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

TRANSADELAIDE (STA) v TREMCO (PABCO)

[2000] SASC 158

1................ LANDER J....... The proceedings in this matter were commenced by the plaintiff against the defendant in 1990. They relate to a contract in writing between the plaintiff and the defendant entered into in 1982 to construct a roadway. The proceedings have been extraordinarily slow-moving. Much of the fault for that rests upon the plaintiff.

The defendant commenced third party proceedings against the first third party on 21 March 1995. The third party proceedings have nearly been as slow-moving as the plaintiff’s proceedings against the defendant. Much of the fault for that lies upon the defendant.
The defendant filed its statement of claim in these third party proceedings on 18 April 1996. That statement of claim still stands, unamended. In that statement of claim the defendant has pleaded that on or shortly prior to 31 May 1982 it entered into a policy of insurance with the first third party. It has pleaded the terms of the policy of insurance and a schedule to that policy. Those allegations are in paragraphs 2, 3 and 4 of the Statement of Claim. It also pleads that the first third party was on risk, over the relevant period. Those pleas are in paragraphs 5 and 6 of the Statement of Claim.
The third party filed its defence to the third party proceedings on 16 December 1996. That defence has remained unamended. In that defence the first third party admitted the allegations in paragraphs 2, 3, 4, 5 and 6 of the defendant’s statement of claim, save that the first third party said that the indemnification provided by the policy only related to any legal liability incurred by the defendant during the currency of the policy.
In short, there appeared to be no issues between the parties in relation to the existence, terms, and conditions of the policy of insurance issued by the first third party.
On 14 February 2000, the first third party issued an application to amend its defence to the defendant’s statement of claim. In particular, it sought to plead an exclusion to the policy, being exclusion (d). It set out in its application a proposed paragraph 4A. The defendant does not object to that amendment to the third party’s defence and I shall return to that issue later.
On 6 April 2000, the first third party issued a further application seeking to withdraw the admission it had made in relation to paragraph 4 of the third party statement of claim and to add a paragraph 3A. Both applications, of course, are very late. The proceedings between the plaintiff and the defendant, and between the defendant and this third party and a second third party are otherwise ready for trial. Whilst it has taken almost 10 years to have the parties ready for trial, over the last 12 months, with some encouragement from the court, the parties have become ready. The parties wish to attempt to mediate their differences and expect to be able to attempt to do so in September of this year. However, apart from the question of mediation, the matter is otherwise ready for trial in relation to all issues between all parties.
The application of 6 April 2000 was supported by an affidavit of the first third party’s solicitor. In that affidavit he said that in the course of preparation for trial, he had conferred with counsel in relation to the admission made in paragraph 4 of the defendant’s statement of claim against the first third party. He says he believes, after a review of the first third party’s documents, that such an admission should not have been made. He says that the first third party has not been able to locate a copy of the policy which it issued to the defendant, nor has the first third party been able to identify the schedule which is referred to in paragraph 4 of the defendant’s statement of claim. He also says in his affidavit that the defendant has not discovered the policy, or a copy of the policy, or the schedule. He says, in those circumstances, the admission in respect of paragraph 4 of the defendant’s statement of claim should not have been made.
The matter first came before me on 17 May 2000. At that time, as I have said, the defendant indicated that it did not object to the application to amend the first third party’s defence to include paragraph 4A. In due course I will allow that amendment. The defendant, however, did object to the proposed paragraph 3A and the proposed withdrawal of the admission in respect of paragraph 4 of its statement of claim.
The matter was fully argued at that time. The argument rather centred around whether or not the amendment would cause the defendant any prejudice. It was pointed out to the defendant during argument that the defendant had not adduced any evidence of prejudice. The defendant sought an adjournment to obtain any evidence that might be available as to the existence of the policy of insurance or the schedule. During that argument I also pointed out to the first third party that whilst it sought to withdraw its admission in respect of paragraph 4 of the defendant’s statement of claim, it in fact needed only, for the purpose of the point which it wished to argue, to withdraw the admission in respect of one sub-paragraph of paragraph 4. In those circumstances, the first third party indicated that it would redraft its proposed amended paragraph 3A and I allowed the first third party to do so.
The matter was adjourned, therefore, for two reasons: first, to allow the first third party to bring forward a further proposed paragraph 3A and, secondly, to allow the defendant to obtain whatever evidence was available to it in relation to the policy of insurance and the schedule.
This morning I have been provided with a new proposed amended paragraph 3A. Last night I was provided with an affidavit from the defendant’s solicitor relating to inquiries which he had made from insurance brokers as to the existence or otherwise of the policy of insurance. Neither party objected to the late delivery of the other party’s document, and I will say no more about that.
The proposed amendment seeks, in fact, to do four things. First, it seeks to assert that the first third party has not been able to locate the policy and the schedule referred to in paragraph 4 of the defendant’s statement of claim. There is no issue about that and that amendment should be allowed. Where it takes the first third party is another thing.
Secondly, it seeks to agitate the matters which it proposed in its application of 14 February 2000 in the proposed paragraph 4A. Those matters are now contained in a proposed paragraphs 3A.6 and 3A.7 and because there is no objection I will allow those amendments.
Next, the first third party proposes to admit sub-paragraphs 4.1, 4.2, 4.3 and 4.5 of the statement of claim and only plead to paragraph 4.4 by asserting that it does not know and cannot admit the allegations in paragraph 4.4. Paragraph 4.4 of the defendant’s statement of claim pleads:
“The Policy would include indemnity in respect of “contractual liability” and “indemnity to and/or of principles in contract, contractors and/or subcontractors”.”
It is clear from the evidence of the defendant’s solicitors that insurance brokers have a record which indicates that the conditions of the contract included the matters refers to in paragraph 4.4 of the defendant’s statement of claim.
However it has been pointed out by the first third party during argument that whilst those matters are explicitly referred to in the documents annexed to the defendant’s solicitor’s affidavit, the conditions of the insurance policy apparently were limited to contractual liability for “non-owned equipment”.
I am not prepared to allow the first third party to withdraw its admission as it presently stands to paragraph 4.4 in the terms that it proposes. If it seeks, however, to withdraw the admission so as to plead that in respect of paragraph 4.4 the contractual liability there referred to is limited to non-owned equipment, I would allow the proposed paragraph 3A.3 in those terms.
The last matter which is sought to be raised in proposed paragraph 3A is to raise another exclusion clause in the policy. The first third party wishes to plead that exclusion (j) of the policy is in the following terms:
“This insurance does not apply to:
(j).... As regards to the product’s Hazard, liability, assumed by the Insured under any contract or agreement except to the extent that such liability would have been implied by law. But this exclusion shall not apply to those written contracts designated in the schedule nor to any liability assumed by the Insured under a warrant of fitness or quality as regards the Insured’s products.”
The proposed exclusion has been identified by the first third party as a standard exclusion clause in contracts of insurance of this kind. I do not understand, at least for the purpose of this argument, that the defendant disputes that exclusion (j) would have been a term of the policy. The parties cannot be sure, of course, because no-one can locate the policy or the schedule. On the face of it, therefore, even though the amendment is late, it would appear that such a plea would not embarrass the defendant. However, the plea could only be allowed if it was to advance the first third party’s case. The first third party pleads, in the proposed paragraph 3A.5:
“3A.5........ Says 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 warranty of fitness or quality as regards the Insured’s products.”
In my opinion, that plea in its terms is objectionable. If the third party wishes, after admitting the existence of the policy of insurance, the cover, the risk, and the period of insurance, to plead that the policy does not apply because of an exclusion clause, the first third party must identify that exclusion clause, as it has, and then plead how the exclusion would operate in the circumstances of this case.
It seems to me that if the first third party wishes to rely on exclusion (j), it should plead to the effect: (1), the contract between the plaintiff and defendant the subject of the proceedings between the plaintiff and defendant was not designated in the schedule; (2), the liability assumed by the defendant in the contract referred to in (1) was not a liability implied by law; (3), exclusion (j) therefore operates; (4), the contract of insurance does not apply.
I raised all of those matters with counsel during argument as indicating the deficiencies in the proposed amendment. I think, during argument counsel, agreed that a pleading of that kind would be more appropriate than the pleading in paragraph 3A.5.
I will assume, therefore, that for the purpose of this application, that the third party would wish to plead in accordance with the suggestions made in these reasons.
The first third party, however, faces a greater difficulty. I put to the first third party’s counsel that the first third party would carry the evidentiary onus of satisfying the court that the contract between the plaintiff and the defendant was not designated in the schedule. Neither party has the schedule. Neither party has any reason to believe that the schedule can be tendered at the trial. Therefore, it can be assumed, for the purpose of this application, that the first third party will not be able to tender the schedule to establish the first matter it needs to establish for exclusion (j) to apply. It could, of course, lead oral evidence of the terms of the schedule. It might be able to lead evidence from the brokers to establish that, if the schedule had existed and had included the contract between the plaintiff and defendant there would be a note in the broker’s files.
However because this amendment is so late, it seemed to me to be appropriate to ask the first third party if it had any evidence of any kind to support the allegation which it wished to make.
Counsel frankly conceded that at the present time the first third party has no evidence to support the allegations it would wish to make in order to prove that exclusion (j) operated in the circumstances of this case.
In my opinion, in those circumstances it would be inappropriate to allow the first third party, so late in the day, to raise such an important issue which would wholly defeat the defendant’s case against this third party, in circumstances where the first third party has no evidence to support those allegations.
In those circumstances, I am not prepared to allow the proposed amendments contained in paragraphs 3A.4 and 3A.5. If in due course the first third party can convince me, or the trial judge, that it has such evidence, then it would be at liberty, of course, to renew its application. The success of the application at that stage would, again, depend upon the availability of evidence and other factors such as delay and prejudice.
I am therefore prepared to allow the first third party to amend its defence to delete from paragraph 3 the number ‘4’. Next, to include a paragraph 3A in the following terms:
As to the allegation contained in paragraph 4 of the Statement of Claim the First Third Party:
3A.1 Says that it has not been able to locate the policy and the schedule referred to therein;
3A.2 Admits sub-paragraphs 4.1, 4.2, 4.3 and 4.5 of the Statement of Claim;
3A.3 Admits sub-paragraph 4.4, except that it says that the contractual liability there referred to is limited to non-owned equipment.
3A.6 Says by Exclusion (d) of the Policy it was provided:
“This insurance does not apply to:
(d) Property Damage to the Insured’s Products is such damage as is attributable to any defect therein or the harmful nature or unsuitability thereof.”
3A.7 Says to the extent that Pabco seeks to be indemnified in respect of that part of the plaintiff’s claim which relates to the removal, replacement or repair of Pabco’s waterproof membrane system that such removal, replacement or repair was attributable to defects in the waterproof membrane system or, alternatively, the unsuitability of the system and the First Third Party is not liability to indemnify Pabco in respect thereof.

PARTICULARS

The First Third Party will rely upon the matters pleaded by the Plaintiff in paragraphs16 and 17(b) and 17(c) of the Seventh Amended Statement of Claim.

The amendments which I would allow are in the terms proposed by the first third party, except that I would not allow paragraphs 3A.4 and 3A.5, and I would only allow paragraph 3A.3 in the limited terms to which I have referred. It will be for the first third party to now indicate whether it would wish to put forward paragraph 3A.3 in the terms which I have proposed. The first third party has now indicated it would seek leave to amend in those terms. I allow the first third party to amend in the terms which I have dictated.
The first third party must pay the defendant’s costs of and incidental to the applications to amend the first third party’s defence on document 131 and document 141.

[2000] SASC 158

7 June 2000