Bank of Queensland Ltd v Chartis Australia Insurance Ltd [2013] QCA 183
[2013] QCA 183
Court of Appeal (Qld)|2013-07-12|Before: Holmes and Gotterson JJA and Applegarth, J, Separate reasons for judgment of each member of the Court, each, concurring as to the orders made
Holmes and Gotterson JJA and Applegarth, J, Separate reasons for judgment of each member of the Court, each, concurring as to the orders made
Catchwords
APPEAL AND NEW TRIAL – APPEAL – PRACTICE AND PROCEDURE –
QUEENSLAND – POWERS OF COURT – AMENDMENT –
where appellant
sought leave to further amend its notice of appeal – where respondent
Source
Original judgment source is linked above.
Catchwords
APPEAL AND NEW TRIAL – APPEAL – PRACTICE AND PROCEDURE –QUEENSLAND – POWERS OF COURT – AMENDMENT –where appellantsought leave to further amend its notice of appeal – where respondentopposed the granting of leave –where there is a real dispute between theparties concerning the proper construction of the policy – whether leaveshould begrantedINSURANCE – THE POLICY – PRINCIPLES OF CONSTRUCTION –where respondent denied indemnity based on an exclusion inthe insurance policy– where appellant claims exclusion only applies to the respondent’sobligation to pay for Loss –where appellant claims an entitlement to beindemnified for Defence Costs – whether the insurance policy requires therespondentto pay Defence Costs where the claim for Loss is outside the cover ofthe policyTrade Practices Act 1974 (Cth), s 73
Adams v Lambert (2006) 228 CLR 409
[2006] HCA 10, cited
AMP
Fire & General Insurance Co Ltd v Maros Construction Co (Qld) Pty Ltd
(1968) 62 QJPR 48
[1968] QWN 11, cited
Australian Broadcasting Commission
v Australasian Performing Right Association Ltd (1973) 129 CLR 99
[1973]
HCA 36, cited
Fitzgerald v Masters (1956) 95 CLR 420
[1956] HCA 53,
cited
Johnson v American Home Assurance Company (1998) 192 CLR
266
[1998] HCA 14, cited
McCann v Switzerland Insurance Australia Ltd
(2000) 203 CLR 579
[2000] HCA 65, cited
National Australia Bank Ltd
v Clowes [2013] NSWCA 179, cited
Noon v Bondi Beach Astra Retirement
Village Pty Ltd [2010] NSWCA 202, cited
Rainy Sky SA v Kookmin
Bank [2011] 1 WLR 2900
[2011] UKSC 50, cited
Selected Seeds Pty Ltd v
QBEMM Pty Ltd (2010) 242 CLR 336
[2010] HCA 37,
cited
Western Australian Bank v Royal Insurance Co (1908) 5 CLR
533
[1908] HCA 11, cited
Westpac Banking Corporation v Tanzone Pty
Ltd (2000) 9 BPR 17,521
[2000] NSWCA 25, cited
Wilkie v Gordian
Runoff Ltd (2005) 221 CLR 522
[2005] HCA 17, cited
Judgment (45 paragraphs)
[1]
The application of the principles of construction in this case
[2]
[63] The bank has failed to establish that the primary judge erred in the findings reached in sub-paragraphs 74(b), (c), and (d) of the reasons for judgment. Those matters and the language of the insuring clause (which was uncontroversial and addressed in sub-paragraph 74(a)) supported the construction that "if cl 3.9 applies to a Claim for Loss, and the insurer denies indemnity for the Claim, the insurer is not obliged to pay Defence Costs".[25]
[3]
[64] The issue then is whether that construction should have been favoured over the competing construction, which essentially relied on the absence of any reference to Defence Costs in the opening words of cl 3.
[4]
[65] In construing the policy as a whole it is appropriate to:
[5]
(a) have regard to cl 6.6 and conclude that it contemplates that a denial of indemnity on the basis of an exclusion, such as cl 3.9, affects the payment of Defence Costs;
[6]
(b) observe that the opening words of cl 3, viewed in isolation, support the bank's construction;
[7]
(c) note that otherwise the policy tends to treat liability to pay "Loss and Defence Costs" under the insuring clause as subject to the same provisions in the policy, rather than deal with a liability to pay Loss and a liability to pay Defence Costs differently;
[8]
(d) seek to resolve the inconsistency between a literal reading of cl 3 and other provisions of the policy;
[9]
(e) have regard to the subject matter of the policy, which in essence is insurance against liability for the bank's professional services and the costs of defending claims that asserted such a liability; and
[10]
(f) give the policy a businesslike interpretation, and, in choosing between competing constructions prefer the construction that avoids an unlikely commercial result.
[11]
[66] The bank's literal interpretation of cl 3 gives rise to apparently unintended and absurd consequences. It requires the insurer to pay the costs of defending claims that clearly fall outside the terms of cover because the damages and other relief they claim are excluded by cl 3. Such a literal interpretation of cl 3 with such absurd consequences might be avoided in favour of an interpretation which supplied the words "or Defence Costs" after "Loss" in the opening words of cl 3. This is because "words may be supplied, omitted or corrected in order to avoid absurdity or inconsistency".[26]
[12]
[67] The bank submits the primary judge erred in failing to construe the policy contra proferentem in order to resolve the tension which was found to exist between cl 3 and cl 6.6 of the policy. I do not agree.
[13]
[68] As to the construction of the exclusion clause itself, on one view, there was no ambiguity in the clause itself, and, as the primary judge found, the opening words of cl 3 favoured the bank's construction. On this view, there was no real need to resort to the contra proferentem rule in construing cl 3 since its literal meaning was against Chartis' construction.
[14]
[69] Such a literal interpretation of cl 3, however, gave rise to an inconsistency with cl 6.6, and was not justified when, in accordance with the principles of construction, the clause was read in light of the contract as a whole. The inconsistency between a literal interpretation of cl 3 and cl 6.6, the context in which cl 3 appeared, the text of the remainder of the policy (particularly the insuring clause) and the policy's subject matter gave rise to a construction that competed with the bank's literal interpretation of cl 3. This competing view interprets cl 3 as qualifying the liability to pay Loss and Defence Costs, not simply a liability to pay for Loss.
[15]
[70] The policy being open to two constructions, the preferred construction was one that avoids capricious, unreasonable, inconvenient, or unjust consequences. This was the construction preferred by the primary judge.
[16]
[71] The primary judge applied principles of construction to the proper interpretation of cl 3 in its context. Any ambiguity was resolved and no basis remained to apply the contra proferentem rule which applies "only when, having applied all other aids to construction, ambiguity remains".[27]
[17]
[72] Ground of appeal (d), which concerns the contra proferentem rule, is not established.
[18]
[73] The bank has failed to establish any of its grounds of appeal. I would:
[19]
Grant leave to further amend the notice of appeal to delete sub-paragraph 3(a) and insert in its place:
[20]
"(a) a declaration that, upon the proper construction of the Policy, the clause 3.9 exclusion does not apply to Defence Costs, as that term is defined in the Policy."
[21]
Grant leave to the appellant to rely upon the affidavit of Russell Redsell sworn 20 May 2013.
Dismiss the appeal.
Order the appellant to pay the respondent's costs of and incidental to the appeal to be assessed on the standard basis.
[18]Johnson v American Home Assurance Company(1998) 192 CLR 266; Carter JW, Contract Law in Australia 6th ed, LexisNexis, Chatswood, 2012 at [14-03]-[14-04].