The "Wayne Tank principle"
88 Wayne Tank must be seen against the background of the place of causation in insurance law. Much has been written about the particular place of the phrases "proximate cause" and "dominant cause" in the law of insurance. For a helpful discussion, see Davies, M "Proximate Cause in Insurance Law" (1995) 7 Insurance Law Journal 284 and Clarke, M "Insurance: The Proximate Cause in English Law" (1981) 40 Cambridge Law Journal 284. See also the discussion in the judgment of McColl JA in Lasermax Engineering Pty Ltd v QBE Insurance (Australia) Ltd (2005) 13 ANZ Insurance Cases 61-643 at pp 77,858-60 and the many cases cited by her Honour. See also, in particular, Government Insurance Office (NSW) v R J Green & Lloyd Pty Ltd (1966) 114 CLR 437 and 447 per Windeyer J, and Insurance Commission of Western Australia v Container Handlers Pty Ltd (2003) 218 CLR 89 at 107 [45] and 117 [78] per McHugh J and Gummow J, respectively. The distinctions between the various phrases connoting some causal relationship and the relationship of such phrases with the notion of proximate cause is discussed helpfully by Davies in the above article.
89 This notion of proximate or direct cause led to a view that for the answering of a question about the response of an insurance policy there could be only one cause. In National & General Insurance Co Ltd v Chick [1984] 2 NSWLR 86 at 97-98 Samuels JA quoted Colinvaux The Law of Insurance (4th Ed 1979) [4.32] as follows:
"…A loss may be the combined effect of a whole number of causes, but, for the purposes of insurance law, one direct or dominant cause must in each case be singled out."
Support for this proposition may be also seen in Smith, Hogg & Co Ltd v Black Sea & Baltic General Insurance Co Ltd [1940] AC 997 at 1006, and in The Howard Fire Insurance Company v Norwich and New York Transportation Company 79 US 196 (1870).
90 In City Centre Cold Store Pty Ltd v Preservative Skandia Insurance Ltd [1985] 3 NSWLR 739, Clarke J discussed this question and concluded, in my respectful view correctly, for the reasons that he gave, that (subject, of course, to the terms of the policy in question) there can be more than one dominant, proximate or effective cause giving rise to a loss for the purpose of insurance. City Centre Cold Store v Preservative Skandia and the approach in it were approved by the New South Wales Court of Appeal in HIH Casualty & General Insurance Ltd v Waterwell Shipping Inc (1998) 43 NSWLR 601. See also the English Court of Appeal in J J Lloyd Instruments Ltd v Northern Star Insurance Co Ltd (The 'Miss Jay Jay') [1987] 1 Lloyd's Rep 32. Reference might also be made on the question to such classic insurance treatises as Welford The Law Relating to Accident Insurance (2nd Ed 1932) at 181 and 185 and Noakes, SN Welford and Otter-Barry's Fire Insurance (4th Ed 1948) at 259 and 263-65.
91 It has been said that when an argument as to causation arises in respect of rival causes under a policy of insurance, the first task of the Court is to look to see whether one only of the causes can be identified as the proximate or efficient cause: The 'Alizia Glazial' [2002] 2 Lloyd's Rep 421 at 431. Nevertheless, if, applying commonsense principles and recognising the commercial nature of the insurance policy that is the context of the question, two causes can be seen as proximate or efficient, the terms of the policy must then be applied to those circumstances. Once the availability of two relevantly proximate causes is accepted, care is necessary in analysing the response of an insurance policy. If there are two concurrent causes one falling within the policy, the other simply not covered by the terms of the policy, the insured may recover: Dudgeon v Pembroke (1877) 2 App Cas 284 at 297; Grill v General Iron Screw Collier Co (1866) LR 1 CP 600 at 611; City Centre Cold Store v Preservative Skandia at 743-45; Reischer v Borthwick [1894] 2 QB 548 at 551; Ocean Steamship Co Ltd v Liverpool and London War Risks Insurance Association Ltd [1946] 1 KB 561 at 575; and The 'Miss Jay Jay'. I do not read the self-critical comments of Devlin J in West Wake Price & Co v Ching [1956] 2 Lloyd's Rep 618at 624 directed at his own expression of reasons in Haskell v Continental Express Ltd [1950] 1 All E R 1033 at 1047-48, as denying the recognition by his Lordship of the possibility of two proximate or efficient causes.
92 More difficulty arises, however, where one can discern two proximate or efficient causes and one falls within, and the other is excluded from, the policy. That is the circumstance to which Wayne Tank was directed.
93 Wayne Tank¸ the cases referred to in Wayne Tank and other illustrations of the "principle" found in Wayne Tank can be seen as the operation of ordinary contractual principles upon facts revealing two proximate causes which are concurrent and interdependent, in the sense that neither would have caused the loss without the other. In such cases the two causes can be seen as inseparable and so, in effect, as joint: see, in a somewhat different context, Shipping Corporation of India Ltd v Gamlen Chemical Co Australasia Pty Ltd (1980) 147 CLR 142 at 163-64.
94 Wayne Tank concerned the operation of a public liability policy. The insureds, a firm of engineers, claimed indemnity for their liability to a factory owner in connection with their design and installation of equipment for storing and conveying hot liquid wax in the owner's plasticine factory. The factory had burnt down, the fire having been ignited by the escape of heated liquid wax from a failed pipe. In the litigation brought by the factory owner (Harbutt's Plasticine Ltd v Wayne Tank and Pump Co Ltd [1970] 1 QB 447) the causes of the fire were held to be (a) the unsuitable and dangerous plastic material used in the pipe and the useless thermostat that were installed and (b) the conduct of an employee of the insureds in switching on the heating of the pipe and leaving it on overnight before the system had been tested. The policy provided indemnity as follows:
"…against all sums which the insured shall become legally liable to pay as damages consequent upon … damage to property as a result of accidents as described in the schedule…"
The description of the property and the accident fell within the schedule to the policy. The policy excluded indemnity in the following terms:
"… in respect of liability consequent upon … death injury or damage caused by the nature or conditions of any goods or the containers thereof sold or supplied by or on behalf of the insured."
95 The unsuitable and dangerous plastic material and the useless thermostat had been supplied by the engineers. Cairns LJ made clear at 68, that the fire would not have occurred if both causes had not been present: the defective goods would have caused no trouble if there had been testing, and if the goods had not been defective then lack of testing would not have caused the fire.
96 As a matter of ratio both Lord Denning M.R. and Roskill LJ dealt with the appeal on the basis that the one (and only) proximate cause of the fire was the supply and installation of defective goods which therefore fell squarely within the exclusion. Each dealt in obiter dicta with the appeal assuming two causes; Cairns LJ approached the appeal on this basis as a matter of ratio. On this basis, all three Lords Justices decided the appeal by giving preference to the exclusion clause. At 67 and 68 Lord Denning gave precedence to the exclusion clause as a particular provision over the general provision of the insuring clause. It was a matter of applying the words of the contract - the contract stated (through the exclusion) that a loss brought about by a particular cause was not intended to be within the cover. Cairns LJ and Roskill LJ approached the matter likewise: at 69 and 73-75. The relevant principle is that the policy should be applied according to its terms as found.
97 All the cases referred to in Wayne Tank involved factual circumstances in which the two proximate causes were concurrent and interdependent in the sense that neither would have caused the loss without the other. The first, John Cory & Sons v Burr (1883) 8 App Cas 383, concerned a time policy of marine insurance which included as one of the perils insured against the barratry of the master. The ship was warranted "free from capture and seizure and the consequences of any attempt thereof", a so-called f.c. and s. clause or warranty. In consequence of the barratrous act of the master in engaging in smuggling, the ship was seized by Spanish revenue officers, an event falling within the f.c. and s. clause. The insured claimed the cost of obtaining the ship's release from the process in Spain to condemn and confiscate her. The courts at all levels (Queen's Bench Division, Court of Appeal and House of Lords) were unanimous that the insured failed. Lord Blackburn, in particular at 399-401, treated both the barratry and the seizure as causal. The loss was caused by an excluded peril. There was no independent operation of two causes each of which would have caused the loss in the absence of the other. The barratry led the Spanish revenue officer to seize the ship. The Earl of Selborne LC at 397 said that to allow recovery would be entirely destructive of the f.c. and s. warranty.
98 The second, Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350, concerned an insured ship that had been torpedoed in 1915 25 miles off Le Havre. With the aid of tugs, she reached Le Havre, where she was taken to a quay in the outer harbour. Shortly thereafter, a gale came up bumping her on the quay. She was then moved to a mooring in the outer harbour, where she took the ground at each ebb tide, floating on the flood tide. Finally, as a result of these strains, her bulkheads gave way and she sank. The owner sought recovery under a marine policy in which there was an f. c. and s. clause as follows:
"…Warranted free of capture seizure and detention and the consequences thereof or of any attempt thereat piracy excepted, and also from all consequences of hostilities or warlike operations whether before or after declaration of war…"
The owners claimed that the loss was proximately caused by perils of the sea, being the events from the time of her entry into Le Havre harbour. The underwriters successfully asserted that the loss was proximately caused by the torpedoing - hostilities within the f. c. and s. clause.
99 The third, Board of Trade v Hain Steamship Co Ltd [1929] AC 534, concerned damage to a vessel, Trevanion, requisitioned by the British Government. By the terms of the charterparty pursuant to which the requisition had been effected the Government was not liable for "sea risks", but was to be liable for all consequences of hostilities or warlike operations. Shortly after the Armistice was signed, Trevanion was proceeding to England from the United States laden with oats. She collided with a United States Navy ship (Roanoke), a mine planter, proceeding from England to the United States with 720 live mines on board, and with no other cargo and no passengers. The collision was caused by the negligent navigation of both ships, both being equally to blame. The arbitrator found that the collision was a consequence of warlike operation. This was upheld. At 541-42, Viscount Sumner said that the causes were joint and simultaneous causing one loss which would have been excluded under an ordinary marine policy warranted free of warlike operations, but the charter included that very risk.
100 The fourth, P Samuel & Co Ltd v Dumas [1924] AC 431, concerned a ship that was scuttled by the master and crew with the connivance of the owners. A mortgagee of the vessel, which was not involved in the scuttling, claimed under the policy. It is unnecessary to deal with the various complexities of the case; it is sufficient to note what Lord Sumner said at 467 that was relied upon by Cairns LJ in Wayne Tank:
"…Where a loss is caused by two perils operating simultaneously at the time of loss and one is wholly excluded because the policy is warranted free of it, the question is whether it can be denied that the loss was so caused, for if not the warranty operates. …"
101 The fifth, Atlantic Maritime Co Inc v Gibbon [1954] 1 QB 88, was alsoa marine insurance case. It concerned the operation of an exclusion clause based on restraint of princes. Lord Evershed M.R. at 118 and 119 discussed the question of dual causes by reference to Cory v Burr, not taking the matter beyond what was discussed in that case: and Morris LJ at 138 quoted Lord Sumner in P Samuel & Co Ltd v Dumas.
102 It is instructive to recognise what the learned authors of MacGillivray on Insurance Law (10th Ed 2003) take from Wayne Tank and Cory v Burr at [19-5] on p 480:
"…It often happens that the insured's loss is attributable to at least two causes each of which is a proximate cause in the sense that the loss would not have happened if only one of the causes had been operative."
As well as referring to Wayne Tank and Cory v Burr, the authors refer to The 'Miss Jay Jay'. This was a marine insurance case in which it was held that there were two proximate causes of the loss: the frequent and violent impacts of an adverse sea (perils of the sea - covered) and a badly designed hull (not covered). The plaintiff's motor cruiser, Miss Jay Jay, was built in 1976 with a single moulded hull. She was insured under a time policy for loss or damage directly caused by, amongst other things, "external accidental means". The circumstances of the loss were that in approaching the mouth of the Seine estuary, rough messy seas were encountered. The helmsman, competently, took the vessel across these waves at a speed enabling planing to occur. This led to a slamming effect on the hull when the vessel fell into a trough between waves. The underwriters said that there were no external accidental means that caused the loss, rather the ordinary and anticipated action of the sea on the hull, and the faulty design of the cruiser had caused the loss. There was no relevant exclusion. The other proximate cause - design defect leading to unseaworthiness - was simply not a peril insured against. Though it was unnecessary for the Court to deal with the matter, it would appear (see 36) that the loss would not have occurred but for the unseaworthiness of the vessel. Thus, again, though not an example of the application of Wayne Tank, it was an example of two operating causes, without each of which the loss would not have occurred.
103 Other examples can be found in the cases where an insured failed to recover in respect of a loss caused by two cause (one excluded, one covered) operating in an interdependent way: see for example, Re an Arbitration between Hooley Hill Rubber and Chemical Co Ltd and Royal Insurance Co Ltd [1920] 1 KB 257 and Curtis's and Harvey (Canada) Ltd v North British and Mercantile Insurance Company Ltd [1921] 1 AC 303. In each such case the solution was seen as an application of the revealed contractual intention of the parties. The scope of the insurance cover is identified by reading the policy as a whole (insuring clause and exclusion, in particular) and appreciating that loss caused in a particular way is excluded. Given that the two causes are interdependent and that the loss would not have occurred without the operative effect of the excluded cause, the non-response of the policy can be comfortably and logically accepted as the intended result of the revealed agreement of the parties. As Duke LJ said in Re an Arbitration between Hooley Hill Rubber and Chemical Co Ltd and Royal Insurance Co Ltd at 273-74:
"The memorandum provided that the policy should not cover loss or damage by explosion, nor loss or damage by fire following an explosion unless it were proved that, to put it shortly, the fire was independent of the explosion. What is the effect of excluding one of several kinds of damage which insurers might otherwise be bound to make good? I take it to be elementary that an exception such as this is an exception of something which would be in the policy if it had not been excepted. The intention then is to exclude loss by explosion which but for the exclusion would or might have involved the insurers in liability."
104 More difficulty may be encountered in circumstances where a policy excludes one cause, includes another and the loss is occasioned by the two causes operating concurrently, but independently, in the sense that each would have caused the loss without the other. At the outset, it may doubted that the solution in any given case is to be found in the application of any principle of insurance law, other than one which states that the rights of the parties to the policy are to be determined by reference to the terms of the contract as found. This was the principle applied by all three Lords Justices in Wayne Tank. Thus, it is always essential to pay close attention to the terms of any policy and the commercial context in which it was made, for it is out of these matters that the answer to the application of the policy to the facts will be revealed.
105 Cases concerning damage to property, often water damage after a bout of torrential rain, have thrown up this problem of concurrent and independent causes. Policies will often contain coverage for water damage caused in one way (say, from leaks or drains) but will exclude water damage caused in other ways (say, from general flooding). An example of such a case was Petersen v Union des Assurances de Paris IARD (1997) 9 ANZ Insurances Cases 61-366 which concerned water damage from torrential rain. Flooding was excluded unless it came from drains and pipes. The water damage was found to have been caused by water from drains and pipes and water from general flooding. Priestley JA construed the coverage clause as meaning that there was only cover for damage caused by flooding from drains and pipes which did not also originate from other sources. The causation question was thus answered by a careful construction of the policy.
106 In Elilade Pty Ltd v Nonpareil Pty Ltd (2002) 124 FCR 1, Mansfield J dealt with questions of individual causation in a "flood exception" case. The policy in question covered water damage (including from rainwater and leaks), but excluded water damage resulting from flood. Stock was damaged by rainwater during sever storms; the following morning the nearby Katherine River broke its banks and flooded the premises. The insurer argued that no loss was recoverable. Mansfield J dealt with the damage caused up to the second inundation differently to the damage caused after the second inundation. In respect of the first period, he rejected an argument based on Wayne Tank. He said that the rainwater (the first inundation) was to be considered separately from the later flood from the river, they not being contemporaneous events. Thus, Wayne Tank was held not to be applicable in this first stage of the loss, to the extent that the first wetting was the proximate cause of damage. Mansfield J also dealt with the consequences of the second inundation, which was devastating. Whilst he recognised the damage which had already actually occurred from the first wetting to be covered, he found that any damage from the time of the second flooding, including potential further deterioration to property that would have occurred in any event by reason of the first wetting was to be seen as damage caused by the second flooding and so excluded. His Honour said at [55]:
"From that point, that is from the time of the second inundation, I do not consider that Elilade is entitled to be indemnified under the policy for any damage to its stock or plant and equipment. There are two means of reaching that conclusion. The first is to treat the initial inundation and the second inundation from that point as each operating as effective or proximate causes of Elilade's losses sustained thereafter. In that event, as one of the proximate causes was an exempted event under the policy, Elilade would not be entitled to indemnity: Wayne Tank and Pump Co; CountrywideFinance Ltd v State Insurance Ltd [1993] 3 NZLR 745. The second is to conclude, as I do, that in a real and practical sense, the proximate or effective cause of any damage caused after that time was the second inundation. It effectively rendered the initial inundation of no ongoing significance to the losses sustained after that time. The quality of the water from the Katherine River, with its high organic content, was different from that of the initial inundation. It had different and more adverse consequences, including health considerations, leading to virtually all the stock and plant and equipment being irrecoverable and being disposed of. Its height of 1.8 metres was greatly higher than the initial inundation. The process by which, after 6 am on 27 January 1998, damage would have continued to be caused to the stock and plant and Elilade from the initial inundation effectively ceased because it was overtaken and overwhelmed by the nature and extent of the second inundation: cf Cory v Burr (1883) 8 App Cas 393."
107 Mansfield J referred to Countrywide Finance Ltd v State Insurance Ltd [1993] 3 NZLR 745. In that case a restaurant operated from a permanently moored ferry boat which sank in two feet of water. The vessel sank because of worm damage and dry rot. An exception covered the worm damage, but not the dry rot. Hammond J treated the causes as "co-mingled", saying at 756 after referring to Wayne Tank:
"It appears to me that the principle then is this: If there is a dominant cause of the loss, then the Court will have regard to that. But, if there are two approximately equal, or, I would say, co-mingled causes, the insurer can effectively rely on one of those causes not being within the policy.
In my view, the insurer has established that (at least) one of two effectively co-mingled causes was within the exception. If there had been appropriate evidence, it might have been possible to make a finding that both causes were within the exception, but as I have said, I decline to speculate in the absence of evidence and the law is that the insurer need demonstrate only one."
108 In Prosser v AMP General Insurance [2003] NTSC 80, Angel J in the Supreme Court of the Northern Territory dealt with another claim from the same flood of the Katherine River as concerned Mansfield J in Elilade. Angel J's findings were that the water that inundated the insurer's property was a combination of surface run-off and the overflow from the river. His Honour said at [12] and [13]:
"The plaintiffs have established that their loss was caused by an event within the terms of the policy viz. 'rain falling naturally from the sky including rainwater run-off over the surface of the land.' The defendant has established a concurrent cause was the Katherine River overflowing its banks both east and west of the plaintiffs' property trapping the rainwater and groundwater accumulating on the plaintiffs' property.
There being concurrent effective or proximate causes, one covered and the other excluded by the policy, the defendant insurer is not liable on the policy. Wayne Tank & Pump Co Ltd v Employers Liability Assurance Corp Ltd [1974] QB 57; Peterson v Union des Assurances de Paris IARD (1995) 8 ANZ Insurance Cases 61-244; on appeal (1997) ANZ Insurance Cases 61-366 at 77034; HIH Casualty & General Insurance v Waterwell Shipping (1998) 146 FLR 76 at 83,84."
109 In these cases, even though it could be posited that the damage may or would have occurred in any event by the cause that was not excluded, the fact is that the policy in each case was construed as excluding damage caused in a particular way. As a matter of fact the damage was caused in that way (whether or not there was another concurrent cause). Thus, recognising the limits of the cover agreed upon, the loss fell outside the terms of the policy. Wayne Tank has become the best known illustration of this result. But the result is not the consequence of the application of a principle other than that which truly underlay Wayne Tank - the ascertainment and application of the contractual intentions of the parties.
110 Other cases cited in this context by St Paul can be thereby explained: Eastern Suburbs Leagues Club Ltd v Royal & Sun Alliance Insurance Australia Ltd (2004) 13 ANZ Insurance cases 61-599; Hams v CGU Insurance Limited (2002) 12 ANZ Insurance Cases 61-525; HIH Casualty & General Insurance v Waterwell Shipping. See also The 'Demetra K' [2002] 1 Lloyd's Rep 795.
111 Tektrol Ltd v International Insurance Co of Hanover Ltd [2005] 1 Lloyd's Rep IR 358 is a very good example of the importance of close attention to the terms of the policy. In that case the insured conducted a business designing, developing and manufacturing energy saving devices for industrial motors. Vital to that business was a source code which it kept in five places: on the managing director's laptop computer, in a remote and commercially run back-up data server, on two computers at head office and a paper copy at head office. Through an extraordinary series of events, all copies of the source code were lost: a virus down-loaded on to the laptop erased the data on the laptop, an attempt to reload the laptop from the remote site caused the destruction of the data on the remote site, and shortly thereafter a burglary occurred in which the two other computers and the paper copy were stolen. The business interruption insurers claimed that all the occurrences were excluded causes. Relevantly here, they also argued that even if only one occurrence was excluded that was sufficient to exclude the loss in its entirety because the business interruption claim was dependent on no copy of the source code remaining. There would have been no loss, it was said, if any copy of the source code had survived. In other words, the cover was not directed to the consequence, individually, of each incident, rather the cover was directed to the business interruption caused by an entire absence of the code. Langley J accepted this argument. Important to the argument was that the exclusion clause which clearly covered the incident with the virus was couched in terms of consequential loss arising directly or indirectly from the excluded cause. This was a wider clause than one directed to the proximate or efficient cause. Langley J said at [14]:
"In my judgment, whether as a matter of 'instinct' or on the basis of an increased risk of loss, in the context of this policy both the virus and the burglary are properly to be described as causes of the consequential loss (business interruption) claimed by Tektrol. It is true, as Mr Strauss submitted, that there was no consequential loss following the virus and before the burglary and that the effects of the virus did not increase the risk of a burglary but they undoubtedly increased the risk of loss of the source code and so of interruption to Tektrol's business. Exclusion 7 is on any view intended to exclude from cover certain losses of electronically held information. The reason no doubt is that such losses may be considerable. The very fact that Tektrol sensibly saw fit to have the source code held in two locations and on four computers and one hard copy demonstrates both its vital importance to the business and the perceived need to reduce the risk of loss. If the question is asked whether the consequential loss claimed arose indirectly from the virus in my judgment the answer is 'Yes'. If there had been no virus the burglary would not have caused the loss claimed. The virus deprived Tektrol of the protection for the source code which the company considered to be appropriate, and in particular the protection at a remote site free from perils, such as fire, which might destroy all copies at Tektrol's business premises. The virus also, unknown to Tektrol, in fact misled Tektrol into believing the protection had been fully restored before the burglary."
Having thus examined the causal role of the virus, Langley J said at [15]-[17]:
"Mr Railton further submits that if either cause of the loss (the virus, as I have held or the burglary as is agreed) is excluded from cover then the result is that the loss is excluded. That is because insurers have stipulated that it is to be excluded on that ground and for that reason and it is nothing to the point that another cause of the loss is not excluded.
In Wayne Tank and Pump Co Ltd v Employers Liability Ltd [1974] 1 QB 57 there was a fire at a factory. The factory owners sued the plaintiffs who had installed equipment at the factory. The equipment was held to have caused the fire together with the conduct of an employee of the plaintiffs who had left the installation switched on. The plaintiffs were held liable to the factory owner and sought to recover from insurers. The insurers were held to have excluded liability for the equipment but not for the conduct of the employee. The Court of Appeal 'per curiam' held that where there were two causes of damage, one within the general insuring provisions of the policy for which insurers had agreed to an indemnity, and one within an exception and so excluded from indemnity, insurers could rely on the exception.
The Court of Appeal was addressing circumstances in which a single event (the fire) giving rise to the loss had two proximate causes. That is not this case. But I can see no difference in the principle to be applied to a case such as this where, as I have held, two separate events cause the loss and one is excluded as an indirect but not a proximate cause. To quote Lord Denning Mr at page 67F, in respect of the exempted loss insurers 'have stipulated for freedom' and 'the only was of giving effect to it is by exempting them altogether'. The judgments of Cairns LJ (69B) and Roskill LJ (75D) are to the same effect. In The Aliza Glacial[2002] 2 Lloyd's Rep 421, at paragraph 47, Potter LJ, in agreeing the principle, also stated that the two or more causes need not be 'exactly coextensive in time'."
112 Whilst, as Langley J said, the facts could be seen as different from a single event that had two proximate causes giving rise to loss. The two causes of the two events combined to produce the state of affairs to which the policy was said to respond: the entire loss of the source code. The case went on appeal [2005] 2 Lloyd's Rep 701, but there was no appeal on this aspect of the case.
113 This question of the interplay between exclusion clauses and concurrent and interdependent and independent causes is most helpfully discussed, if I may respectfully say, by Clarke, M et al The Law of Insurance Contracts (4th Ed 2002) at pp 833-35 [25-6]. The cases there cited, in particular the United States decision of Niagara Fire Insurance v Muhle 208 F2d 191 and the Canadian decision of Ford Motor Co of Canada Ltd v Prudential Assurance Co Ltd (1958) 14 DLR (2d) 7 (Ontario Court of Appeal) affirmed by the Supreme Court of Canada ([1959] SCR 539) can be seen to reflect the importance of understanding, with precision, the scope of the cover, taking into account the exclusion clause. It is unnecessary to discuss whether (as the authors opine) the United States case of Guaranty National Insurance Co v North Rivers Insurance Co 909 F 2d 133 (1990 5 CCA) would have been decided differently in England or Australia.
114 Once one concludes that, as a matter of construction of the contract, the insurer and insured have agreed that the cover does not extend to any loss caused by a particular cause, and that the loss was caused by that cause, the policy's lack of response can be seen as evident. It is only if one concludes that the parties have agreed that the policy will not respond if the excluded cause must be the sole cause, for the existence of a concurrent and not excluded cause to be relevant. Again this is a question of construction of the policy.
115 As discussed by Clarke, M et al op cit at 835, support is drawn for this approach from the cases dealing with liability of a party for breach of contract in circumstances where there are two causes involved, one being a breach of contract and one not. The existence of the "innocent" cause does not gainsay the reality that the circumstances or damage have or has been caused by a breach of contract. An example can be found in the carriage of goods cases where damage is occasioned by the carrier's negligence and by another peril: see the discussion in Shipping Corporation of India v Gamlen Chemical Co Australasia Pty Ltd (1980) 147 CLR 142 at 154-55 and the cases referred to by Clarke, M et al op cit at 835 at footnotes 4 and 5.
116 The above said, it is necessary to deal with the policy and the facts here.