SunWater Limited v Liberty Mutual Insurance Company

[2022] NSWCA 273

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

SunWater Limited v Liberty Mutual Insurance Company [2022] NSWCA 273

Hearing dates:

29 August 2022

Date of orders:

16 December 2022

Decision date:

16 December 2022

Before:

Bell CJ at [1];
Macfarlan JA at [2];
Meagher JA at [82]

Decision:

Appeal dismissed, with costs.

Catchwords:

INSURANCE — liability insurance — exclusions — whether liability arose out of the rendering of or failure to render professional advice or service for a fee – whether SunWater itself rendered professional advice or service — act of subordinate was act of SunWater — whether exclusion confined to liability to client or extended to liability to third parties – whether exclusion clause excessively circumscribed cover if interpreted as insurers contended

Cases Cited:

Central Coast Council v Norcross Pictorial Calendars Pty Ltd (2021) 391 ALR 157; [2021] NSWCA 75

Darling Island Stevedoring and Lighterage Co Ltd v Long (1957) 97 CLR 36; [1957] HCA 26

Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; [1986] HCA 82

Drexel London (a firm) v Gove (Blackman) [2009] WASCA 181

Fitzpatrick v Job t/as Jobs Engineering [2007] WASCA 63

HDI Global Specialty SE v Wonkana No.3 Pty Ltd (2020) 104 NSWLR 634; [2020] NSWCA 296

IBM Australia Ptd v National Distribution Services Ltd (1991) 22 NSWLR 466

Kable v New South Wales [2012] NSWCA 243

Legal & General Insurance v Eather (1986) 6 NSWLR 390

Limit (No 3) Ltd v ACE Insurance Ltd [2009] NSWSC 514

Optus Administration Pty Ltd v Wright (2017) 94 NSWLR 229; [2017] NSWCA 21

Pioneer Mortgage Services v Columbus Capital (2016) 250 FCR 136; [2016] FCAFC 78

Prince Alfred College Incorporated v ADC (2016) 258 CLR 134; [2016] HCA 37

Rava v Logan Wines Pty Ltd [2007] NSWCA 62

Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority trading as Seqwater (No 22) [2019] NSWSC 16

Transfield Services (Australia) v Hall; Hall v QBE Insurance (Australia) [2008] NSWCA 294

Vero Insurance Ltd v Power Technologies Pty Ltd [2007] NSWCA 226

Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance (2018) 359 ALR 256; [2018] NSWCA 100

Category:

Principal judgment

Parties:

SunWater Limited (Appellant)
Liberty Mutual Insurance Company, Australia Branch (First Respondent)
Underwriting Members of Lloyds Syndicate 0386 DAC (Second Respondent)
QBE Insurance (Europe) Limited (Third Respondent)
QBE Insurance (Australia) Limited (Fourth Respondent)
Underwriting Members of Lloyd’s Syndicate 1218 ODY (Fifth Respondent)
Underwriting Members of Lloyd’s Syndicate 2468 MFM (Sixth Respondent)
Underwriting Members of Lloyd’s Syndicate 1225 AES (Seventh Respondent)
Certain Underwriters and Lloyd’s and Co-Insurers subscribing to Policy No. 509/DR442210(2) (Eighth Respondent)
Zurich Australia Insurance Limited (Ninth Respondent)
XL Insurance Company SE (Tenth Respondent)
Great Lakes Insurance SE, as Societas Europea incorporated in Germany trading as Great Lakes Australia (Eleventh Respondent)
Insurance Australia Limited trading as CGU Insurance Limited (Twelfth Respondent)
Chubb Insurance Australia Limited (Thirteenth Respondent)
AAI Limited trading as Vero Insurance Limited (Fourteenth Respondent)
Allianz Australia Insurance Limited (Fifteenth Respondents)

Representation:

Counsel:
J Sheahan QC, N Kidd, J Dooley (Appellant)
MJ Darke SC, GES Ng, RA Jedrzejcyzyk (First Respondent)
EC Muston SC, MF Newtown (Second and Third Respondents)

Solicitors:
Allens (Appellant)
YPOL Lawyers (First, Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth, Fourteenth and Fifteenth Respondents)
HWL Ebsworth Lawyers (Second and Third Respondent)
QBE Insurance (Australia) Limited (Fourth Respondent)
Clyde & Co (Fifth, Sixth and Seventh Respondent)

File Number(s):

2021/361913

 Decision under appeal 

Court or tribunal:

Supreme Court

Jurisdiction:

Equity

Citation:

[2021] NSWSC 1582

Date of Decision:

3 December 2021

Before:

Stevenson J

File Number(s):

2020/12558

HEADNOTE

[This headnote is not to be read as part of the judgment]

Following the Queensland Floods in January 2011, class action proceedings were brought against SunWater, the State of Queensland and Seqwater claiming damages for property loss from the release of, or failure to release, water from the Somerset and Wivenhoe Dams. The liability of SunWater (the present appellant) arose out of an agreement it had with Seqwater to provide flood management services. SunWater was held vicariously liable for breaches of duty committed by its employee who was the Senior Flood Operations Engineer at the time.

SunWater sought indemnity from its insurers in respect of that liability, under two contracts of insurance. The first was a combined policy of General and Products Liability insurance and Professional Indemnity insurance. The second policy provided cover in respect of the first excess layer of the General and Products Liability Insurance. Certain of the insurers (the present respondents) relied on an exclusion clause (Exclusion 8) to deny indemnity. Exclusion 8 excludes liability arising out of the rendering of or failure to render professional advice or service for a fee by the insured.

On 3 December 2021, Stevenson J delivered judgment, holding that the exclusion clause operated to deny SunWater entitlement to indemnity in respect of the liability arising out of the class action proceedings.

SunWater appealed on two grounds. First, that the primary judge erred in finding that SunWater’s liability arose out of professional advice or service given by it and secondly, that the primary judge erred in concluding that Exclusion 8 could apply to claims made against SunWater by persons who were not the recipients or intended recipients of the advice or service given by SunWater.

The Court (Macfarlan JA; Bell CJ and Meagher JA agreeing) concluded that Exclusion 8 operated to deny indemnity in respect of liability arising out of the class action proceedings; it therefore dismissed the appeal with costs: [1], [81]-[82].

Was SunWater rendering professional advice or service to Seqwater?

1. SunWater’s essential contractual obligation was to provide flood management services. The fact that this was to be done at least in part by providing appropriately qualified and experienced personnel did not mean that SunWater itself did not provide flood management services. The reality was that it did so, inter alia, through its employee, Mr Ayre: [51].

2. The primary judge’s finding that SunWater provided flood management services through Mr Ayre was entirely consistent with Beech-Jones J’s finding that SunWater was vicariously liable for Mr Ayre’s conduct: [52].

3. Mr Ayre’s acts were to be regarded as those of SunWater or, alternatively, SunWater’s vicarious liability arose because Mr Ayre’s acts were done in the course of his employment by SunWater, irrespective of whether the particular acts were authorised or directed by SunWater: [53].

Darling Island Stevedoring and Lighterage Co Ltd v Long (1957) 97 CLR 36; [1957] HCA 26; Kable v New South Wales [2012] NSWCA 243; Pioneer Mortgage Services v Columbus Capital (2016) 250 FCR 136; [2016] FCAFC 78; Optus Administration Pty Ltd v Wright (2017) 94 NSWLR 229; [2017] NSWCA 21; Prince Alfred College Incorporated v ADC (2016) 258 CLR 134; [2016] HCA 37 considered

Is Exclusion 8 confined to professional advice or service rendered to Seqwater?

4. It is relevant to the construction of an exclusion clause in an insurance policy to consider whether a broader construction advanced by the insurers would excessively circumscribe the insuring clause and defeat the commercial purpose of the contract of indemnity. However, this does not permit rejection of the plain meaning of an unambiguous exclusion clause simply because another meaning might appear more reasonable in light of the other terms of the policy: [56], [70]-[79].

Transfield Services v Haul [2008] NSWCA 294; partly reported at 75 NSWLR 12; Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance (2018) 359 ALR 256; [2018] NSWCA 100 considered

Fitzpatrick v Job t/as Jobs Engineering [2007] WASCA 63; Vero Insurance Ltd v Power Technologies Pty Ltd [2007] NSWCA 226; Legal & General Insurance v Eather (1986) 6 NSWLR 390; Limit (No 3) Ltd v ACE Insurance Ltd [2009] NSWSC 514 distinguished

5. The insurers’ broader construction would not excessively circumscribe cover. A substantial part of SunWater’s activities were non-professional in character. The existence of a separate professional indemnity component meant that cover for professional negligence claims by third parties, even if not complete, remained available under the professional indemnity component of the Combined Policy: [62]-[65].

6. In its natural and ordinary meaning, Exclusion 8 does not contain any limitation on its operation of the type for which SunWater contended. The critical words used, “arising out of”, would have to be read down if such a limitation were to be imported. The phrase “arising out of” is a broad one, well capable of capturing the present circumstances: [68]. There is no textual hook upon which SunWater’s construction could be based: [69].

JUDGMENT

1. BELL CJ:  I have had the considerable benefit of reading the reasons of Macfarlan JA in this matter, am grateful for his Honour’s exposition of the issues and agree with his very clear analysis of those issues.  For the reasons his Honour gives, I, too, would dismiss the appeal with costs.

2. MACFARLAN JA: This is an appeal by SunWater Limited (“SunWater”) against a judgment dated 3 December 2021 of Stevenson J sitting in the Commercial List of the Supreme Court (Liberty Mutual Insurance Company, Australia Branch v SunWater Ltd (No 2) [2021] NSWSC 1582). His Honour found that an exclusion clause in the General and Products Liability insurance issued to SunWater operated to deny any entitlement of SunWater to indemnity in respect of a liability arising out of certain class action proceedings (see Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority trading as Seqwater (No 22) [2019] NSWSC 1657 (“Rodriguez Class Action”)). Those proceedings related to the Queensland floods of January 2011 and the release of, or failure to release, water from the Somerset and Wivenhoe Dams in the days leading up to the 2011 flood event. Somerset and Wivenhoe Dam are owned and operated by Queensland Bulk Water Supply Authority, trading as Seqwater.

3. By the Class Action, Rodriguez and the Group Members, who suffered property loss when substantial areas located downstream from the Wivenhoe Dam (and from the Somerset Dam which is upstream from the Wivenhoe Dam) were inundated by floodwaters, claimed damages from SunWater, the State of Queensland and Seqwater.

4. SunWater’s liability was alleged to have arisen out of its provision to Seqwater of services pursuant to a “Service Level Agreement – Flood Management Services” (“the Service Level Agreement”) with Seqwater dated 13 October 2009.

5. SunWater appealed against two of the judgments delivered by Beech-Jones J (as his Honour then was) in the Rodriguez Class Action proceedings but settled the proceedings on the basis that it accepted liability for an agreed sum of money. In the present proceedings it sought indemnity from its insurers in respect of that liability. The exclusion clause (General Exclusion 8), upon which certain of the insurers successfully relied at first instance to deny indemnity, excluded liability: “arising out of the rendering of or failure to render professional advice or service for a fee by The Insured”.

6. On its appeal to this Court against Stevenson J’s judgment, SunWater relied on two grounds as follows:

1. That the primary judge erred in finding that the claims against SunWater in the Class Action proceedings arose out of professional advice or service given by SunWater, within the meaning of General Exclusion 8.

2. That the primary judge erred in concluding that the exclusion applied to claims made against SunWater by persons who were not the recipients or intended recipients of the professional advice or service given for a fee by SunWater.

7. For the reasons that appear below, I have concluded that the primary judge was correct to find that General Exclusion 8 (‘Exclusion 8’) applied and that SunWater was not therefore entitled to indemnity.

THE SERVICE LEVEL AGREEMENT

8. The Service Level Agreement of 13 October 2009 commences by referring to Seqwater’s ownership of Wivenhoe, Somerset and North Pine Dams and to the existence of an earlier agreement (of 2001) between the parties which related to SunWater’s provision to Seqwater of, inter alia, flood management services. It then recites that SunWater is to continue to provide flood management services.

9. Clause 3 of the Agreement is relevantly in the following terms:

“3.1 Supply of Service

Commencing on the Effective Date, and continuing during the Term, SunWater must provide the Service to Seqwater on the terms of this Agreement.

3.2 Service requirements

The service requirements are described in the Service Schedule attached to this Agreement.

SunWater must:

(a)    Provide the Service in accordance with the Service Schedule;

(b)    provide the Service to Seqwater using appropriately qualified and experienced personnel; and

(c)    act in accordance with reasonable directions from Seqwater in respect of SunWater’s performance of the Service.

3.3 Standard of Service

SunWater shall perform the Service in a diligent manner and to a standard which is, at a minimum, the higher of:

(a)    the standard to which the Service was performed over the 24 months prior to the Effective Date;

(b)    the standard of skill and care expected of a contractor experienced in the provision of the Service.

…”

10. The “Service” referred to in these provisions is defined in clause 1.1 to mean “the service to be provided by SunWater to Seqwater under this Agreement, as described in the Service Schedule”. The “Service Schedule” is in turn defined to mean the Schedule to the Agreement.

11. Clause 6.1 provides for the payment of fees in accordance with the Service Schedule.

12. The Service Schedule commences with the following provision under the heading “GENERAL”:

“Scope of Work

SunWater shall provide flood management services for Wivenhoe, Somerset and North Pine Dams in accordance with the provisions of this Service Schedule, the Emergency Action Plans [“EAP’s”], Standing Operating Procedures [“SOP’s”], the Flood Operations Manuals.”

13. The Flood Operations Manuals are referred to in the Service Schedule as follows:

“The Flood Operations Manuals set out detailed procedures and working instructions that are to be followed by SunWater during a flood event…”

14. In clause 5 the Schedule provides for SunWater to establish and maintain a “Flood Control Centre” and to “competently deal with flood events” in accordance with the requirements of the Standard Operating Procedures, Emergency Action Plans and the Flood Operations Manuals.

15. The following is then included in clause 6 under the heading “FLOOD OPERATIONS AND REPORTING”:

“Flood Operation

SunWater shall perform flood operations during flood events in accordance with the relevant provisions of EAPs and SOPs, which refer to the Flood Operations Manuals.

SunWater shall ensure that adequate arrangements are in place within SunWater’s organisation to ensure that storm warnings are responded to promptly including notification of key staff required for flood operations at each dam, at the Flood Control Centre and elsewhere.

SunWater, in conjunction with Seqwater, shall mobilise flood response teams to attend each relevant dam and the Flood Control Centre when:

•    for Wivenhoe Dam indications are received of an imminent flood which may require flood releases.

•    for Somerset Dam indications are received of a significant inflow which may require flood releases.

•    for North Pine Dam heavy rain is experienced in the dam’s catchment area.

…

Payment for SunWater’s personnel involved in flood operations at the dams, the Flood Control Centre or elsewhere shall be made at the applicable hourly rates contained in clause 7 of this Schedule for the actual hours involved in the flood event.”

16. Clause 7 of the Schedule provides for a specified annual amount to be paid to SunWater for its services, “with flood events to be paid for on an hourly rate basis in accordance with the schedule of rates”. The Schedule of Rates includes “Duty Flood Engineers” with a Standard Hourly Rate of $270.

17. The Manual (bearing the full title “Manual of Operational Procedures for Flood Mitigation at Wivenhoe Dam and Somerset Dam”) includes the following concerning a Senior Flood Operations Engineer:

“Seqwater must nominate one or more suitably qualified and experienced persons to undertake the role of Senior Flood Operations Engineer. If approved by the Chief Executive, these persons can be authorised in the Schedule of Authorities (see Section 2.6). When rostered on duty during a Flood Event, the responsibilities of the Senior Flood Engineer are as follows:

•    Set the overall strategy for management of the Flood Event in accordance with the objectives of this Manual.

•    Provide instructions to site staff to make releases of water from the Dams during Flood Events that are in accordance with this Manual.

•    Apply reasonable discretion in managing a Flood Event as described in Section 2.8.

Seqwater must ensure that an adequate number of Senior Flood Operations Engineers are available to manage all Flood Events.”

18. The “Chief Executive” is defined by clause 1.2 to mean the Director General of the Department of Environment and Resource Management or nominated delegate. “Flood Event” is defined to refer to a situation where the Duty Flood Operations Engineer expects the water level in either of the Wivenhoe or Somerset Dams to exceed the Full Supply Level.

19. Clause 2.8 confers a discretion on the Senior Flood Operations Engineer to depart from the procedures in the Manual if certain circumstances arise.

THE CLASS ACTION PROCEEDINGS

20. The primary judge in the present case described the Rodriguez Class Action proceedings in the following terms.

21. In the Class Action proceedings, Rodriguez & Sons Pty Ltd, on behalf of the Group Members, alleged that insufficient releases of water for flood mitigation purposes were made from Wivenhoe and Somerset Dams, with the result that, when there was extreme rainfall on 9, 10 and 11 January 2011, the dam operators were forced to release large volumes of water, exacerbating the impact of the flood on downstream urban areas and Rodriguez and the Group Members’ properties.

22. Rodriguez brought a claim against SunWater for negligence, including on the basis that SunWater was vicariously liable for breaches of duty committed by its employee, Mr Robert Ayre, who was acting as the Senior Flood Operations Engineer at the time. Rodriguez alleged that Mr Ayre failed to conduct flood mitigation operations in accordance with the Manual of Operational Procedures and in such a manner as to prevent the inundation of the areas in which Rodriguez’s and the Group Members’ properties were located. SunWater was asserted to be liable either for its own acts or omissions, based on its obligations to provide the flood management services under the Service Level Agreement with Seqwater, or alternatively, vicariously liable for the conduct of Mr Ayre as SunWater’s employee. Beech-Jones J found that SunWater was vicariously liable for breach of a duty of care that Mr Ayre owed to Rodriguez and the Group Members. He found that SunWater did not itself owe a relevant duty of care to Rodriguez and the Group Members.

23. As noted above, SunWater’s appeal from Beech-Jones J’s decisions was settled prior to its determination. SunWater sought indemnity in the present proceedings for the amount for which it was liable under the settlement.

24. Some observations and findings of Beech-Jones J that SunWater relies on in the present proceedings are as follows:

“159   The plaintiff contended that SunWater owed a duty of care by reference to the ‘same recognised category of duty in relation to the operation of potentially hazardous equipment’. The contention that Seqwater owed a nondelegable duty of care has been rejected. As it does not owe such a duty, then neither does SunWater, especially given the findings that have just been made regarding its control over the dams.

160   The plaintiff further submitted that as SunWater was ‘contracted to provide professional engineering services to Seqwater, the scope and content of that duty in this case is informed by the duty which all professionals performing professional services owe to third parties who might reasonably foreseeably suffer physical damage to person or property as a result of any failure to take reasonable [care] in the performance of those services’. The plaintiff cited the following passage from the judgment of McLure JA (with whom Le Miere and Kenneth Martin JJ relevantly agreed) in Drexel London (a firm) v Gove (Blackman) [[2009] WASCA 181 at [121]]:

‘An engineer owes a duty to exercise reasonable care and skill in the provision of professional services. The duty is owed not only to the client but to other classes of persons who might foreseeably suffer injury as a result of the failure to exercise reasonable care.’ (emphasis added)

161   The plaintiff’s submissions elide the difference between ‘provid[ing] professional engineering services’ and acting as an engineer. SunWater is not an ‘engineer’ and it did not so much promise to act as an engineer as promised to provide professional engineers and other support to enable the performance of flood management services ‘in accordance with the Manual’.

…

191   In addressing the statutory provisions affecting the standard of care it is necessary to identify, in light of the pleaded case and the findings to this point, who owed the relevant duty and who (allegedly) committed the relevant breach. The above findings are to the effect that each of the flood engineers owed a duty of care in the conduct of flood operations, as did Seqwater and also SunWater at least in respect of its provision of flood management services under the SLA. However, the duties owed by Seqwater and SunWater were not found to be non-delegable. As discussed in Chapter 12, all of the allegations of breach concern the conduct of the flood engineers. It follows that the only form of liability in negligence that may be imposed on Seqwater, SunWater or the State is a ‘true vicarious liability’, that is ‘the master is liable not for a breach of a duty resting on [it] and broken by [it] but for a breach of duty resting on another and broken by another.’” (citations omitted)

SUNWATER’S INSURANCE

25. SunWater seeks indemnity under two contracts of insurance. The first is a combined policy of General and Products Liability insurance on the one hand and Professional Indemnity insurance on the other. It was issued by the second, third, fifth, sixth and seventh respondents for the period 30 June 2008 to 30 June 2010 and was later extended to 30 June 2011 (“the Combined Policy”).

26. The second policy (“the Excess Liability Policy”), issued by the first respondent, provided cover in respect of the first excess layer of SunWater’s General and Products Liability insurance, on the same terms as the underlying insurance. Insurance existed in respect of further excess layers but it is not presently relevant.

27. The precise details of the insurers’ positions are not of significance for the purpose of determining the issues that have been raised for resolution on appeal. It is sufficient in this regard to adopt SunWater’s description as follows of the position:

“Broadly speaking, the primary layer and 2nd excess layer accepted that General Exclusion 8 did not apply, subject to reservations. The 1st excess layer (the 1^st respondent), and other excess layers, contended that General Exclusion 8 was engaged, and filed a Summons and Commercial List Statement (subsequently amended) seeking declaratory relief. The appellant, in turn, filed a Cross-Summons and Commercial List Cross-Claim Statement (also subsequently amended), effectively seeking declaratory relief that the insurers stood liable to indemnify it.”

28. Under the General and Products Liability insurance, the insurer agreed to indemnify SunWater in respect of its legal liability to pay compensation relating, inter alia, to property damage. The cover expressly extended to liability incurred by way of settlement of claims.

29. SunWater’s business was described in two places in the General and Products Liability policy documents in the following terms:

“Principally, SunWater undertakes the management of water and water infrastructure, designs, operates and maintains water infrastructure and systems, locally and nationally and undertakes engineering consultancies related to water infrastructure locally, nationally and overseas for private and public clients.

Maintains and operates water and waste water treatment facilities and systems and

(a)    generation of electricity through use of hydro electric generation using water controlled by SunWater, locally; and proposes to

(b)    set-up a water exchange to conduct water trading activities;

(c)    is examining feasibility of treating and supplying groundwater and water extracted as a by-product of coal seam methane gas operations by third parties.

Business management, chattel ownership and property and major infrastructure ownership, leasing and renting, locally and nationally for undertaking its business and providing accommodation for staff. SunWater is a Statutory Owned Corporation (GIC) established under the GOC Act. Volunteer Work by SunWater employees and any other occupation incidental thereto”

30. The following further information concerning SunWater’s business was stated, immediately prior to one of these descriptions, as follows:

“The following underwriting information is held on file by Marsh Ltd Global Placement and has been seen by the Insurers subscribing hereto:

Estimated Turnover 2008/2009: AUD182,109,000 (Goods and Services Tax exclusive)

Estimated Professional Fees 2008/2009: AUD 15,800,000 (budgeted)

31. The exclusion clause in question in the present proceedings appears as the 8^th of 11 General Exclusions, as follows:

“8.   PROFESSIONAL LIABILITY

arising out of the rendering of or failure to render professional advice or service given for a fee by The Insured”

32. As earlier indicated, the Professional Indemnity policy constitutes part of the Combined Policy. It is a distinct and self-contained component of it. Its description of SunWater’s business is in the same terms as that in the General and Products Liability policy (see [29] above).

33. The Professional Indemnity insuring clause is in the following terms:

“2.1    CLAIMS MADE AND NOTIFIED

The Insurers will pay to or for The Insured any amount which The Insured becomes legally liable to pay in respect of a claim made against The Insured arising from any negligent act, negligent error or negligent omission of the Insured or persons acting on their behalf committed or allegedly committed in the conduct of the lnsured's Professional Activities and Duties. The claim must have been first made against The Insured, and must be notified in writing to the Insurers during the Period of Insurance.”

34. The expression “Professional Activities and Duties” used in this clause is defined later in the policy as follows:

“professional work involving design and consulting activities including

(a)    design;

(b)    advice;

(c)    pre-design;

(d)    specification;

(e)    technical information calculation;

(f)    feasibility studies;

(g)    surveying;

(h)    provision of inspection services;

(i)    plans preparations;

(j)    project management and supervision of construction when remunerated by fee for services.”

THE JUDGMENT AT FIRST INSTANCE

Was SunWater rendering professional advice or service to Seqwater?

35. The primary judge noted that SunWater did not dispute that it provided some “services” to Seqwater (but not “professional advice or service” as referred to in Exclusion 8) and that the services that Sunwater’s employee, Mr Ayre, provided in his role as Senior Flood Operations Engineer constituted “professional advice or service” provided by Mr Ayre.

36. His Honour then referred to, and rejected, SunWater’s submission that SunWater did not itself provide the professional services provided by Mr Ayre but was merely “providing people to provide services”. In elaboration of this, Sunwater submitted that the Service Level Agreement was “properly characterised … as a labour hire arrangement rather than a professional services arrangement”.

37. His Honour accepted that one of SunWater’s services was to provide “appropriately qualified and experienced personnel” to Seqwater but held that “the reality was that SunWater was, by its employee, providing professional engineering services”.

38. His Honour did not consider that the observations and findings of Beech-Jones J in the Rodriguez Class Action (quoted above at [24]) contradicted that conclusion.

Is the Exclusion confined to professional advice or service rendered to Seqwater?

39. SunWater’s submission, in relation to this question posed for the primary judge’s consideration, was that Exclusion 8 “only applies to claims made by the recipient or intended recipient of the professional advice or service given for a fee by SunWater: that is Seqwater”.

40. After considering the legal principles applicable to the construction of insurance contracts generally, his Honour referred to the decisions of the Western Australia Court of Appeal in Fitzpatrick v Job t/as Jobs Engineering [2007] WASCA 63 (“Fitzpatrick v Job”), the New South Wales Court of Appeal in Vero Insurance Ltd v Power Technologies Pty Ltd [2007] NSWCA 226 (“Vero”), and in Transfield Services (Australia) v Hall; Hall v QBE Insurance (Australia) [2008] NSWCA 294 (partially reported at 75 NSWLR 12) and that of Rein J in Limit (No 3) Ltd v ACE Insurance Ltd [2009] NSWSC 514.

41. His Honour considered that the observations of Campbell JA in Transfield supported the view that Exclusion 8 was not confined in its operation to liabilities to the recipients of the relevant advice or service, that is, to clients of the insured party. On this view, the liability in the present case, which was to third parties to whom the advice or service caused loss, was excluded even though it was not a liability to the recipient of the advice or service, in this case Seqwater. His Honour noted that he regarded the first instance decision of Rein J in Limit as inconsistent with Transfield, and that he was obliged to follow what Campbell JA said, and in any event agreed with him.

42. His Honour then noted that unlike the exclusions considered in Fitzpatrick v Job and Vero, the exclusion in the present case “is expressed by reference to claims arising out of the rendering of professional advice, rather than claims arising out of a breach of professional duty”. His Honour did not however consider the distinction to be presently material.

43. The primary judge accordingly gave a negative answer to the question recorded in the heading at [39] above, with the consequence that Exclusion 8 excluded SunWater’s claim from the insurance cover. His Honour did not regard the “Business Description” statements in the policies nor the estimates of turnover in the General and Products Liability policy as dictating a different conclusion.

44. His Honour’s conclusions included the following observations:

“138   It may be that the cover afforded by the professional indemnity component of the Primary Policy would not necessarily be contiguous with that excluded by the Exclusion as I have construed it. But the fact remains that the Primary Policy has the two elements to which I have referred so that the natural reading of the Exclusion so as to exclude, in effect, claims for professional negligence sits comfortably within the structure of the Primary Policy as a whole.”

CONSIDERATION OF THE APPEAL

LEGAL PRINCIPLES

45. It is sufficient for present purposes to quote Hammerschlag J’s (as his Honour then was) recent description in HDI Global Specialty SE v Wonkana No.3 Pty Ltd (2020) 104 NSWLR 634; [2020] NSWCA 296 (“HDI Global”) of general legal principles applicable to the construction of insurance policies (the numerous citations given are omitted):

“114   An insurance policy is a commercial contract and is to be given a business-like interpretation.  Interpreting it requires attention to the language used by the parties, the commercial circumstances which it addresses, and the objects which it is intended to secure. The meaning of the words chosen is determined objectively by reference to its text, context, and purpose, the question being what a reasonable person would have understood them to mean. Preference is given to a construction supplying a congruent operation to the various components of the whole and so as to avoid making commercial nonsense…

115   No special rule applies to the construction of exclusions in contracts of insurance, but in some cases the normal rules of construction will make it appropriate to interpret an exclusion narrowly…

116   If it is clear:

(1)   on the face of a written contract that an error has been made;

(2)   that the literal meaning of the words used by the parties is an absurdity;

(3)   what the self-evident objective intention of the parties was; and

(4)   what correction is to be made to cure the mistake,

Orthodox canons of construction will displace the absurd literal meaning by a meaningful and sensible one.

117   This approach:

(1)   is to be distinguished from rectification in equity;

(2)   is premised upon absurdity, not ambiguity;

(3)   applies even where the language used by the parties is unambiguous;

(4)   does not apply where to give the words their literal meaning brings about a result which is inconvenient or unjust but not absurd; and

(5)   does not give the Court a mandate to rewrite an agreement so as to depart from the language used by the parties merely to give a provision an operation which, it appears to the Court, might make more commercial sense…

118   Finally, the contra proferentem principle has some continuing but perhaps limited vitality…”

GROUND 1: WHETHER SUNWATER WAS RENDERING PROFESSIONAL ADVICE OR SERVICE TO SEQWATER

46. SunWater summarised its submissions in relation to this ground of appeal as follows:

“(a)    The Class Action Proceedings arose out of the release and non-release of water from the dams.

(b)    When regard is had to the terms of the Service Level Agreement between the appellant and Seqwater, and the Flood Operations Manual …, the appellant could play no part in the decisions to release or not to release water from the dams.

(c)    It follows that the releases and non-releases of water were not part of any professional services or advice given by the appellant.

(d)    It follows that General Exclusion 8 was not engaged in respect of the appellant’s liability in the Class Action Proceedings.”

47. SunWater then sought to demonstrate the correctness of the submission in sub-paragraph (c) by referring to various provisions of the Service Level Agreement and the Flood Operations Manual, which are quoted in [9]-[17] above.

48. SunWater then noted that Beech-Jones J had found it liable to Rodriguez and the Group Members by reason of its vicarious liability for the conduct of Mr Ayre who was an employee of SunWater nominated by Seqwater to be the Senior Flood Operations Engineer. In support of its submissions, SunWater particularly emphasised the following findings of Beech-Jones J, which are partly included in the quotations in [24] above:

“158   …Mr Ayre’s control over the Dams and other engineers as SFOE or DFOE was not something that SunWater could exercise…Thus while its employee, Mr Ayre, was conferred with at least a de facto authority to control the Dams during flood operations as DFOE and whilst he did possess some authority over the other DFOE’s as SFOE, SunWater was not conferred with that authority and under the SLA it could not direct Mr Ayre as to the manner of exercise of that authority…”

…

161   [SunWater] did not so much promise to act as an engineer as promise to provide professional engineers and other support to enable to the performance of Flood Management Services ‘in accordance with the manual’”

49. SunWater’s oral submissions to this Court were to similar effect. For example, Senior Counsel contended that “the water release decisions were not [what] SunWater was contracted to provide. It contracted to provide people…”.

50. SunWater then asserted that the primary judge did not engage with the requirement of Exclusion 8 that the liability in question arose out of professional services or advice given by SunWater, as distinct from Mr Ayre. The primary judge did however do that by observing that “the reality was that SunWater was, by its employee, providing professional engineering services”.

51. Moreover, it is clear from the Service Level Agreement that SunWater’s essential contractual obligation was to provide “flood management services”. Clause 3.1 stated that it was to provide the “Service” which was defined to mean “the service to be provided by SunWater to Seqwater under this Agreement, as defined in the Service Schedule” (see [10] above). Then in the Service Schedule the “Scope of Work” described the provision by SunWater of “flood management services”. The fact that SunWater was to provide those services at least in part by the method of providing appropriately qualified and experienced personnel (see for example clause 3.2(b)) quoted in [9] above) does not mean that SunWater itself did not provide the flood management services. As the primary judge said “the reality” was that it did so, inter alia, through its employee Mr Ayre.

52. As I have indicated, the primary judge’s finding that SunWater provided the flood management services through its employee, Mr Ayre, was entirely consistent with Beech-Jones J’s finding that SunWater was vicariously liable for Mr Ayre’s conduct. Many cases have discussed the theoretical basis of the doctrine of vicarious liability. The debate has centred on whether the liability of the principal is for the act of another or for the wrong of that other. The former involves the proposition that the act of the subordinate is to be regarded as the act of the principal, as expressed by the Latin maxims qui facit per alium facit per se (he who acts through another is deemed to act in person) and qui per alium facit per se ipsum facere videtur (he who does anything by another is deemed to have done it himself). The latter view, namely that “the master is liable not for a breach of duty resting on him and broken by him but for a breach of duty resting another and broken by another”, has however gained currency with the passage of time (see Darling Island Stevedoring and Lighterage Co Ltd v Long (1957) 97 CLR 36 at 57; [1957] HCA 26 (Fullagar J); Kable v New South Wales [2012] NSWCA 243 at [53] (Allsop P); Pioneer Mortgage Services v Columbus Capital (2016) 250 FCR 136; [2016] FCAFC 78 at [48]–[58] (Davies, Gleeson and Edelman JJ); Optus Administration Pty Ltd v Wright (2017) 94 NSWLR 229; [2017] NSWCA 21 at [281] (Gleeson JA)).

53. The former view supports the primary judge’s conclusion because, in accordance with that view, Mr Ayre’s acts are to be regarded as those of SunWater. The latter view is however also consistent with that conclusion. On that view, SunWater’s vicarious liability arose because Mr Ayre’s acts were done in the course of his employment by SunWater, irrespective of whether the particular acts were authorised or directed by SunWater (see Prince Alfred College Incorporated v ADC (2016) 258 CLR 134; [2016] HCA 37 at [39]-[85] particularly at [39] and [80] where the plurality described the connection to employment that gives rise to vicarious liability). None of the parties to the present case contended that Beech-Jones J’s finding of vicarious liability was erroneous. It carries with it the conclusion that Mr Ayre acted in the course of his employment by SunWater in engaging in the conduct that Beech-Jones J found to be negligent. He was thus acting on behalf of SunWater in providing flood management services.

49. In light of these considerations, ground 1 must be rejected.

GROUND 2: IS EXCLUSION 8 CONFINED TO PROFESSIONAL ADVICE OR SERVICE RENDERED TO SEQWATER?

55. SunWater summarised its submissions in support of this ground of appeal as follows:

“(a)    First, his Honour paid insufficient heed to the fact that the construction advanced by the insurers would circumscribe excessively the insuring clause, and defeat the commercial purpose of the contract of indemnity.

(b)    Secondly, his Honour erred in concluding that there was a difference between (i) exclusion clauses in respect of claims arising out of a breach of professional duty, and (ii) exclusion clauses of the sort in this case, referable to claims arising out of rendering professional services.”

56. As to the first contention, authority supports the view that it is relevant to the construction of an exclusion clause in an insurance policy to consider whether the construction advanced by the insurers would circumscribe excessively the insuring clause and therefore defeat the commercial purpose of the contract of indemnity (see for example, Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance (2018) 359 ALR 256; [2018] NSWCA 100 at [125] (“Weir Services”)). This is not however a principle that permits rejection of the plain meaning of an unambiguous exclusion clause simply because another meaning might appear more reasonable in light of other terms in the policy. In Fitzpatrick v Job, Buss JA (as his Honour then was) at [268] referred to cover in the policy in that case being “severely circumscribed” on the construction contended for, and continued:

“The parties cannot have intended such an uncommercial and unreasonable result, and it is not a construction which the language of the policy unequivocally requires.” (at [268])

57. Whether this puts the threshold for departure from the natural meaning of an exclusion clause sufficiently high need not be determined in the present case as, for the reasons given below, I do not consider that the present case is analogous to Fitzpatrick v Job. In insurance and contract law generally the circumstances which warrant departure from literal meanings have been severely constrained (see the summary in HDI Global at [116] and [117] quoted in [45] above).

58. SunWater relied on a reference by McHugh JA in Legal & General Insurance v Eather (1986) 6 NSWLR 390 at 407 (“Eather”) to the defeat of “an important part” of the cover if a particular interpretation of an exclusion clause were adopted. His Honour was however there dealing with a requirement in an insurance policy that the insured “take all reasonable precautions to avoid or minimise injury, loss or damage…”. The expression “all reasonable precautions” was clearly one open to different possible interpretations and the Court decided that a narrow interpretation was appropriate. The case contrasts with the present in that, in Eather, no violence was done to the language of the policy in adopting the narrow construction. Here, the critical words are “arising out of”. Those would need the importation of an implied restriction in their operation in order to be read down. Eather does not therefore provide support for SunWater’s submission that Exclusion 8 should be read down in the manner suggested by Ground 2 of the appeal as otherwise “an important part of what is covered by the general ground of indemnity… is wiped away by” it.

59. Turning to the question of whether in any event there would, on the insurers’ construction of Exclusion 8, be such an excessive circumscription of cover, SunWater emphasised the terms of the Business Description found at three places in the Combined Policy (see Business Description excerpted above at [29]). The first paragraph of that Description commences with the word “Principally”. As the primary judge held, all, or at least most of, the activities referred to in the first paragraph of that Description would aptly be described as professional. On the other hand, SunWater implicitly accepted that many, if not most or all, of the activities described in the second and third paragraphs of the Description would not be “professional” activities and Exclusion 8 would not therefore exclude liabilities arising out of them. Nevertheless, SunWater submitted that on the insurers’ construction the exclusion would operate in respect of all of the “principal” activities of SunWater’s business because the first word (“Principally”) of the first paragraph so described the activities listed in that first paragraph. Thus, SunWater submitted, the apparent scope of the insurance policy would be substantially undermined by the insurers’ broad construction of Exclusion 8.

60. SunWater then submitted that, by reason of the term “Principally” in the first paragraph of the Business Description, there was therefore “textual support” for its narrower construction of Exclusion 8.

61. SunWater further submitted that there was no practical difference between clauses (such as those considered in Fitzpatrick v Job and Vero) that required a breach of professional duty and those (such as that in the present case) turning simply on the rendering of professional services. It submitted that “[i]t would be rare indeed for a claim to be made, even by a third party, which can be said to arise from professional services but which did not involve any breach of duty as a professional”. It therefore submitted that the fact that Exclusion 8 did not require a breach of duty to have occurred but simply the liability to have arisen out of the provision of professional advice or service was not a reason to construe it any more broadly than the clauses considered in Fitzpatrick v Job and Vero which did require a breach to have occurred.

62. For a number of reasons I consider that, as the primary judge held, Exclusion 8 does operate to exclude cover in the present circumstances.

63. First, I do not consider that adoption of the insurers’ construction, that is, reading Exclusion 8 as not confined to liabilities to persons to whom SunWater has provided advice or service, would circumscribe excessively the cover afforded by the Combined Policy. Whilst the clause would, on that construction, exclude cover from liabilities arising out of professional activities generally, the Business Description in the policy indicates that a substantial part of SunWater’s activities are non-professional in character. That these non-professional activities are in fact of major significance is indicated by the turnover estimates also contained in the policy. These identify “Professional Fees” as a limited percentage only of total turnover (see [30] above). The word “Principally” at the commencement of the first paragraph of the Business Description must in light of those estimates be seen as referring to something other than a ranking of the professional activities according to their ability to generate income. To what “Principally” in fact refers is left unclear, leaving SunWater’s circumscription of cover argument without a sound basis. SunWater suggests, by implication, that it might relate to the “risks covered and the size of potential claims” but whether it does is a matter of speculation.

64. Also against the attribution of significant weight to the use of the word “Principally”, is the reference in the third paragraph of the Business Description to SunWater’s major infrastructure ownership. This would appear to be a matter outside the purview of Exclusion 8 because SunWater would be unlikely to be rendering professional fee-paying advice or service in relation to its own infrastructure. That its dam ownership is of major significance to its business was suggested by a document in evidence to which the Court was taken in argument by SunWater, indicating that SunWater owns and operates some 18 named dams in Queensland, apart from the three dams the subject of the Service Level Agreement between SunWater and Seqwater.

65. Also of relevance on the circumscription of cover point is the existence in the Combined Policy of a separate professional indemnity component. The insurers’ interpretation of Exclusion 8 does not mean that under the policy as a whole all liabilities arising out of professional activities are excluded. Rather, if adopted, it would leave many liabilities arising out of fee-paying professional activities to be covered under the professional indemnity component of the policy. Thus, SunWater would not automatically be deprived of cover under the Combined Policy in respect of liabilities to non-clients arising out of SunWater’s professional activities. Instead SunWater would have to seek indemnity under the Professional Indemnity component of that policy: hardly a surprising or anomalous consequence. The force of this consideration is not in my view negated or diminished by the fact that there may not be complete identity between claims excluded from the General and Products Liability policy and those included in the Professional Indemnity cover. Nor is it negated by (as occurred here) the insured choosing to obtain a much lower limit on its Professional Indemnity insurance than on its General and Products Liability insurance. SunWater submitted in this context that the present claims were not within the professional indemnity component of the Combined Policy because that cover is restricted to “professional work involving design and consulting activities”. Whether or not that is so, the point remains that by reason of Exclusion 8 and the separate professional indemnity cover, the inference is available that the insured chose to have its professional indemnity claims addressed by that separate cover.

66. The rationale behind statements in the authorities about excessively circumscribing cover is not therefore applicable here because cover (even if not complete) of professional negligence claims by third parties remains available under the professional indemnity component of the Combined Policy. As a result there is no question of the commercial purpose of the Combined Policy being defeated (see [55] above).

67. Moreover, the following submission made by the insurers has force and points to an anomalous situation that would arise if SunWater’s construction were adopted:

“On Sunwater’s construction, General Exclusion 8 would apply only to claims brought by Sunwater’s clients. In those circumstances, Sunwater would be entitled to indemnity to the full extent of the cover provided under the Primary Policy in addition to full indemnity under the PI Policy in respect of any claim made against it by a third party. However, if a claim were brought by a client, Sunwater would be entitled to indemnity under the PI Policy only, which is capped at $50 million and in respect of which there are no excess policies. That arrangement would serve no sensible commercial purpose, since there is no reason to assume that, in its course of its professional activities, Sunwater would be more exposed to claims made by third parties than to claims made by its own clients. The point is not that any claim arising out of Sunwater’s provision of professional advice or services was intended to be covered under the PI Policy only. But the anomalous outcome described above does tell against the the [sic] position advanced by Sunwater…”

68. Secondly, in its “natural and ordinary meaning” (see Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; [1986] HCA 82 at 510 (“Darlington Futures”)) Exclusion 8, does not contain any limitation on its operation of the type for which SunWater contends. No aspect of its wording suggests that it should be limited to liabilities to persons to whom SunWater has rendered professional advice or service, as distinct from others, as referred to by Beech-Jones J in the class action proceedings, who may have suffered loss as a consequence of the provision of that advice or service. The words used would have to be read down if such a limitation were to be imported. The expression “arising out of” used in the Exclusion is a broad one, well capable of capturing the circumstances of the present case (see IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466 at 483 (Clarke JA) and 487 (Handley JA)). If the parties had intended to incorporate the limitation for which SunWater contends, it would have been easy for them to limit the operation of the words “arising out of”, as they did in General Exclusion 1 where the expression “arising out of” is used but the Exclusion states that it nevertheless does not apply to certain identified matters.

69. Thirdly, there is in these circumstances no occasion for operation of the contra proferentem rule, which has been described as a rule of “last resort” (Central Coast Council v Norcross Pictorial Calendars Pty Ltd (2021) 391 ALR 157; [2021] NSWCA 75 at [126]; Rava v Logan Wines Pty Ltd [2007] NSWCA 62 at [55]). As stated in Darlington Futures at 510 the contra proferentem rule is in some circumstances applicable where there is ambiguity in an exclusion or limitation clause. For the reasons given above Exclusion 8 contains no such ambiguity. There is thus no textual hook upon which SunWater’s construction argument could be based. SunWater sought to find a basis for reading down Exclusion 8 in the impact it would allegedly have in circumscribing cover under the Combined Policy if it had the meaning given to it by the insurers. For the reasons given above in [63] – [67], that attempt was unsuccessful, leaving SunWater without a basis on which its contention that Exclusion 8 should be read down could be supported.

70. Fourthly, to reject SunWater’s contended-for limitation on the operation of Exclusion 8 is not inconsistent with relevant authority, to which I now refer.

71. In Fitzpatrick v Job, Mr Fitzpatrick was injured as a result of Jobs Engineering’s professional activities but he was not a client of that firm. Jobs was found entitled to claim on its insurance notwithstanding an exclusion of liability arising “out of a breach of duty owed in a professional capacity”. The Supreme Court of Western Australia held that the exclusion clause should be limited to liabilities to clients of Jobs, on the basis that a broader construction would severely circumscribe the insurance cover and would therefore be “an uncommercial and unreasonable result” (at [268]).

72. A similar result was reached by this Court in Vero Insurance Ltd v Power Technologies Pty Ltd in which the exclusion clause and circumstances were found to be analogous to those in Fitzpatrick v Job.

73. In both Fitzpatrick v Job and Vero, the exclusion clauses referred to liabilities arising out of a “breach” of professional duty. Exclusion 8 in the present case is expressed more broadly but the difference is not in my view material in the context of determining the issue posed by Ground 2 (or in fact Ground 1). That is, the difference does not make it more or less likely that Exclusion 8 is confined in its operation to liabilities to clients: the key expression is “arising out of” and that appears in both types of clauses.

74. In Transfield Services v Haul [2008] NSWCA 294; partly reported at 75 NSWLR 12, Campbell JA (who dissented in the result) considered an issue, not expressly considered by the other judges, of whether a clause that excluded liability “[c]aused by or arising out of…[1] The rendering of or failure to render professional advice or service by the Insured or any error or omission connected therewith… [2] Advice, design, formula or specification given for a fee”, should be construed as limited to liabilities to clients of the insured and not extend to third parties. His Honour concluded that it should not be so limited, stating that such a construction “would involve narrowing the exclusion, in a way for which there is no textual support” (at [211]).

75. Weir Services involved an insured’s claim for indemnity in respect of its liability to a client to whom it supplied professional services. Whilst it was found that the insured’s claim failed for other reasons, it was also found that the claim would have been defeated by a professional indemnity exclusion in the policy, excluding liability “caused by or arising from the rendering of or failure to render professional advice or service…” (at [48]). Barrett AJA, who gave the principal judgment, referred in passing to the possibility, not relevant to the proceedings then before the Court, of a professional service exclusion being “confined to claims arising out of breaches of duty owed to persons who have retained the insured to perform such service in the course of its business”. His Honour referred in this regard to Fitzpatrick v Job and to Vero.

76. The upshot of these authorities is that, as a matter of principle, a conclusion that a particular broad construction of an exclusion clause would circumscribe excessively the cover provided by the relevant policy might warrant a narrow construction of the exclusion being adopted, but much will depend on the particular circumstances of the case. For the reasons I have given above in [63] - [66] I do not consider that the conclusion can be drawn in the present case that the insurers’ construction would have that consequence and that the present case can be regarded as analogous to that considered by Buss JA in Fitzpatrick v Job (see [56] above). The exclusion clause is not ambiguous, either by reason of its terms or by reason of any other aspect of the policy documents, and there is no warrant for not giving its broad unambiguous terms their natural meaning. As a result, there is no basis for reading down its clear terms.

77. In the first instance decision in Limit (No 3), Rein J examined the three different judgments in Transfield and concluded that there was no majority support for the view of Campbell JA that the exclusion clause in question there was not to be confined to liabilities arising out of professional advice or service given to a client. Rein J then concluded:

“187   In my view an interpretation of ‘professional services’ that is not restricted to professional clients of the JV would cut back the cover dramatically and pays insufficient regard to the obvious commercial purpose of the policy and I adopt the approach taken in Fitzpatrick, Vero and Transfield, which is to read down the clause as dealing with liability to a client.”

78. The primary judge in the present case also considered the judgments in Transfield and concluded, as did Rein J, that they did not give rise to any binding authority. Nevertheless, the primary judge thought he should follow what Campbell JA said as persuasive dicta of a Court of Appeal judge. In any event he agreed with Campbell JA’s non-binding opinion on the point and therefore concluded that “there is no ‘textual support’ for reading down the Exclusion so that it applies only to claims made by the intended recipient of the ‘professional advice or service’: i.e. Seqwater”.

79. On the present appeal, none of the parties contended that Transfield constituted binding authority. As I have said, whilst regard is to be had, as indicated in the cases to which I have referred, to whether a particular construction of an exclusion clause would curtail excessively the cover provided by the insurance policy in which the clause appears, each case is to be determined on its own facts and in light of the wording and proper construction of the particular policy under consideration. For the reasons I have given, SunWater’s circumscription argument does not assist it in the present case. SunWater is therefore left without any textual basis for its argument that the Court should adopt a more restricted construction of Exclusion 8 than is justified by its wording.

80. For these reasons, ground 2 should be rejected.

ORDERS

81. For the reasons above, neither ground of appeal has merit. As a result, the appeal should be dismissed with costs.

81. MEAGHER JA: I agree with Macfarlan JA.

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Decision last updated: 16 December 2022