Cover by Vero
96 Vero's contention depends on the construction of that part of the Comcare Manual which provides cover in the following terms:
Property loss, destruction or damage
If your property is lost, destroyed or damaged
where property means the Fund Member's real and personal property but excluding watercraft more than 15 metres in length and aircraft, which is in your possession, care, custody or control, or your responsibility
…
then
we will pay:
o the actual replacement value of the property lost, destroyed or damaged
For the purpose of this class of cover, the replacement value is the amount equivalent to the actual replacement
cost of a similar item or building, or the repair cost, such that the item or building is reinstated to a condition equal to, but not better than, its original, new condition.
97 Vero's submission is as follows:
20. The insuring clause expressly provides for cumulative requirements. In order for property to be insured by the policy it must be: (a) the Fund Member's real or personal property and (b) "which is in" its possession, care, custody or control, or its responsibility. The second requirement alone is not sufficient.
21. The construction adopted by the primary judge ignores, in the case of a Fund Member which is not a legal entity separate from the Commonwealth, the actual wording: "which is in" necessarily imposes cumulative requirements rather than equating the concepts. Further, the reference to "Fund Member" and "your" must be a reference to the same "entity". If one substitutes "the Commonwealth" for "the Fund Member" as the primary judge did (J [53]), the reference to "your" must similarly be a reference to the Commonwealth. Then the insuring the clause would cover "the Commonwealth's real and personal property … which is in the Commonwealth's possession, care, custody or control, or the Commonwealth's responsibility:". That would insure all of the Commonwealth's property, not that which is attributable to the Fund Member.
22. Contrary to the primary judge's approach, the first part of the clause must be given some work to do in the case of a Fund Member which is not a legal entity separate from the Commonwealth. The agencies of the Commonwealth, such as the AAD, are defined by reference to their functions. Accordingly, the identification of property which is the "Fund Member's" must also be by way of function. The words "the Fund Member's" property should be understood to mean "the Commonwealth's property which is owned by the Commonwealth for the purpose of performance of the Fund Member's functions". That is not a "gloss" (cf AWS [23]) but rather seeks to give work to the words actually used. It is to enable one to identify that which can properly be described as the AAD's property for the purpose of insuring clause.
23. It is no part of the AAD's functions to own land in Antarctica, that is merely where it performs many of its functions. The AAD's charter [Tab 14.A52] says no more than it "administers" the Australian Antarctic Territory. It also conducts scientific research there under its charter, including at Casey Base Station. Thus, the buildings, plant and equipment at the Station, which the Commonwealth presumably buys out of the AAD departmental budget and ships to Antarctica for use at Casey Base Station, would be regarded as the AAD's property and insured by the policy because they are owned by the Commonwealth for the purpose of performance of the AAD's functions. However, in light of the AAD's functions, no part of the land in Antarctica is to be treated as "the AAD's real and personal property" for the purpose of the insuring clause; Antarctica is merely where it performs functions.
24. The evidence at trial does not alter this position. The actual evidence in relation to the boundaries of Casey Base Station was contained in the affidavit of Mr Wilkins. The actual evidence (as opposed to the assertion at paragraph 22 of his affidavit) was no more than there is a "Casey Station Management Area", considered an area of operation for all station personnel. Travel outside this zone is controlled and requires additional permissions and safety procedures. The plans prepared for this litigation and put in evidence by the Commonwealth show administrative boundaries imposed at some time for the purposes of regulating people's movements at the station, which could be altered at will by the Commonwealth. The Commonwealth has not shown that the area within those administrative boundaries is owned for the purpose of the performance of the functions of the AAD, any more than the area immediately outside those boundaries. Nor for that matter has it shown that the AAD has some custody, control or responsibility for the land inside the boundary that distinguishes it from that outside. Thus, it is not to be accepted that "the insuring clause is satisfied by the administrative control exercised over Case Base Station by the AAD" (cf AWS [26]). Having some form of administrative control over a thing does not make that thing the functionary's property.
98 Despite Vero's submission it is impossible to characterise its construction as something other than an impermissible gloss on the words of the cover identified by the Comcare Manual. The gloss "which is owned by the Commonwealth for the purpose of the performance of the Fund Member's functions" finds no support in the language of the provision in question. It may be accepted that there are two requirements in that provision. First, "the Fund Member's real and personal property" and, secondly, "which is in your possession, care, custody or control, or your responsibility". The provision pre-supposes the acceptance of the fiction that various emanations of the Commonwealth, which in fact have no legal existence separate from the Commonwealth, are legal persons with legal capacity. Hence, the only way in which "the Fund Member's real and personal property" can be read is as a reference to the Commonwealth's property, as the primary judge, Vero and the Commonwealth all accepted to be so. Vero also accepted that the Casey Base Station is the Commonwealth's property so that the first of the two cumulative requirements is satisfied.
99 Once it is accepted that the fiction must also continue for the second requirement it is apparent that the words "which is in your possession, care, custody or control, or your responsibility" cannot mean the Fund Member; it must also mean the Commonwealth, albeit acting through the Fund Member as its particular emanation for that purpose. Vero's argument that the property must be owned by the Commonwealth for the purpose of the Fund Member performing its functions does not reflect the terms of the second requirement, which is simply that the property be in your (for which read the Commonwealth, acting through the Fund Member) "possession, care, custody or control, or your responsibility". Even if it be accepted that the Casey Base Station is not in the possession of the Commonwealth acting through the AAD there cannot be much doubt that the station is in the care, custody or control of the Commonwealth acting through the AAD and there is even less doubt that the Commonwealth acting through the AAD is responsible for the station. It could hardly be otherwise given that the Casey Base Station is where the AAD is located, where it houses its personnel in Antarctica, and where it conducts much of its scientific research. The fact that the boundaries of the so-called "Casey management area" are fixed by the Commonwealth for the purpose of regulating the movement of personnel and may be changed by the Commonwealth at any time is beside the point. On the facts of this case the oil spill occurred directly outside one of the AAD's buildings and migrated through the ice towards a lake relatively close the building. Vero's submissions about an occurrence anywhere throughout the entire Australian Antarctic Territory do not engage with the facts of the present case. How can it be the case that the Commonwealth, through the AAD, is not responsible for land immediately adjacent to one of its building within the Casey Base Station on which it placed oil tanks which leaked?
100 For these reasons the primary judge's rejection of this argument by Vero for the denial of liability was not in error. The requirements of the Comcover Manual, in this regard, were satisfied.
101 The more difficult question, in my view, is the argument raised by the Commonwealth. The primary judge's conclusion was that the Comcover Manual, properly construed, did not provide cover for damage to land in and of itself.
102 Questions of construction readily result in differences of opinion. In the present case it is apparent that the Comcover Manual, which does not descend to such useful matters as section references, is a relatively informal document. Nevertheless, it is the document by which Vero accepted its liability to the Commonwealth under the UNL policy.
103 First, the definitions must be relevant. They are referred to on the first page of the Comcover Manual. The reference to the definitions indicates that the reader is expected to refer to the definitions at the end of the document to understand which terms are defined and the meaning those terms take. Hence, "property" means all tangible real or tangible personal property excluding watercraft more than 15 metres in length and aircraft. As the Commonwealth submitted there cannot be any real question that this definition, on its own terms at least, encompasses all real property of which the most obvious and common kind is land. It follows that if land is to be treated as not being "property" for the purpose of any other provision of the Comcover Manual that exclusion must be apparent from that other provision. This, in effect, is what the primary judge found by reference to p 20.
104 Second, to the extent that the primary judge relied on the statement on p 3, as to the basic principle of cover, to interpret p 20, the primary judge was in error. This is because, as the Commonwealth said, p 1 directs that Part 1 is not to be used to interpret Part 2. Given, however, that the references to replacement cost and repair also appear on p 20, which is in Part 2 itself, it does not seem to me that this error could be material. In particular, the Commonwealth's submission that the absence of the words "in general" from p 20 compared to their presence on p 3 is significant cannot stand in the face of the fact that p 1 directs that Part 1 (which includes p 3) is not to be used to interpret Part 2 (which includes p 20).
105 Third, coming to p 20, there is nothing in the first paragraph on that page which is inapt for land. Land may be "lost, destroyed or damaged". Even if the concept of "lost" is more readily applicable to personal property than to land, the same is true of buildings which are accepted by Vero to be within the scope of the cover.
106 Fourth, it cannot be the case, as Vero submitted, that the opening paragraph on p 20 somehow excludes the definition of "property". It is true that reading the first paragraph in light of the definition makes the paragraph repetitious. Despite this, if Vero were correct the express limitation in the definition to "tangible" real and personal property would be lost. Given the informal nature of the Comcover Manual it is preferable to read the references to "property" on p 20 as references to "property" as defined despite the fact that this involves repetition of elements of the definition in the text of p 20. At worst, this is an example of redundancy rather than a different meaning being given to "property" on p 20 than the meaning ascribed by the definition.
107 Fifth, and contrary to the Commonwealth's submissions, I do not think too much weight, if any, can be placed on the different fonts and text sizes apparent on p 20 of the Comcover Manual. If the different fonts and text sizes are a code to construction, the meaning escapes me.
108 Fifth, the part of p 20 on which the primary judge relied and which Vero emphasises (commencing with the word "then") is performing a particular function, being identification of the measure or scope of the indemnity. But this does not mean that the words are necessarily irrelevant to the scope of the cover itself. The measure of the indemnity (that is, what Comcover said it will pay) may well cast light on the scope of the cover itself. In the present case there is tension between the measure of the indemnity (the actual replacement cost of the property lost, destroyed or damaged which is further defined as the "the amount equivalent to the actual replacement cost of a similar item or building, or the repair cost, such that the item or building is reinstated to a condition equal to, but not better than, its original, new condition") and the notion that the indemnity was intended to apply to land. Despite the Commonwealth's submissions it is apparent that the measure of the indemnity refers to replacement cost and repair cost by reference to words, "item" and "building", which are not apt to include land. Yet land is plainly "tangible real property" which may be, at the least "damaged", if not "lost" or "destroyed". The fact that "item" might mean nothing more than "thing" does not make the word apt to describe land. Nor are the concepts of "replacement cost" or "repair cost", at least in the context of an item or building, readily applicable to land.
109 It follows that there is real ambiguity in the Comcover Manual. Land is real property. The promise of indemnity relates to all tangible real property. The drafter of the Manual went to the trouble of excluding from the definition of property two classes of tangible personal property, watercraft more than 15 metres in length and aircraft, yet did not expressly exclude perhaps the most obvious class of real property, being land. Land is patently capable of suffering damage by any one of a number of means, oil and other spills being one of the most obvious examples. Yet the measure of the indemnity is expressed in terms not readily applicable to land.
110 The Commonwealth submitted that any ambiguity had to be resolved in its favour given cl 18(a) of the UNL Policy. The problem with recourse to cl 18(a) is that there was no evidence to the effect that cover for the cost of remediating one's own land from the effects of a spill would constitute a "normally insurable risk". If the Commonwealth wished to rely on cl 18(a) then ultimately it was for the Commonwealth to prove that the conditions of engagement of that clause are satisfied, which it did not do. It seems to me to be wrong to attempt to apply the first part of the clause (providing the Fund Member with the broadest possible indemnity or cover) without regard to the second part (that is, always having regard to the principle of covering Fund Members for normally insurable risks only).
111 The resolution to the ambiguity, accordingly, is not to be found in cl 18(a), at least not in this case.
112 What then is the answer? A number of considerations lead me to prefer a different construction from that which the primary judge adopted.
(1) The drafter of the Comcover Manual turned his or her mind to exclusions from the definition of "property". Hence, two items are expressly excluded. Land is not one of the excluded items.
(2) Land is an obvious form of tangible real property.
(3) Land can be damaged. It can also be repaired in the sense of reinstated or remediated to its original or a pre-existing condition.
(4) The measure of indemnity on p 20, being the replacement value of the property lost, destroyed or damaged, does not include replacement cost only. It also includes "repair cost".
(5) To read the measure of indemnity provision as impliedly excluding land means reading "item" in the description of repair cost as tangible real or personal property other than land or, perhaps, tangible personal property. While there is some warrant for this reading, particularly given the reference to "similar item" immediately above in the description of replacement value, there are other indicators to the contrary.
(a) First, the exclusion of land from the scope of the property the subject of the indemnity gives the text below "the actual replacement value of the property lost, destroyed or damaged" an extraordinary amount of work to do. It seems to achieve by a most indirect and obscure means that which was done directly for two items of personal property in the definition of property itself.
(b) Second, on p 21, a fairly detailed list of other exclusions from this class of cover appears. These exclusions include "pollution, unless it is sudden and accidental". In other words, sudden and accidental pollution is covered. It is difficult to conceive of a drafter thinking that sudden and accidental pollution might damage buildings and items of personal property but not land. Sudden and accidental pollution, if anything, is more likely to damage land than buildings and items of personal property. It is also notable that flood, including the action of seawater, tidal wave or high water is excluded. Damage to land by reason of flood is just as readily conceivable as damage to personal property and buildings. Having turned his or her mind to these exclusions, and made express provision for them, if land had been intended to be excluded altogether from the scope of cover for damage to property, then the text below "the actual replacement value of the property lost, destroyed or damaged" it is an undoubtedly strange way for the drafter to have achieved that result.
(c) Third, the general exclusions on p 29 lead to similar conclusions. The drafter turned his or her mind to excluding cover for damage from ionising radiation or contamination by radioactivity. While buildings and items of personal property can be so damaged, so too can land. Loss caused by confiscation, nationalisation or requisition is also excluded. In terms of real property, land is the obvious class of real property most likely to be confiscated or nationalised.
113 I agree with the primary judge's analysis of the extrinsic material. Given that it is not apparent that Vero received that material, it cannot be said that it was relevant to the scope of cover Vero provided. To the extent that Comcover's agent received that material from the AAD it is impossible to conclude that Comcover somehow thought it was not covering land in the scope of cover. That is not apparent from the documents which are ambiguous at best.
114 For these reasons I am unable to agree with the primary judge. I accept the Commonwealth's argument on the appeal.