VCAT determined that this exclusion did not entitle the insurer to deny liability in respect of the sum awarded against MCM. The question for this Court is whether that determination was correct as a matter of law.
7 The purpose of MCM's insurance was to protect it from the financial consequences of compensable injury or property damage caused to someone else in circumstances where MCM is held legally liable. The definition of "occurrence" in the policy specifically contemplates the possibility of that injury or damage being caused by a process of exposure to particular conditions which occur in connection with the insured's business as well as injury being caused more directly and immediately by a discrete event. As far as the identity of the injured party is concerned the policy extends to injury to the insured's landlord or his property. Thus, in the absence of the application of the exclusion relied upon by the insurer in this case, the corrosion of the factory building by chlorine and water vapour over time as described by the VCAT Senior Member in his reasons for decision would constitute adequate circumstances to entitle MCM to indemnity from QBE in respect of its landlord's claim.
8 There was no argument between the parties in this Court that the chlorine component of the gaseous vapour which caused the relevant damage was a pollutant within the definition in the policy. Nor was there any argument that the method by which it was able to contact both the water vapour with which it mixed and the metal parts of the factory building could be described by the words "discharge, dispersal, release or escape". Even though the sodium hypochlorite was stored in containers which were deliberately vented to the air, the words "discharge, dispersal, release or escape" are of ample width to cover the movement of that gas from the surface of the liquid sodium hypochlorite to the air above it and thence into the factory air space and into contact with the water vapour and the metal parts of the fabric of the factory.
9 The insurer's argument that it is not liable to indemnify MCM turns on its contention that the exclusion clause applied because of the chlorine passing into "the atmosphere", albeit within the factory and that, accordingly, the relevant damage was caused by an excluded event. It relied, to some extent at least, on one of the dictionary definitions of "atmosphere". The Oxford English Dictionary provides many definitions of the word. In some contexts it can mean the whole of the envelope of air surrounding the earth, including that within confined spaces. The question here, however, is whether it should be given such a wide ambit in the context of an insurance policy which is designed to cover legal liability arising from the conduct of a business carried on, at least partly, within the confines of a factory building, and when the word "atmosphere" occurs in a phrase which includes "into or upon land" and "any water course or body of water".
10 The interpretation of a commercial document must not only concern itself with the language used by the parties in the document itself but must also take into account the commercial circumstances in which it was created: McCann v Switzerland Insurance Australia Ltd.[1] Preference should be given to a construction which supplies ". . . a congruent operation to the various components of the whole": Project Blue Sky Inc v Australian Broadcasting Authority.[2] See also Wilkie v Gordian Runoff Ltd,[3] Intergraph Best (Vic) Pty Ltd v QBE Insurance Ltd,[4] Darlington Futures Ltd v Delco Australia Pty Ltd,[5] and Nissho IWAI Australia Ltd v Malaysian International Shipping Corp Berhad.[6]
11 In Carlingford Australia General Insurance Ltd v E Z Industries Ltd[7] the Full Court of this Court was construing an exclusion clause in not dissimilar terms to the one relevant to this appeal. However, there the question was not whether the substance which was alleged to have injured stevedores unloading a ship (lead concentrate powder) had been discharged into the atmosphere - that was conceded in agreed facts - but rather whether the exclusion clause applied to the lead powder in the particular circumstances of that case. In reaching the conclusion that it did not, Gobbo J, with whom Murray J agreed, held that where a particular construction of an exclusion clause would give rise to a result which according to the ordinary meaning of the words in it the Court regards as so absurd that that result could not have been intended by the parties, it will not permit the clause to have that result, no matter how plain the words. A construction must be adopted which would avoid irrational and unjust consequences. Although Carlingford was distinguished on the facts in a subsequent Full Court case, Australian Paper Manufacturers Ltd v American International Underwriters (Australia) Pty Ltd[8] the Court there accepted it as standing for the proposition set out above. See also Alex Kay Pty Ltd v General Motors Acceptance Corporation and Hartford Fire Insurance Co.[9] Having regard to proposition for which Carlingford is authority, the purpose of the policy is a significant matter in the construction of such a clause.
12 In Carlingford reference was made to a number of United States cases dealing with similar exclusion clauses in insurance policies.[10] Some of them were also referred to by Mr S. O'Bryan SC for MCM in this court in support of the VCAT decision. A reading of them suggests that the origin of the clause now under consideration, and many similar to it, was probably a New York statute designed to discourage environmental pollution. MCM contended in this case that these decisions strengthened the conclusion reached by VCAT that the atmosphere meant the air environment outside the factory and did not include the air within the factory as contended for by the insurer. In the Australian Paper Manufacturers case the Full Court considered that a number of the same American cases cited to it were not particularly useful. Mr D.F.R. Beach SC who appeared for the insurer in this Court criticised the U.S. cases because, as he submitted, not only did they not deal with the issue before this Court but they tended to construe the similar clause with which they were concerned, not as the law would require but rather by reference to the statute which mandated its inclusion in the particular insurance policy. Whether this is a valid criticism need not concern this Court. The conclusion reached here does not in any way, depend upon the reasoning in the U. S. cases. In any event their authority appears to be in question, even there.[11]
13 A construction of the exclusion clause which interpreted the word "atmosphere" as including the air within the factory could indeed lead to absurd, inconsistent or unjust results. If one of the sodium hypochlorite containers developed a leak such that liquid sodium hypochlorite came into contact with a person visiting the factory, MCM would be entitled to indemnity against the visitor's claim for burns caused by the liquid sodium hypochlorite but not in respect of the same visitor's claim for respiratory damage caused by his breathing gaseous chlorine which emanated from the same source. The insurer would have it that to cover that case, and cases similar to it, MCM would need another policy of insurance specifically against the risk of damage by gases escaping within the factory. On the insurer's case although it would be covered for injury caused by leaking liquids under this policy it would not be covered for injury caused by leaking gases! This result is at least surprising, having regard to the purpose of the policy, public liability. The policy would be