Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited

Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited - [2006] NSWSC 362 - NSWSC 2006 case summary — Zoe

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JUDGMENT 1 AMPG was the professional indemnity insurer of BHE. The AMPG policy of insurance provided insurance for breach of professional duty up to $20 million for one claim and up to $40 million in the aggregate for more than one claim. AMPG agreed to indemnify BHE in respect to the first claim made against AMPG to the limit of $20 million. On 20 January 2005 AMPG paid to BHE the sum of $20 million less deductibles. 2 In these proceedings BHE sues AMPG in the alternative in regard to what is alleged to be a second claim made under the AMPG policy. The pleaded claim by BHE against AMPG in these proceedings is in effect an attempt to multiply the indemnities available to BHE under the AMPG contract and to recover a further $20 million from AMPG. 3 AMPG had a number of defences to BHE's claim. Its primary defence rested on the proposition that the claim made by SACL against BHE in the SACL proceedings, was one claim within the meaning of the AMPG contract, which claim involved both accelerated corrosion of the steel straps in the sea wall and mill stream wall and the loss of sand from behind the walls. If this proposition be correct, then BHE's claim against AMPG in the proceedings would fail because AMPG had already extended indemnity to BHE in respect of the SACL claim to the limits to which BHE would have been entitled under the AMPG contract. 4 The proposition that the SACL claim involved two claims was not a proposition which BHE primarily advanced. Indeed, by paragraph 26.2 of its amended reply to the defence of Gordian and to the defence of CGU, BHE specifically denied that proposition and alleged that there was no distinction between that part of the SACL claim characterised as "the accelerated corrosion claim" and that part characterised as being in relation to the loss of sand behind the walls. 5 It is at least arguable [although for reasons which will become apparent the Court presently has no intention of dealing with the possible question of costs which may be raised as a result of this judgment], that the origin of the proposition that the SACL proceedings involved two claims is to be found in paragraphs 126 to 137 of Gordian's amended defence and in paragraphs 100 to 111 of CGU's amended defence. In summary and in effect, in those paragraphs Gordian and CGU alleged that:

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"In order that AMPG indemnify BHE to the limits of the cover under the AMPG contract in respect of lost costs, expense or liability incurred by BHE in the performance of its obligations under the settlement agreement, or in the alternative in respect of all sums which BHE is legally liable to pay in the performance of its obligations under the settlement agreement." 22 This claim to relief does not include any claim for costs qua cross-claims. It is true that the amended reply does make certain claims. In paragraphs (d) and (e) of the particulars to paragraph 3 of its amended reply BHE seeks indemnity for "legal costs associated with ongoing claims and cross-claims against the various Connell Wagner parties and Reinforced Earth". As will appear from what follows, those cross-claims fall precisely within the terms of clause 1.13 of the AMPG settlement deed and within the terms of clause 3.4(b) of the AMPG settlement deed. BHE has been expressly excluded from the recovery of those costs involved in the continuation of those cross-claims by clause 3.4(b) of the AMPG settlement deed. In any event, the AMPG contract does not respond to such costs because those costs are not costs incurred in the investigation defence or settlement of any claim within the meaning of that phrase in clause 2 of the AMPG contract. 23 It is presently unwise to characterise the SACL proceedings otherwise than in the most general terms [for the reason that other issues between other parties remain for the final judgment]. However, the SACL proceedings, it may generally be said, dealt with rectification of the subject walls. I do not intend by that to be exhaustive. 24 Dealing with what I have referred to as the first half of the matters raised in BHE's paragraph 659(c), it is clear that those costs, as I have said, were expressly excluded from any further indemnity by reason of the settlement deed to which I have referred. That deed is to be found at PXXXX AMP 1.349. Clause 1.13 read as follows:

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"3.4 The parties further agree that (subject to clause 3.3)… (b) BHE may continue or not continue any cross claims or separate proceedings as referred to in clause 1.13 in its absolute discretion. AMPG and/or TGI have no obligation either to pay any or all of the costs and expenses involved after the date of this Deed or to indemnify BHE under the AMPG Policy in respect of those separate proceedings and AMPG and/or TGI shall not be entitled to payment of any of the proceeds (if any) of any settlement or judgment in favour of BHE in those claims or proceedings." 25 As to the second half of the claims referred to in BHE's written submission paragraph 659(c), BHE appears to claim for other costs, including design and construction costs, being costs associated with the 30 per cent, 60 percent and 90 percent design reports prepared by third parties. These are costs incurred by BHE under the settlement agreements and for which it would have been liable in the absence of the accelerated corrosion claim, or so-called accelerated corrosion claim, in any event. Those costs were not occasioned by the accelerated corrosion claim. No evidence was adduced that additional design and construction costs were occasioned by the accelerated corrosion claim. 26 BHE cannot establish that the insuring clause responds to what for present purposes, if ever there was a second claim, may be called the accelerated corrosion claim. It has not established that it will become legally liable to pay costs in connection with the cross-claims against RE and CW as a result of whatever may be called the accelerated corrosion claim. If there be a second claim, BHE has effectively conceded that it will not become legally liable to pay any sum in respect of that so-called second claim qua the rectification solution. 27 For the reasons given above, BHE does not have a case in relation to the matters identified in BHE's paragraph 659. No triable issue within General Steel principles has been established by BHE in respect of either half of what I have referred to as paragraph 659 of BHE's submissions. I have already dealt with the position with respect to the matters which fell from Mr Finch yesterday. 28 Finally, BHE has not put forward any contentions that there was negligence in relation to corrosion. On the evidence given, a judgment for the plaintiff could not be supported in relation to any of its pleaded claims concerning AMPG. 29 For those reasons, it is appropriate for the Court to accede to the application made from the Bar table this morning to enter a verdict and judgment in favour of the eleventh defendant. As indicated in the application by Mr White, the application was for the issue of the costs of the eleventh defendant to be stood over to a date to be fixed by the Court, which seems to me to be appropriate. 30 In the circumstances I make orders 1 and 2 in terms of the short minutes of order, which I initial and date 2 March 2006.

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