (Supreme Court, S ECI 2019 03225, Forbes J, 10 February 2021) (‘T’) 97.
In cross-examination Mr Dhillon agreed he had observed the powerlines in the vicinity of where he was erecting scaffolding.[8] He again said he spoke to the supervisor on the building site. He said that he did not contact the power authority to obtain a permit because ‘it was meant to be done by Western or the builder’.[9] It was put to him that it was Dhillon Scaffolding’s responsibility to obtain a permit and he answered that it was Western [Scaffold] and the builder’s responsibility.[10] He agreed that Dhillon Scaffolding did not prepare a safe work method statement (‘SWMS’) for work it did on 21 and 22 October nor undertake a risk assessment nor have regard to the Electricity Safety (Installations) Regulations2009 (‘ESI Regulations’)[11]. He said he was not aware of AS/NZ 4576.
[8]Ibid 119.
[9]Ibid.
[10]T (n 7) 120.
[11]Made under the Electricity Safety Act 1998.
Mr Dhillon did know what a ‘No Go Zone’ was. He said that despite knowing he was working in a ‘No Go Zone’ he continued to erect the scaffold because he was working to the plan that he was told to follow by Martin.[12]
[12]T (n 7) 120.
He said Martin Elliott called him on 28 October 2015 to inform him that the plaintiff, had been electrocuted and injured at the site. At some later time he was contacted by Worksafe investigators. He participated in two records of interview in his capacity as director of Dhillon Scaffolding in August 2016[13] and provided documentation and written answers to a request for particulars.[14]
[13]Exhibit 10, Transcript of Interview dated 4 August 2016; Exhibit 11, ‘Exhibit 57’, recorded interview between Inspector Mark Hamilton and Dhillon Scaffolding Pty Ltd.
[14]Exhibit 9, Worksafe letter 6 July 2016 to Dhillon Scaffolding Pty Ltd and schedules; Letter from Dhillon Scaffolding Pty Ltd in reply to Mr Hamilton at WorkSafe 30 July 2016.
In 2017 Dhillon Scaffolding was charged by Worksafe with one charge of breach of s 26(1) of the Occupational Health and Safety Act (Vic) 2004 (‘OHS Act’). The particulars of the charge were that Dhillon Scaffolding was a person to any extent with management or control of the workplace including constructing scaffold on units at the workplace and including scaffold within a ‘No Go Zone’ for overhead powerlines that ran adjacent to the workplace. Those working in the construction of the scaffold, including Mr Dhillon and two others, were exposed to a risk of electric shock or electrocution from live powerlines. Dhillon Scaffolding failed to ensure that a permit for the works had been obtained and any scaffold works in the ‘No Go Zone’ were completed in accordance with such a permit. It was said to be reasonably practical to ensure a permit had been obtained; to not perform scaffold works until such time as a permit was obtained and to ensure the scaffold works were completed in accordance with such a permit. Dhillon Scaffolding pleaded guilty to this charge in Broadmeadows Magistrates’ Court and was convicted and fined in January 2018.
Mr Dhillon also agreed that he did not notify the Insurer at the time of the incident, nor when Worksafe investigated and prosecuted Dhillon Scaffolding or subsequently. The Insurer was made aware of Mr Noori’s proceeding when court documents were emailed to it by Mr Noori’s solicitors.[15]
[15]Exhibit 20, Email from National Compensation Lawyers to ASR Underwriting Agencies Pty Ltd (attaching Writ and Statement of Claim) dated 30 September 2019.
Conduct relied on to refuse indemnity
The Third Party relies on the conduct outlined above as demonstrating that Dhillon Scaffolding breached the conditions of the policy. Reliance was placed on:
· Non-compliance with AS/NZ 4576 Section 5: Hazards. In particular it relied on breach of 5.1 which sets out some features of occupational health and safety law in Australia, 5.3 dealing with ‘Identification of Hazards including electricity’ and 5.4 Guidelines relating to ‘Proximity to Powerlines’ (which is set out below);
· Breaches of the condition in clause 16.1.4 of the policy that it comply with all statutory requirements by breach of s 23, 26(1) and 31 of the OHS Act and Part 3.5, and regulation 3.6.3 of the Occupational Health and Safety Regulations2007 (OHS Regs). Part 3.5 classifies scaffolds as ‘plant’ and imposes various duties on classes of people dealing with plant including employers and self-employed persons. Regulation 3.6.3 provides that a person must not do any high-risk work unless they hold an appropriate high-risk work licence for that work.
· Regulation 313 of the ESI Regulations which prohibits the erection of scaffolding within certain distances of various identified aerial powerlines without written permission of the power operator and compliance with conditions imposed by the power operator as evidence of a breach of clause 16.1.4 of the Policy Wording;
· Breached the condition in clause 16.1.1 of the Policy Wording because it failed to take reasonable precautions to prevent personal injury;
· Acted in a way that constituted a deliberate, conscious or intentional disregard of the need to take all reasonable steps to prevent personal injury so as to enliven the exclusion clause 12.3 of the Policy Wording; and
· Did not notify the Insurer of the events that give rise to the claim in breach of the condition in clause 15.1 of the Policy Wording and by dealing with the Worksafe investigation and prosecution without notifying the Insurer of those matters in breach of 15.2.
Legal Principles
There was no issue that the policy responds to the occurrence of personal injury and therefore the claim for indemnity. The refusal to indemnify relies on breaches of conditions or the operation of exclusions outlined above which give rise to questions of construction.
The Policy is a commercial contract. The words are to be given their plain meaning[16], interpreted to give effect to the objective intentions of the parties[17] within the commercial circumstances that the contract addresses. Before me Counsel for both parties agreed that contract was to be given a businesslike interpretation, in the context of considering the purpose of the transaction and giving a congruent operation to the various parts of the whole document, was to be taken in resolving any ambiguity. A commercially sensible construction is to be given in any question of interpretation of the policy[18].
[16]Hutton v Watling [1948] Ch 398.
[17]Pacific Carriers Ltd v BNP Paribas (2004) CLR 451, 461-2.
[18]All State Exploration NL v QBE Insurance (Australia) Ltd [2008] VSCA 148 [7].
The Insurer contends that the condition in the Schedule of compliance with AS/NZ 4576 was a condition precedent. That is, the Insurer’s promise to pay money was subject to the insured acting in a particular way: in compliance with AS/NZ 4576 so that this element of the contract was non-negotiable. It submitted that this Policy elevated certain elements of the Insured’s conduct to an essential element of the agreement.
In Wallaby Grip Ltd v QBE Insurance (Australia) Ltd,[19] the nature of a condition of cover that forms an essential part of the primary obligation to insure was described. The Court said:
In insurance contract law an insurer promises to pay money to the insured if the circumstances stated in the policy exist. The insurer’s promise may be equated with the cover provided by the insurance contract. The insured must prove such facts as are necessary to prove that the loss was covered by the contract, or as Bailhache J said in Munro Brice & Co v War Risks Association Ltd, the plaintiff must prove such facts as bring the claim within the terms of the insurer’s promise.
Professor Malcolm Clarke in The Law of Insurance Contracts refers to three elements as ordinarily present in the circumstances necessary to the performance of the insurer’s promise. The first is the insured event. Much may turn upon how it is described. The other two elements are the subject matter, which may be a class of persons, and the cause of the loss, usually referred to as the risk.[20]
[19](2010) 240 CLR 444 (‘Wallaby Grip’).
[20]Ibid 457 [28], [29] (citations omitted).
Further, the conditions relied on to refuse indemnity include ‘reasonable precautions’ clauses. Clause 16.1.1 was expressly described as such and the parties accepted that it was so. Dhillon Scaffolding submitted that expressly or by implication, both the Policy Schedule[21] condition of compliance with AS/NZ 4576 and clause 16.1.4, should be interpreted as clauses obliging the insured to take reasonable precautions to comply. The insurer submitted that strict compliance was required. The competing constructions require determination.
[21]Exhibit 3, Policy Schedule.
The parties agreed that for those clauses that were terms requiring the insured to take all reasonable precautions, the test to be applied is whether the conduct of the insured demonstrates recklessness or a deliberate courting of risk as described in Fraser v B N Furman:
Failure to take safety precautions was a reckless failure, viz., that the employers recognised the danger to their employees and deliberately refrained from taking measures to avert it; but on the finding of the trial judge that the employers probably did not appreciate the risk.[22]
[22]Fraser v B N Furman [1967] 3 All ER, 58.
This test was adopted here in Albion Insurance Co Ltd v Body Corporate Strata Plan No 4303, where McGarvie J said:
The condition will protect the insurer where there is a failure to take reasonable precautions which is due to ‘a deliberate decision to expose himself to the risk of bodily injury occurring, because he did not care whether it occurred or not.’ … The insured is in breach of the condition if, through a lack of concern and desire to prevent bodily injury, he deliberately adopts a course of action or inaction which he realises exposes him to the risk of someone being injured by the recognised danger.[23]
[23][1983] 2 VR 339.
Construction of the Policy
Commercial purpose
The commercial purpose of the insurance sought and offered was to insure against the risk of liability to third persons for certain types of loss and damage including personal injury. It covered personal injury that occurred to persons in the course of its scaffolding construction business, with certain exclusions including workers compensation matters and penalties and fines. The personal injury exclusions, apart from clause 12.3 are not relevant.
The insurance was not expressed to cover all circumstances of the risk to third parties of personal injury. It may be accepted, as the Insurer submitted, that the risk of personal injury associated with the presence of scaffolding to others may be significant, or that the business of scaffolding is inherently dangerous. That does not speak to the risk that is covered by the policy.
The terms of the policy and the purpose of the insurance contract as provided for by clause 6 was to indemnify the insured for ‘liability to pay damages for/and arising out of personal injury’. Therefore the commercial purpose of the insurance contract was to provide indemnity for injuries that occurred in circumstances where legal responsibility for that injury lay with the insured and not otherwise. The risk accepted by the Insurer is not one that it will provide indemnity for all relevant personal injuries associated with the scaffolding business.
A legal liability to pay damages is not established in the case of all persons injured in the course of the scaffolding business. Only those who can establish a want of care by the insured through a breach of a common law duty of care owed to them or a breach of a statutory obligation are entitled to damages. That means that the possibility that the Insured might have exercised a want of care, underpins the commercial purpose of the Policy. I do not accept the submission that the Insurer accepted the risk that scaffolding businesses are inherently dangerous and sought to accept that risk only for injuries that occurred when the insured had acted in accordance with all statutory and regulatory obligations and the obligations imposed by AS/NZ 4576. Such a construction would lead to a policy that would in effect insure ‘no fault’ circumstances of injury but not those creating a legal liability to pay damages. This is contrary to the express wording of the policy.
The Policy also contains a condition that a claim will only be defended if ‘in the opinion of the Underwriters there is a reasonable prospect of success and after taking account of the commercial considerations and economics of defending such a claim’.[24] This clause helps clarify that the commercial purpose of the contract is to cover allegations of negligence or other legal bases upon which the acts or omissions of the insured are alleged to create a liability to pay damages. The particular conditions are to be construed in the context of this purpose.
[24]ASR Underwriting Policy (n 1), Clause 15.5.
Construing the Conditions of the Policy
The Insurer submits that each of the conditions relied on to refuse indemnity are to be conditions precedent necessary to the accrual of liability to indemnify. The burden of proving compliance lies on the Insured. It submitted that each of clause 16.1, the AS/NZ 4576 Schedule condition and clause 15 are to be construed in accordance with clause 14 – that is
Any term or condition of this Policy insofar as it relates to anything to be done or complied with by the Assured shall be a condition precedent to the Underwriter’s liability to make any payment under this policy.
It was submitted that this reflected the intended coverage of the policy – to insure risk that existed only when the action of the insured had not breached the terms of the policy. In my view such a construction is somewhat at odds with a contract to insure a liability to pay damages and this commercial purpose is to be borne in mind when reaching a proper construction of the conditions.
In both common law negligence and the statutory duties relevant to the claims made against the insured, a necessary element of reasonableness is imported. A breach of a duty of care is demonstrated by a failure to take reasonable steps to reduce a foreseeable risk. A statutory duty under Part 3 in respect of Plant (including scaffold) in the OHS Regulations is to identify,[25] and eliminate or reduce,[26] by a cascading series of steps, the risk of injury. The OHS Regulations require each step to be undertaken ‘as far as is reasonably practicable’.
[25]OHS Regulations 3.5.23.
[26]Ibid 3.5 .24(1) - (3).
Likewise the obligation imposed on Dhillon Scaffolding by s 26 of the OHS Act is a duty imposed upon it as a person with some management or control of a workplace to ensure as far as is reasonably practical, the workplace is safe and without risks to health. This was the section relevant to the Worksafe charge.
The Insurer submits that a statutory obligation to make the scaffold as safe as reasonably practical unequivocally fell on Dhillon Scaffolding notwithstanding the fact that other parties were under similar obligations. This is undoubtedly correct. The requirement of what might be reasonably practical might be informed by the involvement of others who hold similar obligations. But that does not address the way that the terms in the policy of insurance should be construed.
(i) Clause 16.1 Construction
Clause 16.1 is headed Reasonable Precautions and contains 4 subparts. The words ‘reasonable precautions’ are expressed in 16.1.1, hence the agreement of both parties. The Insurer submits that 16.1.4 provides that the Insurer shall comply and therefore is not a clause subject to reasonable precautions considerations. The relevant parts of clause 16 have been set out earlier.
A common sense construction of clause 16.1 is that sub-part 1 is directed at common law circumstances and sub part 4 to statutory liability. The obligations created by the legislation and regulations itself requires only compliance as is reasonably practical. Reasonable precautions are implicit. The remaining two sub – parts of clause 16 deal with other matters and while the words ‘all reasonable precautions’ are not used they likewise talk of care or precautions as circumstances require, wording that is consistent with a ‘reasonable precautions’ condition. The overall wording of clause 16.1 taken together with the Heading for that clause, intends that it be construed as a reasonable precautions clause. Clause 16.1 as a whole therefore is construed as one where to deny liability, the Insured’s conduct is reckless or amounts to a deliberate courting of harm in accordance with the test in Fraser v F B Furman. I will return to whether or not this has been established later in these reasons.
(ii) AS/NZ 4576: the Schedule condition
The Guidelines contained in AS/NZ4576 are incorporated as conditions of the contract by reference to them in the Policy Schedule. They are terms despite the evidence of Mr Dhillon that he had not read and was not aware of them. I do not accept the submission made on behalf of Dhillon Scaffolding that it was an unusual inclusion such that s 37 of the Insurance Contracts Act required written notice prior to entering the contract of insurance. Despite the form of naming which omitted the works ‘Guidelines for Scaffolding’ the document was one of standards relevant to those working in the scaffolding industry and something that might reasonably be expected to be familiar to those licenced to work or experienced in the industry seeking insurance associated with that activity.
The introductory remarks for AS/NZ 4576[27] states that is has been prepared with every attempt to make the guidelines compatible with Worksafe Australia’s publications of national standards and references obligations imposed by Occupational Health and Safety legislation and regulations. It is not suggested that the guidelines themselves give rise to any right of action by injured persons, but they can and do inform the statutory or common law obligations upon those supplying, erecting, altering, dismantling maintaining, inspecting and using scaffolds.[28]
[27]Exhibit 7, Australia and New Zealand Standard 1995.
[28]Griffin v VWA& Ors [2016] VSC 101 as an example of AS/NZ being used to inform common law duty of care.
Incorporating the Guidelines into the contract serves to identify some of the ways that statutory obligations and industry practice are relevant and applicable to the business of the Insured. Much of the information contained in AS/NZ 4576 is informational. It describes and identified equipment and tools commonly used, training, relevant information about certain sites and work areas. It gives ‘practical guidance’ and refers to obligations that are imposed by various legislation and Regulations as they might apply to the various chapters in the document. It could not be said that the Guidelines impose obligations on a scaffolder greater than are imposed by Act or regulation.
If the statutory obligations referred to in the Guidelines, are satisfied by demonstrating action that is reasonably practical, then by incorporating the Guidelines into the contract can achieve no greater obligation for compliance.
To the extent that compliance with the Guidelines forms conditions it is said that strict compliance with each and every element of them is necessary. Insofar as the Guidelines reflect what may be required of a scaffolding business to meet a duty of care or a statutory duty, the Insurer described them as incorporating ‘a formal requirement that it do what it should reasonably have been doing in the first place’.[29] It cannot sensibly be read as creating by incorporating the Guidelines into the contract of insurance that some higher standard of compliance is necessary. On such an interpretation it is difficult to see circumstances in which a liability to pay damages for personal injury under the policy could ever arise.
[29]Third Party Submissions [28].
Insofar as the Guidelines are said to be consistent with regulatory provisions their incorporation into the contract imposes no greater obligations on Dhillon Scaffolding than are imposed by the relevant acts and regulations. In those circumstances the Schedule condition should be interpreted consistently with other clauses dealing with the conduct of the Insured in conducting the business – as a reasonable precautions clause.
The Insurer submits that AS/NZ 4576, required the Insured to obtain a permit from the relevant power company and by failing to do so it breached Clause 5.4.2 . Clause 5.4.2 reads
Australian requirements The clearance between scaffolds and any transmission line, main apparatus or transmission apparatus should not be less than (see Figure 5.4.2):
·4.0m where any metal member is used.
·1.5m where only non-conductive materials such as dry timber of plywood are used.
Advice should be sought from the local electricity supply authority for any reduction to the above clearances.
Do not erect scaffolding until the necessary measures have been taken to minimize risk and a written authorization has been received from the electricity supply authority.
High voltage mains (i.e more than 600 V) near scaffolding be de-energized, short-circuited and erected, or re-routed prior to erection of the scaffolding.
Low voltage mains (i.e. not more than 250 V) and medium voltage mains (i.e. in the range of 250V to 600V) should be de-energized, short-circuited and earthed, or re-routed where practicable. Make sure that inadvertent re-energizing of mains cannot occur while work is in progress.
Low and medium voltage mains that cannot be de-energized should be insulated by the supply authority for the full length of the scaffolding plus a minimum distance beyond each end of the scaffolding of 5.0 m. Although this insulation (e.g. tiger tails) is a safeguard against contact with live wires under dry conditions, a combination of small gaps in the insulation and wet weather conditions can cause an unsafe situation, which can result in severe shocks.
The scaffolding may only be erected where no part is allowed to touch or fall across the insulated wires.
The reflects the regime found in the ESI Regulations. The ESI Regulations prohibit any member of the public from erecting scaffolding within the proximity of overhead powerlines unless a written permit is obtained from the appropriate electricity company.
Neither the ESI Regulations nor AS/NZ 4576 specify who holds the obligation to obtain a necessary permit for the erection of a scaffold within the reduced clearances of a ‘No Go Zone’. The ESI Regulations and AS/NZ4576 contemplate that scaffold may be erected within the minimum clearances for powerlines with a written authorisation. Guideline 5.4.2 set out above indicates that during erection of the scaffold the power is turned off but that once erected, while the scaffold is in place the powerlines may be live. It does not deal with how the scaffold should be constructed or speak to measures to protect users of the scaffold once it is place when power is or may be restored.
At present there is no evidence whether this would be addressed by conditions on a permit from the power company or whether there are some other rules that apply. I do note that AS/NZ 4576 deals with the design and construction of scaffolds in Section 8 but does not mandate particular construction requirements and references other Standards for compliance in the construction of particular scaffold. Those other Standards do not form conditions of the Policy.
Mr Dhillon’s evidence was that he observed the proximity of the powerlines to the area where he was to work. He said he did not know whether or not a permit was required but that if one was required he understood that it was the builder or Western Scaffolding who would arrange a permit.[30] His evidence was that in all the time he undertook scaffolding work (at the time of the incident approximately five years) he was never involved in dealings with power companies about permits.
[30]T (n 7) 148.
The breach relied on by the Insurer is that Dhillon Scaffolding failed to obtain a work permit from Jemena in breach of the ESV Guidelines for scaffolding.[31] I do not construe 5.4.2 of AS/NZ 4576 as imposing a specific obligation upon Dhillon Scaffolding that it was required to obtain a permit from the power company. There has not yet been any evidence as to what steps were taken or by whom to obtain any such permits. What is clear from Mr Dhillon’s evidence is that Dhillon Scaffolding did not make itself aware whether a permit existed or its conditions. The Worksafe particulars of charge were based upon this failing. That is the breach to which it pleaded guilty in the Worksafe prosecution.
[31]Amended Third Party Defence to Fourth Defendant’s amended third party notice dated February 2021at 4C(b)(iii).
Reliance was also placed on the evidence that the two persons working on site with Mr Dhillon did not hold scaffolding licences as breaching OHS Regulations. He said he was erecting the scaffold and the other two were helping and passing equipment. The evidence went no further as to any licences held by those workers or whether what they were doing required any licence. Mr Dhillon gave evidence that a scaffolding licence such as he held was required to erect or dismantle scaffold and to work at heights over two metres but was not required for general labourers as was being provided by the other two persons.[32]
[32]Transcript 107.
Does the conduct provide for refusal of indemnity for breach of Reasonable Precautions clauses?
Matters of fact and degree of Dhillon Scaffolding’s conduct are relevant to the ultimate determination of liability and, as outlined earlier, an Insurer retains the right to determine whether and to what extent to defend a claim made against the Insured. A liability to pay damages exists whenever the requisite degree of departure is established. Save that the policy does exclude liability for fines and for conduct giving rise to liability for non-compensatory damages such as aggravated, punitive or exemplary damages, it is otherwise a policy responds to claims that allege a want of care on the part of its insured: whether or not they may be successfully defended. Save for considerations applicable to the reasonable precautions clauses or exclusions, the degree of departure from the common law or statutory obligations as may be found plays no part in construing the terms of the contract.
Clauses that require an Insured to take reasonable precautions are not breached by action that amounts to negligence but require that an insured have actual recognition that a danger exists and be at least reckless as to averting the danger. That test is a subjective one.[33] The Insurer submits that Dhillon Scaffolding’s conduct does meet this test.
[33]Albion Insurance Co Ltd v Body Corporate Strata Plan No 4303 [1983] 2 VR 339.
Undoubtedly Mr Dhillon was aware of the close proximity to powerlines as he said in evidence. He was one of the persons who erected the scaffold in close proximity and without knowing whether there was a permit to turn off the electricity current during construction and thereby placed himself at risk of serious injury or death. It was unclear what his comprehension was of the risk that he himself faced. His evidence was that he played no part in the manner in which the scaffold was to be constructed but constructed it in accordance with the information provided to him by Western Scaffold. On that basis of his evidence, in particular his evidence that in practice he was not the contractor to manage obtaining permits or design the manner of scaffold construction, I am not satisfied that his actions or inactions were a course of action deliberately adopted by him subjectively realising the danger it posed.
(iii) Clause 12.3 – Reasonable Steps to prevent personal Injury
The exclusion requires ‘deliberate, conscious or intentional disregard’. For the reasons outlined at [68] I am not satisfied that the acts of Dhillon Scaffolding were deliberate, conscious or intentional disregard to bring it within the exclusion clause of the Policy.
Failure to Notify – Clause 15
The facts clearly demonstrate the Dhillon Scaffolding failed to notify the Insurer in accordance with the terms of the Policy.
The Insurer submitted that the failure of Dhillon Scaffolding to notify it of the occurrence and the likelihood of a claim has caused prejudice. The Insurer led no evidence of actual prejudice but submitted I could draw an inference from the various documents tendered in evidence of how the insurer would have been prejudiced by the lack of notice. It submitted that the prejudice stemmed from an inability to investigate the circumstances in a timely fashion and deprived of an opportunity to be involved in the Worksafe prosecution.
Accepting that the Insurer was not able to do either does not of itself demonstrate that the inability leads to any prejudice. There was a timely investigation undertaken by Worksafe which led to a prosecution. It is apparent that this included contemporaneous photographs and statements. It has not been suggested that the investigation was inadequate or that there was some aspect overlooked that the Insurer would have pursued had it been notified. The absence of an ability to conduct its own independent investigation does not necessarily lead to an inference of prejudice where there has been an independent investigation undertaken.
The Policy excluded liability for fines and so did not respond not the occupational health and safety charge and conviction. The statement of facts upon which the plea proceeded described partial admissions made in the record of interview. Those matters were broadly consistent with the sworn evidence of Mr Dhillon before me. The role that the insurer might have had, as a non-party, in the prosecution was not developed. I find it difficult to see what prejudice flows in those circumstances and I will not infer as a matter of generality that prejudice has been suffered.
The fourth defendant by Reply pleaded that if the contract provided the Insurer with a contractual right to refuse to pay the claim then it called on s 54 of the Insurance Contracts Act. Relevantly s 54 provides:
54 Insurer may not refuse to pay claims in certain circumstances
(1)Subject to this section, where the effect of a contract of insurance would, but for this section, be that the insurer may refuse to pay a claim, either in whole or in part, by reason of some act of the insured or of some other person, being an act that occurred after the contract was entered into but not being an act in respect of which subsection (2) applies, the insurer may not refuse to pay the claim by reason only of that act but the insurer’s liability in respect of the claim is reduced by the amount that fairly represents the extent to which the insurer’s interests were prejudiced as a result of that act.
(2)Subject to the succeeding provisions of this section, where the act could reasonably be regarded as being capable of causing or contributing to a loss in respect of which insurance cover is provided by the contract, the insurer may refuse to pay the claim.
(3)Where the insured proves that no part of the loss that gave rise to the claim was caused by the act, the insurer may not refuse to pay the claim by reason only of the act.
(4)Where the insured proves that some part of the loss that gave rise to the claim was not caused by the act, the insurer may not refuse to pay the claim, so far as it concerns that part of the loss, by reason only of the act.
….
Dhillon Scaffolding pleaded that if the construction of the contract was such that the Insurer was contractually entitled to refuse cover it relied on s 54 (3) or (4). The Insurer submitted that s 54(2) applied as the act was one ‘capable of causing or contributing to a loss in respect of which insurance cover is provided’. The Insurer submitted that the ‘act’ was the actions and inactions on site in October 2015 which were clearly capable of causing or contributing to the loss.
The relevance of s 54(2) and the circumstances set out in the subsequent provisions depends however on the construction of the particular contract of insurance. It is first necessary to determine whether under the contract an insurer is entitled to refuse to pay a claim. It is only then that s 54 provides a remedy limiting the circumstances in which refusal can be maintained in the face of the contractual right to do so.
For the reasons outlined earlier I have concluded that the Insurer is not entitled to refuse indemnity. It would only be necessary to consider the operation of s 54 and the identification of circumstances where refusal may not be maintained in the face of a contractual entitlement to do so, had I concluded that the Policy was to be construed as otherwise entitling refusal the of the claim.
I will hear the parties in due course as to the appropriate orders.
SCHEDULE OF PARTIES
S ECI 2019 03225
| ZELMAI NOORI | Plaintiff |
| - v - | |
| H & A MAJESTIC PLUMBING PTY LTD | First Defendant |
| ASSAR PTY LTD | Second Defendant |
| WESTERN SCAFFOLD PTY LTD | Third Defendant |
| DHILLON SCAFFOLDING PTY LTD | Fourth Defendant |
| - and - | |
| CERTAIN UNDERWRITERS at LLOYD’S OF LONDON SUBSCRIBING TO POLICY NUMBER B1294HSGBGH152448 | Third Party |
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