Limit (No 3) Limited v ACE Insurance Limited [2009] NSWSC 514 | Case summary

Limit (No 3) Limited v ACE Insurance Limited [2009] NSWSC 514 | Case summary | Zoe

[6]

UNITED KINGDOM CASES Acton v Blundell (1843) 12 M. & W. 324; 152 ER 1223 Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251 Becton Dickinson UK Ltd v Zwebner [1989] QB 208 Brook's Wharf and Bull Wharf Ltd v Goodman Bros [1937] 1 KB 534 Craythorne v Swinburne (1807) 14 Ves Jun 160 Dalton v Angus (1881) 6 App Cas 740 Dawson's Field Arbitration (March 1972) Dering v Earl of Winchelsea (1787) 1 Cox 318; 29 ER 1184 Devco Holder Ltd and Burrows & Paine Ltd v Legal and General Assurance Society Ltd [1993] 2 Lloyd's Rep 567 Duncan Fox & Co v North and South Wales Bank (1880-81) 6 App Cas 1 England v Marsden (1866) LR 1 CP 529 Esso Petroleum Co Ltd v Hall Russell & Co Ltd (The Esso Bernicia) [1989] AC 643 Exall v Partridge (1799) 101 ER 1405 Fraser v B N Furman (Production) Ltd (1967) 3 All ER 57 Gold v Patman [1958] 2 All ER 497 Investors Compensation Scheme Limited v West Bromwich Society [1998] 1 WLR 896 Kennaway v Thompson [1981] QB 88 Kuwait Airways Corporation v Kuwait Insurance Co SAK [1996] 1 Lloyd's Rep 664 Langbrook Properties Ltd v Surrey County Council [1969] 3 All ER 1424 Moule v Garrett (1872) LR 7 Ex 101 Netherlands Insurance Co Est 1845 Ltd v Karl Ljungberg & Co AB, The Mammoth Pine [1986] 3 All ER 767 Owen v Tate [1975] 2 All ER 129 Re Gasbourne Pty Ltd [1984] VR 801 Ruabon Steamship Co Ltd v London Assurance [1900] AC 6 Scholefield Goodman & Sons Ltd v Zyngier [1986] AC 562 Scott v Copenhagen Reinsurance Co (UK) Ltd [2003] 2 All ER (Comm) 190 Selous Street Properties Ltd v Oronel Fabrics Pty Ltd [1984] 1 EGLR 50; (1984) 270 E.G. 643 Stephens v Anglian Water Authority [1987] 1 WLR 1381 Wayne Tank & Pump Co Ltd v Employers Liability Assurance Corp Ltd [1974] 1 QB 57 SINGAPORE CASES Afro Asia Shipping Co. Pte Ltd v Da Zhong Investment Pte Ltd [2004] 2 SLR 117 OTF Aquarium v Lian Shing Construction Co Pte Ltd (Liberty Insurance Pte Ltd, Third Party) [2007] SGHC 122 Loh Siew Keng v Seng Huat Construction Pte Ltd [1998] SCHC 197 Tesa Tape Asia Pacific Pte Ltd v Wing Seng Logistics Pte Ltd [2006] SGHC 73 Wong Jin Fah v L&M Prestressing Pte Ltd & Ors [2001] 4 SLR 529 Xpress Print Pte Ltd v Monocrafts Pte Ltd [2000] 3 SLR 545 Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] SGCA 27 AUSTRALIAN CASES Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 Albion Insurance Company Ltd v Body Corporate Strata Plan No 4303 [1983] 2 VR 339 Allstate Exploration NL v QBE Insurance (Australia) Ltd [2008] VSCA 148 AMP Workers Compensation Services (NSW) Ltd v QBE Insurance Ltd [2001] NSWCA 267; (2001) 53 NSWLR 35 Australian Eagle Insurance Co Ltd v Mutual Acceptance (Insurance) Pty Ltd [1983] 3 NSWLR 59 Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Limited [2008] NSWCA 243 CASES CITED : Beresford v Royal Insurance Co Ltd [1938] AC 586 Bowling v Wienert [1978] 2 NSWLR 287 Burke v LFOT Pty Ltd [2002] HCA 17 CGU Insurance Ltd v Lawless [2008] VSCA 38 Clayton v Mutual Community General Insurance Pty Ltd (1995) 64 SASR 353 Cockburn v GIO Finance Ltd (No 2) [2001] NSWCA 177 Commercial and General Insurance Co Ltd v Government Insurance Office (NSW) (1973) 129 CLR 374 Distillers Co Bio-Chemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd (1970) 130 CLR 1 Drayton v Martin (1996) 67 FCR 1 Edwards v Insurance Office of Australia Ltd (1933) 34 SR (NSW) 88 Fire & All Risks Insurance Co Ltd v Powell [1966] VR 513 Fitzpatrick v Job t/as Jobs Engineering [2007] WASCA 63 GIO General Ltd v Newcastle City Council (1996) 38 NSWLR 558 Glebe Island Terminal Pty Ltd v Continental Seagram Pty Ltd (The Antwerpen) (1993) 40 NSWLR 206 Government Insurance Office (NSW) v Crowley [1975] 2 NSWLR 78 Government Insurance Office (NSW) v RJ Green & Lloyd Pty Ltd (1966) 114 CLR 437 GRE Insurance Ltd v QBE Insurance Ltd [1985] VR 83 Israel v Foreshore Properties Ltd (in liq) (1980) 54 ALJR 421 Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 Kodak (Australasia) Pty Ltd v Retail Traders Mutual Indemnity Insurance Association (1942) 42 SR (NSW) 231; 59 WN 197 Legal and General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390 Lucas v CMT Construction & Metropolitan Tunnels (1986) 4 ANZ Ins Cas 60-752 Lumley General Insurance Ltd v Oceanfast Marine Pty Ltd [2001] NSWCA 479 Lumley General Insurance Ltd v QBE Insurance (Australia) Ltd [2008] VSC 216 McColl's Wholesale Pty Ltd v State Bank of NSW [1984] 3 NSWLR 365 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 Penrith City Council v Government Insurance Office (1991) 24 NSWLR 564 Peterson v Union de Assurance Ltd Paris IARD [1985] ANZ Ins Cas 61-24 Provincial Insurance Aust Pty Ltd v Consolidated Wood Products (1991) 25 NSWLR 541 State Bank of Victoria v Parry (1990) 2 ACSR 15 Street & Halls v Retravision (NSW) Pty Ltd (1995) 56 FCR 588 Suncorp Metway Insurance Ltd v Landridge Pty Ltd [2005] VSCA 223 Sydney Turf Club v Crowley (1972) 126 CLR 420 Sydney Turf Club v Crowley [1971] 1 NSWLR 724 Transfield Services (Australia) v Hall [2008] NSWCA 294 VACC Insurance Ltd v BP Australia Ltd [1999] NSWCA 427 Verna Trading Pty Limited v New India Assurance Limited [1991] 1 VR 129 Vero Insurance Ltd v Power Technologies Pty Ltd [2007] NSWCA 226 Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 Workcover Queensland v Suncorp Metway Insurance Ltd [2005] QCA 155 Xuereb v Viola (1989) 18 NSWLR 453 CANADIAN CASES Chemetics International Ltd v Commercial Union Assurance Company of Canada (1984) 11 DLR (4th) 754 UNITED STATES CASES Aetna Casualty and Surety Co v Freyer 411 NE 2d 1157 (1980) Hanover Insurance Group v Cameron 298 A 2d 715 (1973) SR International Business Insurance Co Ltd v World Trade Centre Properties LLC F Supp 2d 2002

[14]

The Issues [9] The ACE policy [9(1)] The Lloyds policy [9(13)] Further Issues [9(23)] The Properties and Infrastructure Damaged [10] The JV Contract with PowerGrid [11] The ACE policy [19] The Lloyds policy [20] The Project Background [21] Dr Redman's Approach [38] Woodlands shaft [38(1)] The Gambas shaft [38(11)] The TBM/G4 problem [38(12)] The TBM/dyke problem [38(15)] Dr Pells' Approach [39] Credibility of Witnesses [50] Mr Embery [50] Other Witnesses [53] Dr Pells [54] Mr Cooper [58] ISSUE 1: What was the cause of the damage to the property of third party property owners (including PowerGrid)? [60] The Woodlands and Gambas shafts [64] The TBM/G4 problem [93] The TBM/dyke problem [94] ISSUE 2: Did the cause (or causes) of damage give rise to a liability in the JV to the third party property owners? [103] ISSUE 3: Has the JV incurred a 'legal liability' within the meaning of the insuring clause? [114] ISSUE 4: Was the damage sustained within the ACE policy period? [129] ISSUE 5: What is the effect of GC 14 in the ACE policy? [137] ISSUE 6: Was there removal or weakening of support? [165] ISSUE 7: Was there any negligent act by the JV? [166] ISSUE 8: What is the effect of the Professional Services Exclusion in the ACE policy? [167] ISSUE 9: If the PSE and GC 14 applies, is ACE's liability to indemnify excluded by the PSE in ACE policy? [190] ISSUE 10: Does the rule in Wayne Tank operate to exclude any liability of the JV where the cause was the result of both professional and non-professional services? [191] ISSUE 11: Was the TBM/G4 problem an intentional act? [194] ISSUE 12: How many 'occurrences' were there? [195] ISSUE 13: Cause of damage under Lloyds policy. [200] ISSUE 14: Has the JV incurred a 'legal liability' within the meaning of the insuring clause of Lloyds policy? [201] ISSUE 15: Was the JV 'unable to obtain an admission of liability' from ACE? [202] ISSUE 16: If so, was Lloyds liable to indemnify the JV under Section 1? [206] ISSUE 17: If so, was that liability excluded under Section 1 by the professional indemnity exception in clause 5.11 or the reasonable precautions condition in condition 7.3? [216] Clause 5.11 [216] Reasonable Precautions [217] ISSUE 18: Does the rule in Wayne Tank operate to exclude any liability of the JV where the cause was the result of both professional and non-professional services? [252] ISSUE 19: Did sub-clause 1.17(b) of the Lloyds policy operate so that cover afforded under the Lloyds policy was the same as that provided under the ACE policy? If so, what was the extent of this cover having regard to proper construction of the PSE and GC 14 of the ACE policy? [253] ISSUE 20: Was Lloyds liable to indemnify the JV by reason of the 'drop down cover' provision in sub-clause 1.17(c) even if an exclusion in the Lloyds policy otherwise applied? [254] ISSUE 21: How many 'occurrences' were there for purposes of Lloyds policy? [255] ISSUE 22: If not liable under Section 1, were Lloyds liable under Section 2? [256] ISSUE 23: Recoupment, indemnity or contribution? [272] ISSUE 24: Quantum [317] Conclusion [321]

[47]

(4) The Contractor shall forthwith and as a condition precedent to the commencement of any work under this Contract insure against the aforesaid risks or matters in the joint names of the Company, the Engineer and the Contractor with an insurance company to be approved by the Company in writing and for such amount as the Company may direct. (Please refer to the Appendix for the amount.) The Contractor shall make all payments necessary for the above purposes on the first day on which the same ought to be paid. The Contractor shall deposit the policy or policies for such insurance with the Company before the commencement of any work under this Contract and shall produce on demand to the Company the receipt of each of the said payments. Provided always that if the Contractor shall at any time fail to keep himself insured as aforesaid the Company may do all things necessary to effect or maintain such insurance and deduct such moneys expended by the Company for that purpose from any moneys due or to become due to the Contractor." 15 General Condition 28 provided: "(1) The Contractor shall forthwith and as a condition precedent to the commencement of any work under this Contract take out at his own expense with an insurance company to be approved by the Company in writing a policy or policies of insurance indemnifying the Contractor, the Company and the Engineer from all liabilities arising out of claims by any and every workman employed in and for the performance of this Contract for payment of compensation under or by virtue of the Workmen's Compensation Act or any other law amending or replacing such Act and from all costs and expenses incidental or consequential thereto. (2) The said policy or policies so taken out shall be deposited with the Company and the Contractor shall maintain it or them in full force and effect by payment of all premiums from time to time of the first day on which the same ought to be paid and until the completion of this Contract and upon demand the Contractor shall produce to the Company the last receipt for payment of such premiums." 16 General Condition 29 provided: "(1) The Contractor shall forthwith and as a condition precedent to the commencement of any work under this Contract insure against loss or damage by fire or other causes all works and buildings constructed or in the course of construction in pursuance of or for the purposes of this Contract and all materials and other things delivered on to the site and approved by the Engineer and ready for incorporation in such works and buildings and shall keep the same insured until such works, buildings and things respectively are handed over to the Company. (2) The said insurance shall be effected with an insurance company to be approved in writing by the Company and in the joint names of the Company, the Engineer and the Contractor for the full value of the works executed together with all materials on site including any materials supplied by or the property of the Company; and the Contractor shall deposit with the Company the policies and the receipts for the premiums paid for such insurance. (3) In case of failure by the Contractor to effect or renew such insurance the Company may effect or renew such insurance and pay the premium in respect thereof and deduct the amount so expended from any moneys due or to become due to the Contractor. (4) In the event of loss or damage by fire or other causes to any works, buildings or things insured under this clause all moneys received by the Company under the insurance policies shall be paid by the Company to the Contractor by such instalments as the Company may deem reasonable and shall be applied by the Contractor in or towards the rebuilding, repair or replacement of the works, buildings, materials or things destroyed or damaged and the Contractor shall on receipt of such moneys proceed with all due diligence to effect such rebuilding, repair or replacement as aforesaid and shall have no claim to any payment in respect thereof beyond the payment to him of the said moneys; provided that in case of any loss or damage by fire or other causes as aforesaid the Company shall allow the Contractor such extension of time for the performance of this Contract as shall be just and reasonable."

[59]

(9) GC 14 was in the following terms: "The clauses contained in this special endorsement shall not in any way be deleted, altered or amended by other provisions in the policies and any other subsequent endorsements and where contradiction arises, this special endorsement shall precede. (i) PowerGrid Ltd and the Consultants M/s Development Resources Pte Ltd shall be insured in joint names with the Contractor or any sub-contractor as a party to the policy. Each of the parties comprising the Insured shall be considered as a separate and distinct unit and words "the Insured" shall be considered as applying to each party in the same manner as if a separate policy had been issued to each of the said parties and the Insurers hereby agree to waive all rights of subrogation or action which they may have or acquire against any of the aforesaid parties arising out of any accident in respect of which any claim is made hereunder provided nevertheless that nothing in this clause shall be deemed to increase the Limit of Indemnity in respect of any one occurrence as stated in the Schedule. (ii) Any employee of PowerGrid Ltd and the Consultants M/s Development Resources Pte Ltd shall not be deemed to be a person engaged in the service of or acting on behalf of the Insured notwithstanding that PowerGrid Ltd and the Consultants M/s Development Resources Pte Ltd are named as Insured under the policy. (iii) Property belonging to PowerGrid Ltd shall not be deemed to be property belonging to or in the charge or under the control of the Insured or any servant or agent of the Insured except for that part of the property temporarily occupied by the Insured for work therein. (iv) The Insurers shall indemnify the Insured in respect of injury, illness, loss or damage covered by or in connection with or arising from: a. any lift elevator hoist crane or other lifting machinery owned or used by the Insured or for the maintenance of which the Insured is responsible; b. loss of or damage to any property or land or building caused by vibration or by the removal or weakening of support (including damage to property occasioned by or resulting from any such loss); c. any negligent act of the Insured, servants or agents of the Insured; d. bursting of any pressure parts of any steam boilers or any economizer, any vessels or apparatus (including steam turbine or engine or other steam driven machinery) intended to operate under steam pressure. subject to the limits of indemnity for any one occurrence as stated in the Schedule."

[167]

73 Mr Sternath was an impressive and impartial expert witness. He is not a geotechnical engineer but he is someone with extensive practical tunnelling experience and he expressed a view as to the interrelationship between the excavation of the shaft and the damage to property that accorded with Dr Redman's views. He provided, at p 5 of Exhibit 11, an explanation of the process that is instructive: "1. Soft Soil is subject to settlements in case of changes in the groundwater (GW) table as the weight of soil with GW and without GW is different. 2. The pores in soft soil are initialled filled with GW and are able to bear the ground load with less deformation. 3. When the pores fall dry they will be compressed and the soil will deform (consolidate) such leading to surface settlements. 4. Different kinds of soils react to dewatering with more or less settlement. Particularly vulnerable for consolidation are soft clays and peat as they exist in the "Kallang Formation" surrounding the Woodlands Shaft area. 5. A further serious source of ground settlements is ground loss during excavation operations. Ground loss means the volume of soil which is extracted from the ground in an uncontrolled manner. 6. This can happen when the soil is left unsupported or due to GW inflow into the construction site when file particles are carried with the GW flow. 7. The volume deficit will lead to uncontrolled ground settlement. Ground loss during excavation can be avoided by choosing adequate support and sealing methods." See Exhibit 11 at p 5. At T1149.10 - 1150.6 Mr Sternath indicated the distance at which an effect could be expected horizontally, particularly in permeable soils. The properties affected were within that zone. 74 ACE's attempt to resist the connection between the excavation of the Woodlands shaft and the damage claimed by Lloyds to have resulted, included drawing attention to the lack of photographs (depicting ponding or pumping machinery being used) and records relating to the alleged problem in the shaft. It also drew attention to Mr Embery's evidence that leaks in the diaphragm wall and in the toe were attended to promptly and effectively. I think there is some force in this, but nor are there records establishing the extent of water removed from the shafts prior to February 2002 and Mr Embery explained that there was no point in undertaking measurement of water in the shafts prior to completion of excavation: see T545.6 - 22. There is clear evidence of groundwater loss before the commencement of excavation of the adits (i.e. 19 January 2002): see Figures 6 and 10 of Exhibit F and PSM1245.04 to Exhibit 5.

[168]

75 Mr Embery saw water flows at the toe and attempts were made to deal with those flows which took some time to implement. Once groundwater levels had dropped they would not be reinstated by grouting or plates, but rather, the flow would be stemmed. Recharge wells, used to reinstate or attempt to reinstate prior groundwater levels, were not installed until February 2002. There is a further reference to the importance of water loss at the toe: see T586.14 - 41, T589.50 - T590 and T594, where Mr Embery made clear that he regarded the water loss through the toe as more significant than through the walls: see also T530.49 - 531.2. The JV was on notice of the prospect of water ingress, there being a statement that "water inflows may occur at unknown locations of varying severity" in the tender documents provided to the JV: see Exhibit 5 at p 36. The excavation was at least 40 metres below the water table: see Exhibit 5 at p 36. As Dr Redman noted, everyone would have known that "there was a lot of water in the region": see T804.13. I think that the evidence of loss of groundwater from monitoring results referred to in Dr Redman's second report (Exhibit F), Mr Embery's evidence as to his observations and the work done to deal with the problems, the note of the agreement of the experts that as at 18 January 2001 there was a water flow into the shaft of 0.04m³/minute (or 0.7 litres/second) (see Exhibit D at para 4.3) and Dr Redman's evidence (leaving aside his theory of a failure to take the diaphragm wall of Woodlands shaft down far enough) support the finding that I make that there was significant loss of water through the Woodlands shaft and particularly at the toe of the shaft because it was at a deeper level than the defects in the wall itself and in an area of rock or material affected by the presence of the dyke, and that the groundwater loss, by reason of its impact on surrounding soils, lead to consolidation beneath the properties damaged. The likelihood is that the same process occurred at the toe of the Gambas shaft but at a reduced flow because the conditions were less problematic and there was no dyke. Whilst there was no adit construction from the shaft there were 'commencement' tunnels there.

[178]

86 The evidence of Mr Embery referred to in [75] above and further at T586 - 587 is also relevant to another matter which is whether there was significant water loss through the upper adit. Mr Embery sought to minimize the extent of water loss through the upper adit by initially seeking to resist the accuracy of what had been described by PowerGrid's representative Engineer in a letter of February 2002 (see CB vol 3.10 at p 3-6154) as a significant quantity of water still flowing through the rock face of the upper adit and its having caused "continuous loss of groundwater and severe ground settlement": see also T599 - T600, but see T603.30 - 39, T604.32 - 34, T605, T606.20 - 24 and T616.22 - 34 and Exhibit 1 where Mr Embery has marked the area of water flow in the upper adit. The roof of the upper adit was very close to the known G4 material: see Exhibit E at paras 74 and 75, Exhibit F at para 64, Exhibit 4, q 1, p 75 and section 3.5 of Exhibit 5, and see also the dewatering results from Woodlands shaft from February 2002 at PSM 1245TR2 Figure P of Exhibit 5. I recognize that Mr Sternath, although he thought the upper adit was not located at a sufficient depth, saw this defect as unconnected with water loss, but I am satisfied on the balance of probabilities that there were also water flows in the upper adit, and that these were not the result of construction defects, but rather, as Dr Pells contends (see Exihibt 5 at p 63), were due to the failure to design a method of preparation of the fractured permeable rock around the adits to reduce or eliminate water flows. Documents 90-145 and 90-146, which formed part of MFI 14, suggest that the water loss through the upper adit was much less than from the Woodlands shaft, but both the shaft and the adit were located in or close to the dyke. 87 I find that water losses in the upper adit contributed to the general loss of groundwater with consequential impact on adjoining property, which I find was otherwise substantially caused by the flow of water at the toe of the Woodlands shaft and, far less significantly, by leaks through the diaphragm wall. 88 The presence of the dyke, at least in the shaft area, the fractured quality of the rock at the base of the shaft, the high water table, the high level of permeability of ground conditions were all matters which pointed to the need for extensive precautionary steps to be taken if groundwater loss was not to be experienced. If Dr Pells is correct and a second dyke also went through the upper adit, this would only increase the need for caution, but it is not necessary to determine if it did.

[196]

Mr Embery did say that Kiso-Jiban had recommended installing a recharge well, which was done: see his first affidavit at para 56, but it is clear that this did not prevent the significant flow of water into the main tunnel. 100 The JV prepared two CEPs, dated 21 April and 23 April 2003: see: CB vol 3.21 at pp 3-14647 et seq and 3-14786 et seq, which ACE claims were not followed. Lloyds disputes that the JV failed to follow its own program, which required test holes to be drilled and water flow out of them measured. If that is correct then the program, however comprehensive it may appear to have been, has been shown to be flawed, and that leads to the conclusion that the JV's design for the works was defective. Since there was significant water inflow into the tunnels (even if that inflow did not arise through the test holes) then the design did not sufficiently anticipate and guard against the prospect of water loss: see CB vol 3.23 at p 3-1689, the documents at pp 90-72 - 90-79 which were part of MFI 14 and T714 for details of the water flow. Dr Pells gave evidence as to where the dyke could be anticipated: see Figures 4.2 and 6.2 of Exhibit 4, and Mr Sternath said the JV "had to have known of the risks of hitting a dyke or similar formation": see Exhibit 11 at p 12. That was not challenged by Dr Redman. Mr Embery admitted foreknowledge of the presence of a dyke at around chainage 1450: see Mr Embery's first affidavit at para 56. 101 Dr Pells' criticism of the JV, supported by Mr Sternath, in failing to adequately prepare the ground to prevent water loss before excavation in the region of this dyke is, I think, made out. Mr Cooper did not deal with the extent of water loss actually experienced and I do not read his report at paras [36] - [39] as expressing any view as to why the JV's program failed to prevent the significant groundwater loss that occurred. 102 In short then, the JV's proposed means of dealing with the higher permeability zone in the region of chainage 1456 was ineffective to prevent significant groundwater loss and consequent damage. Given the history of the problems at the Gambas and Woodlands shafts and the entombment of the TBM, the JV was clearly aware of the risks of groundwater loss and in my view, the failure to introduce a regime of grouting from the surface in advance, if relocation of the tunnel was not viable or deemed unnecessary, points to a failure in the design of the project.

[257]

(a) A court should take into account the essence and attributes of the document being examined. The court's treatment of extrinsic evidence at various stages of the analytical process may differ depending on the nature of the document. In general, the court ought to be more reluctant to allow extrinsic evidence to affect standard form contracts and commercial documents. (b) If the court is satisfied that the parties intended to embody their entire agreement in a written contract, no extrinsic evidence is admissible to contradict, vary, add to, or subtract from its terms (see ss 93-94 of the Evidence Act). In determining whether the parties so intended, our courts may look at extrinsic evidence and apply the normal objective test, subject to a rebuttable presumption that a contract which is complete on its face was intended to contain all the terms of the parties' agreement. In other words, where a contract is complete on its face, the language of the contract constitutes prima facie proof of the parties' intentions. (c) Extrinsic evidence is admissible under proviso ( f ) to s 94 to aid in the interpretation of the written words. Our courts now adopt, via this proviso, the modern contextual approach to interpretation, in line with the developments in England in this area of the law to date. Crucially, ambiguity is not a prerequisite for the admissibility of extrinsic evidence under proviso ( f ) to s 94. (d) The extrinsic evidence in question is admissible so long as it is relevant, reasonably available to all the contracting parties and relates to a clear or obvious context. However, the principle of objectively ascertaining contractual intention(s) remains paramount. Thus, the extrinsic evidence must always go towards proof of what the parties, from an objective viewpoint, ultimately agreed upon. Further, where extrinsic evidence in the form of prior negotiations and subsequent conduct is concerned, we find the views expressed in McMeel's article and Nicholls' article persuasive. For this reason, there should be no absolute or rigid prohibition against evidence of previous negotiations or subsequent conduct, although, in the normal case, such evidence is likely to be inadmissible for non-compliance with the requirements set out at [125] and [128]-[129] above. (We should add that the relevance of subsequent conduct remains a controversial and evolving topic that will require more extensive scrutiny by this court at a more appropriate juncture.) Declarations of subjective intent remain inadmissible except for the purpose of giving meaning to terms which have been determined to be latently ambiguous. (e) In some cases, the extrinsic evidence in question leads to possible alternative interpretations of the written words (i.e., the court determines that latent ambiguity exists). A court may give effect to these alternative interpretations, always bearing in mind s 94 of the Evidence Act. In arriving at the ultimate interpretation of the words to be construed, the court may take into account subjective declarations of intent. Furthermore, the normal canons of interpretation apply in conjunction with the relevant provisions of the Evidence Act, i.e., ss 95-100. (f) A court should always be careful to ensure that extrinsic evidence is used to explain and illuminate the written words, and not to contradict or vary them. Where the court concludes that the parties have used the wrong words, rectification may be a more appropriate remedy.

[263]

147 The Singapore Court of Appeal said at [62] (citations and internal paragraph references omitted): "First, the scope and quantity of extrinsic evidence that can be used in the exercise of interpretation has now increased. It should be noted, however, that the prohibition on evidence of the prior negotiations of the contracting parties and their declarations of subjective intent apparently remains applicable (see Lord Hoffmann's third proposition in Investors Compensation Scheme ; such evidence may, however, be admitted and used to interpret a contract after the court has determined that it contains a latent ambiguity. The restriction on evidence of prior negotiations has been said to arise out of the principle that the parties' intentions have to be objectively ascertained [see Prenn v Simmonds [1971] 1 WLR 1381]. It has come under fire in England (see Gerard McMeel, "Prior Negotiations and Subsequent Conduct - The Next Step Forward for Contractual Interpretation?" (2003) 119 LQR 272 ("McMeel's article") and Donald Nicholls, "My Kingdom for a Horse: The Meaning of Words" (2005) 121 LQR 577 ("Nicholls' article"); note also in our local context Art 8(3) of the United Nations Convention on Contracts for the International Sale of Goods (1980), which is applicable in Singapore by virtue of s 3 of the Sale of Goods (United Nations Convention) Act (Cap 283A, 1996 Rev Ed)). (We will deal with this point in greater detail at [132] below.) The second, and by far more important, impact of the Investors Compensation Scheme restatement is the change in the way in which contractual interpretation is to be carried out. From Lord Hoffmann's fourth proposition in this restatement, it appears that ambiguity is no longer a prerequisite for the admissibility of extrinsic evidence. Furthermore, the court may conclude that the "wrong words or syntax" (see Investors Compensation Scheme at 913) have been used, i.e. the court may substitute what it deems to be the correct language or syntax for that used in the contract. This creates an immediately apparent tension with the thin definition of the parol evidence rule as articulated at [33] above."

[288]

So far as (1) is concerned, there already is a waiver of subrogation clause within the policy: see General Conditions 5 and 6, Exhibit L at p 1.228. 164 Sub-clause (iv), however, expands the scope of GC 14 beyond these matters and it is difficult to see why these matters were expressly included if GC 14 was not intended to grant to the insureds a more expansive cover than existed without the sub-clause. I agree that it is unlikely that the sub-clause was intending to turn the policy into a workers compensation or motor accident policy but it is not difficult to accept that ACE understood that the JV wanted cover in respect of liability as a result of loss of or weakening of support in any event. The express inclusion of liability for these items (irrespective of negligence) and of liability for negligence in respect of other matters has a purpose if it is accepted that liability arising from the rendering of, failure to render or negligent provision of professional services would not otherwise be covered if it lead to loss of support or subsidence. I regard the words "shall precede" as overcoming any narrowing of the policy by exclusions relevant to public liability. On the approach I take, the liability to PowerGrid of the JV, otherwise excluded by the PSE, is protected by GC 14, a clause which PowerGrid expressly required the JV to have included, presumably in its own interest. ISSUE 6: Was there removal or weakening of support? 165 ACE also argued that GC 14 (iv)(b) did not apply because there was no 'removal or weakening of support'. Mr Simpkins argued that there was no evidence that the buildings, aprons, pipes etc could not be held up by the soil that was underneath these structures. They may have dropped down to a new level, he submitted, but then could still be 'supported' by the soils. In my view there is no substance to this argument. The PUB sewer pipe, to take one example, was resting on soil. When that soil consolidated and dropped, forcing the pipe to sag to accommodate the changed conditions, it lost support, albeit temporarily. The loss of support is what caused it to fracture or at least be endangered and hence it required remedial work. Similarly, when a building's footings dropped down they dropped down as a result of a loss of support: see Dr Redman's evidence at T813.45 - 816. Mr Sternath's analysis at p 5 of Exhibit 11, which I have set out at [73] together with his comment "The property damages were caused by ground settlements resulting from uncontrolled outflow of groundwater and soil material into the Gambas and Woodlands shafts as well as the Woodlands adits and the eastern TBM tunnel during different stages of excavation" confirms the correctness of this view. In my view, these events are properly characterised as a removal or weakening of support.

[321]

And summarised the relevant principles relating to proximate causes as: "(a) Proximate cause does not mean the latest, but the direct, real or common sense, dominant, operative or efficient one ( National & General Insurance Co Limited v Chick [1984] 2 NSWLR 860); (b) In any event, the term "arising from" requires something less than a relationship of proximate cause and imports a more general notion of causation irrespective of whether the term is used in an insuring clause or an exclusion clause. (c) It is not always possible to single out one effective or dominant cause of a loss and the Court should avoid straining "to find a dominant cause if… there are two causes both of which can properly be described as effective causes of the loss…unless one cause is clearly more decisive than the other, it should be accepted that there are two causes of the loss and no attempt should be made to give one of them the quality of dominance" ( Wayne Tank ). (d) It is proper for a Court to conclude that on a common sense view of the facts there can be two causes which are equal or at least nearly equal in their efficiency in bringing about the damage ( JJ Lloyd Instruments Limited v Northern Star Insurance Co Limited ("Miss Jay Jay") [1987] 1 Lloyd's Rep 32); (e) There may be two or more causes in the sense that where there are two or more causes equal, or about equal, in effect the insured is entitled to recover if one of the causes is an insured peril. There may be more than one cause of sufficient significance. Causes can be regarded as having approximately equal efficiency ( Waterwell Shipping Inc v HIH Casualty & General Insurance Limited [1987] Aust Torts Reports 81-444). (f) "…where each of two or more causes may realistically be described as an efficient and, in that sense, proximate cause, prefers common sense to the artificial exercise of attempting to decide which of two or several is the winner of what in fact may be a dead heat." ( HIH Casualty & General Insurance Limited v Waterwell Shipping Inc [1998] 43 NSWLR 601)." See ACE's submissions dated 11 March 2009 at para 82.

[362]

217 ACE accepts that "reasonable precautions" clauses, such as condition 7.3 of the Lloyds policy, are to be read in a restrictive way. A clause of that kind was the subject of consideration by the Victorian Court of Appeal in CGU Insurance Ltd v Lawless [2008] VSCA 38 ("CGU v Lawless"). Redlich JA at (with whom Maxwell P and Neave JA concurred) referred with approval to the test articulated by Diplock LJ in Fraser v B N Furman (Production) Ltd (1967) 3 All ER 57 at 61 ('Fraser") which was approved in Albion Insurance Company Ltd v Body Corporate Strata Plan No 4303 [1983] 2 VR 339 ("Albion") at 342 - 343: "What, in my judgment, is reasonable as between the insured and the insurer, without being repugnant to the commercial purpose of the contract, is that the insured, where he does recognise a danger should not deliberately court it by taking measures which he himself knows are inadequate to avert it. In other words, it is not enough that the employer's omission to take any particular precautions to avoid accidents should be negligent; it must be at least reckless, that is to say, made with actual recognition by the insured himself that a danger exists, and not caring whether or not it is averted. The purpose of the condition is to ensure that the insured will not, because he is covered against loss by the policy, refrain from taking precautions which he knows ought to be taken." And to the test articulated by McGarvie J, with whom Young CJ and Anderson J agreed, in Albion at 344 - 345: "the condition will protect the insurer where there is a failure to take reasonable precautions which is due to 'a deliberate decision to expose himself to the risk of bodily injury occurring, because he did not care whether it occurred or not.'… The insured is in breach of the condition if, through a lack of concern and desire to prevent bodily injury, he deliberately adopts a course of action or inaction which he realises exposes him to the risk of someone being injured by the recognised danger."

[486]

(2) the liability of the JV had to not be excluded by virtue of a condition or exception to the Lloyds policy. There was no disagreement that "Exceptions" include exclusions. 262 These requirements, I think, carry with them a need to determine whether the claim falls within Section 1 or Section 2 of the policy so that it can be determined whether the liability in question falls within one or other section and so that any relevant conditions and exceptions can be identified. I accept Lloyds' submission that the exceptions and conditions which apply to claims that would fall under Section 1 (if they were over $15 million) are the exceptions and conditions expressed to apply to all claims under the policy and those specific to claims under Section 1, and that the conditions and exceptions which apply to Section 2 are those expressed to apply to all claims under the policy and those specific to Section 2 claims. It follows that if a claim would fall within Section 2 (were it for an amount in excess of $15 million) the reasonable precautions condition 7.3 is irrelevant to that claim and is also irrelevant to a claim paid under sub-clause 1.17(c) when the claim is for an amount equal to or less than $15 million. 263 If a claim falls within coverage under Section 2 of the Lloyds policy and is not excluded by any condition or exception I do not think it is necessary to determine whether it would be payable under one provision of Section 2 or another. In any event given the fact that claims were made on the JV by third parties and given that I have found that there was a liability in the JV, I am of the view that the JV had no need to resort to clause 3.8 to obtain payment. 264 In relation to [259(7)(b)], the discussion of principle in relation to pre-contractual correspondence: see [137] - [150] above, applies equally here. Even if the material were admissible it sheds no light on the meaning of clause 1.17 and could not do so because the correspondence is not directed to whether there should be drop down cover in relation to the ACE policy but rather to another quite different policy. 265 In relation to [259(7)(a)] I do not think that it is at all clear that sub-clause 1.17(a) is intended to deal only with Section 2, but in any event although I accept that the use of the phrase "Claim or Claims" in sub-clause 1.17(a) stands in contrast to "legal liability in respect of damage to property or personal injury to third party or employees" in sub-clause 1.17(b) and "such legal liability, costs and expenses" in sub-clause 1.17(c):

[540]

306 As was pointed out in Cockburn v GIO Finance Ltd (No 2) [2001] NSWCA 177 contribution and recoupment are siblings. In Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 at [239] Giles JA said: "The basis is described in Mason and Carter, Restitution Law In Australia , 1995 at 208 as recoupment, derived together with contribution from considerations of natural justice (as to contribution see Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 at 350-2 per Kitto J). The authors say - "Rights of contribution and recoupment derive from a single source, namely the injustice of the defendant having had its burden relieved by the plaintiff. But a right of recoupment differs in its application from contribution because there is no `equality': rather the respective positions of P and D are such that it is just that P should throw the whole burden of P's liability to X upon D's shoulders. If it were otherwise, D would be seen to have received an unjust benefit (that is, the effective release of the burden to X) at the expense of P who bore it. [Cf Pavey v Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 256-7 per Deane J.] Thus, in the standard guarantee situation a guarantor (P), who is forced to meet the creditor's (X's) claim, is entitled as against the principal debtor (D) to recoupment in full for the outlay. This is one example of a broader principle, as Lord Wright MR demonstrated in Brook's Wharf and Bull Wharf Ltd v Goodman Bros: [[1937] 1 KB 534 at 544, cited with approval by Walsh JA in Armstrong v Commissioner of Stamp Duties (1967) 69 SR (NSW) 38 at 47. See also The Pindaros [1983] 2 Lloyd's Rep 635. The essence of the rule is that there is a liability for the same debt resting on the plaintiff and the defendant, and the plaintiff has been legally compelled to pay, but the defendant gets the benefit of the payment, because his debt is discharged either entirely or pro tanto, whereas the defendant is primarily liable to pay as between himself and the plaintiff.""

Limit (No 3) Limited v ACE Insurance Limited

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