The amount of contribution [NB: Resolution of this issue is deferred]
23. In the event that the Euclidian interests are entitled to contribution from CGU, how should that contribution be quantified?"
Relevant terms of the lease
7 Clause 8 of the lease dealt with insurance and damage. By cl 8.1.2, Emibarb was required to keep current "an insurance policy noting the interest of the landlord as trustee and the Minister as owner of the property covering … damage or destruction from any cause to or of all improvements comprised or erected on the property."
8 Clause 8.2 dealt with the consequences of damage to (including destruction of) the property. By cl 8.2.4, in the event of damage or destruction, Emibarb was required to repair that damage or destruction within a reasonable time if the trustee requested it in writing to do so.
Relevant provisions of the Euclidian policy
9 It was common ground that Euclidian was obliged to indemnify Emibarb under the policy, and that the payment for or towards the cost of reinstatement was a payment that Euclidian was obliged to make. Accordingly, it is not necessary to set out the insuring clause.
10 The memoranda to section 1 of the policy (section 1 is the relevant section, dealing with "Material Loss or Damage") contained the following provision:
"Interests Of Other Parties
1. The insurable interest of only those lessors, financiers, trustees, mortgagors, owners and/all other parties specifically noted in the records of the Insured shall be automatically included without notification or specification; the nature and extent of such interest to be disclosed in event of damage.
… "
Relevant provisions of the CGU policy
11 In principle, and assuming for the moment that the Council had an insurable interest in the premises or that the trustee was entitled to indemnity under the CGU policy, the description of the premises fell within the insuring clause of the CGU policy, and within the definition of "the indemnity" in section 1 of that policy (which dealt with material loss or damage). Accordingly, it is not necessary to set out those provisions.
12 Again, the policy made provision for the interests of other parties. It was in terms that are either identical to or in no material way distinguishable from the equivalent provision in the Euclidian policy quoted in para [10] above.
13 Mr S R Donaldson SC, who appeared with Mr R A Cavanagh of counsel for CGU, conceded that the trustee, either in its own right as trustee or as lessor (or sub lessor) named in the lease, was "specifically noted in the records of the" Council for the purposes of that clause.
14 One of the endorsements to the CGU policy dealt with the "basis of settlement". There was a specified basis of settlement for "any Property Insured where values have been assigned". It was Euclidian's case that the "Kiosk/Restaurant" occupying either the whole or part of the premises at Stuart Park was property insured with an assigned value, and that the assigned value was $900,000. I am not sure that this is correct. The schedule to which Mr G M Watson SC (who appeared with Mr A P Coleman of counsel for Euclidian) referred provides a "Reinstatement with New Value" of $800,000, additional amounts of $5,000 and $40,000 for extra cost of reinstatement and removal of debris, and a "Limit of Liability" of $900,000.
15 The endorsements to the CGU policy also included what the parties called a "DIC" clause. That reads as follows:
" DIFFERENCE IN CONDITIONS
In the event of any of the Property Insured hereunder is subject to a guarantee, warranty or maintenance agreement in respect of Damage, then this Policy will apply to the extent that such guarantee, warranty or maintenance agreement does not meet the extent of any loss which is or would be otherwise insured by this Policy."
16 Mr Donaldson referred to some documents that, he said, showed that CGU had charged a lower rate for property (including the premises) that was subject to the DIC clause. He submitted that this reflected CGU's perception of a lower exposure where others had some obligation to make good losses that would otherwise be the subject of indemnity under the policy. Mr Watson did not accept this. He submitted that the lower rate was equally referable to the possibility of the benefit of contribution on the basis of double insurance.
Contribution between insurers: the relevant principles
17 The principles are of some antiquity. They are easy to express, but in many cases difficult to apply.
Entitlement to contribution
18 In Albion Insurance Company Limited v Government Insurance Office of New South Wales (1969) 121 CLR 342, Barwick CJ, McTiernan and Menzies JJ said at 345 that double insurance exists "when an assured is insured against the same risk with two independent insurers". Their Honours said at 346 that where each insurer covers a risk that gives rise to the claim, then each must contribute to the satisfaction of that claim.
19 Their Honours said at 346 that the test of double insurance was simple. It asks "whether payment by one insurer of the policy holder's claim for indemnity would provide the other insurer with a defence to a like claim against it." If payment by one insurer would indemnify the policy holder against the risk, so that "[h]e had received all that he was entitled to receive under both policies" then that payment made by one insurer would discharge them both. Thus, their Honours said, "payment by one is made for the benefit of both, and, contribution is equity."
20 In the same case, Kitto J (with whom Windeyer J agreed) said at 352 that "[w]hat attracts the right of contribution between insurers … is not any similarity between the relevant insurance contracts as regards their general nature or purpose or the extent of the rights and obligations they create, but … simply the fact that each contract is a contract of indemnity and covers the identical loss that the identical insured has sustained".
21 There was some dispute between the parties as to whether (as Mr Watson put it) the doctrine was specific to the law of insurance, or whether (as Mr Donaldson put it) the doctrine was an application of the equitable obligation of parties under a co-ordinate liability for the one loss to contribute rateably to the satisfaction of that loss. Kitto J in Albion made it plain (at 350) that "[t]he general doctrine of contribution … forms part of the common law" although, as his Honour had said earlier on the same page, it was analogous to the equitable obligation of those under a co-ordinate liability to share the burden pro rata; and both doctrines, according to his Honour, had "natural justice" as their basis.
Basis of assessment of contribution
22 Where the obligation to contribute arises it is, as I have said, an obligation to contribute rateably to the loss. The practical expression of that obligation has varied from case to case. It was considered by Helsham J in Government Insurance Office of New South Wales v Crowley (1975) 2 NSWLR 78. His Honour said at 83 that the Court considering the question of contribution was entitled "to take into consideration all matters which go towards ensuring that there is a just result."
23 The dispute in Crowley related to the Sydney Turf Club's liability to an employee injured in the course of his duties. That liability (including for the employee's costs) was quantified at $43,768. The Club was entitled to be indemnified by two policies. One of those policies covered many risks, including the Club's statutory and common law liabilities to its employees; there was an overall limit of liability of $2 million at the relevant time. The other was a specific policy under the provision of the Workers' Compensation Act 1926, covering the Club's liability to its employees under that Act and at common law, with a limit of liability of $40,000.
24 Helsham J rejected the proposition that contribution should be prorated by reference to each insurer's proportion of the aggregate level of cover. He said at 84-85 "that justice would best be served" by prorating liability according to the actual liability of the two insurers for the particular claim. For the workers' compensation insurer, the amount of that liability was the policy limit: $40,000. For the other insurer, the amount was the full amount of the claim including costs, $43,768. That approach created an aggregate cover of $83,768, by reference to which each insurer's contribution was prorated. His Honour found support for this approach in the judgment of Hamilton J in American Surety Co of New York v Wrightson (1910) 103 L.T. 663. In that case, his Lordship treated the non specific policy as being a specific policy insuring against the event to the extent of the loss, aggregated the "pool" of insurance available on that basis, and prorated the two insurers' contributions accordingly.
25 Helsham J accepted (at 83-84) that "in a case where the amount of the cover bears some direct relationship to the amount of the loss", an approach of taking "the aggregate of the cover and then [fixing] the rateable contribution by reference to it" might be appropriate. However, his Honour said at 84, that approach would not be fair in the present case:
"Neither insurance policy … related solely to the amount suffered; each indemnified against a wide range of events, with each amount of cover fixed no doubt by reference to what was being indemnified against, and both covering almost fortuitously, as it were, and indeed contrary to the assertions of both insurers, the particular loss that occurred. In no way would the respective amounts of the insurance cover present any basis for adjusting in any fair manner what proportion each should bear of the loss."
Approach to the agreed issues
26 For the reasons that I have indicated in para [5] above, I think that the better view of the deed of lease is that it is the trustee that is the lessor. On that basis, I think, it is appropriate to consider the competing submissions on that basis.
27 In my view, for reasons to which I next turn, the claim for contribution must fail. I therefore do not propose to address the individual issues.
The claim for contribution fails
28 Euclidian would be entitled to contribution if: