JB Metal Roofing Pty Ltd v Garry Denson Metal Roofing Pty Ltd

District Court of NSW|2008-11-21|Before: Mr P

CITATION: JB Metal Roofing Pty Ltd v Garry Denson Metal Roofing Pty Ltd [2008] NSWDC 266

Finding that the insuring clause in the policy of insurance responds to the claim made on the policy. DECISION: 2. Finding that the Respondent / Proposed Second Defendant is not entitled to disclaim liability to indemnify the Defendant under the policy. 3. The Applicant / Plaintiff's costs of the determination of the separate question are to be paid by the Respondent / Proposed Second Defendant.

CATCHWORDS: INSURANCE - construction of covering clause in policy of insurance. - SEPARATE QUESTION - determination of whether covering clause in policy of insurance responds to the subrogated claim for indemnity made by the Plaintiff against the Defendant's insurer following an earlier claim paid by the Plaintiff's insurer consequent upon the death of a worker employed by the Plaintiff.

LEGISLATION CITED: Law Reform (Miscellaneous Provisions) Act, 1946 Compensation to Relatives Act, 1897

Tzaidas v Child (2004) 61 NSWLR 18 Zurich Australia Insurance Ltd v Royal Pearl Pty Ltd [2006] NSWCA 328 CASES CITED: Commonwealth of Australia v National Mutual Fire Insurance [1980] 2 NSWLR 719 Allianz Australia Finance Ltd v Wentworthville Real Estate Pty Ltd & Ors [2004] NSWCA 100 Unsworth v Commissioner for Railways [1958] HC 41; (1958) 101 CLR 73

PARTIES: JB Metal Roofing Pty Ltd (Plaintiff) Garry Denson Metal Roofing Pty Ltd (Defendant)

COUNSEL: Mr D Feller SC with Mr P Perry (Applicant / Plaintiff) Mr JE Maconachie QC with Mr N Chen (Respondent / Proposed Second Defendant)

SOLICITORS: Vardandega Roberts (Applicant / Plaintiff) Wendy Blacker (Respondent / Proposed Second Defendant)

This motion involves a subrogated application by the Plaintiff to join an insurer to the proceedings as the proposed Second Defendant pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act, 1946. A discrete insurance issue has been identified for determination as a separate question.

The question identified for separate determination is: "Does the covering clause of the policy respond to the claim made for statutory contribution pursuant to s. 5 of the Law Reform (Miscellaneous Provisions) Act, 1946 made in the Statement of Claim or, if leave be granted to amend the Statement of claim, the Amended Statement of Claim?"

This question requires construction of the terms of the covering clause in the policy of insurance which in turn requires a consideration of the context in which the claim has arisen.

On Wednesday 15 October 2003, the deceased, Joel Exner, who was an employee of the Plaintiff, fell 12 metres to his death on a construction site known as ECI Business Park at Walgrove Road, Eastern Creek, where multiple contractors were carrying out works. The incident occurred in the course of the deceased's employment with the Plaintiff.

On 16 April 2007 the Plaintiff's workers' compensation insurer, Allianz Workers Compensation (NSW) Ltd and Australand Holdings Pty Ltd, the head contractor on the site at the time of the death of the deceased, settled by way of compromise an action for damages brought by the mother of the deceased. That claim arose from the death of the deceased and sought damages for nervous shock and damages under the provisions of the Compensation to Relatives Act, 1897.

The Plaintiff claims that it compromised the action brought by the mother of the deceased in a reasonable amount.

On 10 October 2007 the Plaintiff filed the current proceedings against the Defendant claiming damages. That claim, which was initially based on an alleged breach of contract and negligence, claimed indemnity in respect of the amount of the compromise.

At some stage the Defendant company became de-registered however on 3 August 2007 that company was re-registered by the Australian Securities and Investments Commission following related Supreme Court proceedings because at the time of the incident in which the deceased was killed the Defendant company had a relevant policy of insurance issued by GIO General Insurance Limited ("the insurer").

By way of subrogated right the Plaintiff's insurer seeks indemnity from the Defendant's insurer in respect of the amount of the compromise settlement it reached with the mother of the deceased. The Plaintiff seeks this remedy pursuant to s 5(1)(c) of the Act. The Plaintiff contends that the Defendant is a joint tort-feasor for the purposes of that section.

The Defendant's insurer maintains it is entitled to disclaim liability under the policy and seeks an order to this effect pursuant to s 6(4) of the Act which, if found to be applicable, provides for a statutory prohibition to the Plaintiff's claim in respect of the relief claimed against the insurer.

On 23 July 2008 the Plaintiff filed the current Notice of Motion naming GIO General Insurance Limited as the Respondent and Proposed Second Defendant in the proceedings. To that end a proposed Amended Statement of Claim was prepared which contained claims that were framed in contract, breach of statutory duty and in negligence. Ultimately, the Plaintiff abandoned the counts framed in breach of contract and breach of statutory duty and now only relies upon a claim framed in negligence.

On 5 September 2008 an order was made for the determination of a separate question concerning the cover provided by the relevant policy of insurance.

At the time of the death of Joel Exner the Defendant held a business policy of insurance. The covering clause of that policy relevantly stated: "We will insure you, under the terms of this policy and subject to the limits set out below, for any amount you may become legally liable to pay as compensation for personal injury or damage to property, happening during the period of insurance, and caused by an occurrence connected with your business."

The Plaintiff has read two affidavits of Nyree Quirk that were respectively sworn on 23 July 2008 and 2 September 2008.

The first affidavit of Nyree Quirk, sworn on 23 July 2008, annexed the relevant policy of insurance issued by GIO General Limited.

Annexure "U" to that affidavit comprised the Public & Products Liability policy section which provided relevant cover to Garry Denson Metal Roofing Pty Ltd for claims for compensation for personal injury. This annexure activated the covering clause within the Policy which comprised Annexure "V".

The policy defined the meaning of personal injury to include "death, bodily injury, illness, sickness, disease, disability, mental injury, nervous shock"

The second affidavit of Nyree Quirk, sworn on 2 September 2008, outlined aspects of the procedural history of the matter relevant to the costs incurred as a consequence of various amendments to the Plaintiff's Statement of Claim and various changes to the formulation of the claimed basis for the proposed joinder to the proceedings of GIO General Insurance Limited.

Section 5 of the Law Reform (Miscellaneous Provisions) Act, 1946 enables proceedings to be brought for contribution between joint and several tort-feasors. The provision extends to circumstances where the proposed tort-feasor would, if sued, have been liable.

Section 6 of the Act enables a charge on insurance moneys payable against liability in tort subject to sub-section (4) which requires that no such proceedings shall be commenced without the leave of the Court. Such leave shall not be granted where the insurer is entitled to disclaim under the policy.

The subject matter of the dispute is the construction of the words "as compensation for personal injury".

On behalf of the Plaintiff company, which now seeks the benefit of the policy issued by the Respondent / Proposed Second Defendant, Mr Feller SC has submitted that these words in the insuring clause of the policy respond to the claim which was made by the mother of the deceased and paid by the Plaintiff's insurer. It is further argued that these words also respond to the subrogated claim for contribution as brought by the Plaintiff against the Defendant and Proposed Second Defendant.

On behalf of the Respondent / Proposed Second Defendant insurer, Mr Maconachie QC has submitted that the policy does not respond to the claim as the damages sought to the recovered by the Plaintiff company by way of subrogated right are properly characterised as damages for pure economic loss and therefore did not constitute a payment of damages "as compensation for personal injury".

On behalf of the Applicant / Plaintiff Mr Feller SC submitted that since the deceased was killed in an occurrence connected with the Defendant's business and this occurrence was one which gave rise to a liability in the defendant to pay an amount as compensation for personal injury to which s 6 of the Law Reform (Miscellaneous Provisions) Act, 1946 applies because the Defendant had a relevant policy of insurance which is covered by sub-section (4) of s 6 of the Act.

On behalf of the Respondent Mr Maconachie QC submitted that the Plaintiff's claim, as distinct from the claim made by Mrs Exner, is not a claim for personal injury or property damage but is rather, a claim for pure economic loss. As a consequence it was submitted this is a circumstance that falls outside the purview of s 6 of the Act and, as a consequence, it is argued, the question for determination should be answered in the negative.

A review of the evidence and the submissions does not reveal or suggest any disentitling factors of a discretionary nature that would contra-indicate the joinder of the insurer : Tzaidas v Child (2004) 61 NSWLR 18. Accordingly, the matter of the separate question falls to be determined on a construction of the relevant words within the insuring or covering clause of the policy when these words are aligned with the nature of the claim.

Mr Maconachie QC argues that the word "for" in the insuring clause phrase "as compensation for personal injury" should be read narrowly. He argues that the word "as" should also be given a narrow construction.

In approaching the construction of the relevant elements within the insuring clause it is necessary to establish the relevant context in which the insuring clause appears. This requires a consideration of the policy as a whole.

The Public Products Liability Section within the policy found in Annexure "U" to Ms Quirk's first affidavit, by its terms is stated to cover claims for compensation for personal injury or property as noted in the policy wording. This section enlivens the Business Insurance Policy found in Annexure "V" to the affidavit and refers to 13 areas of potential legal liability and in particular, Policy Section 7 : Public and Products Liability which appears in Annexure "V" at page 26. Within the policy there are General Conditions and General Claims Conditions, including the right of subrogated recovery as well as exclusion clauses.

The overall context of the policy is a contract to cover legal liability for the payment of damages on the happening of certain contemplated events.

What then are those events and is the subject matter of the compromise settlement in the context of this claim within or outwith those events. Simply put, the successive questions are : did the compromise settlement, as paid by the Plaintiff's insurer to the deceased's mother, have the character of compensation and if so, once that compensation was paid by the insurer, did it retain its compensatory character in the accounts of the paying insurer or did it become an economic loss which the insurer now seeks to coup by making a claim for indemnity against the Respondent / Proposed Second Defendant?

There is no doubt that the payment to the deceased's mother should be characterised as compensation. Before dealing with the textual matters arising from the covering clause in the policy a consideration of the claims context is important.

The deceased's mother did not make a claim against the Defendant company nor did she make a claim against its insurer. It is not necessary for me to speculate as to the reasons for this circumstance. However, it is clear that if she had concurrently brought such a claim against the Plaintiff and the Defendant in the same proceedings the Respondent's Business Policy would have responded to such a claim if liability had been accepted or established in those proceedings and any payment by the Respondent insurer which contributed to the settlement or a judgment would have been "as compensation for personal injury".

In view of that context, the Plaintiff has argued that the economic loss distinction sought to be made by the Respondent / Proposed Defendant, properly understood, is "hair splitting".

In the present case textual considerations are of critical importance.

If the Respondent's submission to the effect that the Plaintiff's claim is for indemnity for pure economic loss rather than as compensation for personal injury is correct, the words "as" and "for" appearing before and after "compensation" in the insuring clause necessarily require a narrow construction to achieve that result.

There is ample authority for the proposition that the word "for" in the context of personal injury should be construed more narrowly than the phrase "in respect of".

I approach the interpretation of the clause in question in the same manner as one would interpret a statute but with the focus of the context of a policy of insurance : Zurich Australia Insurance Ltd v Royal Pearl Pty Ltd [2006] NSWCA 328 per Spigelman CJ at [38] - [40].

I construe the composite term "as compensation" to denote the payment characteristic to be of a compensatory nature in the context of a claim for damages for injury which includes death. Allowing that such an approach may be overly simplistic, it requires testing by examining its elements.

A contextual consideration of the isolated term compensation is instructive. In Commonwealth of Australia v National Mutual Fire Insurance [1980] 2 NSWLR 719 at 722 [6] Rogers J said: " (6) It is self evident that s 6 of the 1946 Act is not restricted to policies of insurance providing cover against liability in respect of personal injury. Thus, for example, a public liability policy providing cover to a construction company against damage caused as a consequence of building operations, would appropriately come within the scope of the respect of such damage should not enjoy the appellation "compensation". Reference to standard judicial dictionaries yields ready illustration of the wide field of monetary payments ordered by courts which are described as "compensation"."

I find the foregoing approach to be persuasive in characterising the payment made by the Plaintiff in this instance. Guided by that view I find that the word compensation as it appears in the covering clause in this case permits a wide range of monetary payments to have a compensatory character.

Against the preceding view is the decision in Allianz Australia Finance Ltd v Wentworthville Real Estate Pty Ltd trading as Starr Partners (Wentworthville) & Ors [2004] NSWCA 100 in which the court, per Mason P concluded at [47] that an insurer's claim for contribution / indemnity against economic loss did not assume the character of a claim for bodily injury in the context of a claim for contribution against a joint or concurrent tort-feasor pursuant to legislation similar to s 5 of the Law Reform (Miscellaneous Provisions) Act, 1946 following Unsworth v Commissioner for Railways [1958] HC 41; (1958) 101 CLR 73.

It is therefore necessary to consider the surrounding words "as" and "for" to determine whether these words assist in revealing the contextual meaning of the composite phrase "as compensation for".

In this regard I construe the contextual meaning of "as" in its juxtaposition with "compensation" to be "by way of" or "with similitude" to compensation.

This then leads to a consideration of the contextual meaning of "for".

It has already been determined that the term "for" is to be seen as being of protean character especially where it is used in juxtaposition with the word "personal injury" and it is therefore capable of the broader meaning "in respect" of personal injury : Zurich Australia Insurance Ltd v Royal Pearl Pty Ltd [2006] NSWCA 328 per Spigelman CJ at [63] and [75].

In giving the word "for" this broader meaning it does not narrowly confine the meaning of the term "compensation" but rather it extends its meaning in the wider sense of a wide range of monetary payments of a compensatory character.

The Respondent / Proposed Second Defendant argues that once the Plaintiff's claim for contribution to the payment of Mrs Exner's claim is characterised as pure economic loss that puts an end to the argument for contribution as it is not a payment for compensation for personal injury within the meaning of the covering clause in the policy. Whilst that argument is superficially attractive, in my view it is not applicable in this case.

My reason for coming to this view emerges from a review of the context of the policy as a whole : Zurich Australia Insurance Ltd v Royal Pearl Pty Ltd [2006] NSWCA 328 per Spigelman CJ at [37] - [40]. This context includes the exclusion clauses as well as that section of the Claims Conditions which provide for the insurer's subrogated right of recovery.

A review of the exclusion clauses to the policy does not reveal any limitation on the responsiveness of the insuring clause to the claim now made.

The insurer's right of recovery is to be found at page 50 in the General Claims Conditions portion of the policy and provides: " 5. Rights of recovery We shall have the right to take action or institute legal proceedings, in your name, for the recovery of payments made and expenses incurred in relation to any claim insured by this policy, against any person, company or entity legally liable to you in respect of that claim. You must provide us with full information and all reasonable assistance in the recovery of those payments or expenses.

You must not enter into any agreement or make any admissions that have the effect of limiting or excluding your rights and our rights to recover payments and expenses without first obtaining our approval in writing to do so."

In my view the juxtaposition of the compensatory character of the payment made by the Plaintiff to Mrs Exner with the insurer's subrogated right to recover derogates from and contradicts the suggested characterisation of the settlement monies as pure economic loss.

This analysis compels me to to the view that the Plaintiff's submissions on the separate question should prevail.

I therefore conclude that the covering clause of the policy of insurance does respond to the subrogated claim made by the Plaintiff.

I make the following orders: (a) I construe that the insuring clause of the policy of insurance does respond to the claim so that the question for determination is answered in the affirmative; (b) The Respondent is not entitled to disclaim liability for the claim made by the Plaintiff against the Defendant's insurer; (c) The costs of the determination of the separate question are to be paid by the Respondent / Proposed Second Defendant.

(d) Liberty to apply on 7 days notice should consequential orders be required.

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.

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Judgment (66 paragraphs)

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Cases Cited (4)