TransAdelaide (STA) v Tremco (Pabco) No. Scgrg-58-90

[2000] SASC 201

[2000] SASC 201

TRANSADELAIDE v TREMCO PTY LTD & ORS

1................ Ex Tempore

LANDER J.      This is an application by the first third party for leave to appeal from my decision refusing in part the first third party’s application for leave to amend its defence on the third party proceedings brought by the defendant.

1. The history of these proceedings is set out in my ex tempore reasons of 7 June 2000 and need not be repeated.

2. The first third party sought leave to amend its defence by inclusion of paragraph 3A. By that proposed paragraph, the first third party sought to withdraw an admission made in its defence filed in 1996 and to plead for the first time positively the provisions of an exclusion clause in the contract of insurance.

3. I allowed the withdrawal of the admission, but refused leave to the first third party to plead the exclusion clause.

4. It is from my refusal to allow the first third party to plead the exclusion clause that the first third party now seeks leave to appeal.

5. Because the decision was an interlocutory one leave is required: s 50(1)(3) of the Supreme Court Act.  An application for leave to appeal is made ex parte or upon such notice as the Court may direct, within 14 days of the date of delivery of the judgment: r 94.01 of the Supreme Court Rules.  The application was made within time.  The defendant sought to be heard on the application and I directed the defendant be heard.

6. The first third party complains that I acted on a wrong principle in refusing the first third party’s application and that leave should be given to it to appeal to correct that error.

7. Because the matter is one of importance to the first third party, if I reached the conclusion that I did err in principle, and that the error vitiated the exercise of my discretion, then it would be appropriate for me to allow the third party leave to appeal: Consolidated Gold Mining Areas NL v Enterprise Gold Mines NL (1992) 57 SASR 584.

8. The first third party seeks to plead the following:

   “3A.4        Says that by exclusion (j) of the Policy it was provided;

   “This insurance does not apply to:

   (J)As regards the product’s Hazard, liability assumed by the Insured under any contract or agreement except to the extent that such liability will have been implied by law.  But this exclusion shall not apply to those written contracts designated in the schedule n or to any liability assumed by the Insured under a warranty of fitness for quality as regards the Insured’s products.”

   3A.5Says that in the circumstances the Defendant has not shown that the written contract upon which it relies was designated in the schedule and further that the liability in respect of which the Insured seeks to obtain indemnity was not one assumed by the Insured under a warranty of fitness or quality as regards the Insured’s products.”

9. In my reasons for refusing leave to amend I pointed out the deficiencies in the proposed pleas.  It seemed to me that if the first third party wished to rely on the exclusion, it must plead that the policy contained that exclusion and that the policy does not apply as regards the product’s Hazard, liability which has been assumed by the insured under a contract or agreement. The third party would need to give particulars of the contract or agreement by which it says the insured has assumed the liability. Next I think it must plead, if it wishes to rely upon exclusion (j), that such liability would not have been implied by law.

10. It seems to me that those pleas must be made before the first third party is entitled to rely upon the exclusion. If the first third party wished to rely upon the exclusion, the first third party would have the onus of establishing that the cover relates to the product’s Hazard and that liability has been assumed by the insured under a contract or agreement and that such liability would not have been implied by law: Stateliner Pty Ltd v Legal & General Assurance Society Ltd (1981) 29 SASR 16.

11. The proposed plea in paragraph 3A.5 is neither relevant nor appropriate. If the first third party was given leave to plead in accordance with the suggestions I have made, then the defendant would have to consider whether it wished to file a reply and wished to take issue with the positive averments made by the first third party; that exclusion (j) was a term of the policy; that the claim on the policy is under the product’s Hazard; that liability has been assumed by the insured under a contract or agreement; and that such liability has been assumed in circumstances where that liability would not have been implied by law.

12. Two alternative positive pleas by way of reply would be available to the defendant.  The defendant could, in a reply, plead positively that the exclusion clause does not apply because the defendant’s liability arises pursuant to a written contract designated in the schedule.  In the alternative, the defendant could plead that the exclusion clause does not apply because the liability assumed by the defendant arose under a warranty of fitness for quality as regards the defendant’s products.

13. In the event that the defendant wished to plead those positive averments relying upon the exceptions to the exclusion, it would seem that the onus would rest upon the defendant to prove those matters: Stateline Pty Ltd v Legal and General Assurance Pty Ltd (supra).

14. The plea which was been put forward by the first third party, in my opinion, cannot be sustained. It is not to the point as pleaded in the proposed paragraph 3A.5 that the defendant has “not shown” those matters. The defendant has no onus to establish any of those matters as a condition precedent to obtaining indemnity under the policy. Those matters which were pleaded in proposed paragraph 3A.5 are only relevant if the first third party relies upon the exclusion clause of the policy and positively pleads the matters to which I have referred. The proposed plea is still objectionable.

15. I agree, however, with the argument advanced by Mr Howard that, in my earlier reasons, I inappropriately cast the onus of proof in regards to the exceptions to the exclusion clause upon the third party. It is right, as Mr Howard has pointed out, that the first third party would bear the onus of showing that the exclusion clause applies and, that thereafter, the defendant would bear the onus, if the defendant wished to rely upon the exceptions to the exclusion clause, of establishing those matters.

16. In that respect, Mr Howard has established, I think, that I did err in principle in my previous decision. However, that error does not, in my opinion, affect the result at which I arrived.  For the reasons which I have mentioned in respect to the structure of the proposed pleading the result at which I arrived would have been inevitable

17. In my opinion because it is inevitable that the Full Court would refuse the first third party leave to amend its defence in accordance with the proposed paragraphs 3A.4 and 3A.5, I should refuse leave to appeal from my decision notwithstanding that the third party has demonstrated an error in principle.

18. It would be appropriate to refuse leave to appeal because the appeal would inevitably fail, but to allow the first third party to make a further application to amend its defence if so advised. 

19. I therefore refuse leave to appeal.

20. There will be no order as to costs.