Ellington v Heinrich Constructions P/L & Ors [2004] QCA 475

SUPREME COURT OF QUEENSLAND

CITATION: Ellington v Heinrich Constructions P/L & Ors [2004] QCA 475

PARTIES: ROBERT SNEITH ELLINGTON / (plaintiff/not a party to the appeal) / v / HEINRICH CONSTRUCTIONS PTY LTD / ACN 080 897 605 / (first defendant/not a party to the appeal) / WATPAC AUSTRALIA PTY LTD ACN 010 462 816 / (second defendant/respondent) DUMARESQ CONSTRUCTIONS PTY LTD ACN 080 341 564 / (third defendant/appellant)

FILE NO: Appeal No 5490 of 2004 / SC No 5805 of 2002

DIVISION: Court of Appeal

PROCEEDING: Personal Injury

ORIGINATING COURT: Supreme Court at Brisbane

DELIVERED ON: 10 December 2004

DELIVERED AT: Brisbane

HEARING DATE: 18 October 2004

JUDGES: McMurdo P, Davies JA and Chesterman J / Separate reasons for judgment of each member of the Court, each concurring as to the order made

ORDER: 1. That that part of the orders of 31 May 2004, whereby judgment was entered ‘for the second defendant [respondent] against the third defendant [appellant] for damages for all sums and costs which, pursuant to [those] orders, the second defendant [respondent] is liable to pay’, be set aside. / 2. Order instead that as between the second defendant (respondent) and the third defendant (appellant) the second defendant pay two-thirds of the damages and costs ordered to be paid to the plaintiff and that the third defendant (appellant) should pay one-third of those damages and costs. / 3. That the respondent pay the appellant’s costs of the appeal to be assessed on the standard basis.

CATCHWORDS: INSURANCE – INDEMNITY AGAINST INDUSTRIAL AND LIKE RISKS – where the appellant was the subcontractor of the respondent – where the learned trial judge concluded that both the appellant and the respondent were liable to pay damages to the plaintiff at first instance – where the appellant and the respondent each issued notices claiming contribution or indemnity in respect of the plaintiff’s claim – where the learned trial judge ordered that the appropriate apportionment was two-thirds to the respondent and one-third to the appellant and made orders allowing those parties to recover contributions from each other – where the respondent also claimed indemnity on the basis of cl 16 of the subcontract between the parties – where the learned trial judge concluded that the requirements of cl 16 had not been complied with so offered no indemnity – where the appellant was ordered to pay damages – whether the learned trial judge erred in finding that the obligations imposed by cl 16 had not been complied with – whether cl 16(a) was illusory, or void for uncertainty and not capable of giving rise to any contractual right, breach of which would sound in damages / Andar Transport Pty Ltd v Brambles Limited (2004) 78 ALJR 907, cited / Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549, cited / Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130, discussed / Canberra Formwork Pty Ltd v Civil and Civic Ltd & Anor (1982) 41 ACTR 1, discussed / Chan v Cresdon Pty Ltd (1989) 168 CLR 242, cited / Coulton v Holcombe (1986) 162 CLR 1, discussed / Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500, discussed / Davis v Commissioner for Main Roads (1968) 117 CLR 529, discussed / Gillespie Brothers & Co Ltd v Roy Bowles Transport Ltd [1973] QB 400, discussed / Groves & Anor v BMW Finance Ltd [2001] QCA 16, Appeal No 3316 of 2000, 9 February 2001, discussed / Photo Production Ltd v Securicor Transport Ltd [l980] AC 827, discussed

COUNSEL: Mr P A Keane QC, with Mr J B Rolls, for the appellant / Mr D B Fraser QC, with Mr R B Dickson, for the respondent

SOLICITORS: Minter Ellison Gold Coast for the appellant / Jensen McConaghy for the respondent

McMURDO P: I agree with the orders proposed by Chesterman J and with his reasons.

DAVIES JA: I agree with the reasons for judgment of Chesterman J and with the orders he proposes.

CHESTERMAN J: The respondent, the well known building company, was engaged to build new grandstands for the Brisbane Cricket Ground. It subcontracted part of the work to the appellant which carries on business as a steel fixer and concreter. By the terms of the relevant subcontract between the respondent and the appellant the latter was to supply and fix reinforcing steel and mesh for stage five of the ‘redevelopment of the Brisbane Cricket Ground’. Payment was to be made at the rate of $515 per tonne of reinforcing steel supplied and fixed and $2 per square metre for mesh. The concrete was to be supplied and poured by others.

The plaintiff in the action (who was not a party to the appeal) was employed by the appellant as a steel fixer. On 30 June 1999 he fell from a partly constructed grandstand onto the ground some four metres below. At the time he was helping put a prefabricated steel beam in place and was required to stand on a ledge at the perimeter of the construction.

The plaintiff was seriously injured and sued the respondent and two of its subcontractors. One of them, the appellant, was, as I have said, his employer. On 21 May 2004 Muir J gave judgment for the plaintiff against both the appellant and the respondent. The action against the other subcontractor was dismissed. The appellant and the respondent had each issued to the other notices claiming contribution or indemnity in respect of the plaintiff’s claim. Muir J found that the respondent was ‘more culpable and that its acts and omissions played a more significant role in causing the plaintiff’s damage than did those of the [appellant].’ His Honour concluded that the appropriate apportionment was as to two thirds to the respondent and one third to the appellant and made orders allowing those parties to recover contribution from each other to the extent of their respective responsibility for the plaintiff’s damages and costs.

The respondent had a separate basis for its claim for indemnity against the appellant. It relied upon the terms of cl 16 of the subcontract between them which, the respondent contended, obliged the appellant to indemnify it against*, inter alia*, its liability to compensate the plaintiff. The trial judge rejected this submission but found that the clause obliged the appellant to effect a policy of insurance which would have indemnified the respondent against that liability. The appellant had not taken out the requisite policy and his Honour found that that failure constituted a breach of contract by the appellant. Damages were assessed in the sum for which the respondent was liable to pay the plaintiff and its costs of resisting the plaintiff’s claim.

The appellant submitted on appeal that the trial judge erred in concluding that cl 16 of the subcontract obliged it to effect a policy of insurance indemnifying the respondent against the plaintiff’s claim. The submission was, in effect, a rehearsal of the argument addressed to the trial judge. The appellant raised a second argument which had not been advanced at trial. It was that cl 16(a) was illusory, or void for uncertainty and not capable of giving rise to any contractual right, breach of which would sound in damages. The appellant accepted that this ground could not be made out if there was any possibility that, with notice of the point, the respondent could have led evidence at trial to defeat it.

The respondent by notice of contention submitted that the trial judge erred in concluding that cl 16 did not oblige the appellant to indemnify the respondent against the plaintiff’s claim.

It is convenient to deal with this point first.

Clause 16 provided:

‘The Subcontractor shall not commit any act of trespass or commit any nuisance or be guilty of any negligence and shall effectually protect and hereby indemnifies the Builder and the Builder’s employees against all loss, damage, injury or liability whatsoever that may occur in respect of the Works or through the execution of the Works and in case of any such loss, damage, injury or liability occurring the Subcontractor shall make full compensation and shall make good all such loss, damage, injury or liability and if the Builder is required to pay any damages for such loss, damage, injury or liability the amount of such damages may together with all costs which the Builder may have incurred in defending or settling the claim for such damages may be deducted from any monies due or becoming due to the Subcontractor under this Contract or may be recovered from the Subcontractor as liquidated damages in that respect incurred and without any way affecting the generality of the foregoing the Subcontractor expressly covenants and agrees with the Builder that in respect of –

(a)Injury to Persons and Property

The Subcontractor shall effect a Public and Products Liability Insurance Policy in the joint names of the Proprietor, the Builder and the Subcontractor, for an amount not less than that stated in the Second Schedule in respect of any one occurrence. The Policy shall include a Cross Liability Clause, in which the Insurer waives all rights of subrogation against any of the parties comprising the Insured, and accepts that each of these parties is considered as if a separate Policy had been issued to each of them. The Policy must indemnify the Insured parties in respect of claims made against them by any person who is not defined as a “worker” under the WorkCover Queensland Act 1996. The Policy shall be maintained until the Final Certificate under the Head Contract is received by the Builder.

(b)Injury to Employees and PPS Workers

The Subcontractor shall insure and keep insured against any liability, loss, claim or proceedings whatsoever whether arising at Common Law or by virtue of any statute relating to Workers Compensation or Employer’s Liability by any person employed by him in or about the execution of the Works. The amount of insurance in respect of Common Law Liability shall be for an unlimited amount. The Subcontractor shall also insure any person engaged by them, who is not defined as a “worker” under the WorkCover Queensland Act 1996, under an Eligible Persons cover or Income Protection Insurance.

If any statute requires the Subcontractor or any secondary Subcontractor to insure against the liability stated in this clause, the Subcontractor must ensure that insurance is in place in strict accordance with that legislation for workers covered by that legislation.

If the Subcontractor or secondary Subcontractor is not required by any statute to insure against the liability stated in this clause, the Subcontractor must ensure that, in respect of those workers not covered by insurance required by legislation, the Subcontractor or secondary Subcontractor takes out insurance under which those workers will receive benefits at least equivalent to the benefits available under the Construction Accident Protection Plan (CAPP).

(Details of what constitutes equal benefits to CAPP are available from the Queensland Master Builders Association).

(c)Damage to the Works or Plant And Equipment

(i)The Subcontractor shall effect a Contract Works Insurance Policy in the joint names of the Subcontractor and the Builder, in respect of the works, for an amount not less than the Contract Sum. The Policy shall be maintained until the Certificate of Practical Completion under the Head Contract is received by the Builder.

(ii)the Subcontractor shall effect a Contractors Plant Insurance Policy covering all plant and equipment to be used by the Subcontractor in connection with the works for their full market value.’

The subcontract defined the appellant’s Works to be:

‘Provide all supervision, labour, materials, plant and equipment necessary to place and fix of all the steel reinforcement and associated works, in accordance with the plans, specification and tender documentation.’

The rival contentions were these. The respondent, at trial and in support of its notice of contention, submitted that that part of cl 16:

‘… hereby indemnifies the [respondent] … against all loss, damage, injury or liability whatsoever that may occur in respect of the Works or through the execution of the Works …’

meant that, as they appear to say, that the appellant should indemnify the respondent against its liability to the plaintiff which occurred in respect of or through the execution of the works. The appellant contended that the clause should not be construed so as to oblige it to indemnify the respondent against the consequences of the respondent’s own negligence or fault.

A term very similar to cl 16 was the subject of judicial examination in Canberra Formwork Pty Ltd v Civil & Civic Ltd and Anor (1982) 41 ACTR 1. Muir J accepted the reasoning of Blackburn CJ and concluded that the clause did not require the appellant to indemnify the respondent against its liability to the plaintiff arising from its own fault. The structure of the clause in issue in Canberra Formwork is a little different to that in issue here but the effect of both provisions appears to be very similar, if not identical. What appears in cl 17 of the subcontract between the appellant and the respondent appeared as para (d) to the clause considered in Canberra Formwork. The difference in structure appears insignificant and may be ignored.

It must be remembered that the trial judge found that the respondent itself, by its servants, had not taken reasonable care for the protection of the workmen building the grandstand. The plaintiff was injured because of the respondent’s failure to protect him by adequate guard rails. What the respondent seeks, pursuant to cl 16, is that the appellant should indemnify it against the consequences of its own negligence.

Blackburn CJ (21) analysed the clause in question and noted that it contained parts or ‘limbs’ as his Honour called them. Adopting the analysis the parts, or limbs, are:

First – ‘the [appellant] shall not commit any act of trespass or … nuisance or … negligence’

Second – ‘and shall effectually protect and hereby indemnifies the [respondent] against any loss damage injury or liability’ whatsoever that may occur in respect of the works or through the execution of the works

Third – ‘and in case of any such loss, damage, injury or liability’ occurring the appellant ‘shall make full compensation and shall make good all such loss, damage, injury or liability’

Fourth – ‘and if the [respondent] is required to pay any damages for such loss, damage, injury or liability the amount of such damages may together with all costs … be deducted from any moneys due … to the [appellant] under this order …’.

As Blackburn CJ noted some of the parts, taken in isolation, lend support to the respondent’s contention that the appellant should indemnify it against the plaintiff’s claim. The second part is sufficient to achieve that result. The third part might also answer that description.

The question is whether the second part or limb is to be read as a separate obligation or whether it is to be seen as part of the subject matter of the clause as a whole. There would, as the Chief Justice observed, be more force in the respondent’s contention if the clause were punctuated in such a way as to suggest separate subject matters were being dealt with in the clause. If, for example, a full stop followed the word ‘negligence’ and a new sentence began, ‘The appellant hereby indemnifies the respondent against any loss etc.’, the respondent’s case would be stronger. As it is the promise of indemnity follows hard on the expression of the appellant’s obligation not to commit any act of trespass or commit any nuisance or act of negligence. The indemnity is against any loss, damage, injury or liability in respect of the works or through the execution of the works. The indemnity, constrained as it is between the promise not to commit trespass, nuisance or negligence and the liability to make good that damage or loss in respect of, or through the execution of, the appellant’s works suggests that it is limited to damage or loss occasioned by the appellant’s conduct.

This was the view expressed by Blackburn CJ. His Honour said (22):

‘But as the clause stands, I think that the first limb indicates the extent of meaning of the phrase “loss, damage, injury or liability” in the second and third limbs – that is, loss etc occasioned by fault of the kind indicated by the first limb. To construe the second limb more extensively is to attribute to the draftsman a grossly forced conjunction of two distinct provisions. Construed as I think it should be, the second limb does not extend to loss etc occasioned by the fault of the general contractor. It indemnifies the general contractor against liability for breach of a non-delegable duty … or for strict liability … occasioned by the trespass, nuisance, or negligence of the sub-contractor, but not against liability arising from the fault of the general contractor itself.’

The Chief Justice was ‘fortified in [his] tentative conclusion’ by the expression of opinion of Buckley LJ in Gillespie Brothers & Co Ltd v Roy Bowles Transport Ltd [1973] QB 400 at 419 that:

‘It is … a fundamental consideration in the construction of contracts of this kind that it is inherently improbable that one party to the contract should intend to absolve the other party from the consequences of the latter’s own negligence.’

and by the remarks of Kitto J in Davis v Commissioner for Main Roads (1968) 117 CLR 529 at 534:

‘It seems to me impossible to suppose that the parties were intending that the appellant should indemnify the respondent against claims based upon the respondent’s negligence.’

The trial judge was persuaded by this analysis to reach the same conclusion. His Honour also noted that the appellant and respondent agreed to the inclusion of cl 16 in their contract ‘well after’ the decision in Canberra Formwork which had determined the proper construction of a relevantly identical clause. His Honour supposed the parties intended cl 16 to have the meaning ascribed to it by Blackburn CJ. This, in my opinion, is an eminently sensible approach. I agree with it.

The respondent argued on appeal that, contrary to the remarks of Buckley LJ and Kitto J, that there is nothing improbable in a construction which made the appellant liable to indemnify the respondent against the consequences of the respondent’s own wrongdoing ‘because the obligation would be backed by the insurance policies in the names of the appellant and the respondent’, which cl 16(a), (b) and (c) required the appellant to effect.

The submission cannot be accepted because the insurance policies called for by those clauses do not afford protection to the appellant against the full width of the indemnity for which the respondent contends. Its claim is that the appellant is liable to indemnify the respondent against ‘all loss, damage, injury or liability whatsoever that may occur in respect of the Works or through [their] execution.’ The policy of insurance, which the appellant was to effect pursuant to cl 16(a), was one which indemnified both appellant and respondent ‘in respect of claims made against them by any person who is not defined as a “worker” under the WorkCover Queensland Act 1996.’ This would include the plaintiff’s claim against the respondent but the policy falls far short of covering all of the liability which the respondent would impose on the appellant pursuant to the indemnity. Likewise the policy required by cl 16(b) is only the statutory workers’ compensation policy in respect of the appellant’s own employees. The policy required by subclause (c) is one to indemnify the appellant and the respondent against damage to or loss of the subcontract works themselves. It says nothing of any liability which the respondent may incur during or through the performance of the works.

The respondent’s contention would make the appellant liable for the financial consequences of the respondent’s acts that could be seen to be in respect of the works, though the appellant had not authorised or performed the act, and was not insured for the loss. This is an unlikely construction.

The respondent relies also on the principle which found expression in Photo Production Ltd v Securicor Transport Ltd [l980] AC 827 at 851:

‘In commercial contracts negotiated between business-men capable of looking after their own interests and of deciding how risks inherent in the performance of various kinds of contract can be most economically borne (generally by insurance), it is … wrong to place a strained construction upon words in an exclusion clause which are clear and fairly susceptible of one meaning only even after due allowance has been made for the presumption in favour of the implied primary and secondary obligations.’

There is no need to doubt the principle which, in any event, was approved by the High Court in Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 but it has no application in the present appeal. The meaning which the respondent seeks to ascribe to the clause is not that which its words ‘clearly and fairly’ give rise to. On the contrary the respondent’s favoured construction involves a misreading of the clause which is, in any event, only ambiguously certain. There is an element of doubt about the true construction but, for the reasons already given, its meaning should be taken to be contrary to the respondent’s contention.

The respondent also points to the principle which guides the construction of contractual indemnities, which is to resolve doubts in favour of the surety. See Andar Transport Pty Ltd v Brambles Limited (2004) 78 ALJR 907 and Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 and Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 256. Again, the principles expressed in these cases must be accepted, but they are of no assistance in the present case in which the point is not the construction of an indemnity provision but the construction of a building contract to see whether it contains an indemnity.

In my opinion the trial judge was correct in his construction of cl 16. The respondent’s attack upon the conclusion should be rejected.

The appellant did not effect the policy of insurance which cl 16(a) appeared to require. The trial judge found it liable to pay damages for this breach of contract, the amount of which was equal to the judgment the plaintiff obtained against it. The appellant submits this part of the judgment is wrong on the ground that the subclause did not require the appellant to effect a policy of insurance that would have provided cover to the respondent against the plaintiff’s claim. The submission is that the scope of the policy required by cl 16(a) is limited by the introductory words of the clause so that the policy was to protect the respondent against claims that had their origin in some act of trespass, nuisance or negligence of the appellant, and did not extend to the respondent’s own acts of negligence. As a separate point the appellant argued that the policy required by the clause was to indemnify the appellant and respondent in respect of claims made against them by any person not a worker. The plaintiff was a worker. He was employed by the appellant. The policy would not, it is argued, have indemnified the respondent against the plaintiff’s claim, in any event.

The arguments should be rejected.

The concluding words of the first part of the clause, those which immediately precede 16(a) are:

‘… without any way affecting the generality of the foregoing the [appellant] expressly covenants and agrees with the [respondent] that in respect of –

(a)Injury to Persons and Property

The [appellant] shall effect … Insurance …’.

The words are an explicit indication that the obligation to effect the policy of insurance is a separate and independent obligation from that which appears in the first part of the clause. To read (a) as being limited to the subject matter of the preceding part of the clause is without warrant and is contrary to the express intention of the parties. Moreover the point already mentioned is also relevant here. The subject matter of the policy of insurance which must be effected in performance of (a) is not the appellant’s liability to the respondent in the event that the appellant commits some act of trespass, nuisance or negligence in carrying out the subcontract works. The policy is to cover the respondent for claims against it by third parties. To read the promise to effect insurance in (a) as commensurate with the appellant’s potential liability for breach of its promise in the first part of the clause is to ignore the discrepant natures of the contents of the two promises.

The second argument is no more persuasive. The policy which must be effected pursuant to cl 16(a):

‘… must indemnify the Insured parties in respect of claims made against them by any person who is not defined as a “worker” under the WorkCover … Act …’.

The insured parties are the proprietor, presumably the Brisbane Cricket Ground Trust, the respondent and the appellant. The policy was to include a clause by which the insurer waived all rights of subrogation against any of the parties to the policy who comprised the insured, each of whom was to be considered ‘as if a separate policy had been issued to each of them.’

Had a policy been effected as required by cl 16(a) the respondent would have been an insured and would have had cover for a claim made against it by any person who was not a worker. To give efficacy to the protection the clauses must provide indemnity in respect of a claim by anyone not a worker employed by the particular insured. The insurance required is the equivalent of three separate policies protecting the separate interests of proprietor, appellant and respondent. Each of the insured would have been protected against claims by their own workers by reason of their statutory obligation to take out a policy under the WorkCover Act. It would make little sense to require the appellant to effect insurance for the co-insured against claims made by a worker employed by that insured. The policy was clearly meant to indemnify the insured parties against claims brought by persons in respect of whom the particular insured would not be covered by a WorkCover policy.

The argument about uncertainty arises this way. Clause 16(a) required the appellant to effect a policy which would protect the respondent against, inter alia, the plaintiff’s claim ‘for an amount not less than that stated in the Second Schedule in respect of any one occurrence.’ The second schedule consists of eight items, each identified by the number of the clause in the subcontract to which the item relates. Under the heading ‘Clause 16’ the following appeared:

POLICY NO. INSURANCE CO INSURED FOR AMOUNT EXPIRY DATE

WORKCOVER POLICY

PUBLIC RISK

CONTRACTOR’S RISK

The subcontract was executed by both appellant and respondent. The page containing the second schedule was signed, or at least initialled, on behalf of both parties. Apparently by oversight the amount of cover (and other details) to be effected by the insurance policy was omitted.

The appellant submits that the consequence is to invalidate its promise to effect the policy. It is said that that part of the contract comprising the obligation to take out the policy is illusory or ‘irremediably obscure’. Another way of expressing the point is that the promise is void because an essential term of it was uncertain or was left to be agreed.

There can be no doubt about the correctness of the submissions. They are supported by Groves & Anor v BMW Finance Ltd [2001] QCA 16 especially at paras [20], [40], [43] and [44]. In that case the lessor of motor vehicles was entitled, in the event of the lessee’s default, to recover an amount of money calculated in accordance with a formula set out in the lease. The calculation depended upon a sum representing the ‘final value’ of the vehicles being inserted in a schedule to the lease. The amount was omitted and it was held that the calculation on which proof of the lessor’s claim depended could not be made.

The extent of the appellant’s obligation to effect insurance was to be measured by the agreement of the parties recorded in Schedule 2. The terms of the contract suggest, irresistibly, that the parties did not reach agreement on the point and did not record the measure. According to Kirby P in Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 at 135, although the court endeavours to uphold the validity of agreements it cannot do so:

‘… where, in effect, it is asked to spell out, to an unacceptable extent, that to which the parties have themselves failed to agree. Nor will the court clarify that which is irremediably obscure.’

The respondent’s answer is to point to the principle which finds expression in such cases as Coulton v Holcombe (1986) 162 CLR 1. If at trial evidence could have been given, which by any possibility could have prevented a party from succeeding on a point, it cannot be raised, for the first time, on appeal. This leads to a consideration of whether there is any possibility that the respondent might have led evidence to overcome the deficiency in the contract.

The appellant first intimated it intended to take this point in its outline of submissions filed 13 July 2004. The respondent’s solicitor filed an affidavit on 12 October 2004. The affidavit deposes to information obtained from the respondent’s senior contracts administrator, Mr Carman, who, on its behalf, made the subcontract with the appellant. The affidavit contains no hint that the parties had agreed on the amount for which the policy of insurance was to be effected, or that they shared an intention about the amount. The affidavit exhibits a letter which Mr Carman wrote to the appellant prior to the execution of the subcontract. It read:

‘Please find enclosed two (2) copies of our Subcontract Agreement for your section of the Works.

These should have all the relevant insurance details completed, be signed with each page initialled and both Subcontracts returned to this office within seven (7) days. A signed Agreement will be returned for your records.’

The letter might suggest that ‘the relevant insurance details’ had been agreed and were to be inserted in the schedule. The affidavit does not, however, depose to this fact. Mr Carman, it can be confidently inferred, did not inform the deponent that agreement as to the amount had been made or that both he and the appellant’s representative had come to a common intention about the amount.

The affidavit drew attention to the fact that the appellant and respondent had made a subcontract for the performance of work on an earlier stage of the construction of the grandstands. The second schedule to that earlier subcontract did contain detail of insurance policies, and the amounts of cover, referred to in cl 16. This fact is not, however, relevant to the question whether the parties had turned their minds to the amount of cover for which insurance should be effected for the purposes of the later subcontract.

Had there been agreement or a shared intention as to the amount which the written contract did not reflect the respondent could have sought to have the agreement rectified by a separate claim brought in the action. Had there been any evidence to support such a claim then the appellant could not be allowed to raise that point on the appeal. No such evidence has been put forward. There is no indication that it exists. The solicitor’s affidavit must be taken as the most that can be said on the point on behalf of the respondent. It is insufficient to overcome the deficiency in the contract.

The affidavit concludes that had the issue of the deficient schedule been raised at or before trial the solicitor would have received instructions ‘to investigate [the respondent’s] rights …’. It was to be expected that the investigation would have included ‘issues as to estoppel, the ability of a party to derive a benefit from its own wrong, … misleading and deceptive conduct … as well as … rectification.’ What is missing is an indication that between July and October the deponent had been able to find any evidence to support a claim for rectification or any statement made by or on behalf of the appellant giving rise to an estoppel or a claim for contravention of the Trade Practices Act (Cth). Accordingly it is safe, and indeed appropriate, to infer that the respondent was not able to adduce evidence to address the omission in the schedule.

It follows that cl 16(a) did not oblige the appellant to effect a policy of insurance indemnifying the respondent against the plaintiff’s claim. It was not in breach of contract in not securing such a policy and was not liable to pay damages for breach of cl 16(a).

Judgment was entered ‘for the second defendant [respondent] against the third defendant [appellant] for damages for all sums and costs which, pursuant to [the] orders [made on 31 May 2004], the second defendant [respondent] is liable to pay’. This part of the judgment should be set aside. Instead there should be an order that as between the second defendant (respondent) and the third defendant (appellant) the second defendant pay two-thirds of the damages and costs ordered to be paid to the plaintiff and that the third defendant should pay one-third of those damages and costs.

I would not disturb the order for costs made by the trial judge. Those orders reflected the outcome of the trial on the basis of the arguments addressed to the court. The judgment has not been disturbed on that basis. The appellant has secured victory by an argument discovered after judgment. It should have the costs of the appeal because the respondent chose to resist it with notice of the new ground. There should be an order that the respondent pay the appellant’s costs of the appeal to be assessed on the standard basis.