Helicopter Aerial Surveys Pty Ltd v Insurance Australia Limited

Impact Funding Solutions Ltd v AIG Europe Insurance Limited [2016] UKSC 57; [2017] AC 73

JDGD v Allianz Australia Insurance Ltd [2024] NSWSC 405

LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104

R&B Directional Drilling Pty Ltd (in liq) v CGU Insurance Limited (No 2) [2019] FCA 458; (2019) 369 ALR 137

Selected Seeds Pty Ltd v QBEMM Pty Ltd [2010] HCA 37; (2010) 242 CLR 336

Todd v Alterra at Lloyd's Limited [2016] FCAFC 15; (2016) 239 FCR 12

Wallaby Grip Ltd v QBE Insurance (Australia) Ltd [2010] HCA 9; (2010) 240 CLR 444

Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100; (2018) 359 ALR 314

Woodlawn Capital Pty Ltd v Motor Vehicles Insurance Ltd [2016] NSWCA 28; (2016) 111 ACSR 377

Young Investment Group Pty Ltd v QBE Insurance (Australia) Ltd [2019] WASC 74

Commercial Contracts, Banking, Finance and Insurance

1. Judgment for the Applicant against the Respondent in the amount of $507,510.61 plus interest pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth) at the rates referred to in para [2] of the Interest on Judgments Practice Note (GPN-INT).
2. The Applicant file and serve any affidavits and written submissions in relation to costs by 21 November 2025.
3. The Respondent file and serve any affidavits and written submissions in relation to costs by 5 December 2025.
4. The Applicant file and serve any written submissions and affidavits in reply in relation to costs by 12 December 2025.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

1. In these proceedings, the applicant (HAS) seeks to recover amounts owed by a deregistered company, Bradford Marine Pty Ltd (Bradford), from Bradford's insurer, being the respondent (IAL), pursuant to s 601AG of the Corporations Act 2001 (Cth) (the Act). Bradford was deregistered on 30 October 2024_._ The amounts claimed were established by a judgment against Bradford in proceedings in the Federal Circuit Court of Australia: Helicopter Aerial Surveys Pty Ltd v Bradford Marine Pty Ltd [2020] FCCA 3238 (the FCCA Judgment). The FCCA Judgment was in the amount of $260,000 plus costs as taxed or otherwise agreed. It is common ground that the amount of costs as agreed is $320,000.
2. The FCCA Judgment concerned HAS's claim for damages against Bradford arising from maintenance works done in 2015 by Bradford on a vessel, The Mishima, which was owned by HAS. The works consisted mainly of painting the hull below the water line and painting the topside of the vessel, together with preparation of the surfaces for painting. After the works had been completed, HAS discovered that areas of the vessel had not been satisfactorily treated before painting and had not been satisfactorily painted. HAS engaged another contractor to rectify the works (GT Mac).
3. At all relevant times, Bradford held an insurance policy comprising the Marine Trades Public & Products Liability Policy (Policy), the Marine Trades Additional Cover (Addendum), and the Schedule to the Policy (Schedule). The insurance was initially provided by CGU Insurance Limited, and following the transfer of that company's insurance business to IAL, IAL assumed liability for any liability or indemnity owed to HAS pursuant to that insurance.
4. Section 601AG of the Act provides as follows:

A person may recover from the insurer of a company that is deregistered an amount that was payable to the company under the insurance contract if:

(a) the company had a liability to the person; and

(b) the insurance contract covered that liability immediately before deregistration.

1. I note at the outset that the only evidence as to the facts giving rise to the liability of Bradford to HAS is contained in the FCCA Judgment. Although ordinarily evidence of the decision, or of a finding of fact, in a proceeding is not admissible to prove the existence of a fact that was in issue in that proceeding (s 91 of the Evidence Act 1995 (Cth)), HAS tendered the FCCA Judgment without objection. IAL takes the position that the FCCA Judgment is admissible as a set of agreed facts within the meaning of s 191 of the Evidence Act 1995 (Cth), and HAS agrees with that characterisation. As explained below, the FCCA Judgment does not deal with certain issues which are central to the present dispute, as those issues did not arise in the proceedings between HAS and Bradford.

1. Clause 3.1 of the Policy sets out the insuring clause, relevantly as follows:

... We will pay to or on behalf of the Insured all sums provided by the Policy which the Insured shall become legally liable to pay as compensation for ... Property Damage ... caused by an Occurrence happening in connection with the Business of the Insured.

1. Clause 3.2 deals with the limit of liability, relevantly as follows:

Our liability in respect of any one Occurrence shall not exceed the Policy Limit stated in the Schedule for Public Liability, Products Liability and Advertising Liability.

Our total aggregate limit during any one Period of Insurance for all claims arising out of Products Liability and Advertising Liability shall not exceed the Policy Limit.

The Addendum contains additional cover and Optional Additional Cover, which may be subject to specified Policy Limits unless otherwise noted in the Schedule ...

1. Clause 4 deals with supplementary payments. Clause 4.1 provides relevantly as follows:

With respect to the indemnity provided by this Policy, We will:

a) Defend, in the Insured's name and on the Insured's behalf, any claim or suit against the Insured alleging such ... Property Damage ... and seeking damages on account thereof even if any of the allegations of such claim or suit is groundless, false or fraudulent and may investigate, negotiate and settle any claim or suit as is deemed expedient;

b) Pay all charges, expenses and legal costs recoverable from or awarded against the Insured in any such claim or suit and all interest accruing on Our portion of any judgment until We have paid, tendered or deposited in court that part of such judgment that does not exceed the Policy Limit ...

We will do this provided that:

a) We will not be obliged to pay any claim or judgment or to defend any suit after the Policy Limit has been exhausted by payment of judgments or settlements;

b) If a payment exceeding the Policy Limit has to be made to dispose of a claim, Our liability to pay any costs, expenses and interest will be limited to that portion of those costs, expenses and interest as the Policy Limit bears to the amount paid to dispose of the claim.

1. Clause 6 deals with exclusions and provides relevantly as follows:

We shall not be liable to indemnify the Insured in respect of:

...

6.6 Faulty Workmanship

Any liability for the cost of performing, completing, correcting or improving any work done or undertaken by the Insured.

...

1. I note at this point that cl 1.3 provides that:

The paragraph headings in this Policy are included for the purpose of reference only and do not form part of this Policy for interpretation purposes.

1. Clause 8 provides the meaning of defined terms used in the Policy in bold type and with a capital letter, relevantly as follows:

8.2 Addendum

The industry related Addendum forms part of this Policy and contains additional terms and conditions, including Optional Additional Cover, which must be read in conjunction with the Policy.

8.6 Business means the business stated in the Addendum and Schedule ...

8.12 Occurrence means an event including continuous or repeated exposure to substantially the same general conditions, which causes ... Property Damage ... none of which is expected or intended from the standpoint of the Insured.

8.16 Policy Limit means the amount(s) specified in the Policy.

8.17 Policy means the insurance Policy made up of:

a) this Policy document;

b) the Addendum;

c) the Schedule to this Policy; and

d) the endorsements, if any, contained in the Schedule.

8.20 Property Damage means:

a) physical injury to or destruction or loss of tangible property which

occurs during the Period of Insurance and any loss of use of that property resulting therefrom; or

1. loss of use of tangible property which has not been physically injured or destroyed or lost which is caused by physical injury to or destruction or loss of other tangible property which occurs during the Period of Insurance.

1. As to the Addendum, cl 1.4 provides as follows:

This Addendum forms part of and must be read in conjunction with the Marine Trades Public & Products Liability Policy.

The Addendum provides additional terms and conditions, including Additional Cover, specifically tailored to the Insured's Business.

1. Clause 1.5 deals with the Insured's Business relevantly as follows:

Services relating to Watercraft which are automatically covered as part and parcel of the operation of the Insured's Business are listed below:

a) Repairs and alterations;

b) Maintenance work;

...

d) Fit-out and refurbishment;

e) Painting and anti-fouling;

...

g) Detailing, cleaning and water blasting;

...

1. Clause 3.4 of the Addendum provides as follows:

Notwithstanding Policy exclusion 6.6 Faulty Workmanship, and in addition to any indemnity provided elsewhere in this Policy in respect of resultant damage, We will pay for the rectification of faulty workmanship consequent upon resultant damage, limited to:

a) the wholesale cost of any parts;

b) the net labour cost;

required to perform or re-perform work, in whole or in part, on any property on which:

1. the Insured had contracted to perform work, repairs, maintenance or service prior to the Occurrence causing the resultant damage, and;

   d) the performance or re-performance of the work is made necessary by the same Occurrence causing the resultant damage,

We will pay up to $25,000 for all claims in the aggregate for any one Period of Insurance under this benefit.

1. As to the Schedule, the Business Description is given as:

Principally Yacht Rigging and other services incidental thereto but excluding delivery of vessels entirely.

1. The Limit of Liability is specified in the Schedule to be "$20,000,000 any one occurrence". In respect of Optional Additional Covers, the Schedule states "Section 3.4 Faulty Workmanship, sublimit $25,000 in the aggregate any one period of insurance".

1. The relevant findings in the FCCA Judgment are as follows, with reference to the paragraph numbers of the FCCA Judgment.
2. In 2009, HAS caused The Mishima to have maintenance works, mainly comprising the painting of the hull below the waterline (HBWL) and painting of the topside, being every area above the waterline that is not the hull: [2]. HAS anticipated that maintenance on the vessel would occur, especially on the HBWL, every four years, but for a variety of reasons HAS did not make arrangements for the maintenance works until 2015: [3]. The maintenance works were performed by Bradford and were concluded by early January 2016, but soon after the works were completed, HAS noticed areas that were not satisfactorily treated: [4]. HAS paid another contractor, GT Mac, to rectify the HBWL works, which cost HAS $92,149.49: [5]. After that had occurred, HAS noticed corrosion seeping to the surface of other painted areas in the topside: [5]. GT Mac rectified areas underneath the wooden areas which were removed, and in January 2020, HAS paid $148,697.36 for those rectification works: [6].
3. Because a boat which is in the water is partially submerged, it will corrode and be a source of marine growth if it is not properly maintained; the protection applied to the submerged area is known as "anti-fouling": [9]. There is quite a deal of timber flooring and finishing in the topside, and for proper maintenance, all of the timber must be removed, which exposes the superstructure of the vessel that is also made of metal and must be properly maintained: [10]. Surfaces must be free from corrosion and any other foreign material, such as marine growth, before protective paint can be applied: [11].
4. On about 6 June 2015, HAS met with Bradford and discussed the scope of work required: [13]. Bradford sent a quote to HAS, providing a breakdown of scheduled work and estimated cost, which provides various references to sandblasting and anti-fouling, as well as painting: [15]. The work turned out to be more extensive than had been expected when HAS and Bradford made their agreement: [22]. Eventually, the vessel was ready to be put back in the water, and HAS took the vessel from Southport to Brisbane on 2 January 2016: [26]-[27].
5. HAS began to notice a number of areas of the superstructure and bulwarks showing signs of poor paintwork, and expressed its complaints in an email to Bradford on 8 January 2016: [28]-[29]. The vessel was not lifted out of the water until 21 August 2016, and HAS said that it was then obvious that there was a problem with the anti-fouling coating below the waterline: [34]. At that time, it was not known why the anti-fouling had not been successful: [35].
6. GT Mac made some rectifications to the topside pursuant to instructions from Bradford, and on 27 September 2016, Bradford paid GT Mac the sum of $5,252.54 for rectification works carried out on the vessel: [37]. GT Mac then rectified the anti-fouling and the HBWL maintenance works, which it completed in September 2016: [39]. On 16 September 2016, HAS paid $50,000 to GT Mac, and on 11 October 2016, HAS transferred a further amount of $42,149.49 to GT Mac in satisfaction of GT Mac's invoice: [39]. The invoice described the work done to the HBWL and to the topsides: [40].
7. Despite the fact that GT Mac had completed the rectification works on the HBWL and had done some work to the topside, at a time which is not identified, HAS still noticed that severe corrosion was appearing in areas where there were timber coverings over the metal bulwarks: [43].
8. At a time which is not identified, GT Mac observed that in many places, both above and below the waterline, the surface did not appear to have been properly prepared for painting with the effect that rusting was occurring beneath the surface of the paint: [45]. At the conclusion of the first round of rectification works, it was clear to GT Mac that further works were necessary: [46]. GT Mac provided a quote to HAS on 18 October 2018: [46]. The vessel was hauled out at GT Mac's premises on 11 November 2019, and GT Mac was contracted to undertake some routine maintenance activities on the vessel as well as remediating the work that had been previously done by Bradford: [47].
9. GT Mac prepared two invoices: the first being for the standard maintenance work, and the second being for the remediation work stemming from the works done by Bradford in 2015: [48]. GT Mac made every effort to distinguish between remediation work and maintenance work but there were some items where judgment was required, and on those occasions, GT Mac was conservative in its estimates and allocated those costs to the maintenance work: [48].
10. The total cost of the remediation works was $148,697.36, which GT Mac said represented less than the true cost of remediation works: [49]. The major reason that the cost was so high was that when the timber was removed, the rust and corrosion underneath were far greater than had been initially anticipated: [49].
11. In light of the expert evidence, the cause of the failure seemed to be inadequate preparation of the surface and improper application of the paint: [51]. Four expert witnesses gave evidence, and the trial judge relied on the evidence of Mr Burgaty, Mr Haig and Mr Stanyon (but not Mr Ballantyne): [50], [81].
12. Mr Burgaty gave evidence that the most striking part of the vessel was the delamination and failure of the underwater anti-fouling system, saying that there were areas where the coating had been delaminated from the hull and had started to rust: [52]. The top superstructure that was painted white showed rust stains, runs in the paintwork, bubbling in the coating, missed areas, corrosion and rusting showing through the paintwork: [52]. Mr Burgaty was critical of the specifications given by the manufacturer of the marine paints, in that he said there should have been a greater water pressure specified for the initial wash of the hull and there should have been a specification for stripe painting in areas where it was unsuitable for spray painting: [53]. Mr Burgaty referred to a number of standard forms or records that must be used by persons who are applying paint, including a form for recording surface condition at the time of application which needs to record that the surface is free of flash rusting, as well as other matters: [54]. With respect to the hull, Mr Burgaty saw that there were areas where green algae was left on the hull and this was painted over, and it was obvious that the hull was not prepared in accordance with the specification: [57]. If there had been appropriate water blasting and sandblasting, the surface would have been prepared in such a way that would severely minimise those problems: [57]. Mr Burgaty said that he could see areas where paint had obviously been painted over layers of rust: [58]. Mr Burgaty said that all corroded areas needed to have the corrosion removed and sandblasted back to bare metal and the specified paint system reinstated: [60].
13. Mr Haig said that none of the samples taken from the area of the HBWL showed that the full system of nominated coating layers had been applied: [63]. Mr Haig said that one of the samples showed an adherent layer of rust on the underside of the flakes and another sample showed an adherent layer of marine fouling on the underside of the flakes: [64].
14. Mr Stanyon said that the above water line hull sides, the internal bulwarks and floor deck all had problems because all of the rust was not removed before applying paint: [73]. Mr Stanyon said that rust had been left in place, which had migrated into the newly painted areas or had been painted over: [76]. Mr Stanyon attributed that problem to the failure to remove timber deck mouldings and trims for inspection or preparation, although it was pointed out to Mr Stanyon that the timber had in fact been removed and there was nothing in the way of Bradford having proper access to all of the affected areas: [76] and [79].
15. As to the remediation works that were conducted in 2016, the only available conclusion as to why the paint works by Bradford failed was that there was a failure to properly prepare the surfaces for painting and/or inadequate care or skill in the application of the paint: [82].
16. The remediation works performed in 2019 were necessary as a direct result of the manner in which Bradford conducted the work in 2015: [167]. Although there was a delay between the remedial works of 2016 and the quote given by GT Mac in October 2018, not all of the deficiencies were apparent until 2018 when the rust began to reveal itself to a far greater extent: [168]. There was a direct causal link between the actions of Bradford in 2015 and the remedial works conducted in November 2019: [171].
17. In terms of quantum, judgment was ordered in favour of HAS in the sum of $260,000, with costs to be taxed unless otherwise agreed: [184]. The amount of $260,000 comprised the following payments by HAS to GT Mac, plus interest on those amounts:

(a) $50,000 paid on 16 September 2016;

(b) $42,149.49 paid on 11 October 2016; and

(c) $148,697.36 paid on 31 January 2020 ([180]-[183]).

1. It is common ground that, under the general law, the insured bears the onus of proving the fulfilment of a condition precedent necessary to the accrual of liability of an insurer, but the insurer must prove that a loss falls within an exception to the insurer's obligation: Wallaby Grip Ltd v QBE Insurance (Australia) Ltd [2010] HCA 9; (2010) 240 CLR 444 at [25] (French CJ, Gummow, Hayne, Heydon and Kiefel JJ). That principle has been applied in the context of a claim pursuant to s 601AG, such that the insurer bears the onus of establishing the relevant facts necessary to bring a claim within the scope of exclusions to the insurance: Young Investment Group Pty Ltd v QBE Insurance (Australia) Ltd [2019] WASC 74 at [47]-[51] (Quinlan CJ). The same position was adopted by agreement between the parties in JDGD v Allianz Australia Insurance Ltd [2024] NSWSC 405 at [23] (Elkaim AJ). However, IAL submits that, in the context of s 601AG, the insured bears the onus of establishing both that the insurer's liability falls within the insuring clause and that it is not excluded or limited by any other clause of the policy. I reject that submission for the following reasons.
2. First, the text of s 601AG does not evince any intention of reversing the onus in relation to exclusions. On the contrary, it refers simply to whether "the insurance contract covered that liability immediately before deregistration". That question depends on the general law of insurance, including those aspects of the general law pertaining to the onus of proof.
3. Second, any reversal of the onus of proof in relation to exclusions would operate to the detriment of the party claiming against the insured, contrary to the intention of s 601AG to introduce a procedural reform of obviating the need to reinstate an insured company for the benefit of the party claiming against the insured company. The relevant passage in the Explanatory Memorandum accompanying the Company Law Review Bill 1997 (Cth) stated at [15.22]-[15.23]:

15.22 At present, a person wishing to make a claim against a deregistered company may need to apply to a court for the reinstatement of the company in order to bring an action against it. The Bill enables a person to proceed directly against the insurer of a company that is deregistered, without seeking the company's reinstatement (Bill s 601AG). Comparable rights have previously been provided in other legislation, for example, section 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW).

15.23 The Bill enables a third party to recover directly from the insurer of the deregistered company an amount payable under their contract of insurance if 2 pre-conditions are met:

(a) the deregistered company had a liability to the third party;

(b) the insurance contract covered that liability (Bill s 601AG).

1. Accordingly, in the present case, IAL bears the onus of establishing the facts relevant to the exclusion in cl 6.6 of the Policy.

1. An insurance policy is a kind of commercial contract which should be construed according to the principles of businesslike interpretation: CGU Insurance Ltd v Porthouse [2008] HCA 30; (2008) 235 CLR 103 at [43] (Gummow, Kirby, Heydon, Crennan and Kiefel JJ). Those principles were relevantly set out by French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 at [46], [47] and [51] to the following effect:

(a) the rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (being the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose;

(b) in determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean; that enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract; and

(c) unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption that the parties intended to produce a commercial result; a commercial contract should be construed so as to avoid it making commercial nonsense or working commercial inconvenience.

1. The insuring clause and any exclusion clause must be read together in a harmonious way so that due effect is given to both, and the right conferred by the former is not negated or rendered nugatory by the construction adopted for the latter: Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100; (2018) 359 ALR 314 at [54] (Barrett AJA) (with whom Meagher and White JJA agreed); Woodlawn Capital Pty Ltd v Motor Vehicles Insurance Ltd [2016] NSWCA 28; (2016) 111 ACSR 377 at [133] (Ward JA) (with whom Macfarlan and Gleeson JJA agreed); Impact Funding Solutions Ltd v AIG Europe Insurance Limited [2016] UKSC 57; [2017] AC 73 at [7] (Lord Hodge) (with whom Lords Mance, Sumption and Toulson agreed); and see generally LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 at [56]-[57] (Derrington and Colvin JJ) (with whom Moshinsky J agreed).
2. In relation to the construction of exclusion clauses, such a clause is to be construed according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in case of ambiguity: Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500 at 510 (Mason, Wilson, Brennan, Deane and Dawson JJ). That approach was held to be applicable to the construction of an exclusion clause in a contract of insurance in Selected Seeds Pty Ltd v QBEMM Pty Ltd [2010] HCA 37; (2010) 242 CLR 336 at [29] (French CJ, Hayne, Crennan, Kiefel and Bell JJ).
3. As to the contra proferentem rule, the rule is to be applied only as a last resort after the orthodox process of construction has failed to resolve an ambiguity; it is not a rule which may be applied to resolve "any ambiguity": LCA Marrickville Pty Ltd at [83]-[102], in which Derrington and Colvin JJ thoroughly reviewed the authorities on the point.
4. A contract of insurance has the object or purpose of sharing the risk of, or spreading loss from, a contingency: Todd v Alterra at Lloyd's Limited [2016] FCAFC 15; (2016) 239 FCR 12 at [42] (Allsop CJ and Gleeson J).

1. It is common ground that the claim by HAS falls within the insuring clause (cl 3.1) of the Policy. The first issue which arises in these proceedings is whether the claim by HAS (in whole or in part) falls within the exclusion in cl 6.6.
2. To the extent that the claim by HAS may be found to fall within the exclusion in cl 6.6, it is common ground that cl 3.4 of the Addendum applies to the claim to that extent, and that a sublimit of $25,000 applies to that part of the principal liability under the FCCA Judgment (that is, other than the order for costs).
3. The parties are in dispute, however, as to whether the sublimit of $25,000 is applicable to the claim for costs as well as to the principal liability, in the event that cl 3.4 of the Addendum is applicable. The second issue thus concerns the operation of the costs cover in cll 4.1 and 4.2 of the Policy in light of the outcome of the first issue.

The construction and application of exclusion clause 6.6

1. In R&B Directional Drilling Pty Ltd (in liq) v CGU Insurance Limited (No 2) [2019] FCA 458; (2019) 369 ALR 137, Allsop CJ dealt with an exclusion clause in almost identical form to cl 6.6 of the Policy, namely a clause which provided that:

We will not pay anything in respect of:

...

4. Faulty workmanship

The cost of performing, correcting or improving any work undertaken by an insured person.

1. I note that the word "completing" which appears in cl 6.6 of the Policy was not included in exclusion cl 4 in the policy considered in R&B. However, that is immaterial to the present dispute as it is common ground between the parties that the relevant concept in the present dispute is "correcting".
2. Chief Justice Allsop construed exclusion cl 4 as follows:

[154] The clause is entitled: "Faulty workmanship". If that expression were [in] the body of the clause that would be a simple way of excluding any liability in respect of physical damage that was caused by faulty workmanship. Thus any costs and expenses engaged or covered by the coverage clause would be excluded if caused by faulty workmanship, because they would be "in respect of" faulty workmanship.

[155] The operative words of the exclusion clause are, however, directed to a description of certain things: "performing, correcting or improving any work undertaken." But the chapeau still applies: "We will not pay anything in respect of performing, correcting or improving any work undertaken."

[156] To "correct" is to set right. In the context of the word being used as correcting work done by faulty workmanship, as the clause makes clear, setting right is whatever needs to be done to eliminate the fault and replace it. The particular circumstances of the defective work will determine how much needs to be done to correct it. Here it was the removal of all the contents of the tunnel (concrete and conduits) and the repetition of the work. Thus, the direct removal costs are not covered.

1. The upshot in R&B was that consequential costs for delay associated with the rectification of defective works were held to fall outside the expression "in respect of the cost of correcting" any work undertaken by the insured: R&B at [157]. Those consequential costs for delay may have been in respect of the physical injury, but not in respect of its correction: R&B at [157].
2. On the narrow construction adopted by Allsop CJ, cl 6.6 of the Policy relevantly excludes only the cost of correcting the work done or undertaken by Bradford. Clause 6.6 does not go beyond that so as to exclude the cost of work which is otherwise caused by faulty workmanship.
3. By contrast, the writeback in cl 3.4 of the Addendum is broadly expressed in terms of "the rectification of faulty workmanship consequent upon resultant damage". Not only is the expression "faulty workmanship" used in the body of cl 3.4, but more importantly the scope of the cost of rectification for which the insurer must pay expressly extends to rectifying damage which has been caused by faulty workmanship, in that the words "consequent upon" and "resultant" invoke a causal link. While cl 3.4 of the Addendum and cl 6.6 of the Policy are to be construed harmoniously, the marked difference in the language used in the two provisions points strongly away from an intention that the causal notion used in the additional cover in cl 3.4 of the Addendum should be imported into the exclusion in cl 6.6.
4. Accordingly, I reject IAL's submission to the effect that the description of work in both cll 6.6 of the Policy and 3.4 of the Addendum must be read conformably. That submission conflicts with the ordinary and natural meaning of the language used in the two provisions. The language in cl 3.4 of the Addendum does more than simply write back into the cover what has been excluded by cl 6.6 of the Policy, in that it imports a causal notion of rectifying damage resulting from faulty workmanship, which is much broader than what has been excluded by cl 6.6.
5. How then does the exclusion in cl 6.6 apply in the present case? It is necessary to consider separately the remedial work done in 2016 and the remedial work done in 2019.
6. As to the remedial work done in 2016, the relevant finding in the FCCA Judgment is expressed with some generality, namely that GT Mac "rectified the anti-fouling and the HBWL maintenance works": [39]. An invoice describing the work done to the HBWL and to the topsides was tendered, but its contents were not set out in the FCCA Judgment: [40]. HAS submits that the findings in the FCCA Judgment are insufficiently detailed for IAL to discharge its onus of establishing that the remedial work undertaken by GT Mac in 2016 is properly characterised as correcting the work which had been done by Bradford. However, in my view, it is more likely than not that the amount of $92,149.49 paid by HAS in 2016 was limited to the cost of correcting the work done or undertaken by Bradford in 2015. The payment was for the work of GT Mac having "rectified" the anti-fouling and the HBWL maintenance works which had been done by Bradford. Importantly, that was in circumstances where that rectification work was done about eight or nine months after the original work by Bradford. That relatively short timeframe suggests that the rectification work involved no more than GT Mac setting right the actual work originally done by Bradford, rather than remedying any additional damage which may have been caused subsequently by the way in which Bradford had done its work. Accordingly, I regard the cost of the remedial work performed by GT Mac in 2016 as falling within exclusion cl 6.6. IAL accepts that the remedial work in 2016 falls within the additional cover in cl 3.4 of the Addendum. The result is that IAL is liable to indemnify HAS for $25,000 out of the costs incurred by HAS of $92,149.49, together with an appropriate portion of the interest awarded to HAS in the FCCA Judgment.
7. As to the cost of the remedial work done by GT Mac in 2019, the position is substantially different. In the first place, the work by GT Mac was done about four years after the original work by Bradford. One would ordinarily expect that the rust and corrosion left in place by Bradford in 2015 may have worsened over time and become more expensive to remedy, and also that rust and corrosion may have appeared in new areas of the vessel in light of the findings that Bradford's work failed to protect the vessel adequately. The FCCA Judgment found that GT Mac sought to distinguish between remediation work and maintenance work and did so in areas of doubt in favour of characterising work as maintenance work. However, the real question, which the FCCA Judgment does not directly address, is whether the cost of $148,697.36 for the 2019 remedial work is attributable to correcting the original work by Bradford, as distinct from both correcting Bradford's original work and remedying further Property Damage (as defined in the Policy) beyond that which existed in 2015 which may have been caused by Bradford's original work.
8. In my view, IAL has failed to demonstrate that GT Mac's 2019 remedial work at a cost of $148,697.36 corrected only the work by Bradford, and not also any further deterioration of the vessel, whether of the existing areas of rust and corrosion which existed as at 2015, or of different areas of the vessel, or both. There was undoubtedly rust and corrosion which Bradford had painted over in 2015. However, it is in the nature of rust and corrosion that they will worsen over time, whether becoming more severe in the same areas or appearing in different areas. Mr Stanyon referred expressly to the scenario whereby rust that had been left in place had "migrated into the newly painted areas": FCCA Judgment at [76]. The FCCA Judgment contained a finding that, while it is true that there was a delay between the remedial works of 2016 and the quote given by GT Mac in October 2018, not all of the deficiencies were apparent until 2018 when the rust began to reveal itself to a far greater extent: [168].
9. In those circumstances, IAL has failed to discharge its onus of establishing that the cost of the rectification work in 2019 was entirely attributable to correcting Bradford's work in 2015, as distinct from remedying damage which was caused by Bradford's faulty workmanship. On the contrary, it is more likely than not that at least some of the work done in 2019 was concerned with removing rust and corrosion which was not present in 2015, either because it had become more severe by 2019, or because it had appeared in new areas by then, or both. It may well be that some of the cost of $148,697.36 for the 2019 remedial work would be properly characterised as correcting the 2015 work by Bradford. However, I am unable to find on the basis of the FCCA Judgment the extent to which that may have been the case. Accordingly, IAL has not discharged its onus of proving that any identified amount of the cost of the 2019 remedial work falls within the exclusion in cl 6.6.
10. In those circumstances, HAS is entitled to the full amount of $148,697.36 pursuant to the insuring clause, cl 3.1 of the Policy. There is no need to decide whether that part of the claim by HAS also falls within cl 3.4 of the Addendum, that being additional cover over and above the cover provided by the insuring cl 3.1.

1. Turning to the second issue, namely as to the operation of the costs cover in cll 4.1 and 4.2 of the Policy, cl 4.1(b) (read with cl 4.1(a)) provides relevantly that IAL will pay all legal costs awarded against Bradford in any claim or suit against Bradford alleging "such" Property Damage and seeking damages on account thereof. The word "such" refers back to the indemnity provided by the Policy, given the terms of the chapeau to cl 4.1. The costs of both the 2016 remedial work (to the extent of $25,000) and the 2019 remedial work (to the full extent of $148,697.36) fall within that cover. The Policy Limit applicable to the cost of the 2019 remedial work is $20,000,000 which has not been exceeded. If it is relevant to inquire into the extent to which the agreed costs of $320,000 are attributable to the 2019 remedial work, I find that even if the claim by HAS against Bradford had been limited to the cost of the 2019 remedial work, it is more likely than not that the costs incurred by HAS would have been materially the same as were actually incurred, in that the nature and extent of the 2015 remedial work would still have had to be proved by HAS in order to establish causation of loss.

1. In terms of the principal amount of compensation awarded in the FCCA Judgment, HAS is entitled to indemnity for $25,000 in respect of the cost of the 2015 remedial work, and the full amount of $148,697.36 of the 2019 remedial work, being a total of $173,697.36.
2. The amount of interest awarded in the FCCA Judgment over and above the amount of damages was $19,153.15. Given that HAS is entitled to indemnity in the amount of damages of $173,697.36, being 72.12% of the total amount of damages awarded in the FCCA Judgment of $240,846.85, HAS is entitled to 72.12% of the amount of the interest awarded of $19,153.15, being an amount of $13,813.25. IAL's liability to pay HAS that interest arises under the concept in cl 4.1(b) of "all interest accruing on Our portion of any judgment". The word "judgment" in that expression must refer to the amount of compensation awarded, rather than including any judgment by way of interest and costs, and the word "judgment" would appear to have a consistent meaning in cl 4.2(a).
3. Accordingly, out of the $260,000 awarded by way of damages and interest in the FCCA Judgment, HAS is entitled to indemnity for $173,697.36 plus $13,813.25, being a total of $187,510.61.
4. In addition, HAS is entitled to indemnity for its costs of $320,000 pursuant to the FCCA Judgment.
5. The total amount of the indemnity for which IAL is liable to HAS is therefore $507,510.61. HAS is entitled to interest under s 51A of the Federal Court of Australia Act 1976 (Cth).

1. Both parties expressed a preference to deal with the question of costs of these proceedings after delivery of reasons for judgment. My preliminary view is that HAS has succeeded (although not to the full extent claimed) and is entitled to an order for costs in its favour. It is conceivable that HAS will seek a special order for costs, whether by way of indemnity costs by reason of any offers of compromise, or by way of a lump sum order as to costs, or both. Accordingly, I will set a timetable for the exchange of affidavits and written submissions in relation to costs. I anticipate that if a claim for a lump sum order is made, the evidence to be exchanged will include sufficient evidence for me to quantify the relevant amount, whether on the ordinary basis, or on the indemnity basis, or both. I also anticipate deciding the question of costs on the papers.

I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman.