Threlfall v TBS Building Services and Ors and VWA v City of; Port Phillip and Ors
[2011] VCC 1491
•2 September 2011 (Revised)
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT WARRNAMBOOL
CIVIL DIVISION
DAMAGES/COMPENSATION LIST
GENERAL DIVISION
Case No. CI-09-05565
| PETER ANTHONY THRELFALL | Plaintiff |
| v | |
| TBS BUILDING SERVICES PTY LTD & OTHERS | Defendants |
| (ACCORDING TO THE ATTACHED SCHEDULE) - AND - |
Case No CI-09-01916
| VICTORIAN WORKCOVER AUTHORITY | Plaintiff |
| v | |
| CITY OF PORT PHILLIP & OTHERS | Defendants |
| (ACCORDING TO THE ATTACHED SCHEDULE) |
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| JUDGE: | HIS HONOUR JUDGE O'NEILL |
| WHERE HELD: | Warrnambool |
| DATE OF HEARING: | 31 January 2011, 2 February 2011 |
| DATE OF JUDGMENT: | 2 September 2011 (Revised) |
| CASE MAY BE CITED AS: | Threlfall v TBS Building Services & Ors and VWA v City of Port Phillip & Ors |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 1491 |
REASONS FOR JUDGMENT
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Catchwords: CONTRIBUTION PROCEEDINGS – indemnity and contribution under Notices of Contribution – liability of insurer under Policy of Insurance.
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| APPEARANCES: | Counsel | Solicitors |
| For Port Phillip City Council | Mr G G McArthur SC with | DLA Phillips Fox |
| Mr A Fraatz | ||
| For Kane Constructions Pty Ltd | Mr A J Kelly SC with | Wotton Kearney |
| and Lumley General Insurance Ltd | Mr D McWilliams |
SCHEDULE OF PARTIES
Case No. CI-09-05565
| PETER ANTHONY THRELFALL | Plaintiff |
| v | |
| TBS BUILDING SERVICES PTY LTD | First Defendant |
| and | |
| KANE CONSTRUCTIONS PTY LTD | Second Defendant |
| and | |
| PORT PHILLIP CITY COUNCIL | Third Defendant |
| and | |
| 350Q BBS PTY LTD (formerly BURNS BRIDGE SERVICES PTY LTD | Fourth Defendant |
| and | |
| LUMLEY GENERAL INSURANCE LTD | Third Party |
Case No CI-09-01916
| VICTORIAN WORKCOVER AUTHORITY | Plaintiff |
| v | |
| CITY OF PORT PHILLIP | First Defendant |
| and | |
| KANE CONSTRUCTIONS PTY LTD | Second Defendant |
| and | |
| 350Q BBS PTY LTD (formerly BURNS BRIDGE SERVICES PTY LTD) | Third Defendant |
| and | |
| TBS BUILDING SERVICES PTY LTD (in liquidation) | First Third Party |
| and | |
| LUMLEY GENERAL INSURANCE LTD | Second Third Party |
| HIS HONOUR: |
Preliminary
1 Port Phillip City Council (“Port Phillip”) owns the St Kilda Town Hall.
2 Kane Constructions Pty Ltd (“Kane”) carried out construction work at the Town Hall over a period, including in November 2007. The work was carried out pursuant to a construction contract between the parties dated 15 December 2005 (“the Construction Contract”).
3 As part of the construction works carried out under the Construction Contract, Kane built a hoarding (“the hoarding”) in the gallery area of the Town Hall (“the gallery”) and cut a doorway through it (“the doorway”). The doorway was not cut to the ground and a step-over (“the step-over”) remained along the bottom of the doorway, some several inches high. The doorway was secured with a door.
4 On 21 November 2007, Peter Threlfall (“Threlfall”), an employee of another contractor working at the Town Hall, TBS Building Services Pty Ltd (“TBS”), while carrying a plasterboard sheet in the gallery and through the doorway, tripped on the step-over, fell to the ground and suffered injury. He brought a proceeding (“the principal proceeding”) against:
• his employer, TBS (first defendant); • Kane (second defendant);
• Port Phillip (third defendant); •
350Q BBS Pty Ltd (formerly Burns Bridge Services Pty Ltd) (“Burns Bridge”) – the contract manager of the construction works (fourth defendant).
alleging negligence and/or breach of duty as a cause of his injury, loss and
damage.[1][1] Proceeding CI-09-05565
5 The principal proceeding came on for trial before a jury at Warrnambool in August and September 2010. The jury found for the plaintiff and damages in the agreed sum of $450,000 were ordered. The jury apportioned liability as between the defendants as follows:
• TBS – 60 per cent; • Kane – 5 per cent; • Port Phillip – 35 per cent; • Burns Bridge – no liability. 6 On 8 September 2010, judgment was entered for the plaintiff in accordance with the jury’s findings.
7 By further proceeding[2] (“the recovery proceeding”), the Victorian WorkCover Authority (“VWA”) sought to recover from:
[2] Proceeding CI-09-01916
• Port Phillip (first defendant); • Kane (second defendant);
• Burns Bridge (third defendant) compensation paid by the VWA, pursuant to s.138 of the Accident Compensation Act 1985 (“the AC Act”). The recovery proceeding was resolved by agreement between the parties following the jury verdict and consent orders were made on 9 September 2010.
8 By Contribution Notice dated 18 February 2010, in the principal proceeding, Port Phillip alleged, as against Kane, a claim for contribution and indemnity for the proportion of the damages awarded to Threlfall against Port Phillip on the following basis:
(a) For breach of the Construction Contract in – (i) failing to take out public liability insurance in the joint names of Kane and Port Phillip (Clause 19 of the General Conditions of the Construction Contract);
(ii) failing to carry out work in a safe manner (Clause 410 of the Construction Contract);
(iii) failing to do all things and take all necessary measures to protect persons on the site against the risk of injury (Clause 15 of the General Conditions of the Construction Contract);
(b) As a result of negligence of or breach of duty by Kane. 9 By Contribution Notice dated October 2010, in the principal proceeding, Kane alleged, as against Port Phillip, contribution and indemnity for that proportion of the damages awarded to Threlfall against Kane on the following basis:
Breach of the Construction Contract in that –
(a)
Port Phillip, pursuant to Clause 40.1a of the Construction Contract, could direct Kane to omit any part of the work under the Construction Contract;
(b)
Port Phillip was to indemnify Kane for any claims in respect of the right of Port Phillip to construct works under the Construction Contract on the site (Clause 17.2 of the General Conditions);
(c)
On 21 September 2009, Port Phillip instructed Kane to delete the work in the gallery from the Construction Contract;
(d)
Prior to the date of injury, 21 November 2007, Kane handed the gallery area back to Port Phillip;
(e) Port Phillip commenced work in the gallery thereafter; (f) Threlfall suffered injury while performing Port Phillip’s work; (g)
Port Phillip had failed or refused to indemnify Kane as required by Clause 17.2 of the Construction Contract.
10 By leave granted 27 August 2010, Port Phillip issued a Third Party Notice against Lumley General Insurance Ltd (“Lumley”) alleging:
(a) By Contract made 31 August 2006, Lumley agreed to indemnify Kane and Port Phillip against liability for injury arising out of construction activities carried out by Port Phillip (“the Insurance Contract”); (b) It was a term of the Insurance Contract that Lumley would indemnify Port Phillip for all sums for which it became liable in respect of injuries sustained in connection with the business activities of Port Phillip; (c) Threlfall’s injury was sustained in the course of such activities; (d) Lumley is liable to indemnify Port Phillip pursuant to the Insurance Contract against Threfall’s claim. 11 In the recovery proceeding, Port Phillip issued a Contribution Notice against Kane dated 17 May 2010 (“Port Phillip’s Notice of Contribution in the recovery proceeding”).
12 In the recovery proceeding, Kane also issued a Contribution Notice against Port Phillip dated 18 October 2010 (“Kane’s Notice of Contribution in the recovery proceedings”). Each of the Contribution Notices in the recovery proceedings made allegations aligned to those made in the Notices of Contribution in the principal proceeding.
13 By leave granted 27 August 2010, Port Phillip issued a Third Party Notice dated 30 August 2010 against TBS in the recovery proceeding. The allegations contained in that notice are not pursued.
The Evidence in the Principal Proceeding
14 Threlfall suffered injury when he tripped on the step-over in the gallery on 21 November 2007.
15 The Certificate of Final Completion of the construction works undertaken by Kane at the Town Hall was issued on 12 June 2009.
16 I accept that at some time before Threlfall’s injury on 21 November 2007, the gallery area was handed back to Port Phillip.[3] This meant that Kane retreated behind a constructed barrier and ceased construction work in the gallery. Thereafter, no Kane workers remained in the gallery. The purpose of the handing back of the gallery was to enable Port Phillip to undertake construction works in the gallery using another contractor, TBS.
[3] See evidence in the principal proceedings of Mr Theisz T 308, 349; the plaintiff T 130; Mr Nott T 553.
17 Before the handover, the doorway had been used for several purposes:
• It was used as a potential emergency exit in the event of the occurrence of some hazard. • It was used for a short period of time before Threlfall’s injury as a means for one of the Kane employees to deliver bricks to another floor of the Town Hall via a lift nearby. • To enable another Kane employee to isolate a fire alarm on the “council side” of the doorway. 18 The door had a padbolt on the Kane side which was padlocked at night. The lock was removed during the day but the padbolt remained secured.[4] This was on the “Kane side” of the area. The purpose of this was to ensure that Port Phillip employees and the general public could not get access into the construction works being carried on in the gallery area during the day.
[4] See evidence of Mr Theisz T 302, 338.
19 Kane knew that after the handover, access could be gained to the gallery by tradesmen from another contractor to finish construction works in the gallery.[5] After the handover, a Mr Nott (an employee of Port Phillip appointed as the manager of the construction works) told a Kane employee, Mr Gray, when Mr Gray had enquired as to what to do with the hoarding, to leave it in place. Mr Gray then took the padbolt off the Kane side, and replaced it on the Port Phillip side.
[5] See T 352.
20 Kane argues that the step-over became a hazard after the handover, not because of its design but rather because of the change of purpose for which it was then used, namely as a thoroughfare into the gallery area by workmen, including the plaintiff. Kane submits it was not designed nor constructed for that purpose.
The Issues to be Determined
21 The issues to be determined are:
• In the Port Phillip contribution proceedings: - is Kane obliged to indemnify Port Phillip for its proportion of the
damages due to Threlfall?; alternatively
- has Kane breached the Construction Contract in failing to: ƒ indemnify Port Phillip; ƒ take out public liability insurance;
ƒ carry out the works in a safe manner; ƒ take all necessary measures to protect persons at the site; or, has Kane breached its duty of care in some other manner?
22 In the Kane contribution proceedings:
• Is Port Phillip obliged to indemnify Kane for its proportion of the damages due to Threlfall pursuant to Clause 17.2 of the Construction Contract given it is alleged that Threlfall suffered injury while performing Port Phillip’s work? 23 In the recovery proceedings:
• Is Kane obliged to indemnify Port Phillip for its proportion of the contribution in the recovery proceedings upon the same grounds as above? • Is Port Phillip obliged to indemnify Kane for its proportion of the contribution in the recovery proceedings upon the same grounds as above? 24 In the third party proceedings:
•
Is Lumley obliged to indemnify Port Phillip pursuant to the Contract of Insurance for its proportion of:
ƒ the Threlfall damages; ƒ the amount due pursuant to the recovery proceedings?
The Contribution Proceedings
25 The entitlement of Kane and Port Phillip to indemnity for damages falls to be determined by interpretation of the relevant provisions of the Construction Contract. In submissions, Port Phillip did not pursue its claim for indemnity against Kane.
26 Clause 17 of the Construction Contract relevantly provides:
“17 Damage to persons and property other than the works 17.1 Indemnity by contractor The contractor shall indemnify the principal against ─
… personal injury …
arising out of or as a consequence of the carrying out by the contractor of the work under the contract, but the contractor’s liability to indemnify the principal shall be reduced proportionally to the extent that the act or omission of the principal or employees or agents of the principal may have contributed to … the injury.
Clause 17.1 shall not apply to ─
…
(iv) damage which is the unavoidable result of the construction of the works in accordance with the contract; and
(v) claims in respect of the right of the principal to construct the work under the contract on the site.
17.2 Indemnity by the Principal
The principal shall indemnify the contractor in respect of damage referred to in Clause 17.1(iv) and claims referred to in Clause 17.1(v).”
27 I accept that in determining the meaning of these clauses, I should have regard to what a reasonable person in the position of the parties would have understood the indemnities to mean, taking into account the surrounding circumstances and the purposes and objects of the construction contract.[6]
[6] Toll (FGCT )Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179.
28 I further accept that any indemnity owed by Kane to Port Phillip pursuant to Clause 17 is qualified by reducing Kane’s liability “proportionally to the extent that the act or admission of (Port Phillip) may have contributed to the … injury”.
29 The phrase:
“… claims against the principal … arising out of or as a consequence of
the carrying out by the contractor of work under the contract …”
requires a causative link to be established between the injury suffered and the carrying out of the works under the contract in the manner described. So much is evident by the use of the phrase “arising out of or as a consequence of …”.
30 “Works under the contract” is defined to mean[7] “the work which the contractor is or may be required to execute under the contract and includes variations … .”
[7] General Condition – Clause 2
31 There is no issue that Kane:
• constructed the hoarding to prevent Port Phillip employees and the public entering the construction site; • cut out the doorway in the hoarding; • left the step-over in place so as to give the doorway structural integrity. 32 However, as to whether the injury suffered by Threlfall was causatively related to Kane’s work under the contract, regard must be had to the surrounding circumstances. Firstly, the injury was not caused by any inherent defect in the door or the hoarding. Secondly, Kane had left the area by the time the injury occurred, at the behest of Port Phillip, and was no longer carrying out any construction works in that area. Thirdly, I accept the evidence of Kane that its employee was told by Mr Nott of Port Phillip to leave the hoarding in place with the doorway as it was. Fourthly, the injury was not caused by the doorway or the step-over itself, but rather the use to which Threlfall and TBS put it, under the direction, express or implied by Port Phillip. That included the carrying in of pieces of plasterboard through the doorway and over the step- over. Fifthly, when Kane was in occupation of the area, the hoarding and the door were used for very different, and limited, purposes. Sixthly, that change of use, at the direction of Port Phillip, was the cause of the injury to Threlfall, rather than the structure itself.
33 Accordingly, in my view, it was not the “works under the contract” which was the cause of injury, but rather the change of use for which the works under the contract were put. Had the doorway and step-over been used in the manner for which it was designed and constructed by Kane, including that it remained padlocked or locked from the inside, it is difficult to see how any injury could have occurred to Threlfall. The situation is analogous to a piece of plant or machinery being left at premises under construction. If used in an appropriate manner, it presents no hazard. If used in an inappropriate or negligent manner, for example with the removal of a guard of a saw, it presents as a hazard.
34 The jury found Kane liable as to 5 per cent for Threlfall’s injury. Port Phillip was sued as occupier; Kane was not. Although the finding of the jury was based in tort, the finding against Kane, under general principles of negligence, indicates there was only a very modest liability in tort to be attributed to Kane. While the determination in the present application is in contract, the finding by the jury adds to the argument that there was no causative link between Kane’s carrying out of its work under the contract and Threlfall’s injury. The jury may have found (as particularised in paragraph 18(d) of the Amended Statement of Claim) that Kane had an obligation under general negligence principles to remove the step, despite the advice of Mr Nott that it remain, in the knowledge that it was possible other workmen may enter the area. It is difficult to see how, upon the evidence presented to the jury, the plaintiff could have succeeded on any of the other pleaded particulars of negligence. Considering the issue of causation from the perspective of the parties at the time of the execution of the contract, I am not satisfied there is the causative link between the construction works carried out by Kane, and Threlfall’s injury. Reference was made in Australian Paper Plantations Pty Ltd v J and EM Venturoni[8] as to the need for a discernible and rational link between the claim, and the carrying out of the contract. While in that case there was a temporal link between the happening of an accident causing injury and the employment of the injured worker, that was not sufficient to establish the causative link. By analogy, while there is in the present case a link between injury and works, that being the construction by Kane of the door and the step-over, I am not satisfied that that link is discernible nor causative.
[8] [2000] VSCA 71
35 It is alleged by Port Phillip that Kane breached the construction contract by:
ƒ failing to carry out the works in a safe manner; ƒ failing to be responsible for the health and safety of site personnel; ƒ failing to provide all things and take all measures to protect people and property, including the provision of barricading, guards, fencing, warning signs and removal of obstructions. 36 Upon the basis of the analysis above, it was not the failure by Kane to carry out the works in a safe manner, et cetera, but rather the change made to the use made of the hoarding and doorway which was the cause of the Threlfall injury.
37 For the reasons set forth above, Port Phillip’s claim as against Kane on the basis of indemnity or damages fails.
38 Further, it is alleged Kane failed to take out public liability insurance in the joint names of Kane and Port Phillip in accordance with Clause 19 of the General Conditions of the Construction Contract. It is clear Kane did take out a policy of public liability insurance, but rather the issue is whether or not the policy responds to Threlfall’s injury. The policy was taken for work under the contract. However, the injury did not arise as a result of Kane’s construction works. This claim by Port Phillip also fails.
39 Kane claims to be indemnified against Port Phillip in respect of its 5 per cent apportionment pursuant to Clause 17.2 of the Construction Contract. Clause 17.1(iv) has no application. Clause 17.1(v) enlivens an indemnity for “claims in respect of the right of the principal to construct the work under the contract on the site”. The phrase “claims in respect of the right of the principal …” refers to damage which may arise where the issue of whether Port Phillip had the right to construct the work on the site is raised. Port Phillip submits that such an indemnity is designed where, for example, Port Phillip may direct Kane to carry out works on land not owned by Port Phillip, or subject to an easement, lease or some other proprietary right.
40 In my view, Port Phillip’s submission is correct.[9] Such a provision has no relevance to the present case. Kane’s argument fails.
[9] See paragraph 7.3 Port Phillip’s outline of argument
The Recovery Proceeding
41 The analysis set forth above in respect of Kane’s work is applicable to the Notices of Contribution raised in the recovery proceeding. For the same reason, each of Port Phillip and Kane’s claim to indemnity and/or contribution under the recovery proceeding fails.
The Third Party Proceeding
42 Port Phillip claims to be entitled to indemnity under the insurance contract undertaken between Kane and Lumley.
43 The insuring clause[10] provides:
[10] Section 3, clause 1, Court Book 159
“The insurer(s) hereby agree, subject to the limitations, exclusions, terms
and conditions hereinafter mentioned that they will:
(1) pay on behalf of the insured or sums which the insured shall
become legally obliged to pay as compensation for:
(a) personal injury; …
that happens during the period of insurance as a result of an Occurrence which arises in connection with the business and activities of the insured and insured contracts …”
44 “The insured” is defined:[11]
[11] CB 172
“Insured means:
(a)
the insured named in the schedule and subsidiary companies (referred to as the contractor); and/or
… (c) principals and/or owners; and/or … (f)
any other company of which the insured assumes management together with all other parties for whom the insured is required under insured contracts to provide insurance protection, are also included as insured.
But in relation to (a) to (f) above only in respect of the Business and
Activities of the insured.”
45 There is no issue Port Phillip became “legally obligated to pay” compensation for personal injury of Threlfall.
46 The issues for debate are whether:
(a) Port Phillip was “an insured” under the policy given Kane had been removed from the area; (b) the Construction Contract was an insured contract under the Policy of Insurance in respect of works undertaken by Port Phillip; (c) the incident was not an “occurrence” within the meaning of the insurance policy. 47 “The insured” has a further definition under the policy: In the “Annual Contract Works, Plant and Equipment and Third Party Liability Insurance Policy”,[12] “the insured” is defined:
“Insert insured (as contractor) and others as defined as insured herein together with other interested parties as may be required to be insured by Insured Contracts for their respective rights, interests and liabilities.”
[12] Commencing CB 148
48 Pursuant to the “Kane Constructions Pty Ltd placing slip”,[13] “name of insured” is defined as:
“Kane Constructions Pty Ltd … (various other Kane companies) … and others as defined as insured together with all other interested parties as may be required to be designated as insureds by insured contracts, for their respective rights, interests and liabilities.”
[13] Commencing at CB 131
49 The insurance contract is a general contract undertaken by Kane in respect of a range of works throughout Australia, and is not specific to the Town Hall project.[14]
[14] T 1105
50 The first matter to determine is whether, for the purposes of the insurance contract, Port Phillip is an “insured” within the definitions. If “the insured” is restricted to Kane, then, following the reasoning referred to in determining the issue of the parties’ respective Notices of Contribution, given Threlfall’s injuries did not arise as a result of Kane’s construction activities, cover would not be extended to Port Phillip. If, alternatively, “the insured” includes Port Phillip, then given Port Phillip was the owner and occupier of the Town Hall and directed TBS and Threlfall in the activities he was undertaking at the time, and subject to compliance with the various other terms of the policy, cover could be said to extend to Port Phillip.
51 The argument of Lumley is that once the gallery area was handed back to Port Phillip, Kane no longer became contractually bound to maintain public liability cover as it had ceased work in the area. As a result, Port Phillip ceased to be an insured for the purposes of the insurance contract. Port Phillip argues there is no such restriction in the insurance contract. The only requirement, argues Port Phillip, is that the occurrence need only be “in connection with” the business and activities of the insured. The business and activities of Port Phillip include as “… property owners, property occupiers …”. Port Phillip further argues that, given Kane designed and constructed the hoarding and step-over, that is a sufficient connection with its activities.
52 It is plain from the definitions of “insured” that the insured is intended not only to be Kane, but a range of other parties who may, for one reason or another, seek indemnity under the policy.
53 It is submitted by Port Phillip that there is utility in one policy of insurance covering all parties under construction contracts so as to avoid defendants, in a trial such as this, blaming each other.[15]
[15] Petrofina (UK) Ltd v Magnaload Ltd (1984) QB 127 at 136
54 Port Phillip further argues that it is the wording of the insurance clause which is appropriate to the question of whether indemnity ought be extended to Port Phillip. The clause requires there to be an occurrence to arise in connection with the business and activities of the insured and the insured’s contracts. Simply put, Port Phillip is an insured, and Threlfall’s injury occurred “in connection with” its business and activities. It says that the injury to Threlfall falls within the definition of “occurrence” as set forth; that is,[16] “an event or continuous or repeated exposure to conditions, which the insured did not expect or intend”.
[16] CB 173
55 Port Phillip further submits that in determining who is the insured, reference should be had to the cross liability clause contained in the Contract of Insurance. That clause provides:[17]
“Cross liability
Each of the parties comprising the insured shall for the purposes of this policy be considered as a separate and distinct unit and the words ‘the insured’ shall be considered as applying to each of such persons in the same manner as if a separate policy had been issued to each of them in their name alone and the insurer(s) waive all rights of subrogation or action which they may have or require against any of such persons.”
[17] CB 168
56 Port Phillip goes further, and submits that all that is required is a mere connection between ownership or occupation of the property in the case of Port Phillip, or construction operations in the case of Kane, to satisfy the insuring clause. The words “in connection with”, Mr McArthur submits, ought be given a wide interpretation.[18] He submits that the argument by Kane that once it left the gallery area, its obligation to insure in respect of that area under the Construction Contract ceased, finds no support in the express words of the policy. Port Phillip submits it is artificial in the extreme if, on the one hand, an incident were to occur two centimetres on the Kane side of the hoarding, in respect of which Port Phillip would have cover, and, if it were to occur two centimetres on the Port Phillip side of the hoarding, it would not have cover. In other words, it could not have been the intention of the parties that there would be liability insurance only in respect of the area actually occupied by Kane.
[18] See The Law of Liability Insurance – Derrington and Ashton (2nd Edition), paragraph 3-122
57 While maintaining the answer to the provision of indemnity under the Lumley policy lies in the wording of the policy, nonetheless, Port Phillip submits, that if one has regard to the Construction Contract, the requirement to take out insurance[19] states:
[19] CB 205
“19 Public liability insurance Alternative 1 Before the contractor commences work, the contractor shall take out a public liability policy of insurance in the joint names of the principal and the contractor which covers the principal, the contractor, the superintendent and all sub-contractors employed from time to time in relation to the work under the contract for their respective rights and interests and covers their liability to third parties. The policy shall also cover the contractor’s liability to the principal and principal’s liability to the contractor for … injury to any person … the policy shall be maintained until the final certificate is issued under clause 42.8.”
58 Put simply, Port Phillip submits that the answer to the interpretation lies in the Insurance Contract. Threlfall tripped over a hoarding which was designed and constructed by Kane. Port Phillip was an owner and occupier at the time of the injury and thus an insured under the Insurance Contract. Port Phillip was sued in respect of the hoarding and the step-over in its capacity as a principal owner and occupier. Lumley’s cover therefore ought be extended to Port Phillip. While the policy of insurance does provide time limitations, there is no express exclusion in respect of Kane being removed from the area where the incident occurred.
59 In response, Lumley submits that the point sought to be made by Port Phillip in accordance with the Petrofina decision[20] that there is public utility in one insurer being responsible for all parties connected with the construction site, and thus avoid the multiplicity of actions with defendants blaming one another, is far too broad a proposition. In Co-operative Retail Services Ltd v Taylor Young Partnership Ltd & Ors,[21] the House of Lords stated that, in order to address the question of interpretation, a more important proposition was what the Contract of Insurance actually provided.
[20] supra
[21] (2002) 1 WLR 1419
60 Lumley submits that a party’s interest under a Policy of Insurance may change. If, for example, it loses its insurable interest, the right of indemnity under a policy equally is lost.[22]
[22] See Deepak Fertilisers & Petrochemical Corporation v Davy McKee (London) Ltd [1999] 1 All ER (Comm) 69
61 Lumley submits that in the insuring clause, the words “which arises in connection with the business and activities of the insured and insured contracts” is the central issue in its interpretation. Lumley says that this phrase constrains the operation of the insuring clause.[23] Further, in the definition of “insured” in the Annual Contract Works Liability Insurance Policy,[24] there are three categories of insured. They are:
[23] See CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 385.
[24] CB 151
• the Insured as Contractor; • others as defined as Insureds; •
other interested parties as may be required to be Insured by Insured Contracts for their respective rights, interests and liabilities.
62 Lumley submits that the constraining phrase “in respect of the business and activities” then requires reference to the definition of “business”.[25] Upon a proper reading of that definition, the appropriate classification is “the construction operations”. That phrase is defined[26] as:
“All Insured Contracts entered into between parties comprising the Insured (including principals and/or owners and/or Sub-Contractors) in respect of which the Contractor is contractually obligated to effect insurance and/or work of every description carried out by or for the Contractor.”
[25] CB 171
[26] CB 171
63 On the other hand, Port Phillip submits that it satisfies the category (d) – “plant and equipment owners, operators and hirers, property owners, property occupiers, lessees, lessors and all incidental and associated operations, trades and activities; …”. By this interpretation, claims Lumley, the “construction operations” must take account of the construction operations envisaged under the Construction Contract. Lumley contends that when reference is had to “insured”,[27] the appropriate category into which Port Phillip fell was as a party “for whom the Insured is required under Insured Contracts to provide insurance protection … only in respect of the Business and Activities of the Insured”. Having determined that the injury suffered by Threlfall fell outside the “carrying out by (Kane) of the work under the Contract”, then the Lumley indemnity is not extended to Port Phillip.
[27] CB 172
64 In my view, the construction urged by Lumley is too narrow. The Lumley policy is a policy taken out between Kane and Lumley so as to cover works throughout Victoria, even Australia, undertaken by Kane during the insured period. Its clear intention is to afford cover not only to Kane, but to a range of other persons with whom Kane would have some association in the course of its construction activities. To that end, the definition of “insured” in the definition section of the policy[28] necessarily encompasses a wide range of persons as insureds. In my view, Port Phillip satisfies the description of “principals and/or owners” in sub-paragraph (c) of the definition. Even if that were not the case, Port Phillip would fall under sub-paragraph (f) of the definition as a party “required under Insurance Contracts to provide insurance protection”. If regard is then had to the definition of “business and activities”, which constrains the definition of “insured”, I am not satisfied that Port Phillip’s business and activities falls to be defined as “the Construction Operations”. In my view, it falls within sub-paragraph (d) of the definition as “… property owners, property occupiers … and all incidental and associated operations, trades and activities; …”. So read, Port Phillip falls in the definition of “insured”, and the tripping incident giving rise to Threlfall’s injury falls within the business and activities of Port Phillip, that is as a property owner and/or occupier; alternatively as “incidental and associated” operations.
[28] CB 172
65 Returning then to the insuring clause, I am satisfied the injury to Threlfall was an “occurrence”. It was clearly an event which the insured (Port Phillip) did not expect or intend. I am further satisfied that Port Phillip has become legally obligated to pay compensation for the injury suffered by Threlfall. As stated, I am satisfied that the incident was “in connection with” the business and activities of Port Phillip, as a property owner, occupier or as otherwise defined. Thus, all of the requirements of the insuring clause are fulfilled. There is no further exclusion in the insurance contract upon which Lumley could rely. I accept the submission of Port Phillip that the words “in connection with” ought be regarded as giving wide compass to “the business and activities”[29] The construction contract provided that the policy of insurance be maintained until the final certificate was issued.
[29] See The Law of Liability Insurance – Derrington and Ashton (2nd edition) at page 174-5, 226.
66 Thus, all the requirements of the insuring clause are made out. Port Phillip is entitled to indemnity under the Lumley policy.
67 Lumley further pleads that it was a condition of the insurance contract that Port Phillip notify it of the existence of any other policies of insurance. The relevant clause provides:
“It is incumbent upon the Insured to notify the existence of, and full details of, any other insurance which does, or may, insure any Personal Injury or Property Damage being claimed for under this Policy.”[30]
[30] Clause 2 of General Conditions of Insurance Contract – CB 168
68 I accept the submissions of Port Phillip that the purpose of such a clause is to enable Lumley to seek contribution from another insurer. It is clear Port Phillip has disclosed its other insurance to Lumley.[31] There is no obligation upon Port Phillip to seek indemnity from any particular insurer, save that it cannot be indemnified twice for the same damage. I accept the submissions of Port Phillip in this regard.
[31] CB 276 – 279.
69 I shall hear further from the parties in respect of appropriate orders and as to costs.
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