Foster v QBE European Underwriting Services

Dual Insurance under Common Law

1. Historically, contract law required the parties to a contract to be specified and to agree as to the terms of the obligations undertaken by each of them and those parties were the only persons entitled to enforce the contract or capable of being legally bound by it. While third parties may have benefited from the performance of the contract, such a third party was not a party to the contract and could not enforce the terms of the contract: Tweddle v Atkinson (1861) 121 ER 762 (the principle of privity of contract).
2. As a consequence of the foregoing principle of contract law, an insurance policy, being a contract between the insured and the insurer, could not be enforced by a party that would benefit from the performance of the contract. (There were exceptions for life insurance that need not be examined for current purposes.)
3. To paraphrase Lord Diplock, the law of contract is part of the law of obligations and, in particular, the remedies available for the Court to require a party to a contract to perform the obligations not undertaken voluntarily. Obligations undertaken voluntarily require no intervention by a Court of law. Nor does the voluntary performance of obligations require the application of any contractual principle: Moschi v Lep Air Services Ltd; Lep Air Services Ltd v Rolloswin [1973] AC 331 at 347-348.
4. Further, Lord Diplock recites that the basic principle has an historical exception that involves English law not giving a remedy for the failure to perform a promise, unless the promise was made in an appropriate form, for example, under seal or for consideration: Moschi, supra. A third party beneficiary to a contract is incapable, in any relevant sense, of providing consideration of a kind that would allow the third party beneficiary to assert that there was in existence a contract that could be enforced by that third party.
5. The law sought some circumvention of the principle. For example, some contracts were said to have been made by the party as agent for the third party beneficiary. Alternatively, it was said or argued that the party to the contract was acting "on trust" or "as a trustee" for the third party beneficiary. Neither is relevant in the circumstances now before the Court.
6. The foregoing principle was of general application and applied to all contracts, including contracts of insurance. There are exceptions to the doctrine of privity of contract, but, generally, they are as described above, namely, where the party to the contract is the agent of an undisclosed principal; or where the third party is a beneficiary under a trust; or, lastly, where statute so provides.
7. As a matter of abundant caution, it should be pointed out that the foregoing statement as to the enforceability of obligations applies to those obligations being enforced under contract and not as a result of tortious conduct, statutory right or some form of estoppel or otherwise arising as a result of a valid assignment of the benefit of a contract; see, on the issue of agency, Australian Tallow & Agri-Commodities Pty Ltd v Malaysia International Shipping Corp (2001) 50 NSWLR 576 at 583; [2001] NSWCA 16; Teheran-Europe Co Ltd v ST Belton (Tractors) Ltd [1968] 2QB 545 at 555; and, on the issue of trusteeship, see: Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541; [1985] HCA 13; Olsson v Dyson (1969) 120 CLR 365; [1969] HCA 3.
8. As for the issue of assignment, not immediately relevant to the present circumstances, a convenient summary can be found in the judgment of McDougall J in Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2004] NSWSC 1041 at [42]-[43]; 220 ALR 26.
9. In the area of insurance, the restrictions associated with the doctrine and principle of privity of contract created much difficulty. The difficulty was the subject of discussion by the High Court in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107; [1988] HCA 44.
10. In Trident, not dissimilarly to the current situation, Blue Circle Southern Cement Ltd, which was a builder of a project, took out an All Risk Policy with Trident expressly to the benefit of all contractors, subcontractors and suppliers. An employee of a subcontractor (McNiece) sustained injuries for which McNiece was held liable on a site covered by the Blue Circle All Risk Policy.
11. At first instance, the Court held that the insurance policy was taken out as, in part, the agent of McNiece and McNiece could enforce it. The Court of Appeal upheld the outcome for a different reason, being on the basis that the insurance policy was an exception to the doctrine of privity, because it was expressly for the benefit of the class of persons that included McNiece: See Trident General Insurance Co Ltd v McNiece Brose Pty Ltd (1987) 8 NSWLR 270 at 288, per McHugh JA, with whom Hope and Priestley JJA agreed.
12. The matter was the subject of further appeal to the High Court and the appeal dismissed by majority (Mason CJ, Wilson and Toohey JJ expressing a particular view, and Gaudron J in a separate judgment and expressing a significantly different view). The minority (Deane, Brennan and Dawson JJ) would have allowed the appeal, primarily on the basis of privity of contract.
13. In the joint judgment of Mason CJ and Wilson J in Trident, their Honours came to the conclusion that the old rules should not apply in the circumstances before them. Their judgment states: "[32] In the ultimate analysis the limited question we have to decide is whether the old rules apply to a policy of insurance. The injustice which would flow from such a result arises not only from its failure to give effect to the expressed intention of the person who takes out the insurance but also from the common intention of the parties and the circumstance that others, aware of the existence of the policy, will order their affairs accordingly. We doubt that the doctrine of estoppel provides an adequate protection of the legitimate expectations of such persons and, even if it does, the rights of persons under a policy of insurance should not be made to depend on the vagaries of such an intricate doctrine. In the nature of things the likelihood of some degree of reliance on the part of the third party in the case of a benefit to be provided for him under an insurance policy is so tangible that the common law rule should be shaped with that likelihood in mind. [33] This argument has even greater force when it is applied to an insurance against liabilities which is expressed to cover the insured and its sub-contractors. It stands to reason that many sub-contractors will assume that such an insurance is an effective indemnity in their favour and that they will refrain from making their own arrangements for insurance on that footing. That, it seems, is what happened in the present case. But why should the respondent's rights depend entirely on its ability to make out a case of estoppel? [34] In the circumstances, notwithstanding the caution with which the Court ordinarily will review earlier authorities and the operation of long-established principle, we conclude that the principled development of the law requires that it be recognized that McNiece was entitled to succeed in the action."
14. In the judgment of Toohey J, his Honour recounted the criticism of the doctrine of privity of contract from all or many legitimate sources and referred to the principle outlined by the Privy Council in Vandepitte v Preferred Accident Insurance Corporation of New York [1933] AC 70 and the expressed unease of Law Lords with the principle following the judgment. In particular, Toohey J referred to the criticism by Lord Diplock of the doctrine and its effect as "an anachronistic shortcoming that has for many years been regarded as a reproach to English Private Law".
15. Toohey J went on to conclude that the principle that a non-party may not sue to enforce a contract is not so well entrenched as to be incapable of change and that, where the third party is by name or by class described as a beneficiary of the contract, a change in the policy would not be frustrating the intention of the parties, but giving effect to that intention. His Honour endorsed a principle that was formulated as follows: "[172] When an insurer issues liability insurance policy, identifying the assured in terms that evidence and intention on the part of both insurer and assured that the policy will indemnify as well those with whom the assured contracts for the purpose of the venture covered by the policy, and it is reasonable to expect that such a contractor may order its affairs by reference to the existence of the policy, the contract or may sue the insurer on the policy, notwithstanding that consideration may not have moved from the contractor to the insurer and notwithstanding that the contractor is not a party to the contract between the insurer and assured." (Trident, supra at 172)
16. The reasons for judgment of Gaudron J were to a different effect. The conclusion, however, accorded with that of Mason CJ, Wilson and Toohey JJ. Her Honour referred to the Statement of Defence, which admitted that the insurer had "agreed for reward to indemnify" all contractors and subcontractors.
17. Her Honour continued to deal with the principle of privity of contract and express the view that a promisor (in this case and in that one, the insurer) "who has accepted agreed consideration for a promise to benefit a third party is unjustly enriched at the expense of the third party to the extent that the promise is unfulfilled and the non-fulfilment does not attract proportional legal consequences." As a consequence, the acceptance of consideration for the provision of a benefit to third parties will, if the benefit or obligation remains unfulfilled, result in an unjust enrichment and would allow the third-party beneficiary to enforce the promise (or indemnity).
18. As earlier stated, Brennan, Deane and Dawson JJ were of the view that the third-party beneficiary could not sue on the basis alleged in those proceedings. In the case of the reasons for judgment of Deane J, his Honour took the view that a further opportunity should be given to the respondent to seek to establish a trust which would allow enforcement of the contractual obligation.
19. Lastly, while strictly, a majority of the High Court in Trident were of the view that the third-party beneficiary could obtain damages as a consequence of the contractual promise, only a minority were of the view that such enforcement was an enforcement of the contract, as distinct from an action for unjust enrichment.
20. Nevertheless, whether because of the force of the majority or plurality reasoning, or because of the intervention of the legislature, the law, since the judgment in Trident, has been applied consistently with the proposition that third-party beneficiaries, of the kind described in Trident, and not coincidentally also described in the present proceedings, could sue for the enforcement of the promise under the contract.

Legislative intervention

1. As described by the plurality judgment in Trident, the difficulties associated with the operation of the privity of contract on third-party beneficiaries named in insurance contracts had created significant difficulty and had been the subject of substantial criticism from judicial officers, academics and the legal profession, as well as in commercial circles. The operation of the doctrine of privity of contract was the subject of a report of the Australian Law Reform Commission to which reference is made in the plurality judgment in Trident. The joint judgment, pithily, commented: "[20] The Australian Law Reform Commission in its Report No 20 on Insurance Contracts noted (par. 122) that Vandepitte had been legislatively displaced in all Australian jurisdictions in respect of compulsory third party insurance. Otherwise the Commission acknowledged that Vandepitte was alive and well, well enough to cause injustice to third parties. Indeed, as the Commission observed, Vandepitte was invoked by an insurer as a defence to an action on a policy by a person, not a party to the contract, who fell within the class of persons expressed to be insured: Jovanovic v. Broers. The Commission, concluding that the problems could not be solved by the application of the principles of trust and agency, recommended that persons falling within the class of persons expressed by a policy to be entitled to indemnity should be able to sue on the policy. The Commission stated (par. 124) that this alteration in the law should be uncontroversial because most insurers already act as though they were under such a liability to such persons. Section 48 of the Insurance Contracts Act 1984 Cth gives effect to this recommendation." (Footnotes omitted.)
2. As a consequence of the Australian Law Reform Commission Report, to which reference is made above, the legislature promulgated alterations to the Insurance Contracts Act. It is appropriate to recite ss 45 and 48 of the Insurance Contracts Act, which are in the following terms: "[45] 'Other insurance' provisions (1) Where a provision included in a contract of general insurance has the effect of limiting or excluding the liability of the insurer under the contract by reason that the insured has entered into some other contract of insurance, not being a contract required to be effected by or under a law, including a law of a State or Territory, the provision is void. (2) Subsection (1) does not apply in relation to a contract that provides insurance cover in respect of some or all of so much of a loss as is not covered by a contract of insurance that is specified in the first‑mentioned contract. … [48] Contracts of general insurance - entitlements of third party beneficiaries (1) A third party beneficiary under a contract of general insurance has a right to recover from the insurer, in accordance with the contract, the amount of any loss suffered by the third party beneficiary even though the third party beneficiary is not a party to the contract. (2) Subject to the contract, the third party beneficiary: (a) has, in relation to the third party beneficiary's claim, the same obligations to the insurer as the third party beneficiary would have if the third party beneficiary were the insured; and (b) may discharge the insured's obligations in relation to the loss. (3) The insurer has the same defences to an action under this section as the insurer would have in an action by the insured, including, but not limited to, defences relating to the conduct of the insured (whether the conduct occurred before or after the contract was entered into)."
3. Section 48 deals with the entitlements of third-party beneficiaries and, by s 48(3), provides that the insurer has the same defences to an action taken by third-party beneficiary under s 48(1) of the Insurance Contracts Act as it would if the action had been taken by the insured. Section 45 of the Insurance Contracts Act deals with what have been called generally "other insurance" provisions or "excess provisions", to which reference has already been made. Section 45 renders such a provision "void": see s 45(1) of the Insurance Contracts Act, recited above.
4. Otherwise it is unnecessary, at this stage, to discuss the operation of either s 45 or s 48 of the Insurance Contracts Act or their interaction. Nevertheless, the interaction of the two may be an important aspect in the determination of the issues that arise from the questions posed and to the answer to them. Such an examination will occur later in these reasons.

Other insurance or excess provisions

1. As earlier stated, the 2009 Allianz Policy did not contain an excess clause. To the extent necessary, Allianz seeks rectification of the 2009 Policy to include the condition in question 3, recited in the preliminary questions earlier in these reasons for judgment. Clause 5 of the 2009 Allianz Policy provided that Allianz "will indemnify the insured against the insured's legal liability to pay damages or compensation in respect of … personal injury" and some other liability, … "happening … during the construction period … in respect of the insured operations … or … during the period of insurance in respect of the Insured's Products."
2. The construction period is defined, in the 2009 Policy, as the phase of a contract until the contract works have been accepted by the principal/owner as having achieved practical completion and the term of the cover in respect of the construction period "shall be the period commencing with … the entering into of each contract; or … the commencement date of the Period of Insurance; whichever is the later, until the completion of the Construction Period". "Insured Operations" is defined, in the 2009 Allianz Policy, in terms of the work to be performed, namely, road network related development, construction and maintenance and contracts of any kind undertaken by or on behalf of the Named Insured and commenced during the period of insurance.
3. Further, the 2009 Allianz Policy contained a "Primary Clause", as described earlier in these reasons. That clause was in the following terms: "To the extent that insurance is afforded to any Insured party under this policy, this insurance shall apply as primary". As has already been stated the rectification seeks the insertion of a clause that is described in question three of the preliminary questions, which appears in most if not all of the earlier policies and certainly appeared in the later policies.
4. The 2011 Allianz Policy commenced on 1 October 2011 and described the Insured and the Construction Period and Insured Operations in the same way as the 2009 Allianz Policy. However, the 2011 Allianz Policy contained an "Other Insurance" Clause in the following terms: "Where allowable by law, this Policy is excess over and above any other valid and collectible insurance and shall not respond to any loss until such times as the limit of liability under such other primary and valid insurance has been totally exhausted. The Treasury Managed Fund is not deemed to be regarded as a policy of insurance or Underlying Insurance, for the purposes of this policy."
5. As earlier stated, the foregoing "Other Insurance" Clause is that which these reasons have described also as an "excess Insurance Clause", or by some such similar description. On its face, such a clause, if operable, would provide insurance cover only to the extent not covered by another insurance policy.
6. The QBE policies (as earlier described on the basis of the representation of the first, second and third defendants) provided cover to Reed in circumstances where Reed entered into a contract of insurance with QBE in which QBE contracted to cover and/or indemnify for loss or damage arising from personal injury for whom either Reed, or, relevantly, any subcontractor to the works, becomes liable. The relevant policy is the policy which commenced 25 July 2011 and concluded 25 July 2012, also referred to as the Lloyd's Policy.
7. Clause 8 of the Lloyd's policy is a clause entitled "Insurance Arranged by Principal" and is in the following terms: "If the Insured enters into an agreement with any other party (who for the purpose of this clause is called the 'principal') pursuant to which the Principal has agreed to provide a policy of insurance which is intended to indemnify the Insured for any loss or liability arising out of the performance of the said agreement then the Insurer will (subject to the terms and conditions of this Policy) only indemnify the Insured for loss or liability not covered by the policy of insurance provided by the Principal."
8. Further, Clause 5 of the Lloyd's Policy, entitled "Difference in Conditions and/or Excess", provides as follows: "In respect of any contract or works were the principal or owner elects to arrange their own insurance, this Policy shall apply to claims not recoverable or in excess of amounts recoverable thereunder, subject to the terms, conditions and exclusions of this Policy."
9. In other words, the Lloyd's Policy, on which the claim against QBE depends, also contains an excess clause.
10. As a matter of logic (if logic be the appropriate guideline), the effect of an excess clause in each contract would be that neither of the contracts of insurance provided cover. However, if neither insurance policy indemnifies for the loss or damage then the excess clause in each insurance policy would not operate to exclude the liability of the insurer. In modern parlance this is a "Catch-22", or a wholly circular and self-defeating proposition.
11. As can be expected, it has been dealt with previously by the courts. It was also sought to be dealt with by the provisions inserted into the Insurance Contracts Act following the Australian Law Reform Commission Report to which reference has already been made: see s 45 of the Insurance Contracts Act. Both the judicial attitude and the effect of the Insurance Contracts Act need to be examined.
12. It is unnecessary to deal with any issue associated with the lack of prior notification and no party relies upon any such issue. Rather, each of the insurers relies upon the effect of the excess clause to exclude its liability. In the case of QBE, it also relies upon the applicability of the 2009 Allianz Policy, which contains no excess clause.
13. First, it ought to be noted that the difficulties associated with "double insurance" or "other insurance" are not resolved by determining whether each insurance policy covers an identical risk. So long as each insurance policy would, but for the other insurance or excess clause, require the insurer to cover or indemnify the damage or loss in question, the issue arises.
14. Relevantly, when the UK Court of Appeal dealt with the issue in Gale v Motor Union Insurance Co [1928] 1 KB 359, there existed double insurance (in relation to a motor vehicle accident), one of which covered the owner of the vehicle for all drivers and the other of which covered the driver for all cars. Each insurance policy negatived cover, if there were "other insurance in respect of such or whereby the insured may be indemnified" and contained a rateable proportion provision of the kind discussed between Aon and Allianz and to which earlier reference has been made.
15. In Gale, Roche J held that each company was liable to contribute one half of that which was required to indemnify and/or cover the loss incurred or damage inflicted. The judgment in Gale was considered and explained in Weddell v Road Transport and General Insurance Co Ltd [1932] 2 KB 563 ("Weddell"), the facts in which were identical to those discussed in Gale, supra. In Weddell one of the policies did not contain a rateable proportion clause, yet Rowlatt J determined the matter in the same way and concluded, on the basis of the inferred intention of the parties reaching the contract, that the excess provisions, in effect, cancelled each other out.
16. After discussing the effect of the other insurance clauses in each policy being that if one looked at each policy, (without regard to the other) then each negatived liability, his Honour then said: "At that point the process must cease. If one proceeds to apply the same argument to the other policy and lets that re-act upon the policy under construction, one would reach the absurd result that whichever policy one looks at it is always the other one which is effective": Waddell, at 568.
17. Where one policy contains a rateable contribution clause (but no excess clause) and the other policy contains an excess clause, the policy with the rateable contribution clause applies and the policy with the excess clause applies only to an amount not covered by the first mentioned policy: see Australian Eagle Insurance Co Ltd v Mutual Acceptance (Insurance) Pty Ltd [1983] 3 NSWLR 59. In New Zealand, at that time, the approach taken was to determine which of the two insured were intended, by the respective parties to each insurance policy, as the party that was to bear the full risk of liability: Commercial Union Assurance Co (NZ) Ltd v Murphy [1989] 1 NZLR 687 (NZ Court of Appeal).
18. Where there are two excess clauses (even if each is slightly differently worded), the approach in Weddell is to be preferred: Lambert Leasing Inc v QBE Insurance (Australia) Ltd (2016) 93 NSWLR 166; [2016] NSWCA 254. The issue was not determined by the Court of Appeal in Lambert Leasing, supra, but the Court noted that the concession, made by the insurers that each excess clause cancelled out the other, was correct and the appropriate approach.
19. Of course, the Court of Appeal (Payne JA, with whom Ward and Gleeson JJA agreed) analysed with great precision the terms of each contract before concluding that each contract excluded the other and the outcome also discussed the applicability and proper construction of s 45 of the Insurance Contracts Act.
20. The High Court in Zürich Australian Insurance Ltd v Metals & Minerals Insurance PTE Ltd (2009) 240 CLR 391; [2009] HCA 50 analysed the effect of s 45 of the Insurance Contracts Act on the issue of double insurance. That provision is recited above, together with the provisions of s 48 of the Insurance Contracts Act. The plurality (French CJ, Gummow and Crennan JJ) referred to double insurance and gave it the definition that had been given by the High Court (Barwick CJ, McTiernan and Menzies JJ) in Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 at 345; [1969] HCA 55 as occurring: "…when an assured is insured against the same risk with two independent insurers. To insure doubly is lawful but the assured cannot recover more than the loss suffered and for which there is indemnity under each of the policies. The insured may claim indemnity from either insurer. However, as both insurers are liable, the doctrine of contribution between insurers has been evolved."
21. The High Court judgment in Zürich referred to the evolution of "Other Insurance" provisions in insurance policies and described two kinds of provisions, the first of which required notice to the first insurer, thereby eliminating fraud and/or facilitating contribution. The second class of provision, with which the Court is concerned in these proceedings, excluded the liability of the first insurer or limited it to an excess insurance cover.
22. The High Court judgment then recited the Australian Law Reform Commission passage and its conclusion that there was no "substantial justification for any of the various types of 'other insurance' clause". The learned judges then outlined the history of the provisions which led to the promulgation of s 45 and which assisted in its interpretation. At [23] of Zürich, supra, the plurality said: "[23] The 'other insurance' provisions to which s 45 is directed are concerned with contracts of insurance 'entered into' by the insured. The first constructional question is whether the words 'entered into' limit the application of s 45 to 'other insurance' provisions affecting contracts of insurance to which the insured is a party. The ordinary, relevant meaning of 'enter into' is 'take upon oneself (a commitment, duty, relationship, etc); bind oneself by, subscribe to, (an agreement)'. That usage is reflected in the definition in s 11(9) of the Act which refers, albeit non-exhaustively, to 'the making of an agreement by the parties to the contract'. It is also reflected in the other sections of the Act referred to below. [24] Section 48 confers a statutory right of recovery upon a non-party referred to or specified in a general contract of insurance as a person insured or to whom cover extends. It does so directly. Its enactment predated the extension, by the decision of this Court in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd, of common law rights of recovery for non-party insured persons under an insurance policy. Section 48 does not deem such a person to be a party to the insurance contract thus attracting the rights conferred on a party. It does not purport to confer contractual or equitable rights upon such a person. There is therefore no basis in s 48 for assimilating the position of a non-party insured to that of a person who has 'entered into' a contract of insurance within the meaning of s 45(1)." (Footnotes omitted.)
23. As is clear from the foregoing, whatever be the appropriate meaning to the word "void", s 45(1) of the Insurance Contracts Act applies only to circumstances in which the insured has entered into another "contract of insurance". As a consequence, Reed, which entered into the QBE contracts, was not "the insured" under the Allianz contract and RMS, which is the insured under the Allianz policies, did not enter into the QBE policies. Neither clause excluding the liability of each insurer is voided by the provisions of s 45(1) of the Insurance Contracts Act.
24. Greater difficulty is occasioned by the construction of s 48 of the Insurance Contracts Act. As earlier stated, s 48 of the Insurance Contracts Act gives a third party beneficiary under a contract the same right of recovery from the insurer as the insured under that policy. The provision does not deem the third party beneficiary to be the insured and/or a party to the insurance contract, whether by fiction or otherwise.
25. Nevertheless, the provisions of s 48(3) of the Insurance Contracts Act allows the insurer "the same defences to an action under this section as the insurer would have in an action by the insured". Again, this provision does not render or deem the third-party beneficiary (or the insurer) to be in a situation where the defences that may be raised are only those that the insured, being the party to two contracts of insurance, would have had if it had entered two contracts of insurance. In other words, the provisions of s 48(3) of the Insurance Contracts Act do not have the effect that an insurer is limited to defences that exclude double insurance defences, if the insured were to have entered into two contracts of insurance.
26. Even on the authority of the High Court in Zürich, supra, and on the Court of Appeal in Lambert Leasing, supra, there is a possible missing element in the double insurance issues. There can be no doubt that the term "entered into" in s 45(1) of the Insurance Contracts Act requires the person to have "entered into" the contract by becoming a party thereto. However, in the current circumstance, it is open to suggest that even though Reed was not a party to the Allianz Policy, it was an "insured" as being an entity insured under the policy as a third party. Thus, as an "insured" under the Allianz policies, Reed entered into an insurance that effected double insurance rendering, in so far as it applied to Reed, each double insurance clause void.
27. It seems neither Zürich nor Lambert Leasing contemplate such an eventuality and it would be inappropriate for the Court to determine that Reed was an "insured" under the Allianz Policy for the purpose of the provisions of s 45(1) of the Insurance Contracts Act. It accords with the wording of the judgments in Zürich and Lambert Leasing, and the rationale of the conclusion, that the term "insured" in 45(1) of the Insurance Contracts Act also refers to an insured that has entered into the contract of insurance.
28. In those circumstances, the Court is required to deal with the 2011 Allianz Policy and the Lloyd's Policy as if each contained an "Other Insurance" clause that rendered each insurance company liable only to the excess not otherwise indemnified by another insurance policy.
29. Adopting, as I do, and as did the Court of Appeal in Lambert Leasing, the reasoning in Weddell, the Court takes the view that each such clause does not exempt nor except liability of the insurer under that policy. In other words, both QBE and Allianz are liable under the Lloyd's Policy and the 2011 Allianz Policy respectively.
30. The foregoing is not the result of application of the principles in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22. An analysis of the provisions of ss 45 and 48 of the Insurance Contracts Act does not allow for the term "insured" to have a meaning that includes a third party beneficiary under a contract. The term "third party beneficiary" is used differently in s 48 of the Insurance Contracts Act. Although, the resulting construction of s 45 and s 48 of the Insurance Contracts Act, and their interaction, leaves a circumstance that is not expressly dealt with by the terms of the Insurance Contracts Act, that circumstance is dealt with by the application of the principles in Weddell that have been adopted by the courts in Australia over some period of time.
31. Thus far I have described the clauses in the respective insurance policies as "excess clauses", without analysing the precise wording of each and the operation of the 2009 Allianz Policy against the 2011 Allianz Policy.
32. Dealing with the latter matter first, on one view, already mentioned, the 2009 Allianz Policy operated from 1 October 2009 until the conclusion of the works by RMS/RTA. However, a reading of the Policy, as a whole, and bearing in mind its commercial context, the Policy necessarily expired on 30 September 2010.
33. If that were not the case, then on 1 October 2010 the Policy was renewed on slightly different terms or replaced by a new Policy between RMS and Allianz. In either case, the 2009 Allianz Policy, as expressed in 1 October 2009, did not apply after 1 October 2010.
34. More importantly, it did not apply after 1 October 2011 at which time, on the same analysis, the 2011 Allianz Policy applied to cover the liability for the damage or loss for which Reed was or may have been responsible as a result of the accident in December 2011.
35. As earlier stated, the 2011 Allianz Policy was in or to the effect of that contained and quoted in question 3, being the preliminary questions the Court is required to answer. It is in every sense, including the strict sense, an "excess clause" that, subject to the principles already outlined, will cover only the excess over any other valid and collectible insurance that may be held and covers the loss or damages covered by the 2011 Allianz Policy.
36. At the same time, the Lloyd's Policy that covered the period in December 2011 was a Policy that commenced on 25 July 2011 and expired on 25 July 2012. It contained a clause, already described and recited, that provides coverage by the Lloyd's Policy only where the insured is not indemnified for loss or liability covered by the other policy.
37. The clause is operative only "if the Insured enters into an agreement" with any other party pursuant to which the Principal has agreed to provide a policy of insurance, intended to indemnify the Insured. Thus, in the present circumstances, clause 8 of the Lloyd's Policy, recited above, operates as an excess clause because Reed (the Insured) entered into an agreement with RMS (the Principal) to provide a Policy of insurance, intended to indemnify the Insured for the loss or liability that has or may, if the plaintiff were successful, arise.
38. The circumstance (that the 2011 Allianz Policy is worded so as to except coverage, while the Lloyd's Policy is worded positively to provide coverage, only where no other policy operates) does not alter the effect of the clauses. Each is, properly construed, an "excess policy".
39. Further, the Lloyd's Policy, also recited above (clause 5), provides that the Lloyd's Policy applies only "to claims not recoverable or in excess of amounts recoverable" under an insurance policy entered into by the principal or owner (RMS).
40. The ordinary grammatical and commercial reading of each of the 2011 Allianz Policy and the Lloyd's Policy is that each contains an "excess clause" that excepts coverage where another insurance policy indemnifies the loss (or, more relevantly, in this case, the other insurance policy covered the loss).
41. In those cases, applying the principle outlined in the judgment in Weddell, each of those excess clauses creates an absurdity which, when taken together, and giving each policy its ordinary, grammatical and commercial interpretation, requires a construction that the "other insurance" must be operative and not contain a similar "excess clause".
42. In those circumstances, both the 2011 Allianz Policy and the Lloyd's Policy operate to indemnify Reed for the loss or liability, if any, occasioned by the damage to the plaintiff and for which the plaintiff sues.

The Miscellaneous Provisions Act

1. It is necessary to deal with the provisions of s 6(4) of the Miscellaneous Provisions Act. As already noted, by order of the Court, the first, second and third defendants have been joined and named pursuant to the provisions of s 6 of the Miscellaneous Provisions Act. It is appropriate to recite those provisions, which are in the following terms: "6 Amount of liability to be charge on insurance moneys payable against that liability (1) If any person (hereinafter in this Part referred to as the insured) has, whether before or after the commencement of this Act, entered into a contract of insurance by which the person is indemnified against liability to pay any damages or compensation, the amount of the person's liability shall on the happening of the event giving rise to the claim for damages or compensation, and notwithstanding that the amount of such liability may not then have been determined, be a charge on all insurance moneys that are or may become payable in respect of that liability. (2) If, on the happening of the event giving rise to any claim for damages or compensation as aforesaid, the insured (being a corporation) is being wound up, or if any subsequent winding-up of the insured (being a corporation) is deemed to have commenced not later than the happening of that event, the provisions of subsection (1) shall apply notwithstanding the winding-up. … (4) Every such charge as aforesaid shall be enforceable by way of an action against the insurer in the same way and in the same court as if the action were an action to recover damages or compensation from the insured; and in respect of any such action and of the judgment given therein the parties shall, to the extent of the charge, have the same rights and liabilities, and the court shall have the same powers, as if the action were against the insured: Provided that, except where the provisions of subsection (2) apply, no such action shall be commenced in any court except with the leave of that court. Leave shall not be granted in any case where the court is satisfied that the insurer is entitled under the terms of the contract of insurance to disclaim liability, and that any proceedings, including arbitration proceedings, necessary to establish that the insurer is so entitled to disclaim, have been taken."
2. The section of the Miscellaneous Provisions Act, recited above, was repealed, effective 1 June 2017 by the Civil Liability (Third Party Claims against Insurers) Act 2017 ("the 2017 Act"), which seems to extend the capacity of a plaintiff to sue an insurer to circumstances that include a third party beneficiary: see s 4 of the 2017 Act, but proceedings already commenced (which include these proceedings) remain governed by the above recited provisions: s 12 of the 2017 Act.
3. As can be seen from the foregoing s 6(1) operates where "any person (hereinafter in this part referred to as the insured) has … entered into a contract of insurance …". Subsection 6(2) deals with a circumstance where the insured, a Corporation is or has been wound up and provides that s 6(1) applies notwithstanding that circumstance.
4. Subsection 6(4) of the Miscellaneous Provisions Act provides that every charge "shall be enforceable by way of an action against the insurer in the same way and in the same court is if the action were an action to recover damages or compensation from the insured". In other words, if Reed is the Corporation named as the defendant in a statement of claim and has been wound up (each of which apply), it is the insurer in the contract of insurance entered into by Reed that is liable and may be sued pursuant to the terms of s 6(4) of the Miscellaneous Provisions Act. That insurer is QBE, representing the interests associated with the Lloyd's Policy.
5. In other words, whether or not the excess clauses in the Lloyd's Policy and the 2011 Allianz Policy cancel each other out, the provisions of the Miscellaneous Provisions Act require the suit to be taken against QBE, and do not allow for the suit to be taken against Allianz, because in relation to the 2011 Allianz Policy (or any of its predecessors) it was RMS (or its predecessors) that entered into the contract of insurance and not Reed.
6. For the same reason and on the same construction applied by the High Court in Zürich, supra, in relation to s 45(1) of the Insurance Contracts Act, s 6(4) of the Miscellaneous Provisions Act (and, incidentally, s 6(1) of the Miscellaneous Provisions Act) relates only to the insurer of a Corporation that has entered into a contract of insurance and does not apply to an insurer of a wound-up Corporation, which is a third party beneficiary in a contract of insurance entered into by a principal or owner or other Corporation.
7. As a consequence of the foregoing, only the first to third defendants could have been substituted for Reed in the Statement of Claim taken by the plaintiff. That, of course, does not finalise the issues between the first to third defendants (in these reasons referred to as QBE) and Allianz.
8. Contribution may be claimed and obtained, where liability is ascertained, by a suit in equity for the contribution. The course taken in these proceedings is the correct course. The plaintiff could have only substituted QBE (the first to third defendants) for Reed. The plaintiff could not have substituted or named Allianz, pursuant to the terms of the Miscellaneous Provisions Act.
9. On the other hand, once named and substituted pursuant to the terms of the Miscellaneous Provisions Act, QBE could cross-claim against Allianz for contribution, as, albeit possibly not finally, has been done.

Conclusion

1. The foregoing analysis leads to a number of obvious answers to the questions that have been asked. First, the 2009 Allianz Policy, in those terms, did not apply to require indemnity of any loss or damage associated with the injury to the plaintiff caused by the accident in December 2011.
2. Secondly, the 2011 Allianz Policy did so apply. So too, disregarding the excess clauses, did the Lloyd's Policy, rendering QBE liable to indemnify.
3. The effect of two excess clauses, one in each of the 2011 Allianz Policy and the Lloyd's Policy, is that each of Allianz, on the one hand, and, on the other hand, the first to third defendants are equally responsible to indemnify for the loss or damage payable to the plaintiff as a result of any injury suffered by him in the accident of 15 December 2011.
4. As a consequence of the foregoing, the Court makes the following orders and declarations: 1. The Court answers the questions posed in the following way: 1. Question 1: Ignoring the application of the 'other insurance' clauses, which of either or both of the RTA Policies for the period of 1/10/09-1/10/10 (2009 Policy) and/or 1/10/11-1/10/12 (2011 Policy) obliges the Fourth Defendant to indemnify Reed Constructions Australia Pty Ltd (under external administration) (Reed) in respect of any judgment to the Plaintiff. 2. Answer 1: The 2011 Allianz Policy, referred to in the question as the 2011 Policy, obliges the fourth defendant to indemnify Reed Constructions Australia Pty Ltd (under external administration) ("Reed") in respect of any judgment to the plaintiff. 3. Question 2: If the 2009 Policy obliges the Fourth Defendant to indemnify Reed in respect of any judgment to the Plaintiff, whether: (a) The 2009 Policy obliges the Fourth Defendant to indemnify Reed for amounts up to $20,000,000 and the First, Second and Third Defendants are only obliged to indemnify Reed under the Lloyd's Policy for amounts over that sum; (b) The Lloyd's Policy obliges the First, Second and Third Defendants to indemnify Reed for amounts up to $20,000,000 and the Fourth Defendant is only obliged to indemnify Reed for amounts over that sum; or (c) Both of the 2009 Policy and the Lloyd's Policy oblige the Defendants to indemnify Reed for amounts up to $20,000,000. 1. Answer 2: Does not arise. 2. Question 3: If the answer to question 2 is either (a) or (c), whether the 2009 Policy can be rectified to include the following condition: "Where allowable by law, this Policy is excess over and above any other valid and collectible insurance and shall not respond to any loss until such times as the limit of liability under such other primary and valid insurance has been totally exhausted. The Treasury Managed Fund is not deemed to be regarded as a policy of insurance or Underlying Insurance, for the purposes of this policy." 1. Answer 3: Does not arise. 2. Question 4: If the answer to question 3 is yes, whether: (a) The 2009 Policy (as rectified) obliges the fourth defendant to indemnify Reed for amounts up to $20,000,000 and the first, second and third defendants are only obliged to indemnify Reed under the Lloyd's Policy for amounts over that sum; (b) The Lloyd's Policy obliges the first, second and third defendants to indemnify Reed for amounts up to $20,000,000 and the fourth defendant is only obliged to indemnify Reed for amounts over that sum; or (c) Both of the 2009 Policy (as rectified) and the Lloyd's Policy oblige the defendants to indemnify Reed for amounts up to $20,000,000. 1. Answer 4: Does not arise. 2. Question 5: If the 2011 Policy obliges the fourth defendant to indemnify Reed in respect of any judgment to the plaintiff, whether: (a) The 2011 Policy obliges the fourth defendant to indemnify Reed for amounts up to $20,000,000 and the first, second and third defendants are only obliged to indemnify Reed under the Lloyd's Policy for amounts over that sum; (b) The Lloyd's Policy obliges the firsts Second and third defendants to indemnify Reed for amounts up to $20,000,000 and the fourth defendant is only obliged to indemnify Reed for amounts over that sum; or (c) Both the 2011 Policy and the Lloyd's Policy oblige the defendants to indemnify Reed for amounts up to $20,000,000. 1. Answer 5: 5(c) operates, although, to clarify any seemingly irrelevant ambiguity, the limit of $20 million applies to each of the 2011 Allianz Policy and the Lloyd's Policy. The Court answers Question 5 in the following manner: 2. Each of the 2011 Allianz Policy and the Lloyd's Policy obliges the fourth defendant and, collectively, the first, second and third defendants to indemnify Reed for an amount up to $20 million in relation to each operative policy. 1. The defendants shall jointly and severally pay the plaintiff's costs of and incidental to the Motion and proceedings in relation to the preliminary question on an indemnity basis. Otherwise, no order for costs. 2. Any other extant motion or matter that arises in relation to the foregoing answers be listed on application of any party to the Associate to Justice Rothman within five working days of this Judgment.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 April 2018