Marketform Managing Agency Ltd v Amashaw Pty Ltd

Introduction

1. The respondent (Amashaw) operated a petrol service station in Loftus. That and four other such sites owned by related companies were insured by the appellant (Marketform) under a Public Liability Combined Liability insurance policy. That policy was issued for the period from 5 December 2011 to 15 June 2012 and then renewed for a further 12 months. Section B insured against Pollution Liability. The northern boundary of the service station was bordered by Loftus Lane, under which a Sydney Water sewer main ran. On 3 June 2013, there was an explosion in the same sewer system, but to the west of the site (see [23] below). At about the same time, petroleum hydrocarbons were detected in works and properties to the north and east of the service station.
2. In response to the leakage of petroleum products from the Loftus site, Amashaw incurred costs totalling $1,197,320. The short-term measures undertaken were directed to pumping out the sewer, damming it and flushing it down-gradient from that damming point. Later measures included the installation of an interception trench just outside the northern and eastern boundaries of the site. Amashaw sought to recover the cost of those measures under the renewed policy. Marketform denied liability on three bases: that non-disclosure entitled it to reduce its liability to nil pursuant to Insurance Contracts Act 1984 (Cth), s 28(3); that the costs and expenses incurred were not in respect of a liability insured under Section B; and that the insured liability could only extend to the part of those costs incurred in making good damage caused by the incursion of petrol into Sydney Water's sewer main.
3. The primary judge (McDougall J) held that Amashaw was entitled to an indemnity but only for the cost of removing contamination from Sydney Water's sewer main, which the parties calculated as $274,000 before interest: Amashaw Pty Ltd v Marketform Managing Agency Ltd [2017] NSWSC 612. In so concluding, his Honour rejected the insurer's non-disclosure and policy coverage arguments, but accepted its argument that the major part of the cost incurred did not represent a liability in damages to Sydney Water or any other entity affected by the contamination. Marketform appeals against the rejection of its arguments as to its liability, and Amashaw cross appeals against the determination as to quantum and refusal to make an order as to its costs of the proceedings.