Sydney Trains v Argo Syndicate AMA 1200 (No 2)

[2023] NSWDC 381

District Court

New South Wales

Medium Neutral Citation:

Sydney Trains v Argo Syndicate AMA 1200 (No 2) [2023] NSWDC 381

Hearing dates:

15, 16 November 2022; 29 March 2023

Date of orders:

15 September 2023

Decision date:

15 September 2023

Jurisdiction:

Civil

Before:

Andronos SC DCJ

Decision:

(1)   Judgment for the first defendant against the plaintiff.

(2)   The plaintiff is to pay the costs of the first defendant as agreed or assessed on the ordinary basis.

(3)   Grant liberty to the parties to make an application to vary order (2) herein, by email to my associate, within 14 days.

Catchwords:

CONTRACTS — Express terms

CONTRACTS — Formation — Incompleteness — Implication of terms – Breach – Causation — Novus actus interveniens – Waiver

INSURANCE — Liability insurance — Professionals - Exclusions — Definitions

INSURANCE — Liability insurance — Public liability

INSURANCE – Construction – Exclusion clauses – Performance warranties – Professional activity

PRACTICE AND PROCEDURE – Release from Harman undertaking

Legislation Cited:

Civil Liability (Third Party Claims Against Insurers) Act2017 (NSW), s 5

Compensation to Relatives Act1897 (NSW), s 3, s 4

Corporations Act2001 (Cth), s 601AG

Evidence Act1995 (NSW), s 136

Law Reform (Miscellaneous Provisions) Act1946 (NSW), s 5

Cases Cited:

Allianz Australia Insurance Ltd v Waterbrook at Yowie Bay Pty Ltd [2009] NSWCA 224

Allianz Australia Ltd v Wentworthville Real Estate Pty Ltd [2004] NSWCA 100

Astley v Austrust Ltd (1999) 197 CLR 1

Barclay v Penberthy (2012) 246 CLR 258

BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 410

Byrne v Australian Airlines Ltd (1995) 185 CLR 410

Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468

Chappel v Hart (1998) 195 CLR 232

Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500

Harman v Secretary of State for the Home Department [1983] 1 AC 280

Hawkins v Clayton (1988) 164 CLR 539

Helicopter Sales (Australia) Pty Ltd v Rotor-Work Pty Ltd (1974) 132 CLR 1

Holpitt Pty Limited v Varimu Pty Limited (1991) 29 FCR 576

Lexmead(Basingstoke) Ltd v Lewis [1982] AC 225

March v E & MH Stramare Pty Ltd (1991) 171 CLR 506

McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; [2000] HCA 65

Michael v Sydney Trains (District Court (NSW), 5 July 2018, unrep)

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37

Nigel Watts Fashion Agencies Pty Ltd v GIO General Insurance (1994) ANZIC 61.235

Reed v Peridis [2005] SASC 136

Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234

Sargent v ASL Developments Ltd (1974) 131 CLR 634

Springfield Nominees Pty Ltd v Bridgeland Securities Ltd (1992) 38 FCR 217

State Government Insurance Office (Qld) v Crittenden (1966) 117 CLR 412

Sydney Trains v Argo Syndicate AMA 1200 [2021] NSWDC 685

Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd (2017) 94 NSWLR 108

Wallaby Grip Pty Ltd v QBE Insurance (Australia) Ltd (2010) 240 CLR 444; [2010] HCA 9

Young & Marten Ltd v McManus Childs Ltd [1969] 1 AC 454

Zorba Structural Steel Co Pty Ltd v Watco Pty Ltd (1993) 115 FLR 206

Zurich Australian Insurance Ltd v Regal Pearl Pty Ltd (2007) 14 ANZIC 61-715

Texts Cited:

D K Derrington and R S Ashton, The Law of Liability Insurance (3rd ed, 2013, LexisNexis Butterworths)

Category:

Principal judgment

Parties:

Sydney Trains (plaintiff)
Argo Syndicate AMA 1200 (first defendant)

Representation:

Counsel:
Mr D Weinberger (plaintiff)
Mr J Catsanos SC (first defendant)

Solicitors:
McCabes (plaintiff)
HBA Legal (first defendant)

File Number(s):

2020/00315332

Publication restriction:

Nil

JUDGMENT

1. The plaintiff (“Sydney Trains”) has brought the present proceedings against the first defendant, the products and public liability insurer (the “Insurer”) of Infrastruction Pty Ltd (“Infrastruction”), a building contractor. Infrastruction went into liquidation on 29 June 2017 and was deregistered on 16 June 2020. Sydney Trains’ claim against the Insurer is brought under s 601AG of the Corporations Act2001 (Cth), which provides that a person may recover from the insurer of a now deregistered company if the company had a liability to the person and the insurance contract covered that liability immediately before deregistration.

2. Sydney Trains seeks damages for Infrastruction’s alleged breaches of contractual duties to it in the performance of upgrade works (the “Works”) at Penshurst Station (the “Station”), a station in the metropolitan rail network operated by Sydney Trains. The Works included the replacement of all stair stringer tiles to all staircases in the public areas of the Station.

3. On 24 August 2016, a commuter (“Ms Michael”) slipped and fell on tiles laid by Infrastruction. She brought proceedings against Sydney Trains in which she ultimately recovered $409,000 by way of damages and a further $207,500 in costs (the “personal injury proceedings”). Sydney Trains alleges its liability to Ms Michael was caused by Infrastruction’s breaches of contractual obligations to complete the Works with due care and skill, to ensure that the tiles installed by it would have an adequate level of slip resistance and that the Works would comply with all relevant Australian Standards and conditions imposed by the Building Code of Australia. Accordingly, Sydney Trains says, Infrastruction had a liability to it immediately before deregistration.

4. Sydney Trains further contends that, at the relevant time, Infrastruction’s policy of Public and Products Liability Insurance with the Insurer covered that liability. In light of Infrastruction’s deregistration, Sydney Trains says it is entitled to recover damages, interest and costs from the Insurer.

5. The Insurer denies liability, contending that Sydney Trains has not made out its allegations as to the terms of the alleged contract, breach or causation in respect of the commuter’s fall. Further, the Insurer contends that the Policy does not respond, and that even if it did, certain exclusions defeat the claim. Finally, the Insurer contends that Sydney Trains has, by its conduct, waived any complaint about non-compliance with the terms of any alleged contract.

6. Sydney Trains had earlier sought leave to pursue a claim for indemnity pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act1946 (NSW) and for leave to continue these proceedings pursuant to s 5 of the Civil Liability (Third Party Claims Against Insurers) Act2017 (NSW). The claim under the Law Reform (Miscellaneous Provisions) Act1946 was abandoned and leave under the Civil Liability (Third Party Claims Against Insurers) Act was refused by Wilson SC DCJ: Sydney Trains v Argo Syndicate AMA 1200 [2021] NSWDC 685.

Evidence: documents alleged to comprise the express written contract

7. The evidence before me was wholly documentary. Sydney Trains was unable, however, to produce executed copies of the documents which it said comprised the express written agreement for the performance by Infrastruction of the Works. It, therefore, advanced an inferential case that certain documents had been executed and others had been exchanged by the parties notwithstanding the absence of direct evidence of either.

8. The documents alleged by Sydney Trains in the Second Further Amended Statement of Claim (the “SFASOC”) to comprise the contract were:

1. A Panel Agreement for Construction of Building Works, Agreement No. P_13001 for Building Construction Works (Principal Contractor) up to $1M (the “Panel Agreement”);

2. A Panel User Instruction (the “Panel User Instruction”); and

3. A Request for Quotation – Station Refresh Package 3 – Penshurst Station (RFW. CZ8912) (the “RFQ”), which contained a Scope of Works and various Technical Specifications, including the Sydney Trains Tiling Specification SRP3 (respectively the “Scope” and “Specification”).

9. Those documents set out a number of obligations and warranties, however, it should be noted that the only terms on which Sydney Trains sues are the three terms identified as express or implied terms at paragraph 3 above.

The Panel Agreement

10. The parties to the Panel Agreement, identified in its Key Details section, were Rail Corporation NSW and Hannas Civil Engineering Pty Ltd. It was accepted that Hannas Civil Engineering Pty Ltd was a previous name of Infrastruction, and no issue was taken as to Sydney Trains being entitled to the benefit of the Panel Agreement if it was otherwise found to be binding. The specified Panel Commencement Date was 1 February 2013.

11. The Panel Agreement provided:

1. Sydney Trains may from time to time invite Infrastruction to quote to perform particular services specified in a request for quotation (cl 4(a)).

2. Should Sydney Trains accept any quote submitted by Infrastruction, Sydney Trains will issue a Purchase Order or Contract to Infrastruction (cl 4(c)).

3. Once Sydney Trains provides Infrastruction with a Purchase Order or Contract, the services identified in the Purchase Order or Contract will be provided to Sydney Trains by Infrastruction on the terms set out in the Purchase Order or Contract (cl 4(d)).

4. Infrastruction warrants to Sydney Trains that:

1. The services will be carried out with all due care and skill and in accordance with the Panel Agreement and any Purchase Order or Contract (cl 7.2(a)) and

2. All its personnel will be appropriately qualified and have the requisite knowledge, skill and expertise to provide the Services (cl 7.2(b)).

5. Infrastruction indemnifies Sydney Trains against any loss, damages, claim, action, expense, cost or liability (including legal fees on a solicitor/client basis) incurred by Sydney Trains directly or indirectly in connection with:

1. A breach of the Panel Agreement by Infrastruction (cl 8.1(a));

2. An act or omission by Infrastruction or its personnel (cl 8.1(d)); and

3. Personal injury, death or property damage caused or contributed to by Infrastruction or its personnel (cl 8.1(e)).

6. Infrastruction must obtain and maintain a public liability insurance policy with a minimum cover per occurrence of $50 million (cl 9.1).

12. As already indicated, the document propounded by Sydney Trains as the Panel Agreement was not executed by either party. There were no communications in evidence which recorded the provision of any version of the Panel Agreement to Infrastruction for execution or for its return as an executed document. There was no affidavit which alleged that a copy of the version of the document in evidence had ever been provided to Infrastruction or which explained the document’s provenance.

The Panel User Instruction

13. A document described as a “Panel User Instruction: For Construction and Building Panels P13001, P13002& P13003, 14 July 2014/Quick Reference Guide” (already defined in these reasons as the “Panel User Instruction”) was also in evidence.

14. The Panel User Instruction included the following terms:

1. Infrastruction (then still known as Hannas Civil Engineering Pty Ltd) was identified as already a panel member for construction and building works up to $1 million.

2. In a table headed “General principles for procuring and managing Construction and Building suppliers”, reference is made at Item 9 to the process of developing RFP (request for proposal) documentation. It refers to the text of cl 4(a) of the Panel Agreement.

15. On its face, the Panel User Instruction appears to be an internal document directed to users of panels, i.e. officers and employees of government bodies who would require assistance in navigating the process of engaging panel members for the purpose of construction and building projects. There was no evidence as to whether, when, how or why this document was ever provided to Infrastruction. There was no evidence as to the date of its creation other than the date it bears on its cover page of 14 July 2014.

The Request for Quotation and its attachments

16. A document described as RFQ No. CZ8912 (already identified in these reasons as the “RFQ”) was in evidence. It was headed “Station Refresh package 3 Penshurst Station”. It comprised a two-page request and made provision for a form of quotation (Part A), and a form for acceptance by Sydney Trains which provides, “Sydney Trains will sign and return this Part A to the service provider if (in its absolute discretion) it accepts the service provider’s proposal.” There is no evidence that the Acceptance form was signed or returned in respect of the works the subject of the RFQ. Attached to the RFQ were several Schedules, Appendices and a Scope of Works (already defined in these reasons as the “Scope” and to which was attached the Specification, also already defined in these reasons).

17. The RFQ was not dated, but its footer referred to June 2013, which might be either the date of the RFQ or the version of precedent ST 005, which appears to be the form of the document. There was no evidence as to when or how it was provided to Infrastruction. The RFQ provided for a mandatory site meeting on 2 September 2013 and that quotations were due by 25 September 2013. According to the attached Schedules, the works were to be completed by 20 May 2016 and any quote was to be accompanied by a proposed program in the form of a bar chart. Provision was made in the Schedules for the contractor to insert its details and to confirm its adherence to certain policies and other requirements of Sydney Trains. In the version of the RFQ in evidence, the spaces for those details and confirmations were left blank. No bar chart was in evidence.

18. Attached to the RFQ were Contract Terms which provided:

1. The contractor must:

1. Provide the Works diligently, with all necessary care expected in the provision of such services (cl 3.1(a));

2. Comply with all applicable laws and standards relevant to the contract and the provision of the Works (cl 3.1(b)); and

3. Ensure that all materials, components, parts, items, consumables and other things used to carry out or incorporated in the Works are of merchantable quality, fit for their intended purpose, free from defects in design, materials and workmanship, are new and unused and not of an age which would impair their operation unless otherwise specified (cl 3.1(e)).

2. The contractor acknowledges that Sydney Trains relies on the contractor’s skill, knowledge and experience in providing the Works and warrants that:

1. It possesses the requisite skill, knowledge and experience necessary to provide the Works (cl 10.1(b));

2. It will provide the Works in a diligent, proper and professional manner with due care and skill (cl 10.1(e)); and

3. All Contract Materials, works, goods, materials or other items supplied as part of the Contractor’s Activities:

1. Are new and fit for the purpose stated in this Agreement or for which the goods would ordinarily be used;

2. Conform in all respects with the Specification;

3. Are free from defects, error and omissions (including defects, errors and omissions in installation);

4. Are of merchantable quality and comply with all laws; and

5. Otherwise comply with the requirements of the Contract

(cl 10.1(i)).

3. Infrastruction indemnifies Sydney Trains against any expense, loss or liability (including legal fees on a solicitor/client basis) incurred by Sydney Trains as a result of any act or omission by Infrastruction or any of its employees, contractors and visitors that result in personal injury to, or the death of, any person, or the loss of, loss of use of, or damage to any property including any of Sydney Trains’ property (cl 11(a)).

19. The Scope attached to the RFQ relevantly provided:

Staircase works: Replace all stair stringer tiles to all stair cases. Propose tile options to match the station décor. Tiles are to be R12 slip rating and approved by Sydney Trains prior to installation. Installation is to be in line with the Sydney Trains Specification and Australian Standards … (at para 1.4.6 of the Scope).

For the Concourse, propose tile options matching the dimensions of the original tiles. Tiles are to be of R12 slip rating and approved by Sydney Trains prior to installation. Installation is to be in line with Sydney Trains Tiling Specification and Australian Standards (at para 9.1 of the Scope).

20. The Specification provided:

1. Under the sub-heading “Standards”, the following bullet points:

AS 14.28.1 and 2

AS 3661

AS 3958

AS 4586

AS 4662

HB 197

Floor tile: Minimum thickness 10 mm

Slip Rating: R12 minimum / Class W

…

2. Under the sub-heading “Tile Types”:

General the tile codes/supplier in the following table is listed for colour scheme only – alternate suppliers can be utilised provided the requirements of the scoping documentation are met subject to approval by Sydney Trains.

Tile Type	Tile Product Description	Tile Size (mm)	Code No	Supplier
…	…	…	…	…
General Floor	General Areas i.e. Concourse, Waiting rooms	300x600	6325NS OR 6321NS	Glennon Tiles
Stair- Tread Infill	General Floor Tile (cut)	300x600	Glennon Tiles
Stair – Landing	General Floor Tile	300x600	Glennon Tiles
Stair – Riser	General Floor Tile (cut)	300x600	Glennon Tiles
Stair – nosing	Stair Nosing	75x300	TT04 OR TT07	Glennon Tiles
…	…	…	…	…

3. Under the sub-heading “Submissions”, “test results demonstrating compliance of slip resistance of floor finishes with AS4586 1999, AS4663 2002, HB197 1999”.

4. Finally, under a chapeau that refers to further clarification on test requirements:

2. A CSIRO test document demonstrating the accelerated wear test of the selected tile product shall be provided prior to procuring the full tile batch. These test results are required for any floor tile batch delivered on site.

…

4. Albeit, while the accelerated wear tests may not be incorporated within Australian Standards, it does not abrogate a tile supplier to provide materials that are fit for its intended purpose. Whether or not a standard exists, the onus is for the manufacturer to ensure that the product they are supplying is fit for its intended purpose.

Purchase Order or Contract

21. Notwithstanding cl 4(c) of the Panel Agreement, which specifies the issue of a Purchase Order or Contract as the mode for acceptance of a quote or proposal, there was no such Purchase Order or Contract document in evidence. There was no correspondence or internal record that referred to either such document ever having been created. In the SFASOC, Sydney Trains did not allege that any such document formed part of the contract, although it alleged without particularisation that a Quote or tender had been submitted by Infrastruction and accepted by Sydney Trains.

Contract claim: other materials relied on by Sydney Trains as evidence of the existence of an express written contract

22. In the absence of a signed set of documents comprising the pleaded written contract, Sydney Trains relies on extrinsic materials from which it says the existence of an express written contract in those terms may be inferred. Mr Weinberger submitted an inference was available that Infrastruction executed the Panel Agreement and that was the preferable inference. The materials relied on by Sydney Trains include documents drawn from its own files, documents in the possession of Infrastruction’s parent, Infrastruction Group Pty Ltd (“IGPL”), produced on subpoena in the personal injury proceedings, the fact that Works in accordance with the alleged Contract had been performed and that Infrastruction had procured and paid for slip testing in about March 2016.

Application for release from Harman Undertaking

23. In Ms Michael’s successful personal injury proceedings against Sydney Trains, a subpoena was issued to IGPL at Ms Michael’s request. IGPL, a stranger both to the personal injury proceedings and to these proceedings, produced documents under compulsion in answer to the subpoena.

24. IGPL was not initially subpoenaed in these proceedings. A subpoena for production of the same documents was issued on the first day of the hearing, returnable the following day, but no documents were produced. Some, but not all, of the documents produced in the personal injury proceedings were apparently tendered in those proceedings. At the hearing of this matter, Sydney Trains sought to rely on all of the documents, including those which were not tendered. This required a release from the implied undertaking only to use documents produced under compulsion for the purpose of the proceedings in which they were produced.

23. The documents in question were all business records. They comprised:

1. A pro forma pricing schedule;

2. A version of the Specification;

3. An addendum to the RFQ;

4. A quote from TileStone Pty Ltd addressed to Infrastruction; and

5. An invoice from Glennon Tiles to Infrastruction together with a cheque remittance from Infrastruction to Glennon Tiles.

26. The parties were unable to indicate which, if any of these, documents were admitted in evidence in the personal injury proceedings. I have therefore approached the question as if none of them were.

27. The Harman undertaking is a substantive obligation and not strictly an undertaking: Harman v Secretary of State for the Home Department [1983] 1 AC 280. It exists to protect a party compelled by court process to produce private documents for the purpose of specific litigation from exposure to publication of those documents for other purposes. The exercise of the compulsory processes of the court to compel production of documents is a serious invasion of the privacy and confidentiality in a party’s affairs and will not be permitted to place on a party any harsher or more oppressive burden than is strictly required for the purpose of securing that justice is done: Harman at 308 per Lord Keith.

28. A party seeking to be released from the undertaking must show some circumstance which takes the matter out of the ordinary course so that the exercise by the Court of the discretion to release it would be in the interests of justice: Holpitt Pty Limited v Varimu Pty Limited (1991) 29 FCR 576.

29. Factors relevant to the exercise of the discretion include the circumstances under which the document came into existence, the attitude of the author of the document and any prejudice which the author may sustain, whether the document existed before the litigation commenced or was created for that purpose and therefore was expected to enter the public domain, the nature of the information in the document (in particular, whether it contains personal data or commercially sensitive information), the circumstances in which the document came into the hands of the party applying for leave, and, perhaps most important, the likely contribution of the document to achieving justice in the second proceeding: Springfield Nominees Pty Ltd v Bridgeland Securities Ltd (1992) 38 FCR 217.

30. Application for release from or modification of the implied undertaking should ordinarily be made in the proceeding in which the documents were produced. There have, nevertheless, been many occasions on which the court in the subsequent proceedings in which the documents are sought to be used has, in the exercise of its inherent power to control its own processes, released a party from the undertaking. As Burchett J considered in Holpitt, the fact that the same court, albeit differently constituted, which heard the original proceedings hears the later application removes a significant possible objection to consideration of the application (at 685).

31. In the present proceedings, I consider the following matters to be relevant:

1. The documents were produced by a stranger to the personal injury proceedings. Neither IGPL nor the now deregistered Infrastruction have been heard on the current application. Nevertheless, the Insurer was the products and public liability insurer for each of them and was in a position to address the Court if it chose to do so. The Insurer ultimately did not wish to be heard on the application.

2. Infrastruction, who was the counterparty or the apparent owner of each of the documents, was deregistered in 2020.

3. The documents are business records as opposed to personal documents. They do not contain any personal, or any apparently confidential commercial information. Although in the possession of IGPL, they appear to be Infrastruction’s documents.

4. Sydney Trains did not take any steps to obtain the consent of IGPL for the use of the documents in the present proceedings until the first day of the hearing, when it was too late for IGPL to produce the documents, which were by then at least six years old.

5. The documents all record communications with third parties, being either documents that originated with Sydney Trains or suppliers, or documents provided to them in the course of Infrastruction’s commercial dealings with them.

6. To the extent that the documents may have contained any commercially sensitive information, which appears unlikely given their nature, that information is now over six years old and any such commercial sensitivity would have dissipated over time in any event.

7. No allegation is made in the present proceedings against IGPL.

8. The present proceedings involve a question as to the terms on which Infrastruction undertook the refurbishment works at Penshurst Station. The parties are at issue on the question of whether Sydney Trains has demonstrated that Infrastruction agreed to certain written terms comprised, inter alia, in the RFQ, including its attachments. The documents above are relevant to a determination of whether Infrastruction agreed to such terms.

32. Having considered the above factors, in my view, the appropriate exercise of my discretion is to grant the release from the Harman undertaking sought by Sydney Trains in respect of the above documents. Nevertheless, against the possibility of some residual prejudice to IGPL on which I was not addressed, and which IGPL was not in a position to address me on, I admit those documents as Exhibit P19, subject to an order under s 136 of the Evidence Act1995 (NSW), that the documents are only admitted for the purpose of demonstrating the terms on which Infrastruction performed the Works (which will also be relevant to the questions of breach, causation and loss) and that the documents are not admitted for any purpose affecting the conduct or liability of IGPL.

Documents which go to the performance by Infrastruction of the Works

33. Sydney Trains contends that the fact that the Works were performed at all justifies the inference that they were performed pursuant to a contract, and it ought be inferred that the contract was comprised in an executed copy of the Panel Agreement, the RFQ (and the attached Scope and Specification) and the Panel User Instruction.

34. In this regard, Sydney Trains relies, inter alia, on the IGPL subpoenaed materials, identified at paragraph 25. Those documents comprise:

1. The pro forma pricing schedule for the Penshurst Station project, which identifies each of the relevant items in the Scope. The schedule produced by IGPL does not populate any of the available fields and would not have been capable of submission to Sydney Trains. There is no evidence that a schedule, with all of the relevant fields populated, was provided to Sydney Trains or, if it could be assumed that it was, how those fields were populated.

From this schedule it is possible, however, to infer those items of the Scope which were communicated to Infrastruction. They include minor patch and repair works, decluttering works, platform repairs, staircase works (including those identified at paragraph 19 above), weatherboard repairs, glazing, electrical and hydraulic works, fencing replacement, painting, garden maintenance, toilet refresh, lighting improvement, replacement of seats, bins and bubblers, deep cleaning and bird proofing.

The provision and laying of new tiles is but one part of what appears to be a comprehensive refurbishment of the Station.

2. A version of the Specification, which is not identical to that propounded by Sydney Trains as being attached to the RFQ. The version of the Specification attached to the RFQ was a longer document that addressed additional issues, which suggests it may have been created later. The relevant substantive sections, however, were the same in both versions. Nevertheless, the unexplained differences between the version in IGPL’s possession and the version propounded as having been attached to the RFQ casts some doubt on the reliability of the documents drawn from Sydney Trains’ own files as being the version, if any, that was provided to Infrastruction;

3. An addendum to the RFQ dated 9 September 2015. The addendum makes a slight change to the closing time for tenders and clarifies the Scope in presently irrelevant ways;

4. A quote from TileStone Pty Ltd dated 15 December 2015, addressed to “Infrastruction”, inter alia, to replace stair stinger tiles (65m @ $150/m + $8,450 (not including GST)); and

5. A “pro forma” invoice from Glennon Tiles to Infrastruction Pty Ltd dated 1 April 2016, together with a cheque remittance from Infrastruction to Glennon Tiles in the same sum on 4 April 2016. The invoice identifies 6325NS tiles amongst the products supplied, but on its face, this appears only to be in respect of 600 x 73mm nosing tiles and not in respect of any 305 x 305mm tiles.

The invoice codes all the tiles “W”, which, according to the nomenclature in the Specification, I take to be a reference to the relevant tiles’ slip rating. It might be noted that such a slip rating corresponds with the required class of slip rating in both versions of the Specification in evidence.

35. The documents produced on subpoena by IGPL did not include the Panel Agreement, RFQ, Contract Terms, copy Quotation, Purchase Order, Contract or Scope.

36. Sydney Trains also relies on the following documents, which appear to be drawn from its own files:

1. An invoice from Work Safe Slip Testing, who performed the slip tests on the newly laid tiles in March 2016, to Infrastruction Pty Ltd, dated 4 May 2016 and a cheque remittance notice from Infrastruction to Work Safe Slip Testing dated 16 June 2016;

2. Three Work Safe Slip Testing reports, which identify Infrastruction Pty Ltd as the client, dated 26 March 2016, in respect of the stair landing, platform and stair nosing at the Station (the “Work Safe Reports”);

3. Correspondence between Infrastruction and Work Safe Slip Testing by which Infrastruction sought and retained Work Safe Slip Testing to conduct slip resistance testing according to AS4663 at the Station;

4. Infrastruction’s invoices to Sydney Trains issued between January and October 2016. The invoices are, in aggregate, for a sum in excess of $700,000 (including GST). Opportunity Works were invoiced on 29 May 2016 in the sum of $9,855.91 (not including GST). The invoices refer to Project No. IJ113. They do not refer to RFQ CZ8912;

5. An undated ELLIPSE Supplier Addition/Modification, which records that Hannes Civil Engineering Pty Ltd was approved as a new supplier to RailCorp; and

6. A copy of Infrastruction’s proposal to Sterling Insurance for a policy of professional indemnity insurance dated 23 June 2015 in which it described itself as having entered into a Master Service Agreement in which it would have responsibility for some design elements.

37. There were three Work Safe Reports: Report 151091, which concerned the station platform; Report 151092, which concerned the stair landing; and Report 151093, which concerned the stair nosing. Sydney Trains admitted that the Work Safe Reports had been in its possession from about April 2016.

38. Reports 151091 and 151093 did not concern the stair tiles and, in any event, disclosed a very low notional contribution to the risk of slipping when wet with water. The stair landing tiles, according to the test results provided to Infrastruction and Sydney Trains in April 2016, had a slip resistance value (“SRV”) of 41 and made a moderate notional contribution to the risk of slipping when wet with water.

39. The Specification referred to a slip rating of R12 minimum/class W and the 1999 version of AS 4586. The Glennon Tiles invoices also classified the relevant tiles as class W. Class W has a relevant SRV (Slider 96, 45 rubber) of 45-54 and a low notional contribution to the risk of slipping when wet with water.

Whether Sydney Trains has established the pleaded express written contract

40. Sydney Trains’ primary claim is that there was an express written agreement comprised in three documents (and the attachments to the RFQ) in the terms pleaded in the SFASOC.

41. Sydney Trains’ contention is not that terms may be inferred in the sense that the parties intended to include terms in their contract which were not articulated and that such intention can be inferred from the nature and context of the transaction: see in this regard Hawkins v Clayton (1988) 164 CLR 539 at 570. Rather, Sydney Trains asks the Court to infer that the terms of a succession of written documents were executed by the parties (in the case of the Panel Agreement) and exchanged between them (in the case of the RFQ and quote or tender) or otherwise agreed (in the case of the Panel User Instruction and acceptance of the quote or tender).

42. Sydney Trains adduced no evidence of a counterpart of the Panel Agreement signed by Infrastruction, or even of an original signed by Sydney Trains. There is no evidence of provision of the RFQ to Infrastruction, a quote or tender being submitted or its acceptance by Sydney Trains in accordance with cl 4(c) of the Panel Agreement. There was no submission that acceptance of the quote or tender could be communicated in any other way.

43. Further, as Mr Catsanos SC points out, there was no evidence from anyone on behalf of Sydney Trains that its invariable, or even usual, practice was to ensure that Panel Agreements were executed and Contracts or Purchase Orders were issued. Even if one were to accept that this was Sydney Trains’ policy, there was no evidence to the effect that steps had been taken to ensure compliance with that policy. There was no evidence as to the record keeping (or record disposal) practices of Sydney Trains that might explain the absence of the documents.

44. Mr Weinberger invited the Court to infer that there was simply no way a contractor could become a Panel Member if it did not sign a Panel Agreement. In the absence of evidence as to Sydney Trains’ invariable or usual practice, I do not consider such an inference can be drawn. Similarly, I cannot infer the existence or terms of a Contract or Purchase Order in accordance with cl 4(c) of the Panel Agreement.

45. I am satisfied, however, that the Scope and a form of Specification had been provided to Infrastruction. It is also likely, on the basis of the addendum, that an RFQ had also been provided. I am not satisfied, however, that an RFQ, to which the Contract Terms had been attached, had ever been provided to Infrastruction.

46. Even taking into account the other documents on which Sydney Trains relies to infer a written contract being entered into on the terms alleged, there was not a sufficient basis to draw the inference for which Mr Weinberger contended. The ELLIPSE Supplier Addition/Modification, which recorded Infrastruction (then Hannes Civil Engineering) becoming a Panel Member, for example, was a purely internal document which contained a checklist of matters in which boxes were ticked by hand. There was no box for execution of a Panel Agreement in any event.

47. Insofar as Sydney Trains relies on the Panel User Instruction, I find that that document was not part of any express contract as it was an internal document created for Sydney Trains’ own purposes. There was no evidence that it was ever provided to Infrastruction or why it would be. While it supports the proposition that Infrastruction was a Panel Member, it does not assist on the question of whether the Panel Agreement, or any subsequent document, was ever provided to Infrastruction or agreed between the parties.

48. Finally, Mr Weinberger also submitted that I could infer from the fact that Infrastruction performed work at the Station that it did so according to the express terms propounded by Sydney Trains. I am unable to do so.

49. Infrastruction performed substantial refurbishment works at the Station over many months. Tiling was only part of the Works. In order to install the relevant tiles, Infrastruction acquired what were described as W class tiles from Glennon Tiles and installed them. It subsequently procured slip testing from Work Safe Slip Testing, who reported its results to Infrastruction and those results were provided to Sydney Trains.

50. These facts, as Mr Catsanos submitted, are consistent with the performance of the Works according to a different contractual regime or no express regime at all. They are common steps that a contractor might be expected to take. The mere provision of the Scope and Specification, even where works appear to have been conducted in accordance with them, does not establish agreement to perform the Works pursuant to those standards. They do not, in the absence of evidence as to their context and circumstances of their provision to Infrastruction, of themselves have contractual force. It would be a matter of conjecture, rather than inference, to conclude that there was an express agreement in the terms of the documents alleged to comprise the written agreement.

51. On the evidence before me, therefore, I am not satisfied that Sydney Trains and Infrastruction entered into any express written contract comprised in the Panel Agreement, Panel User Instruction, RFQ, Scope and Specification. I am not satisfied that the Panel Agreement and Panel User Instruction were provided to Infrastruction. I am similarly not satisfied that the Contract Terms attached to the RFQ were provided to Infrastruction. Finally, the absence of a Purchase Order or Contract weigh heavily against a contract having been brought into existence in accordance with the documents as alleged.

52. While I do accept that the RFQ, Scope and Specification were provided to Infrastruction, I am not persuaded that they form part of any written contract to perform the Works as alleged.

Whether Sydney Trains has established relevant implied obligations

53. Sydney Trains also relied on the alternative submission that there were obligations implied in law or in fact to the same effect as those alleged to have been agreed expressly, namely, to complete works with due care and skill, to ensure that the installed tiles would have an adequate level of slip resistance and that the works would comply with all relevant Australian Standards and conditions imposed by the Building Code of Australia.

Principles: terms implied in law or in fact

54. Terms may, of course, be implied in law or in fact. Terms may be implied in law in a particular class of contracts to prevent contractual rights from being “rendered nugatory, worthless, or … be seriously undermined”: Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 450. They may otherwise be implied as a matter of policy based on contemporary standards of what is appropriate to contractual relationships of the class in question: Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 261.

55. Unless otherwise agreed, a duty of reasonable care, analogous to that imposed in tort, is implied in law in several classes of contract: Astley v Austrust Ltd (1999) 197 CLR 1. It is a recognised implied term in contracts for work and materials that reasonable care and skill will be exercised: Zorba Structural Steel Co Pty Ltd v Watco Pty Ltd (1993) 115 FLR 206; Reed v Peridis [2005] SASC 136 at [27]. I see no reason why such a term would not be implied in the present case.

56. There is also a warranty implied in law in a contract to provide work and materials that the materials will be of good quality (at least insofar as to be free of latent defects) and be reasonably fit for their intended purpose unless the circumstances of the contract are such as to exclude any such warranty: Helicopter Sales (Australia) Pty Ltd v Rotor-Work Pty Ltd (1974) 132 CLR 1 at 6, 8, 17; Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 at 490 and 492B-G. According to Jacobs J in Helicopter Sales, whether a warranty is excluded is a question of law which must be answered in light of the particular facts, including the terms of the agreement and the circumstances of the making of the contract (at 17).

54. In Helicopter Sales, for example, the defendant could not give a warranty of quality of a particular part used in helicopter maintenance (there being a latent defect in a bolt supplied by the manufacturer that the defendant did not have the resources to test). In that case, the warranty was excluded.

55. In Young & Marten Ltd v McManus Childs Ltd [1969] 1 AC 454, referred to in Helicopter Sales at 9, an implied warranty as to fitness for purpose (in respect of roof tiles liable to crack in frosty weather) was excluded because the materials which proved to be defective had been selected by the respondent by their trade name and the respondent had then required that particular brand to be supplied to it. An implied warranty as to quality was not, however, excluded.

56. A relevant consideration, identified by Stephen J in Helicopter Sales at 9, is the extent to which the contract was predominantly for the performance of services, with the supply of materials being only incidental thereto. The more that a contract can properly be characterised as for the performance of services, with the provision of parts being incidental (even if important), the more readily will a court exclude the implied obligation.

57. Terms may be implied in fact according to the well-known criteria set out by the majority of the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283. Those criteria are:

1. The term must be reasonable and equitable;

2. It must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it;

3. It must be so obvious that it goes without saying;

4. It must be capable of clear expression; and

5. It must not contradict any express term in the contract.

Consideration: what were the implied obligations of Infrastruction?

61. There was no dispute that there was some form of contract between Sydney Trains and Infrastruction for the performance of the Works. There was a contract between Sydney Trains and Infrastruction for the performance by Infrastruction of comprehensive refurbishment works at the Station, which included the acquisition and laying of tiles on and around the staircases between the concourse and the platform.

62. The Works identified in the Infrastruction pro forma pricing schedule also included patch and repair works, decluttering works, platform repairs, staircase works, weatherboard repairs, glazing, electrical and hydraulic works, fencing replacement, painting, garden maintenance, toilet refresh, lighting improvement, replacement of seats, bins and bubblers, deep cleaning and bird proofing. Infrastruction invoiced over $700,000 between January and October 2016.

Who was responsible for the selection of the tiles?

63. The questions concerning Infrastruction’s relevant contractual duty are bound up with the selection and acquisition of the tiles laid on and around the Station’s stairs. There was no direct evidence as to who selected the tiles. Sydney Trains submitted that, in the absence of any direct evidence, the best inference is that Infrastruction selected them, and did so pursuant to a contractual obligation to do so. Sydney Trains further submitted that the evidence of invoice and receipt for the tiles and performance of the Works, in the usual course of events, establishes that Infrastruction selected and acquired the tiles, or at least shifts the evidentiary burden to the Insurer to establish that Infrastruction was not responsible for the selection of the tiles.

64. The Insurer submitted that proof of the selection of tiles remains part of Sydney Trains’ legal onus. In the absence of evidence, it submitted that Sydney Trains has failed to prove that Infrastruction selected them, particularly given that the Specification appears to require the approval of Sydney Trains, and mandate or pre-approve certain tiles supplied by Glennon Tiles, from whom Infrastruction in fact acquired the tiles.

65. The evidence on this question is slight. Infrastruction had a copy of the Specification, which provided a minimum standard of slip resistance rating. There was no evidence of any communication in which Infrastruction sought the approval of Sydney Trains for any particular tiles. The Specification identified Glennon Tiles as a potential supplier of tiles but, in its terms, only pre-approved particular tiles from Glennon Tiles for the purpose of colour matching. In my view, the pre-approval of Glennon Tiles and the cognate question of Infrastruction’s responsibility to “propose” tiles went only to the question of the aesthetic compatibility of the proposed tiles with the Sydney Trains colour scheme.

66. In the absence of evidence to the contrary, the usual course of events would be that the party supplying and installing the tiles would be responsible for their selection. For the Insurer to establish that the tiles had been selected, mandated or approved by Sydney Trains would have required some positive evidence that Sydney Trains was responsible for the selection or approval of the tiles. I am not satisfied this was the case. In my view, the Specification does not suffice in this regard.

67. Accordingly, I find that Infrastruction was responsible for the selection and acquisition of the tiles.

Was the provision of the tiles a proper subject for the implication at law of the duty of fitness for purpose?

68. Sydney Trains contends that there was a term implied in law that the installed tiles would have an “adequate level of slip resistance”. Adequacy must be gauged with reference to some criterion. I have treated this term as a term that the tiles have an adequate level of slip resistance to be fit to be laid in the public areas of a train station habituated by commuters.

69. The evidence before the Court as to what was an adequate level of slip resistance to be fit to be laid in the public areas of a train station was comprised in the Specification and the Work Safe Reports. The Specification provided a minimum SRV of W class or R12. The nature of the Works made clear that the intended purpose of the tiles was for use in public areas, which were to be traversed by commuters, often in a hurry to catch trains, which areas were under cover but otherwise exposed to the elements. In such circumstances, the contribution to slipping when wet would be a significant issue.

70. For the reasons set out above, a term of fitness for purpose will be implied in law unless there is a proper basis to exclude it. It was submitted that one such basis was in the Specification itself, which it was contended mandated or pre-approved Glennon Tiles. Properly construed, I do not consider that it provides such a basis. Glennon Tiles is approved as a supplier, however, its selection is neither mandated nor pre-approved for the purpose of compliance with the required SRV.

71. Another possible basis arises from the proviso in Helicopter Sales, referred to at paragraph 59 above. The provision of tiles for the purpose of their installation could not be regarded as incidental in the circumstances of the present case. The proviso in Helicopter Sales does not, in my view, apply.

72. Mr Catsanos submitted that the obligation ought rise no higher than to acquire tiles that had the relevant slip rating and that so long as the tiles had that rating, whether the tiles conformed with that rating was not necessary in order for Infrastruction to comply with its obligation. There would appear to me little utility in the implication of such a term. As set out above, terms are implied in law to prevent contractual rights from being rendered nugatory, worthless, or seriously undermined. Construing the obligation in such a way would not meet the purpose for which the term is implied. I do not accept the submission.

73. Accordingly, I find that Infrastruction was under an obligation implied in law to supply and install tiles that had an adequate level of slip resistance, being a requirement that the tiles were fit for the purpose of being laid in the public areas of a train station, exposed to the elements and habituated by commuters.

74. Sydney Trains also alleges that there was an implied term as to compliance with all relevant Australian Standards and conditions imposed by the Building Code of Australia. I am not satisfied that such a term would be implied in law.

75. I am further not satisfied that such a term was implied in fact. In my view, it does not meet the test in BP Refinery v Hastings. It is neither so obvious that it goes without saying nor necessary to give business efficacy to the contract, given that there is already an implied obligation at law as to the fitness of the tiles for their intended purpose. Such an additional requirement would either be otiose or would impose a higher and specific obligation which would not fall within the BP Refinery v Hastings formulation. Absent evidence of industry practice to which both parties subscribed, I do not consider this term is capable of implication in fact.

Breach, loss and damage: whether Sydney Trains has established breach by Infrastruction of its contractual obligations to it

76. I have found two of the three terms alleged by Sydney Trains were implied in law. I am not satisfied that Sydney Trains has made out breach by Infrastruction of the first of these, being duty to complete the Works with due care and skill, in the performance of the Works. The only relevant acts in performance by Infrastruction of its duties appear to be the acquisition of materials from Glennon Tiles and the physical act of laying the tiles. There is no evidence that could support a finding of a want of skill and care in either respect.

77. As to the question of whether the obligation to ensure the tiles had an adequate level of slip resistance was breached, the Work Safe Reports, available to both Infrastruction and Sydney Trains in April 2016, disclosed that the tiles tested on the landing had a SRV of 41, according to the Slider 96 test in accordance with AS45663:2013 Appendix A. This corresponded to an AS4586:2004 classification of class X (or P3) and a moderate contribution of the floor surface as to the risk of slipping when wet.

78. The Work Safe Reports also set out a table which set out applications and values, inter alia, for external pavements and ramps, determined by Committee BD-094, which I take to be an Australian Standards committee. For external walkways, pedestrian crossings, verandas, carports, driveways, courtyards and roof decks, it provides for a Slider 96 rating of 45-54, which corresponds to class W. In summarising his test results, the author of the reports stated that the most appropriate minimum pendulum classification for the area adjacent to the stair landing (when wet) and stair treads was P4 (45-54 with Slider 96).

79. The expert evidence in the personal injury proceedings was not tendered in these proceedings. The judgment of Curtis ADCJ (Michael v Sydney Trains (District Court (NSW), 5 July 2018, unrep)) was, however, admitted without objection.

80. In the personal injury proceedings, Curtis ADCJ found, on the evidence before him, that Sydney Trains was negligent in that it had failed to lay tiles on the platform on which the plaintiff slipped that had a SRV greater than 54. This was a different measure to that in the Work Safe Report slip test table for external walkways and different to the Specification, both of which referred to class W, which was 45-54. As Curtis ADCJ determined the matter before him according to a different standard and on the basis of different evidence, there is little that can be drawn from that case other than the bare fact that Ms Michael succeeded in obtaining judgment against Sydney Trains.

81. Ultimately, the question is whether Sydney Trains has established, on the evidence before me, that a moderate (as opposed to low) contribution of the floor surface to the risk of slipping when wet is a breach of the obligation of fitness for purpose.

82. On the basis of the Work Safe Reports – particularly Table 3B – I find that laying tiles that make a moderate contribution of the floor surface to the risk of slipping when wet was a breach of the implied obligation.

83. I accept the Work Safe Reports as establishing that compliance with the obligation of the duty to provide tiles of adequate slip resistance required the provision of tiles on and around the staircase with a SRV of 45 or more. The stairs were under cover but otherwise open to the elements. In wet weather they would be traversed by many people, some of whom could reasonably be expected to be rushing to catch their trains.

84. I also accept that the Work Safe Reports establish that, in supplying and laying tiles with a SRV of 41, Infrastruction was in breach of the implied term of fitness for purpose.

Causation, loss and damage: whether Sydney Trains has established loss by reason of Infrastruction’s breach

85. Video evidence clearly shows that on 24 August 2016 Ms Michael fell as she was walking normally, if briskly, down to the platform to catch her morning train. She slipped and fell when her heel struck the last tile at the top of the stairs before the non-slip nosing. Her right foot slipped out from under her, her left foot followed and she landed on the top step. Her left hand was on the railing and she used it to steady herself. She appears to have avoided more serious injury as a result.

86. On the basis of the video evidence, I am satisfied that the slipperiness of the tile at the top of the stairs was factually a cause of Ms Michael’s slip and fall and consequent personal injury. Ms Michael succeeded in recovering $409,000 in damages, together with $207,500 in costs, from Sydney Trains. In his findings, Curtis ADCJ found that Ms Michael’s fall was caused by the slipperiness of the tiles. I have reached the same conclusion.

87. Sydney Trains' own liability to Ms Michael and its costs incurred in defending those proceedings are advanced as its loss caused by the breach of contract. It quantifies that loss at just over $840,000, including its costs of the personal injury proceedings and interest to the date of trial. Sydney Trains has the onus of showing, by either direct or circumstantial evidence on the balance of probabilities, that the loss was caused by the breach of contract.

88. Damages are recoverable even where the breach of contract is only one amongst multiple, concurrent causes. However, a causal link between a breach and loss can be severed by a novus actus interveniens: a plaintiff’s own deliberate or negligent conduct after the breach which may supervene as the legal cause of the loss: March v E & MH Stramare Pty Ltd (1991) 171 CLR 506.

89. The Insurer contends that any breach by Infrastruction did not materially cause or contribute to the harm suffered because a subsequent event can be treated, in a practical sense, as the sole cause of the damage: in this respect, see Chappel v Hart (1998) 195 CLR 232 at 238, 244. The Insurer submitted that Sydney Trains, with knowledge of the unfitness for purpose of the tiles that had been laid, opened the staircase for use by the general public and that this conduct was the proximate cause of the loss in law.

90. Mr Catsanos referred to Lexmead (Basingstoke) Ltd v Lewis (sub nom Lambert v Lewis) [1982] AC 225, which concerned the breach of a statutorily implied term of fitness for purpose of a coupling used to attach a trailer to a motor vehicle. The coupling was fit for purpose on delivery but over time a latent design defect emerged such that its locking mechanism broke and it was no longer fit for use on a public highway. The owner of the vehicle was aware of the break in the locking mechanism but continued to use the coupling anyway. When the locking mechanism failed, resulting in a fatal accident, the question was whether the continued use of the coupling by the motorist with knowledge of the emergent defect broke the chain of causation.

91. The House of Lords found that it did: once the motorist was aware that the coupling was no longer fit for purpose but chose to keep using it, this broke the causal chain. Lord Diplock found that the motorist’s liability arose not from the defective design of the coupling but from his own failure to have it repaired or to ascertain if it was still safe to use. His Lordship held (at 276E to 277C):

The farmer’s liability arose not from the defective design of the coupling but from his own negligence in failing, when he knew that the coupling was damaged, to have it repaired or to ascertain if it was still safe to use. The issue of causation, therefore, on which the farmer’s claim against the dealers depended was whether his negligence resulted directly and naturally, in the ordinary course of events, from the dealer’s breach of warranty. Manifestly it did not.

92. Lambert v Lewis was considered by the Court of Appeal in Allianz Australia Insurance Ltd v Waterbrook at Yowie Bay Pty Ltd [2009] NSWCA 224 and Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd (2017) 94 NSWLR 108. A majority of the Court of Appeal in Allianz applied the reasoning in Lambert v Lewis. Ipp JA, with whom Hodgson JA agreed, held:

[110] In my opinion, applying the same reasoning, a successor in title who acquires a building in full knowledge of its defects, suffers no loss from the existence of those defects. In those circumstances, the builder’s breach of statutory warranty could not be said to have diminished the successor’s assets, nor increased its liabilities. Any adverse impact to the successor’s financial position, and any loss to the successor, would result from the successor knowingly and deliberately paying more for the building than it was worth. The loss would be caused by the successor’s own decision to purchase at the agreed price.

[111] The observations in [110] are predicated on the ‘full knowledge’ of the defects being not only knowledge of the existence of the defects but also knowledge of their significance. A party may know of the existence of defects (because they are patent), but may not appreciate — even acting reasonably — that major expenditure would be required to remedy them.

93. In Walker Group v Tzaneros, Spigelman CJ found that mere acquisition with knowledge of defects was insufficient to break the chain of causation. However, in doing so, the learned Chief Justice endorsed the approach of Ipp JA in Allianz and Lord Diplock in Lewis v Lambert. That case concerned cracks and spalling in pavement laid in a property that had been assigned. The Court of Appeal found that the chain of causation was not broken:

[153]  That is not to say that an act of the assignee could not break the chain of causation (for example, in the present case by using excess loads on the pavement). However, acquisition with knowledge of the defects, in my opinion, would not do so.

[154]  The position is quite different to Lambert v Lewis [1982] AC 225 where a person who acquired an item of equipment with the benefit of a warranty deliberately made use of the equipment knowing it to be defective. It was the use of the equipment in those circumstances which broke the chain of causation in respect of the damage which ultimately eventuated.

[155] Second, Ipp JA made it clear that what was required was that the successor in title had full knowledge of the defects, not only their existence but also of their significance: at [111]. In my opinion it could not be said that Tzaneros had such knowledge.

94. Accordingly, the relevant question for the purpose of the Insurer’s causation argument is not only whether Sydney Trains knew of the breach, but also whether it was aware of its significance when it opened the Station to pedestrian traffic.

95. In the present case, Mr Catsanos places great emphasis on the fact that Sydney Trains, at some point between April and August 2016, elected to open the concourse and staircases to the public with knowledge that the tiles, as laid, made a moderate contribution to the risk of slipping when wet.

94. Further, there was evidence before the Court that there had been a number of incidents in the period between April and August 2016 in which commuters slipped and fell on tiled surfaces at the Station. The evidence did not demonstrate, however, that slipperiness of tiles similar to those in issue in the current proceedings was a cause of any of those incidents, so was of no weight.

95. More significantly, the Specification itself, irrespective of whether it had contractual force, evidenced Sydney Trains’ knowledge that a minimum SRV of 45 was Sydney Trains’ own standard in respect of tiles laid in the public areas of the Station.

96. Sydney Trains had knowledge of the contribution of the tiles to the slipperiness of the surface when wet some months prior to Ms Michael’s fall. It had knowledge of the significance of such slipperiness to the risk of pedestrians slipping and falling on them. Sydney Trains determined to open the staircase to the public notwithstanding such knowledge.

97. In the circumstances of this case, this appears to me to be a sufficient basis to find a break in the chain of causation between Infrastruction’s breach of contract and Sydney Trains’ loss by reason of its liability to Ms Michael in respect of her 24 August 2016 fall.

98. I, therefore, find that Infrastruction’s breach of the implied warranty of fitness for purpose did not cause Sydney Trains’ loss. I should add that if, contrary to my views above, there was also implied into the contract an obligation to comply with all relevant Australian Standards and Building Code conditions, my conclusions as to causation would continue to apply.

99. Accordingly, an essential component of Sydney Trains’ claim cannot be made out and its claim against the Insurer fails.

Waiver: whether the Insurer has established waiver by Sydney Trains of any breach by Infrastruction

102. Although I have already found for the Insurer on the basis that causation is not made out, I nevertheless have also considered the Insurer’s contention in its Defence that Sydney Trains has waived or, alternatively, is estopped from relying on Infrastruction’s breach. The Defence particularises allegations that Sydney Trains’ servants or agents inspected and approved the Works without complaint and thereby represented that it was satisfied with the Works. No complaint was made by Sydney Trains until September 2020. Sydney Trains has filed no Reply so can be taken to have joined issue with these allegations.

103. The Insurer relies on the provision to Sydney Trains of the test results in March or April 2016 as establishing a waiver of any breach.

104. Mr Catsanos points out that Infrastruction invoiced Sydney Trains and those invoices were paid. There is no evidence of any complaint. There is, however, no evidence of any approval or the terms of any such approval.

105. In the course of argument, Mr Catsanos clarified his submission that the failure by Sydney Trains, either to exercise a right to have the work rectified or to threaten a claim for damages at the time it became aware of the breach, made it unfair, inequitable or unconscionable for Sydney Trains to insist on performance in accordance with the implied term of fitness for purpose. The unfairness, it is submitted, derives from Sydney Trains sitting in silence for years when it controlled the situation such that Infrastruction could not take any steps to remediate the risk or otherwise protect itself.

106. Mr Weinberger challenges the factual inference relied upon by Mr Catsanos. He points out that there is no evidence either way as to whether Sydney Trains made any complaint, threatened to sue or reserved its rights in respect of the laying of the tiles. He further relies on Sargent v ASL Developments Ltd (1974) 131 CLR 634 for the proposition that the only relevant form of waiver in issue in the present proceedings requires an election between inconsistent rights, which does not arise on the evidence before the Court.

107. Although couched in terms of waiver, the submissions of Mr Catsanos seemed essentially to be that it would be unconscionable for Sydney Trains to maintain a claim for damages in circumstances where it accepted performance and, by failing to make any complaint, abandoned its claim for damages. The alleged unconscionability arises because Infrastruction was thereby deprived of any ability to rectify the situation or remediate the risk.

108. Leaving to one side whether each of the elements of the defence has been properly articulated, the waiver argument fails for want of evidence. There is no evidence of any representation to Infrastruction to the effect that Sydney Trains waived compliance with its obligation as to fitness for purpose. There is no basis to infer or imply such a representation. More importantly, as to the alleged unconscionability, there is no evidence as to what Infrastruction could or would have done if a complaint had been made at an earlier time.

109. I therefore find the defence of waiver would not be made out.

Insurance issues: whether the policy responds and whether exclusions apply

110. On the view that I have taken as to causation, Infrastruction was not at the time of its deregistration liable to Sydney Trains and hence the Insurer could not be liable under s 601AG of the Corporations Act. If I am wrong about that, Sydney Trains, nevertheless, must still establish that the Policy responds in order to make good its claim under s 601AG. I consider this matter below.

111. The Insurer denies that the Policy responds to the claim and it further asserts that, by reason of certain exclusions in the Policy, it is not liable to Sydney Trains.

112. A policy of insurance must be construed like any other commercial contract, that is, in a businesslike manner, paying attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure: McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; [2000] HCA 65 at [22]. Its terms are determined objectively according to what a reasonable businessperson would have understood them to mean: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [47]. It is always necessary to have regard to the whole of the contract, not merely the particular clause in dispute: Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 at 509.

113. The Insurer bears the onus of proving any qualification or limitation on cover: Wallaby Grip Pty Ltd v QBE Insurance (Australia) Ltd (2010) 240 CLR 444; [2010] HCA 9 at [36].

Relevant terms of the Policy

114. Sydney Trains’ claim against the Insurer is made pursuant to the EBM Construction Risks 44A Public and Products Liability Insurance Policy (“the Policy”). Cover extends to public liability, pollution liability and completed operations or products liability.

115. The following are its relevant terms.

116. Insuring Clause 1.1 of the Policy provides:

The Insurer(s) hereby agrees, subject to the limitations, Exclusions, terms and Conditions of this Policy, to indemnify the Insured against all its legal liability to pay compensation or damages (including claimants’ costs, fees and expenses) in accordance with the law of any country within the Territorial Limits set out in the Schedule.

This indemnity applies to legal liability as specified in each Section of this Policy, arising from an Occurrence within the Territorial Limits in connection with the Business of the Insured specified in the Schedule, and is subject to the exclusions applicable to that Section or otherwise to this Policy.

117. Part 2 of the Policy deals with Indemnity. In Section A of Part 2, which addresses Public Liability, cl 2.1 provides:

The Insured is indemnified in accordance with the Insuring Clauses against liability for Injury, Damage, or Advertising Liability sustained or as a result of an Occurrence during the Period of Insurance.

118. In Section C of Part 2, which addresses Completed Operations and Products Liability, cl 2.3 provides:

The Insured is indemnified by this Section in accordance with the Insuring Clauses against liability for Injury, Damage, or Advertising Liability sustained or as a result of an Occurrence during the Period of Insurance arising out of or in connection with any Product(s) and/or Completed Operations.

119. It may be noted that the formulations in cll 2.1 and 2.3 are not the same. In the case of Completed Operations and Products Liability in cl 2.3, there is a broader connection between the liability and the event by the addition of the words “arising out of or in connection with any Product(s) and/or Completed Operations”. As I read cl 2.3, the Occurrence need only arise out of or have a connection with a Product or Completed Operation for the Policy to be enlivened. This does not directly affect construction of the term “liability for Injury”, but it does shed some light on the ambit and intended reach of the Indemnity Clause itself.

120. Relevant definitions in Section 6 of the Policy include:

Business of the Insured means the Business of the Insured stated in the Schedule and this Policy shall indemnify the Insured for all liability arising from all the Insured’s businesses, occupations and/or activities, which includes Construction Operations and Completed Operations, but subject to any Exclusions, Definitions or Conditions contained in this Policy.

Completed Operations means Construction Operations that have been formally accepted by the principal or owner or any other party as having been completed, including expiry of any maintenance or defects liability period obligations of the Contract.

Contract means contracts or agreements, written or verbal, in connection with Construction Operations.

Construction Operations means all Contracts or work for the construction direction installation alteration manufacture fabrication assembly repair or service of or to tangible property carried out by or for the Insured.

Damage means actual damage to, or loss of possession or control of, tangible property; Loss of Use, trespass, nuisance or wrongful interference with the enjoyment of rights over tangible property.

Injury means death, bodily injury, illness, disease, mental injury, mental anguish, shock, false arrest, invasion of privacy, detention, false imprisonment, false eviction or malicious persecution [sic] but does not include Occupational Illness.

Loss of Use means economic loss suffered by any person or party consequent upon loss or damage of or to any other person’s or party’s tangible property.

Occurrence means an event or series of events attributable to one source or original cause or continuous or repeated exposure to conditions, which results in Injury or Damage provided that the Insured did not intend that such Injury or Damage would result. All exposure to substantially the same general conditions shall be deemed one Occurrence.

Product means any property which has been designed, specified, formulated, manufactured, constructed, installed, sold, supplied, distributed, treated, serviced, altered or repaired by or on behalf of the Insured after it has left the custody or control of the Insured.

The operation of Insuring Clause 1.1 and Indemnity Clauses 2.1 and 2.3

121. There is little doubt, in my view, that the refurbishment work performed by Infrastruction at Penshurst Station in the period to March 2016 was work within the Business of the Insured and that, by August 2016, the tiles laid by Infrastruction constituted either a Completed Operation or a Product within the definitions relevant to cl 2.3.

122. The question before the Court is whether, as a matter of construction of the Policy, Sydney Trains’ claim against Infrastruction is for a “liability for Injury … sustained as a result of an Occurrence … arising out of or in connection with any … Completed Operations or Product”.

123. First, assuming that breach by Infrastruction of the implied term of fitness for purpose and (contrary to my findings above) causation are both made out, I am satisfied that Ms Michael suffered an Injury within the meaning of the definition in cl 6 of the Policy.

124. There was a debate as to whether this claim relates to an Occurrence which caused Injury. Mr Catsanos contended that the relevant Occurrence that triggered the claim was the alleged breach of contract, and Ms Michael’s injury was a mere background circumstance to Infrastruction’s liability to Sydney Trains for any such breach. I do not accept that submission. In my view, the definition of Occurrence in the Policy relates to the cause of the Injury, not the act creating liability. On my reading of the text of the definition in cl 6, an Occurrence is relevantly an event which results in Injury. In my view, Ms Michael’s fall on 24 August 2016 was the relevant Occurrence.

Liability for Injury

125. As to whether Sydney Trains’ claim is for a liability for Injury, Mr Weinberger submitted that the word “for”, where it appears in cl 2.3 in the phrase “liability for Injury”, should be read expansively as “liability in respect of Injury”. So read, Mr Weinberger’s submission continues, the Policy responds to Sydney Trains’ claim.

126. Mr Catsanos contended that “liability for Injury” was a narrow formulation and confined liability, for the purpose of the Policy, to compensation for the Injury itself and to the exclusion of economic loss related to the suffering of an Injury by a third person.

127. Counsel referred me to a number of authorities in which similar language was construed. The balance of opinion in the authorities appears to be that as a strict matter of language, devoid of context, the more natural reading of the term “for” connotes an exchange, and supports a construction that confines the definition to claims made by the party seeking relief. Absent the particular statutory context that governed the policy of motor vehicle insurance in State Government Insurance Office (Qld) v Crittenden (1966) 117 CLR 412, for example, Taylor J noted that a strictly literal construction of “for accidental bodily injury” would limit liability of the insurer to the person who had himself suffered the bodily injury (at 415).

128. This view is corroborated by academic writers. According to the learned authors of The Law of Liability Insurance (D K Derrington and R S Ashton, 3rd ed, 2013, LexisNexis Butterworths) at [3-140], page 500:

‘For’ is more restricted than ‘arising from’. It has a wide operation, but there is still a limitation so that it is less than ‘caused by or arising out of’. If it is used to link a reference to damages or compensation with a reference to personal injury, it has, prima facie, a narrow meaning so that the policy responds only when proceedings are taken by the person injured.

129. As Spigelman CJ pointed out in Zurich Australian Insurance Ltd v Regal Pearl Pty Ltd (2007) 14 ANZIC 61-715 at [37], however, case law may be instructive, but the task of interpretation is always determined by context. “For” is a protean term and will take its meaning from its context: see Nigel Watts Fashion Agencies Pty Ltd v GIO General Insurance (1994) ANZIC 61.235 at 75,648.

130. In the present case, I consider the following matters are relevant to the construction of the word “for”:

1. As a matter of language, the more natural reading of the term “for” connotes an exchange, and supports a construction that confines the definition to claims made by the party seeking relief.

2. Further, if the drafters of the Policy had intended to embrace a wider ambit of liability, the language of cl 2.3 could have been made unambiguous by the inclusion of the words “in respect of” instead of “for”. (Conversely, the language could have been made unambiguous by inserting the word “directly”).

3. On the other hand, the definition of Injury includes cover for death. While at common law no action for death can be brought by third parties who suffer loss through the killing of another (Barclay v Penberthy (2012) 246 CLR 258 at [22]-[27], [80]-[84] and [178]), each Australian jurisdiction has enacted a version of Lord Campbell’s Act which identifies persons who may sue for another’s death. Sections 3 and 4 of the Compensation to Relatives Act1897 (NSW), for example, enable an action to be brought on behalf of certain relatives by and in the name of the deceased’s executor. The inclusion of death in the definition of Injury suggests that actions by third parties for economic loss resulting from Injury, as defined, were expressly contemplated. Death and other forms of personal injury are treated within the definition as members of the same class and in the same way.

4. Similarly, the definition of Loss of Use relevant to Damage (which is also treated the same way as Injury in cll 2.1 and 2.3) expressly contemplates coverage for economic loss by reason of damage to another party’s tangible property.

5. Further, the wording of cl 2.3 relates to liability for Completed Operations and Products, which widens the ambit of cover provided by cl 2.1. Textually it connotes a broader commercial object of the Policy.

6. Finally, the words in cl 2.3 “sustained or as a result of an Occurrence during the Period of Insurance arising out of or in connection with any Product(s) and/or Completed Operations” similarly connote a wider operation of the Policy.

131. On balance, I give greater weight to the factors at sub-paragraphs (2) to (6) above. Accordingly, I consider the wider construction of “for” to be more conformable with a businesslike interpretation of the Policy and the language used in its documentary context, and construe it as “in respect of”. In my view, if liability for the breaches is made out as against Infrastruction, the Policy would respond to the claim.

Exclusions

132. The Insurer also relies on the following exclusions in the Policy:

This Policy excludes liability:

3.1   arising out of liquidated damages clauses, penalty clauses or performance warranties under a Contract unless liability would have attached in the absence of such clauses or warranties;

…

3.3   arising out of any negligent act error or omission in the performance of the Insured’s professional activity or duties, including product design;

However, this Exclusion 3.3 shall not apply to:

Injury, Damage, or interference with traffic or property or the enjoyment of use thereof by obstruction, trespass, loss of amenity or nuisance;

the rendering or failure to render professional medical advice or first-aid by medical persons or any other person(s) employed by the Insured to provide such services at or in the vicinity of any worksite or premises owned or used by the Insured.

133. Mr Catsanos submitted that the performance warranty exclusion at cl 3.1 operates to exclude liability. In my view, it would not be consistent with a businesslike interpretation of the Policy to treat an obligation of fitness for purpose in respect of the installation of tiles for use in a public place (which is implied in law) as a performance warranty. Such a construction, if applied to the whole of the Works performed for Sydney Trains, would leave very little work for the Policy to do. Further, the immediate documentary context of the reference to a performance warranty, in its proximity to liquidated damages clauses, penalty clauses and limitation where liability would otherwise attach, indicates that exclusion cl 3.1 does not apply in the present circumstances.

134. Similarly, I am not persuaded that cl 3.3 applies. “Professional activities” is not a defined term. “Professional”, as a matter of ordinary usage can relate either to conduct in a profession or simply conduct for which one is paid. In its context, however, it seems that “professional activities”, where used in cl 3.3, is a reference to activities in the nature of a profession, rather than simply activities for which one is paid.

135. Some limited guidance can be drawn from the definition of “profession”, a cognate term. There is no strict legal definition of the term “profession”, as the membership of this class shifts with general community perceptions. However, there are a number of characteristics which distinguish professions from trades and other occupations, not all of which will necessarily be found in each case:

1. Professionals apply a specialised skill, which enables them to offer a specialised service.

2. The skill has been acquired by intellectual and practical training in a well-defined area of study.

3. The service provided by a professional calls for a high degree of detachment and integrity on the part of the professional in exercising personal judgment on behalf of a client.

4. The service involves direct, personal and fiduciary relations with the client.

5. The practitioners in a particular profession collectively have a particular sense of responsibility for maintaining the competence and integrity of the occupation as a whole.

6. Professionals tend, or are required, to avoid certain methods of attracting business.

7. Professionals are organised into bodies which, with or without legislative intervention, provide machinery for testing competence and regulating standards of competence and conduct within the particular profession.

136. Mr Catsanos relied on a policy proposal made by Infrastruction to Sterling Insurance in which Infrastruction identified “design” as the relevant professional service in respect of which it sought cover. Similarly, Infrastruction’s policy of professional indemnity insurance with Sterling Insurance provided cover in respect of design, drafting, technical calculation, specification, site inspection, project management, construction management, feasibility studies, programming and time flow management, quantity surveying, surveying and training. For these services to be covered by that policy they must be performed by or under the supervision of a properly registered engineer, architect or surveyor, a quantity surveyor or “any other person providing a professional business service of a skilful character according to an established discipline”.

137. While neither is strictly admissible as against the Insurer on the question of construction, such an approach conforms with the general proposition that the term “professional services”, at the very least, requires the exercise of skill and judgment in such a way as does not embrace the selection, acquisition or laying of tiles.

138. Accordingly, if, contrary to my views as to liability, Infrastruction was liable to Sydney Trains as at the time of its deregistration, the Policy responds, the exclusions do not apply and the Insurer would be liable under s 601AG of the Corporations Act.

Conclusion

139. I have found that Sydney Trains has not made out its claim against the Insurer. The Insurer is, therefore, entitled to judgment in its favour.

140. As costs ordinarily follow the event, the Insurer should also have its costs. In the event that any party seeks a special costs order, I will grant it liberty to make such an application within 14 days.

141. The orders of the Court are:

1. Judgment for the first defendant against the plaintiff.

2. The plaintiff is to pay the costs of the first defendant as agreed or assessed on the ordinary basis.

3. Grant liberty to the parties to make an application to vary order (2) herein, by email to my associate, within 14 days.

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Decision last updated: 15 September 2023