QBE Insurance (Australia) Limited v Lumley General Insurance Limited [2009] VSCA 124

Court of Appeal (Vic)|2009-06-04|Before: NEAVE and DODDS-STREETON JJA and KYROU AJA

INSURANCE - Contribution between insurers - Separate policies taken out by head contractor and sub-contractor each covering both head contractor and sub-contractor - Damage caused by negligence of sub-contractor - Head contractor's insurer pays for the damage - Whether payment made on behalf of head contractor or sub-contractor - Sections 48, 54 and 76, Insurance Contracts Act 1984 (Cth).

INSURANCE - Principles relating to contribution between insurers - Rationale and purpose of principles - Double insurance - Whether time for determining existence of double insurance is the time of the incident giving rise to a liability or a loss - Whether subsequent events can affect contribution rights.

1 This is an appeal from a decision of a judge of the Trial Division ordering the appellant, QBE Insurance (Australia) Limited ('QBE'), to make contribution to the respondent, Lumley General Insurance Limited ('Lumley'), in respect of a payment made by Lumley under its insurance policy for a liability that was also insured by QBE.[1]

2 The payment was in respect of a liability to Dabserv Pty Ltd ('Dabserv') for damage caused to its fit-out at 600 Bourke Street, Melbourne by the negligence of Commercial Interiors Australia Pty Ltd ('Commercial Interiors'). Commercial Interiors was a sub-contractor of Probuild Constructions (Aust) Pty Ltd ('Probuild'), the head contractor for the fit-out works.

3 Probuild was insured with Lumley. The Lumley policy also covered Probuild's sub-contractors, including Commercial Interiors. Commercial Interiors was insured with QBE. The QBE policy also covered 'principals' of Commercial Interiors, including Probuild.

4 This appeal involves a consideration of the principles governing contribution between insurers where there is double insurance and whether, in the circumstances of this case, Lumley was entitled to contribution from QBE.

5 For the reasons that follow, we have decided that the trial judge correctly held that Lumley was entitled to contribution from QBE and that the appeal should be dismissed.

6 The hearing below was conducted on the basis of an agreed statement of facts and an agreed book of documents, without any oral evidence. The appeal before us also proceeded on the basis of the agreed statement of facts and book of documents. The following summary of the facts is based on those materials.

7 Dabserv is a service company of Mallesons Stephen Jaques ('Mallesons'). Dabserv, as principal, engaged Probuild as the head contractor for the fit-out works on several floors at 600 Bourke Street, Melbourne ('fit-out works' and 'premises'). Probuild engaged Commercial Interiors as a sub-contractor for the fit-out works. There was no contractual relationship between Dabserv and Commercial Interiors.

8 The fit-out works were to prepare the premises for occupation by Dabserv and Mallesons. Practical completion of the fit-out works occurred on 24 January 2005. Dabserv and Mallesons were in occupation of the premises on and prior to 31 March 2005 and were the owners of the fit-out works and contents on the premises.

9 On 31 March 2005, Mark Xerri, a director or employee of Commercial Interiors, was working on the premises when he accidentally caused a flush sprinkler head to activate and discharge water, causing significant damage to the fit-out works and contents. Mr Xerri and Commercial Interiors owed Dabserv and Mallesons a duty to take reasonable care to avoid damage to property in the performance of the task being performed at the time the accident occurred. The accident was caused by the negligence of Mr Xerri and Commercial Interiors. Damage was caused to the premises, fixtures and fittings, which were contract works under the head fit-out works contract ('damage to the fit-out'), and to six 'Living Edge' chairs owned by Dabserv.

10 Neither Dabserv nor Mallesons made a formal claim on Probuild or Commercial Interiors in respect of the damage to the fit-out. It was assumed and accepted by Dabserv, Mallesons and Probuild that the damage would be made good at no cost to Dabserv or Mallesons. Commercial Interiors did not form a view as to who would meet the cost of making good the damage to the fit-out.

11 Commercial Interiors did not know that Probuild had entered into the Lumley policy or that the Lumley policy covered it as Probuild's sub-contractor. Commercial Interiors was not advised at any time by Probuild or Lumley that it was entitled to make a claim on the Lumley policy.

12 On 1 April 2005, Probuild notified its broker, Willis, of a claim under the Lumley policy and Willis then notified Lumley of the claim. The latter notification described the accident and the nature of the damage but did not state expressly on whose behalf the notification was made.

13 On or before 4 April 2005, Commercial Interiors notified QBE of a claim arising from the accident. QBE appointed N R Thomas & Associates ('Thomas') as its loss adjustor. Thomas attended the premises to assess the damage on 4 April 2005.

14 On 20 July 2005, Thomas sent a letter to Lumley which contained the following paragraph:

In order that [QBE] might adequately assess their involvement in this matter, could you please confirm that liabilities attaching to sub-contractors would fall within the scope of policy cover issued by your Company. Would you also confirm the policy excess carried by Probuild and thirdly, that a set of six Living Edge chairs belonging to the tenants Mallesons Stephen Jaques, are not included in the claim being handled by your Company.

15 On or about 4 August 2005, Lumley accepted liability in respect of the claim under section 3 of its policy, which dealt with public liability. Lumley had previously refused indemnity under sections 1 and 2 of its policy, which dealt with property damage to the contract works, because the contract value of the fit-out works contract exceeded the maximum value allowed by the policy.

16 On 4 August 2005, Lumley responded to Thomas' letter of 20 July 2005 in the following terms:

We are treating the whole matter as a liability issue, and the subcontractors are allowed for in the scope of cover.
We will be seeking contribution from [QBE's] policy.
Probuild's liability excess is $20,000.
We are currently not involved in handling the Living [Edge] chairs belonging to Mallesons.

17 The damage to the fit-out was made good by Probuild in its capacity as a builder rather than as an insured. The cost of rectification, namely $565,051.50 ('rectification costs'), was paid by Lumley to Probuild under the Lumley policy, save for the deductible of $20,000 applicable under that policy. Probuild deducted $19,751.73 from moneys otherwise due to Commercial Interiors under the sub-contract as reimbursement for the deductible. Commercial Interiors was reimbursed $19,751.73 under the QBE policy.

18 Lumley and QBE have at all relevant times agreed that the amount of $565,051.50 was fair and reasonable.

19 The six chairs that were damaged were not part of the fit-out works. The chairs were replaced with a payment of $8,940 to Dabserv by QBE following a claim made by Commercial Interiors on the QBE policy. This arrangement was agreed to by Probuild and Commercial Interiors and the replacement was co-ordinated by Thomas on behalf of QBE. Dabserv signed a release in favour of QBE on 8 August 2005.

20 On 18 May 2006, Probuild signed a release in favour of Lumley. The release was expressed to be

in full and final settlement, satisfaction and discharge of the claim under policy number 14L 0400-8820 for property damage and other losses sustained by Dabserv ... Mallesons ... and any other parties at 600 Bourke St., Melbourne VIC on or about 31 March 2005 due to water escaping from a sprinkler head on level 50 ...

21 Lumley did not obtain a release from Dabserv or Mallesons in favour of Probuild or Commercial Interiors. Nor did it obtain a release from Commercial Interiors.

22 Lumley requested a contribution from QBE in respect of the sum that it paid to Probuild. QBE refused to make contribution.

23 Lumley then commenced proceedings seeking contribution in the sum of $272,525.75 from QBE, being half of the total that it had paid to Probuild for rectification costs.

24 The Lumley policy was entitled 'Annual Contract Works, Plant and Equipment and Third Party Liability Insurance Policy'. The schedule defined 'Insured' as Probuild and various other entities, including Probuild's sub-contractors.

25 The insuring clause in section 3 of the Lumley policy provided that, subject to the limitations, exclusions, terms and conditions in the policy, Lumley would

[p]ay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as compensation for ... Property Damage ... that happens during the Period of Insurance as a result of an Occurrence which arises in connection with the Business and Activities of the Insured ...

26 The general conditions of the Lumley policy included cl 6(c), which provided: 'Any notice of claim given to the Insurer by any party insured under this Policy shall be accepted by the Insurer as a notice of claim given on behalf of all other parties insured under this Policy.'

27 The exclusions applicable to section 3 of the Lumley policy included a 'Contractual Liability' exclusion in respect of 'liability for Personal Injury or Property Damage assumed by the Insured under any contract, warranty, guarantee or agreement; except to the extent that such liability would otherwise have attached to the Insured by law'.

28 It was common ground at trial and before us that there was 'Property Damage' during the 'Period of Insurance' as a result of an 'Occurrence' which arose in connection with 'the business and activities of' Probuild within the meaning of the insuring clause. It was also common ground that, by virtue of the contractual liability exclusion, Probuild was not covered by section 3 of the Lumley policy in respect of the damage to the fit-out and that Probuild was not covered by any other section of the policy for that damage.

29 The QBE policy was entitled 'Commercial/Retail/Industrial Policy' and comprised a number of separate sections, including a 'broadform liability section'. That section referred to the Insured as 'You' and that expression was defined to include Commercial Interiors and 'every principal' of Commercial Interiors 'in respect of that principal's liability caused by the performance of work for that principal'.

30 The insuring clause for the broadform liability section provided:

We will pay to you or on your behalf all sums you become legally liable to pay by way of compensation in respect of personal injury or property damage happening during the period of insurance and caused by an occurrence in connection with your business.

31 Clause 2.2 of the broadform liability section stated that QBE would 'investigate, negotiate and settle any claim or legal action [against you] as we see fit'. Clause 3.8 contained a contractual liability exclusion.

32 It was common ground at trial and before us that there was property damage which happened during the period of insurance and which was caused by an occurrence in connection with Commercial Interiors' business within the meaning of the insuring clause. It was also common ground that, by virtue of the contractual liability exclusion, Probuild was not covered by the broadform liability section of the QBE policy in respect of the damage to the fit-out and that Probuild was not covered by any other section of the policy for that damage.

Relevant provisions of Insurance Contracts Act 1984

33 Sections 48 and 76 of the Insurance Contracts Act 1984 (Cth) ('IC Act')[2] were relied upon by the parties at first instance and before us. Those sections provide:

48 Entitlement of named persons to claim

(1) Where a person who is not a party to a contract of general insurance is specified or referred to in the contract, whether by name or otherwise, as a person to whom the insurance cover provided by the contract extends, that person has a right to recover the amount of the person's loss from the insurer in accordance with the contract notwithstanding that the person is not a party to the contract.

(2) Subject to the contract, a person who has such a right:

(a) has, in relation to the person's claim, the same obligations to the insurer as the person would have if the person were the insured; and

(b) may discharge the insured's obligations in relation to the loss.

(3) The insurer has the same defences to an action under this section as the insurer would have in an action by the insured.

...

76 Contribution between insurers

(1) When 2 or more insurers are liable under separate contracts of general insurance to the same insured in respect of the same loss, the insured is, subject to subsection (2), entitled immediately to recover from any one or more of those insurers such amount as will, or such amounts as will in the aggregate, indemnify the insured fully in respect of the loss.

(2) Nothing in subsection (1) entitles an insured:

(a) to recover from an insurer an amount that exceeds the sum insured under the contract between the insured and that insurer; or

(b) to recover an amount that exceeds, or amounts that in the aggregate exceed, the amount of the loss.

(3) Nothing in this section prejudices the rights of an insurer or insurers from whom the insured recovers an amount or amounts in accordance with this section to contribution from any other insurer liable in respect of the same loss.

34 Both ss 48 and 76 use the expression 'loss'. Neither those sections nor any other provision of the IC Act defines this expression. However, as both sections apply to contracts of general insurance, which include liability policies,[3] it is clear that 'loss' is not confined to a loss suffered by an insured but extends to a liability of an insured for loss or damage caused to a third party.

35 Section 54 of the IC Act is also relevant. In broad terms, it prohibits an insurer from refusing to pay a claim due to a failure by the insured to comply with an obligation under the policy but permits the insurer to reduce its liability in respect of the claim by an amount that fairly represents the extent to which it has been prejudiced as a result of the non-compliance.

36 The trial judge referred to the leading Australian authority of Albion Insurance Company Ltd v Government Insurance Office of New South Wales[4] and stated that '[a] right of contribution between insurers exists where two or more insurers are liable in respect of the same loss'.[5] He adopted the following statement in Drayton v Martin:[6]

An insurer under an indemnity policy seeking contribution from a co-insurer must establish that

it is liable to indemnify the insured under its own policy;
it has paid out sums in respect of that liability;
the co-insurer is also liable under its policy to indemnify the insured; and
the co-insurer has not paid out moneys to meet its liability to the insured.

37 It was common ground between the parties at trial that the third and fourth requirements identified in Drayton were satisfied. The focus at trial was on whether the first and second requirements were satisfied in relation to the Lumley policy. As it was common ground between the parties that sections 1 and 2 of the Lumley policy did not apply, only section 3 of that policy was in issue at trial. QBE argued that Lumley was not liable to indemnify Commercial Interiors under the Lumley policy and therefore there was an absence of 'true' double insurance. It also argued that Lumley had not paid out sums in respect of any liability it had to indemnify Commercial Interiors.

38 QBE's argument that Lumley was not liable to indemnify Commercial Interiors under the Lumley policy was put on two principal bases. The first was that in order for Commercial Interiors to be covered under the Lumley policy, Commercial Interiors had to authorise or ratify the cover being conferred upon it under that policy. The trial judge rejected this argument on the basis that ss 48 and 76 of the IC Act do not require authorisation or ratification by a person named as an insured under the policy as a condition of being able to recover under the policy.[7]

39 The second basis for QBE's argument was that, for liability to arise under the Lumley policy, it was necessary for Commercial Interiors to first make a claim on the policy, and that no such claim had been made. The trial judge rejected this submission for the following reasons:[8]

The actual notification to Lumley given on 1 April 2005 by Probuild was not in terms, and I cannot read it as being, a claim limited to the liability of Probuild alone. Probuild was notifying 'the incident' as a whole and was not making a claim limited to Probuild itself but, rather, was notifying an incident that would give rise to claims in accordance with the policy. There was no further requirement for the making of a claim and in all the correspondence with Lumley it is clear that the claim which was made related to the liability occasioned by the occurrence caused by Commercial Interiors. Indeed, the single and only wrongful act enlivening a claim was the act of Mr Xerri for which Commercial Interiors was responsible. The notification by Probuild was of that event and there was no requirement for any separate claim by Commercial Interiors. The notification of claim by Probuild was in accordance with the express terms of clause 6(c) a notification by Commercial Interiors. Furthermore, s 54 of the Insurance Contracts Act 1984 would apply had the obligation to make a claim (had there been one) not been satisfied.

40 The trial judge held, based on the terms of the Lumley policy and the circumstances of the accident, that all the requirements of the insuring clause in section 3 of the Lumley policy were satisfied and that, accordingly, the policy covered Commercial Interiors in respect of its liability to Dabserv arising from the accident.[9]

41 In relation to whether Lumley had made a payment under its policy in respect of its liability to Commercial Interiors, the trial judge referred to Thomas' letter of 20 July 2005 and held that 'it is plain that all parties concerned were fully aware that Lumley was considering the claim in respect of the occurrence and that it was doing so by reference to the 'liabilities attaching to subcontractors' within the scope of the Lumley policy'.[10] His Honour also referred to Lumley's reply of 4 August 2005 and held that 'the parties understood Lumley to be treating the claim as one in respect of the damage caused by Commercial Interiors which, from the outset, was contemplated as falling within the Lumley policy'.[11]

42 QBE relied on the contractual liability exclusion in the Lumley policy, which is discussed in [27] of these reasons. It submitted that that clause meant that Lumley was not liable to indemnify Probuild because the sole basis for Probuild's liability to Dabserv was contractual. The trial judge said the following in relation to that[12]ubmission:12

The payment by Lumley was ... not simply the payment of a liability by Probuild assumed under a contract. The liability to property damage was assumed at very least also by Commercial Interiors and that liability of Commercial Interiors was not only under contract but, fundamentally, by reason of the negligent conduct causing the accident which led to the very substantial damage. Commercial Interiors' liability was not excluded by [the contractual liability] exclusion ... Even if Probuild may have been obliged in contract to make good the damage caused by Commercial Interiors, the liability discharged by Lumley's payment was Commercial Interiors' liability in tort.

43 It was common ground at trial and before us that Probuild was not vicariously liable for the negligence of Commercial Interiors.

44 The parties agreed before the trial judge that, if the judge decided in favour of Lumley, the amount to be awarded against QBE was $268,055.75 plus interest from 6 June 2006, being the day after QBE's loss adjustor, Thomas, was notified by Lumley's loss adjustor of the amount sought as contribution.[13] Having found that QBE was required to make contribution, the trial judge accordingly ordered that QBE pay Lumley $268,055.75 plus interest from 6 June 2006.

45 QBE has appealed to this Court from the whole of the judgment below. The notice of appeal contained 12 grounds. Before us, QBE abandoned two of those grounds and sought leave to add two further grounds.

46 The 10 grounds of appeal in the original notice of appeal that were pursued before us were as follows:

That the learned judge erred in law in ruling that the Respondent was liable, pursuant to the terms of a policy of insurance under which Probuild Constructions (Aust) Pty Ltd ('Probuild') was the principal insured ('the Lumley Policy'), to indemnify Commercial Interiors Pty Ltd ('Commercial Interiors') in respect of an accident occurring on 31 March 2005 during the course of the fit out works undertaken at 600 Bourke Street, Melbourne ('the accident').
That there was no, or no sufficient, evidence upon which the learned judge could find that the Respondent was liable, pursuant to the terms of the Lumley Policy, to indemnify Commercial Interiors in respect of the accident.
That the learned judge erred in law in ruling that Commercial Interiors claimed indemnity from the Respondent under section 3 of the Lumley Policy.
That there was no, or no sufficient, evidence upon which the learned judge could find that Commercial Interiors claimed indemnity from the Respondent under section 3 of the Lumley Policy.
That the learned judge erred in law in ruling that the effect of clause 6(c) of the Lumley Policy was that a claim for indemnity by Probuild was also a claim for indemnity by Commercial Interiors.
That the learned judge erred in law in ruling that the Respondent paid out sums in respect of its liability to indemnify Commercial Interiors pursuant to the Lumley Policy.
That there was no, or no sufficient, evidence upon which the learned judge could find that the Respondent paid out sums in respect of its liability to indemnify Commercial Interiors pursuant to the Lumley Policy.
That the learned judge erred in law in ruling that the effect of the payment made by the Respondent to Probuild under the Lumley Policy was to discharge Commercial Interiors' liability in tort.
That there was no, or no sufficient, evidence upon which the learned judge could find that the effect of the payment made by the Respondent to Probuild under the Lumley Policy was to discharge Commercial Interiors' liability in tort.
[Abandoned]
[Abandoned]
That the learned judge erred in law in ruling that there was no requirement for Commercial Interiors to have authorised or ratified the Lumley Policy before there could be double insurance.

47 During the course of argument before us, senior counsel for QBE sought leave to amend the notice of appeal to add an additional basis for its contention that Lumley was not liable to indemnify Commercial Interiors under the Lumley policy, namely that the requirement in the insuring clause that the insured has 'become legally obligated to pay ... compensation for ... Property Damage' had not been satisfied because Commercial Interiors at no time agreed to any settlement or had judgment entered against it. This issue had not been raised at trial and notice had not been given to Lumley or the Court prior to the hearing before us of QBE's intention to seek leave to raise it on appeal.

48 Senior counsel for Lumley opposed the application for leave to raise this new issue. He informed us that he was taken by surprise and was not able to respond to any submissions that QBE might make in support of this issue without being given time to prepare. He also informed us that if this issue had been raised at trial, it may have affected forensic decisions that Lumley made in the conduct of the trial. He gave as examples, decisions relating to the contents of the agreed statement of facts and whether Mr Norm Thomas, who wrote the letter described in [14] of these reasons, was to be cross-examined with a view to establishing a waiver of the 'become legally obligated to pay' requirement in the Lumley policy.

49 After hearing counsels' submissions, we ruled against the granting of leave to amend the notice of appeal to enable QBE to raise the above issue, and stated that we would include our reasons for the ruling in our reasons for judgment. Those reasons are set out below.

50 The principles to be applied in determining whether to permit a party to raise on appeal a ground which was not raised in the court at first instance were recently restated by this Court relevantly as follows:[14]

(a) the substantial issues between the parties are ordinarily settled at the trial;

(b) where, had the issue been raised below, evidence could have been given which possibly could have prevented the point from succeeding, the point cannot be taken afterwards;

(c) where all the facts have been established beyond controversy or where the new point is one of construction or of law, it may be expedient and in the interests of justice for an appellate court to entertain the point;

(d) even when no question of further evidence arises, it may still not be in the interests of justice to allow a new point to be raised on appeal; ...

51 In light of the submission by senior counsel for Lumley that Lumley may have made different forensic decisions at trial if QBE had raised the issue at first instance, we could not be satisfied that the proposed amendment would not prejudice Lumley in a manner that could not be remedied either by an adjournment or an order for costs. Senior counsel for QBE did not explain why the issue was not raised at trial. QBE's failure to do so meant that this Court would not have had the benefit of the trial judge's views on the issue. This was not a case where the issue was a pure issue of law falling within paragraph (c) of the above quoted principles. In all the circumstances, we concluded that it was neither expedient nor in the interests of justice to permit the amendment.

52 Senior counsel for QBE informed the Court that if we ruled against granting leave in respect of the proposed amendment to the notice of appeal, he would seek leave to make an alternative amendment to raise the following additional ground:

Further to paragraphs 1, 6 and 12 hereof, by reason of the absence of any authorisation or ratification of the policy, Lumley had no liability to Commercial Interiors.

53 Senior counsel for Lumley did not oppose leave being granted in respect of the above amendment subject to having an opportunity to make brief written submissions on the new ground after the hearing concluded. We granted leave in respect of the above amendment and also granted leave to Lumley to make written submissions and to QBE to respond to those submissions.

54 Grounds 1 to 5, 12 and 13 of the final version of the notice of appeal are essentially concerned with whether Lumley was liable to indemnify Commercial Interiors under the Lumley policy. Grounds 6 to 9 are concerned with whether Lumley made any payment under the Lumley policy by way of an indemnity in favour of Commercial Interiors or otherwise discharged Commercial Interiors' liability to Dabserv in tort. In relation to grounds 6 to 9, QBE relied on the principle that the law will not assist officious interveners, which was not relied on at trial.

55 Before considering the above issues, we will discuss the principles governing contribution between insurers.

Principles governing contribution between insurers

56 The principles governing contribution between insurers were developed in the context of marine insurance. However, it is now well established that they apply to all insurance policies that are contracts of indemnity, including liability insurance.[15] Section 76 of the IC Act recognises the relevant principles without affecting their scope or operation.

57 In Albion, Kitto J, with whom Windeyer J agreed, stated that contribution between insurers is based on 'two fundamental principles'.[16] The first is that persons who are under co-ordinate liabilities to make good the one loss (such as sureties liable to make good a failure to pay the one debt) must share the burden pro rata. The second is that since an insurance policy is a contract of indemnity, where several insurers have separately insured the one person against the one loss, that person may not recover from any or all of the insurers more than the total loss suffered.

58 His Honour reviewed the history of the principles of contribution at both common law and equity. He referred to cases which described the principles as being based variously on 'natural justice', 'doctrines of equity', 'doctrine of equality', 'reason, justice and law' and 'general principles of justice'.[17] More recently, in AMP Workers' Compensation Services (NSW) Ltd v QBE Insurance Ltd,[18] Handley JA (with whom Mason P and Beazley JA agreed) stated that the principles of contribution exist to avoid unjust enrichment on the part of one insurer at the expense of another insurer.

59 In Albion, Barwick CJ, McTiernan and Menzies JJ in their joint judgment stated the principles as follows:[19]

There is double insurance when an assured is insured against the same risk with two independent insurers. To insure doubly is lawful but the assured cannot recover more than the loss suffered and for which there is indemnity under each of the policies. The insured may claim indemnity from either insurer. However, as both insurers are liable, the doctrine of contribution between insurers has been evolved. It began in the second half of the eighteenth century with Lord Mansfield's decisions with respect to marine insurers and there is no doubt that it now applies generally to insurance which provides the insured with an indemnity. There is no reason why the doctrine should not apply to insurance against liability to third parties and there is every reason in principle that it should. The doctrine, however, only applies when each insurer insures against the same risk; although it is not necessary that the insurances should be identical. Thus one insurer may insure properties A and B against fire and the other insurer may only insure property A against fire. Again, one policy may be for a limited amount and the other may be for an unlimited amount. One policy may cover the risk of a whole voyage and the other may cover only part of the voyage. Differences of this sort may affect the amount of contribution recoverable but they do not bear upon the question whether or not each insurer has insured against the same risk so as to give rise to some contribution. The element essential for contribution is that, whatever else may be covered by either of the policies, each must cover the risk which has given rise to the claim. There is no double insurance unless each insurer is liable under his policy to indemnify the insured in whole or in part against the happening which has given rise to the insured's loss or liability. ...

... It seems to us that each policy did cover the very risk against which the policy holder did seek indemnity from one of the insurers. The matter can, we think, be decided simply enough by inquiring 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. It clearly would, and it would simply because the policy holder had by the payment made been indemnified against the risk insured against. He had received all that he was entitled to receive under both policies so the payment by one insurer would discharge both. Thus, payment by one is made for the benefit of both, and, contribution is equity.

60 Kitto J expressed the entitlement to contribution as existing 'whenever a loss has occurred against which each of two or more insurers has contracted to indemnify the one insured, whatever differences there may be in other respects between the policies'.[20] His Honour added that 'each policy must insure the same person against the very loss that in the event he has sustained, or the very liability that in the event he has incurred'.[21]

61 Albion involved a workers' compensation insurer seeking contribution from a motor vehicle insurer after paying a claim made by the employer, who had incurred a liability to an employee who suffered personal injuries arising from the use of a motor vehicle owned by the employer. The Court held that contribution was available from the motor vehicle insurer even though there were various differences between the policies, such as negligence being a requirement for cover in one but not the other.

62 AMP v QBE[22] also dealt with contribution between a workers' compensation insurer and a motor vehicle insurer. In that case, an employee was injured in the course of employment as a result of the negligent driving of a truck by a fellow employee. Both policies insured the employer's liability to the injured employee. The injured employee sued and obtained judgment against the negligent employee, but the employer was not made a party although it was vicariously liable and therefore was a joint tortfeasor. The motor vehicle insurer (QBE) satisfied the judgment and claimed contribution from the workers' compensation insurer (AMP). AMP denied liability because the workers' compensation policy did not cover the negligent employee and because the employer, not having been sued, was not entitled to indemnity under the policy. AMP conceded that QBE would have been entitled to contribution if the injured employee had sued and obtained judgment against the employer. However, the employer's potential liability to the injured employee was never crystallised by settlement or verdict and ceased to exist as a result of QBE's payment of the judgment against the negligent employee.

63 The New South Wales Court of Appeal held that there was double insurance and that the motor vehicle insurer was entitled to contribution from the workers' compensation insurer even though no claim had been made on the former policy by the employer and thus no payment had been made on behalf of the employer to discharge a liability of the employer. The Court held that Albion, when properly understood, requires the question of double insurance to be determined 'at the time of the casualty'.[23] The Court stated:

... The right [of contribution] arises when and because one of the insurers has paid more than his proper share of the common demand.
When one of the insurers has paid in full the indemnity principle is satisfied and the insured then has no right of indemnity against any other insurer. The right of contribution therefore cannot depend on the continued existence of co-ordinate liabilities for the same demand because the very payment by one which calls the right into existence will have put an end to the liability of the other insurer. ...
The right of contribution cannot, therefore, depend on the state of affairs which exist after the payment has been made which brings that right into existence. ...
Prior to the payment to [the injured employee] being made, the employer remained liable to [him] ... and both policies covered that risk. The payment by QBE extinguished the employer's liability to [the injured employee], and the contingent liability of both insurers to indemnify the employer.

In this case the employer had double insurance and [the injured employee] could choose his defendants, but in principle this should make no difference. The insured's decision to claim against one insurer rather than the other or both was not allowed to unjustly enrich the other, but contribution could be enforced so that all would share the burden equally. Similarly the more or less arbitrary decision by [the injured employee] to sue the driver and not the employer or both jointly should not be permitted to impose the whole burden on QBE to the exoneration of AMP. ...
... [T]here is no reason in precedent or principle why the right of contribution should be defeated by the existence of a second layer of choice available to another party. In a case such as the present it should not rest with either of the persons who had available choices to exercise those choices in a way which would leave the ultimate burden on one of the insurers without any right of contribution from the other.

64 Before us, senior counsel for QBE submitted that the principle adopted in AMP v QBE that the time for determining whether there is double insurance is the time of the casualty should not be followed in Victoria for the following reasons:

(a) The case was influenced by features of the law of New South Wales which do not apply in Victoria, namely the statutory abolition of the principle in Lister v Romford Ice and Cold Storage Co Ltd[24] by the Employees Liability Act 1991 (NSW) and the statutory presumption of agency between an owner and a driver of a motor vehicle under s 53 of the Motor Accidents Act 1988 (NSW).

(b) Contrary to the assertion in the case that the principle was mandated by Albion, there is nothing in Albion that has this effect.

(c) The case relied on principles about the accrual of a cause of action and the incurring of a liability which did not apply in Victoria.

(d) Although the case has been followed in Queensland,[25] the Queensland court relied on the case for a narrower point, and a number of English cases[26] have doubted the correctness of the principle.

65 We do not accept that the above matters, either singularly or in combination, justify AMP v QBE being distinguished. That case did not turn on any peculiar features of New South Wales law but rather on a detailed analysis of the underlying rationale and purpose of the contribution principles to avoid one insurer being unjustly enriched by the payment of the same loss or liability by another insurer. Although Albion did not expressly deal with the question of whether the existence of double insurance is to be determined at the time of the casualty that gives rise to the insured loss or liability, in our opinion, the decision in AMP v QBE is consistent with the underlying principles set out in Albion. As for the conflict in the English authorities, we do not believe there is much to be gained by analysis of those authorities, as the general law of insurance in Australia is informed by the IC Act, which has no equivalent in English statute law.

66 We agree with AMP v QBE that determination of whether double insurance exists at the time of the casualty giving rise to the insured's loss or liability rather than at a later time is more consistent with the underlying rationale and purpose of the contribution principles because it prevents an insurer from being unjustly enriched at the expense of another insurer as a result of deliberate or fortuitous events occurring after the casualty. It may also remove a potential incentive for the insurers at risk to reject claims, delay payment or engage in other conduct aimed at avoiding contribution. However, we would, with respect, make two qualifications.

67 The first qualification relates to terminology. Use of expressions such as 'loss', 'casualty' or 'incident' are apt for 'occurrence policies' (such as the property and public liability policies that are the subject of this appeal) where the insurer indemnifies the insured for loss suffered by the insured or liability incurred by the insured to a third party arising out of an occurrence that takes place during the policy period. Those expressions, however, are less apt for 'claims made and reported' policies (such as the professional indemnity policies that were considered in Drayton[27]) where the insurer indemnifies the insured for a liability arising out of a claim that is first made against the insured during the policy period and reported to the insurer during that period irrespective of whether the act or omission giving rise to the liability (such as the giving of negligent advice) occurred before or during the policy period. In the case of a claims made and reported policy, the policy in force at the time of the act or omission giving rise to the insured's liability may or may not cover the liability depending on whether a claim in respect of that act or omission is made and reported during the currency of the policy.[28]

68 In order to accommodate both occurrence policies and claims made and reported policies, the focus should be on the event that triggers cover under the insuring clause of the relevant policy. We prefer the expression 'insuring clause event', as it is simple and encapsulates the underlying principle.

69 The second qualification relates to whether the issue of double insurance must always be determined at the time of the insuring clause event without being affected by any subsequent events. While we agree that, ordinarily, subsequent events will not affect rights of contribution, we would prefer to leave open the possibility that a departure from this position may be warranted in cases where its adoption would subvert rather than promote the underlying rationale and purpose of the contribution principles.

70 The contribution principles, insofar as they are applicable to this case, may be summarised as follows:

(a) An insurer (first insurer) is entitled to contribution from another insurer (second insurer) if the following requirements are met:

(i) Both insurers insure a common insured. It does not matter if one or both policies insure other persons or if, where they do so, not all insureds are covered by both policies. Nor does it matter if the common insured is a party to the insurance contract under one policy and a person referred to in s 48 of the IC Act in respect of the other policy.

(ii) The common insured has suffered a loss or incurred a liability that is covered by both policies in whole or in part. It does not matter if one or both policies cover other risks or if, where they do so, not all risks are covered by both policies.

(iii) The first insurer has indemnified the common insured in respect of the loss or liability in whole or in part in accordance with its obligations under its policy.

(iv) The second insurer has not indemnified the common insured in respect of the loss or liability in whole or in part in accordance with its obligations under its policy.

(b) Ordinarily, the question whether the loss or liability is covered by both policies is to be determined at the time of the insuring clause event. The fact that, subsequently, the second insurer ceases to be liable under its policy because the common insured has been indemnified by the first insurer under its policy does not extinguish the first insurer's right to contribution.

(c) Other examples of events occurring after the insuring clause event which will usually not affect the first insurer's right of contribution include:

(i) a decision by a plaintiff to sue a person who is a joint tortfeasor with the common insured by virtue of the latter being vicariously liable for the former's negligence, and to enforce judgment against the joint tortfeasor in circumstances where the joint tortfeasor is an insured under the first policy but not the second policy;[29]

(ii) an agreement by the common insured and the second insurer under which the common insured waives his or her rights under the second policy or releases the second insurer from liability under the second policy;

(iii) in the case of an occurrence policy, failure by the common insured to make a claim under the second policy;[30] and

(iv) cancellation of the second policy by the common insured.[31] Where the second insurer refunds part of the premium as a result of the cancellation, the refunded amount may need to be taken into account in quantifying the second insurer's liability to contribute.

(d) Where the loss or liability falls within an exclusion in the second policy, the first insurer is not entitled to contribution from the second insurer.

71 We now apply the above principles to the facts of this case in the context of the grounds of appeal.

Was Commercial Interiors insured under both the Lumley and QBE policies?

72 QBE submitted that Commercial Interiors was not insured under the Lumley policy because it had not taken any step to authorise or ratify its inclusion as an insured under that policy. It submitted that the parties to a contract of insurance could not, by virtue of naming a third party to the contract as an insured, make the provisions of the insurance contract binding on that third party unless that third party authorised them to do so or ratified their doing so. It submitted that s 48 of the IC Act (which is set out in [33] of these reasons) and Trident General Insurance Co Ltd v McNiece B[32]s Pty Ltd,32 both of which enable a third party to an insurance contract to recover a loss or liability under that contract in certain circumstances, require the third party to take steps to 'engage' the insurance contract.

73 Lumley submitted that there is nothing in either s 48 of the IC Act or Trident that requires a third party to an insurance contract to take any steps to authorise, ratify or otherwise engage the insurance contract as a pre-condition to being covered under that contract. It submitted that s 48 was enacted in order to overcome the restrictions that apply at common law to a person who is named as an insured in an insurance policy but who is not a party to the contract of insurance. It submitted that s 48 applies according to its terms and that for the Court to accede to QBE's submissions regarding authorisation, ratification and engagement of the contract of insurance would undermine the reforms to the common law effected by s 48.

74 Section 48 of the IC Act was enacted to confer a statutory right on a person who is included as an insured in an insurance policy but who is not a party to the contract of insurance, to recover the loss or liability covered by the policy and, for this purpose, to be subject to the same rights and obligations as the insured who is a party to the contract. There is nothing in either the language or the underlying purpose of s 48 that requires such a person to do anything as a pre-condition to enforcing the rights conferred by the section.

75 It follows that the absence of any act by Commercial Interiors to authorise Probuild to include Commercial Interiors as an insured under the Lumley policy or to ratify its inclusion as an insured in the policy or to otherwise engage the policy did not alter the legal effect of Commercial Interiors' inclusion as an insured under the Lumley policy. The legal effect was that Commercial Interiors had a right under s 48 of the IC Act to recover its liability to Dabserv under that policy and Lumley had an obligation to discharge that liability.

76 Accordingly, we reject grounds of appeal 1, 2, 12 and 13.

77 QBE submitted that in order for Lumley to be liable to indemnify Commercial Interiors under the Lumley policy, and for double insurance to exist, it was necessary for Commercial Interiors to first make a claim under the Lumley policy.

78 QBE submitted that there was no privity of contract between Lumley and Commercial Interiors, and that any liability which Lumley had to Commercial Interiors was inchoate and contingent upon Commercial Interiors making a claim and thereby invoking either a statutory right under s 48 of the IC Act to recover from the insurer or a common law right to enforce a policy to which it was not a party pursuant to the principles in Trident.[33] QBE submitted that Lumley could not be in breach of the policy by failing to indemnify a third party who had made no claim, and that Commercial Interiors in fact did not make a claim under the Lumley policy, meaning that Lumley had no liability to it.

79 QBE also submitted that the trial judge erred by treating the notification by Probuild to Lumley as having any significance vis-à-vis Commercial Interiors because there was no evidence that Probuild had any authority from Commercial Interiors to notify Lumley on its behalf or that Commercial Interiors ratified the notification. It also submitted that, as Commercial Interiors was not a party to the Lumley policy, cl 6(c) of the policy had no effect unless Probuild's notification was authorised or ratified by Commercial Interiors.

80 In response, Lumley submitted, in reliance on AMP v QBE,[34] that the right to contribution is determined by reference to an entitlement to indemnity at the time of the accident, not by reference to how those entitlements are subsequently dealt with by the various parties. Lumley submitted that the entitlement to indemnity does not depend upon whether a claim is subsequently made by the relevant insured upon any insurer and that, accordingly, whether a claim was made by, or with or without the authority or ratification of, Commercial Interiors is not to the point.

81 Lumley also submitted that, under the Lumley policy, a claim by an insured was not necessary to trigger Lumley's obligation to indemnify as no clause in that policy makes it a precondition to liability that a claim be made. It further submitted that, to the extent required by the policy, notice was given, as cl 6(c) was satisfied in relation to Commercial Interiors by the notification given by Probuild to Lumley. Finally, Lumley submitted that even if there had been a breach of the obligation to give notice, that would not excuse the insurer except as provided in s 54 of the IC Act.

82 We agree with Lumley's submission that if the principle in AMP v QBE is applied, the result is that there is double insurance in respect of Commercial Interiors' liability to Dabserv because the insuring clauses of both the Lumley and QBE policies are triggered at the time of the accident and subsequent events such as a failure by Commercial Interiors to make a claim cannot affect that position. However, the existence of double insurance can also be established without relying on AMP v QBE.

83 Although Commercial Interiors was not a party to the Lumley policy, it came within the definition of 'Insured' under the policy and, in accordance with s 48 of the IC Act, it had a right to be indemnified under that policy. Neither s 48 nor the Lumley policy made that right contingent on the making of a claim. The insuring clause in the Lumley policy (which is set out in [25] of these reasons) did not provide that the making of a claim is a condition precedent to cover under the policy.

84 It is true that s 48(2)(a) of the IC Act refers to 'the person's claim'. However, the word 'claim' is not defined in the IC Act and does not appear in s 48(1), which confers the right of recovery. Furthermore, s 48(2) expressly provides that it is subject to the contract and therefore cannot impose a requirement for the making of a claim as a pre-condition for recovery when the contract of insurance does not contain any such pre-condition.

85 We agree with the trial judge that cl 6(c) of the Lumley policy (which is set out in [26] of these reasons) applied so that the notification of the accident that was provided by Probuild's broker (Willis) was sufficient notification of the claim on behalf of both Probuild and Commercial Interiors. The notification is effective under cl 6(c) whether or not Commercial Interiors authorised or ratified the notification because there is nothing in cl 6(c) which makes the efficacy of the notification dependent on issues of authorisation or ratification.

86 It appears that after making a claim under the QBE policy in April 2005 in respect of the accident, Commercial Interiors left it up to QBE and its loss adjustor, Thomas, to handle the claim and to liaise with Probuild, Dabserv and Lumley. QBE had a right under cl 2.2 of the broadform liability section of its policy to investigate, negotiate and settle Commercial Interiors' claim under the QBE policy. QBE and Thomas had ongoing communications with Lumley and were aware that Lumley was processing the notification that had been given under its policy and that it was treating the notification as extending to Commercial Interiors.

87 QBE had a common interest with Commercial Interiors in ensuring that payment for the rectification costs was made by someone other than them. As QBE was aware that Commercial Interiors' liability to Dabserv was being treated by Lumley as a risk that was insured under the Lumley policy, it can be inferred that it was aware of, and acquiesced in, Lumley treating Commercial Interiors' liability to Dabserv as having been notified under and covered by the Lumley policy. Such knowledge was gained and the acquiescence occurred while QBE was managing Commercial Interiors' claim under the QBE policy with Commercial Interiors' authority in accordance with cl 2.2 of that policy. However, for the reasons already explained, it is not necessary for us to make any findings about Commercial Interiors' knowledge, acquiescence or ratification regarding Lumley's conduct in treating Commercial Interiors' liability to Dabserv as having been notified under and covered by the Lumley policy.

88 We also agree with the trial judge that if Commercial Interiors was obliged to make a claim under the Lumley policy, s 54 of the IC Act would apply to any non-compliance with that obligation. In the circumstances of this case, it is difficult to see how Lumley would have been prejudiced by any such non-compliance and therefore how it would have been entitled to reduce the amount it paid under the policy in respect of the claim.

89 Accordingly, we reject grounds of appeal 3, 4 and 5.

Did Lumley indemnify Commercial Interiors for its liability to Dabserv?

90 QBE submitted that the trial judge erred in finding that 'all parties concerned' were aware that Lumley was considering the claim in respect of the occurrence and that it was doing so by reference to the 'liabilities attaching to subcontractors' within the scope of the Lumley policy, as there was no evidence that Commercial Interiors was aware of this. It also submitted that the trial judge erred in finding that 'the parties' understood Lumley to be treating the claim as one in respect of the damage caused by Commercial Interiors which, from the outset, was contemplated as falling within the Lumley policy, as there was no evidence that Commercial Interiors understood that Lumley was doing anything.

91 QBE submitted that the evidence established that Lumley paid the claim on behalf of Probuild and that the trial judge erred in failing to find that the sums were not, and could not have been, in discharge of any liability to Commercial Interiors. It relied, in particular, on the release that Probuild signed on 18 May 2006 in favour of Lumley (which is discussed in [20] of these reasons) and an internal memorandum dated 10 April 2006 which was apparently from Lumley's claims department to Lumley's head office. The internal memorandum contained the expressions 'Insured's subcontractor' and 'indemnity was eventually granted to our client' in a context which, according to QBE, indicated that the references to the insured and the client were to Probuild. QBE submitted that the only claim made was that made by Probuild, and that the true nature of the insurance cover was a promise by Lumley to Probuild to pay for losses for which a defined class of third persons was liable.

92 Lumley submitted that the only insured that Lumley had an obligation to indemnify was Commercial Interiors, and it was this obligation that it met. It submitted that the trial judge correctly held that the payment it had made met Commercial Interiors' liability to Dabserv under section 3 of the Lumley policy, as Probuild was not covered under any section of that policy.

93 Lumley submitted that it was not relevant whether QBE or Commercial Interiors were aware that this was the position or understood what Lumley was doing. It submitted that the issues in the proceeding are between the two insurers who are parties to the proceeding and that what is of importance is that Lumley met an obligation that QBE was also obliged to meet. It submitted that contribution can readily be imagined in situations where the second insurer was unaware a payment was being made to meet its liability to indemnify at the time payment was made. Lumley further submitted that, if it were relevant, the evidence showed that QBE through its loss adjustor, Thomas, was aware that Lumley was indemnifying Commercial Interior's liability. It relied, in particular, on Thomas' letter of 20 July 2005 and Lumley's reply dated 4 August 2005, which are discussed in [14] and [16] of these reasons.

94 There is evidence to support QBE's contention that Lumley paid the rectification costs to discharge Probuild's liability to Dabserv rather than Commercial Interiors' liability to Dabserv. The most significant evidence is the release signed by Probuild on 18 May 2006. By that release, Probuild released Lumley in respect of the claim under the Lumley policy for property damage sustained by Dabserv. As Commercial Interiors was not required to sign a similar release, it can be argued that the payment of the rectification costs was made under the Lumley policy to discharge Probuild's liability to Dabserv and that Lumley did not at any time make a payment under the policy to discharge Commercial Interiors' liability to Dabserv.

95 However, the evidence must be considered as a whole and, in particular, the release must be seen in the context of the entire dealings between the insurers, the insureds and their representatives. QBE and Lumley were aware that the damage to the fit-out was caused by Commercial Interiors and that Commercial Interiors was insured under both policies. Lumley took the running in relation to the damage to the fit-out and QBE took the running in relation to the damage to the chairs. At no stage, however, did QBE and Lumley agree that Lumley would be solely responsible for the damage to the fit-out and that QBE would be solely responsible for the damage to the chairs.

96 On the contrary, both insurers proceeded on the basis that Lumley would pay for the rectification costs on behalf of Commercial Interiors and then seek contribution from QBE. This clearly emerges from Thomas' letter to Lumley dated 20 July 2005 and Lumley's reply dated 4 August 2005. Thomas, on behalf of QBE, in effect asked whether Commercial Interiors was covered by the Lumley policy and Lumley replied to the effect that Commercial Interiors was covered under the Lumley policy and that Lumley would seek contribution under the QBE policy in respect of the rectification costs.

97 By paying the rectification costs, Lumley discharged Commercial Interiors' liability in tort to Dabserv. The payment also had the legal consequence of discharging the contractual liability of Probuild to Dabserv for the same property damage because, once the rectification costs were paid, Dabserv could no longer claim those costs from either Probuild or Commercial Interiors. However, the purpose of the payment under the Lumley policy was not to discharge Probuild's contractual liability to Dabserv because that liability was not covered by the policy. It follows that the payment under the Lumley policy indemnified Commercial Interiors as the only insured entitled to cover under that policy.

98 The fact that Lumley obtained a release only from Probuild does not alter the nature or effect of the payment of the rectification costs. Even though Commercial Interiors did not sign a release, Lumley's liability to Commercial Interiors under the Lumley policy was extinguished upon Lumley paying the rectification costs.

99 The payment of the rectification costs by Lumley also had the effect of extinguishing QBE's liability to indemnify Commercial Interiors under the QBE policy. It was common ground before us that if the payment had not been made by Lumley, QBE would have been obliged to make the payment on behalf of Commercial Interiors. As Commercial Interiors was a common insured in respect of a common insured liability and one insurer (Lumley) made a payment under its policy to discharge the insured's liability and, as a consequence, also extinguished the obligation of another insurer (QBE) to discharge the same liability, this is precisely the type of situation in which the principles of contribution are intended to apply.

100 We reject QBE's submission that Lumley's payment of the rectification costs was solely on behalf of Probuild and that such a payment was not made under the Lumley policy because of the contractual liability exclusion of that policy (which is discussed in [27] of these reasons). There is no evidence that Lumley made the payment on an ex gratia basis or on any other basis that fell outside the scope of its obligations under the Lumley policy. The fact that Probuild's liability to Dabserv was not covered under section 3 of the Lumley policy as a result of th[35] exclusion35 meant that the only insured entitled to indemnity under the Lumley policy was Commercial Interiors. This supports our conclusion that the payment of the rectification costs was made under the Lumley policy on behalf of Commercial Interiors.

101 In [17] of these reasons, we noted that the deductible of $20,000 applicable under the Lumley policy was passed on by Probuild to Commercial Interiors and was ultimately paid by QBE under the[36]BE policy.36 This strongly supports the proposition that Lumley paid the rectification costs on behalf of Commercial Interiors.

102 The fact that Commercial Interiors personally did not engage in any direct discussions with Lumley in relation to the payment of the rectification costs on its behalf does not alter the character of that payment. In any event, as previously discussed, under cl 2.2 of the broadform liability section of the QBE policy, QBE was empowered to negotiate the resolution of liability issues arising from the damage to the fit-out on behalf of Commercial Interiors, and it is clear that QBE's loss adjustor, Thomas, liaised with Lumley in relation to the resolution of those issues.

103 The internal memorandum of Lumley dated 10 April 2006, which QBE relied on, does not assist QBE. Although we agree with QBE that the references in the memorandum to the 'Insured' and 'client' are to Probuild rather than Commercial Interiors, we agree with Lumley's submission that nothing turns on the language used by the author of the memorandum (who is not identified in the memorandum) because its purpose was to obtain head office approval for an increase in the payment to be made under the policy and, understandably, focused on the principal insured under the policy. In any event, the memorandum expressly refers to Lumley obtaining contribution from QBE and this supports the proposition that Lumley intended that the payment under the policy would enable it to obtain contribution from QBE. The only way the payment could have this effect is if it were a payment on behalf of Commercial Interiors. Ultimately, however, we agree with the trial judge that the subjective thoughts of the unnamed author of the memorandum cannot affect the legal character or effect of the payment.[37]

104 Having regard to the evidence as a whole, we agree with the trial judge's conclusion that Lumley's payment of the rectification costs was made on behalf of Commercial Interiors to discharge its liability in tort to Dabserv.

105 Accordingly, we reject grounds of appeal 6, 7, 8 and 9.

106 QBE raised a further argument, which it said was concerned with coherence in the law. QBE submitted that the law will not assist officious interveners who act without authority.[38] It submitted that in this case, Lumley was an officious intervener who acted without authority from Commercial Interiors or QBE in discharging any liability arising from the damage to the fit-out, and therefore Lumley should not be able to recover anything from QBE.

107 Lumley submitted that the principle has no application to the body of law relating to contribution as between insurers, where almost inevitably the payment by the first insurer will not have been requested by the insurer from whom contribution is obtainable. It submitted that liability was not forced upon QBE, as it would itself have been liable under the QBE policy in any event.

108 QBE's submission can be disposed of quickly. As we have concluded that Lumley paid the rectification costs pursuant to its obligation under its policy to discharge Commercial Interiors' liability to Dabserv, the principle relied upon by QBE has no application.

109 For the above reasons, we agree with the trial judge that Lumley has satisfied the requirements for obtaining contribution from QBE.

110 Our conclusion accords with the underlying purpose and rationale of the principles of contribution. As discussed in [58] of these reasons, contribution is based on general principles of justice. In the circumstances of this case, including that:

(a) the damage to the fit-out was caused by the negligence of Commercial Interiors and it was liable to Dabserv for the rectification costs;

(b) Commercial Interiors paid a premium to QBE and was the principal insured under the QBE policy in respect of, among other things, liability for the negligence of Commercial Interiors;

(d) Commercial Interiors was also an insured under the Lumley policy by virtue of being a sub-contractor of Probuild and without having paid any part of the premium under the Lumley policy;

(e) Commercial Interiors' liability to Dabserv was covered under both the Lumley policy and the QBE policy;

(f) Lumley paid the rectification costs save for the deductible amount applicable under the Lumley policy; and

(g) if Lumley had not paid the rectification costs under the Lumley policy, QBE would have been obliged to do so under the QBE policy,

it would be unjust for Lumley not to be able to obtain contribution from QBE.

112 We will hear from the parties in relation to costs.

[1] Lumley General Insurance Ltd v QBE Insurance (Australia) Ltd [2008] VSC 216 ('Reasons').

[2] See also s 20 (persons benefiting under a contract of insurance need not be specified by name in the policy document) and s 45 (contractual provisions limiting or excluding an insurer's liability due to cover also being available under another policy are void).

[6] (1996) 67 FCR 1, 13 ('Drayton').

[13] The figure of $268,055.75 appears to have been calculated by taking the total initially claimed by Lumley, being $272,525.75, and subtracting half of the amount paid by QBE in respect of the six chairs (namely $4,470, being half of the $8,940 paid by QBE).

[14] Medical Practitioners Board of Victoria v Lal [2009] VSCA 109, [41] (citations omitted).

[18] [2001] NSWCA 267; (2001) 53 NSWLR 35, 40 [22] ('AMP v QBE'). On 9 August 2002, the High Court refused special leave to appeal.

[25] WorkCover Queensland v Suncorp Metway Insurance Ltd [2005] QCA 155; [2005] 2 Qd R 210, 226-7 [50].

[26] Eagle Star Insurance Co Ltd v Provincial Insurance plc [1994] 1 AC 130, 139-42; Drake Insurance plc v Provident Insurance plc [2003] EWHC 1094; [2004] QB 601; Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006] EWCA Civ 383; [2006] 1 WLR 1492, 1507-8 [36]-[38]. Cf Legal and General Assurance Society Ltd v Drake Insurance Co Ltd [1992] 1 QB 887, 891-3, 897-8 ('Legal and General'); O'Kane v Jones (The 'Martin P') [2004] 1 Lloyd's Rep 389, 426-31 [190]-[204] ('O'Kane').

[27] (1996) 67 FCR 1, 4-5, 11-12.

[28] See also s 40(3) of the IC Act which, in broad terms, provides that where during the policy period the insured notifies the insurer of facts that might give rise to a claim against the insured, the insurer is not relieved of liability under the policy if a claim is made against the insured after the expiration of the policy.

[30] Legal and General [1992] 1 QB 887, 892, 898. We leave open the effect of such a failure in the case of a claims made and reported policy.

[31] O'Kane [2004] 1 Lloyd's Rep 389, 430 [202].

[35] As discussed in [15] of these reasons, Probuild's liability was not covered under sections 1 or 2 of the policy on other grounds.

[36] As discussed in [17] of these reasons, Commercial Interiors effectively paid the amount of $19,751.73 and this was reimbursed by QBE.

[37] State Government Insurance Commission v Switzerland Insurance Australia Ltd [1995] SASC 5118; (1995) 64 SASR 537, 548.

[38] Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635, 663 [80], citing Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234, 248.

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