Rusbridge v Lake Fox Limited [2024] QSC 279

Cooper Grace Ward Lawyers for the first defendant/third party

• [1] The plaintiff in the proceeding, Mr Rusbridge, was injured on 5 December 2019. At the time of his injury Mr Rusbridge was an employee of the first defendant, Lake Fox Limited, trading as Rocky's Own Transport Co ('ROTC'). As its name suggests, ROTC carried on a transport business.
• [2] Mr Rusbridge was injured whilst at the premises of the second defendant, Orica Australia Pty Ltd. Orica and ROTC were parties to a contract whereby ROTC provided transport services to Orica. The contract was entitled "Transport Services Agreement" ('TSA') and commenced on 1 November 2019.
• [3] The terms of the TSA are important to the present dispute. I will return to those terms in a moment.
• [4] Mr Rusbridge, who was employed by ROTC as a truck driver, brought a claim for damages alleging that his left hand was seriously injured when he left his left hand on the footplate of a stabilizer leg as it was retracting. Mr Rusbridge's claim was brought against Orica. Orica defended the claim but ultimately paid $228,421 to settle the proceeding. It is agreed that was a reasonable sum and reflected Orica's liability to the plaintiff.
• [5] The remaining dispute is Orica's third-party claim that ROTC breached the terms of the TSA by failing to effect an insurance policy that provided insurance cover for Orica and responded to Mr Rusbridge's claim against Orica.

[ROTC] must, at its own expense, procure and maintain the following minimum insurances:

(b) broadform public and product liability insurance with a limit of indemnity of not less than $20,000,000 for each and every occurrence ... which covers the liability of [ROTC] (including to Orica) in respect of:

(ii) the bodily injury of, disease or illness (including mental illness) to, or death of, any person ...

arising out of the performance of this Agreement (including the provision of the Transport Services) by [ROTC] ... [emphasis added]

• [7] On its own, that clause would not assist Orica. It merely requires that ROTC maintain insurance covering its own liability to a third person who suffers personal injury. The parties agree that ROTC complied with clause 21.2 of the TSA by taking out a Berkshire Hathaway policy (discussed below).
• [8] However, clause 21.3 of the TSA extended that obligation to take out insurance:

The insurance policies required under Clause 21.2(b) and (c) of this Agreement shall include Orica as an additional insured or a person to whom the benefit of insurance extends for its respective rights and interests.

• [9] As can be seen from the words of that clause, there are two methods by which ROTC could comply with its obligations under clause 21.3. ROTC could procure and maintain an insurance policy under clause 21.2(b)[1] which:

(a) included Orica as an "additional insured"; or

(b) extended the benefit of the insurance to Orica for its rights and interests.

• [10] On 30 November 2019 ROTC obtained insurance which complied with clause 21.2 of the TSA. That policy of insurance was arranged by ROTC's brokers, AEI Transport Insurance Brokers and the insurance was placed with Berkshire Hathaway Speciality Insurance. The details of the insurance are as follows:

Insured: ROTC and subsidiary and/or related corporations all for their respective rights, interests and liabilities

Interest Insured: Covering the Insured's legal liability arising from and in relation to ... personal injury to any third party ...

• [11] The coverage summary from AEI records that the Berkshire Hathaway Speciality Insurance Logistics Liability Policy Wording 05-2016 including optional extensions of cover for products liability and advertising injury liability. The Berkshire Hathaway policy wording and the insurance policy schedule were tendered in evidence.[2] AEI's coverage summary,[3] and the policy schedule,[4] records that:

All business insured under this policy is transacted under the Rocky's Own Transport Conditions of Contract except for specific customer contracts that have been noted and approved under this policy of insurance. Copies of all Specific Customer Contracts are to be noted and approved by the Insurer and the Insurer reserves the right to charge a reasonable additional premium if a specific customer contract is onerous in nature.

Subject always to policy terms and conditions and specific qualifications provided by the Insurer at the time each individual contract has been reviewed the following specific customer contracts are noted and approved:-

• Orica AN
• Orica HE
• Dyno Nobel Asia Pacific

• Orica Australia Pty Ltd - Transport Services Agreement - Contract number: CW2245744 - Commencement date: 1 November, 2019. [emphasis added]

• [13] And so, the policy expressly identified ROTC's contract with Orica, the TSA, as an 'Approved Specific Customer Contract'. The effect of the TSA being identified as an Approved Specific Customer Contract did not make the customer, Orica, an insured.[5] The effect of that designation was to extend the insurer's liability to indemnify for contractual liabilities.[6]

• [14] The policy does not identify Orica as an_"additional insured_", or as a co-insured, or as an insured at all. And the policy does not extend the benefit of the insurance to Orica for its rights and interests. In particular, the Berkshire Hathaway policy does not comprehend any liability that Orica may have to third parties for personal injury. That is the relevant requirement of the policy specified by clause 21.2 which clause 21.3 requires to be extended to the liability of Orica.
• [15] The Berkshire Hathaway policy wording defines "Insured" as follows:

the person, legal entity, company or companies noted as the named Insured in the Schedule, including any named Co-Assured; and

• any subsidiary company, including subsidiaries thereof, of the named Insured or any name Co-Assured noted in the Schedule and any other organisation under the control of the named Insured or any named Co-Assured noted in the Schedule and over which it is exercising active managed;
  • any new organisations acquired by the named Insured or any named Co-Assured noted in the Schedule, during the Period of Insurance, through consolidation, merger, purchase of the assets of or assumption of control and active management, provided such acquisition or assumption is reported to the Insurer within 90 days after it is effected and provided further such acquisition is endorsed onto this policy.
• any director, officer or employee of the named Insured or name Co-Assured noted in the Schedule acting in the court of their employment. [emphasis per original]

• [16] That definition does extend the insurance cover to related entities, but it does not extend the cover to "specific customers", or to contractors or principals generally. Orica was not identified as a Co-Assured.
• [17] And so, when the insuring clause in the policy says "The Insurer will pay all sums which the Insured becomes legally liable to pay resulting from an Occurrence happening during the Period of Insurance ..." the liability covered is the liability of ROTC, and its related entities, but not Orica.
• [18] It follows that the Berkshire Hathaway policy does not satisfy the requirements of clause 21.3 of the TSA. As explained, what was required was that either Orica be an "additional insured" or a person to whom the insurance extended for Orica's rights and interests.[7] Neither requirement was met.
• [19] ROTC argued that, properly interpreted, and having regard to a number of case authorities, the TSA did not require ROTC to take out insurance which extended to cover Orica for its own negligence.
• [20] Before considering the specific arguments mounted by ROTC, it is necessary to explain the principles of contract interpretation.

Interpretation of Commercial Contracts - the Principles

• [21] In Heavy Plant Leasing Pty Ltd (In Liq) v McConnell Dowell Constructors (Aust) Pty Ltd (No 2)[8] Stevenson J explained that a court, in interpreting a provision of a document, has regard to its words, its context and the purpose of the document as a whole. As His Honour pointed out, the leading modern statement on the importance of context and purpose is found in the reasons of French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd:[9]

The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.

In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.

Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.

However, sometimes, recourse to events, circumstances and things external to the contract is necessary. ...

• [22] The requirement that the interpretation exercise be determined objectively in that way does not mean that the text, context and purpose are to be, in effect, placed in a blender with meaning to be derived from the resulting puree. As Herzfeld and Prince say in their text Interpretation:[10]

... the only relevant meaning is that which the text conveys. This follows from the need to ascertain the intention expressed in the document. Although ... context and purpose are relevant, ultimately the court must attribute meaning to the words actually used.

• [23] The primacy of the text is the first rule of interpretation for a judge considering a point of interpretation.[11] As has been explained: 'The first place where you look for the intention of the parties is in the language which they themselves used. And it is very often the last place too'.[12] Thus, the process of interpretation does not allow a court to force upon a provision of a private legal document a meaning that the words of the provision cannot fairly or reasonably bear, and to substitute for the bargain actually made one which the court believes could better have been made.[13]
• [24] Here, as will be seen, the submissions made by counsel for ROTC offend that principle in that ROTC seeks to, in effect, sideline the text in favour of ensuring that the interpretation decision in this case conforms, not to the text, but to an interpretation that confines the operation of the clause and is consistent with an interpretation adopted in similar cases (principally, Erect Safe Scaffolding v Sutton[14] - discussed below).
• [25] There is one final, related point here. The court is not bound by the outcome in another case involving a similar but not identical contract.[15] Given that the ultimate question for the court is the meaning of the particular document in issue, dependent on construing it as a whole and with reference to any evidence that is admissible extrinsic evidence peculiar to that document, it is very difficult to see how a decision on the meaning of one document could ever be strictly binding in relation to another.[16] The only relevance of previous decisions on similar contracts is that they may establish relevant principles, or the previous reasoning may be persuasive or relevant by way of analogy.[17]

ROTC's Arguments: Overcoming the meaning the text conveys

• [26] The precise terms of clause 21.3 have been set out above. The text of that clause is clear. There is no ambiguity. Clause 21.3 of the TSA requires that ROTC take out a broad form public and product liability insurance policy, with a limit of indemnity of at least $20 million for each and every occurrence, which covers the liability of ROTC for personal injury, and that the policy also names Orica as an 'additional insured' or otherwise comprehends Orica as entitled to the benefit of that policy.
• [27] There is no room for doubt about that obligation. During the course of argument, I asked ROTC's counsel about the lack of ambiguity in clause 21.3:[18]

HIS HONOUR: See, that was the next question I was getting to, is which is - your excursion into the cases about how businesspeople need to interpret these contracts assumes that there's some ambiguity in all of this. What I'm trying to identify is where is the ambiguity?

MR CHARRINGTON: Well, we submit there's no ambiguity because clause 21.3 refers to 21.2(b) and is therefore constrained by the scope of that policy and, under the authorities that we rely upon that I have already taken your Honour to, it's further informed by the liability agreement between the parties, which is that ROTC is not liable for Orica's own acts of negligence.

MR CHARRINGTON: They - that's the effect of the decisions that we rely upon of Erect Safe, Steele and Canberra Formwork - and indeed, your Honour, that was originally pleaded in this case, the indemnity, and was abandoned. The indemnity was originally pleaded, but abandoned. So there's no dispute that the indemnity doesn't extend to Orica's own acts of negligence. The only dispute is whether the insurance clause, via the backdoor, so to speak, picks up that indemnity, that there was - in a case where the indemnity doesn't exist, there's still an insurance obligation for a transport operation to take out cover that covers a explosives manufacturer for its broad business and that can't be so, in our submission, on any sensible view of the contract. [emphasis added]

• [28] The concession that there is no ambiguity is a concession that was rightly made. The text of clause 21.3 of the TSA requires ROTC to effect the relevant insurance in Orica's name as an additional insured or otherwise as a party entitled to that cover. In my view, a reasonable businessperson would have understood the text of clause 21.3 to mean that ROTC was obliged to fulfil the requirement that the insurance cover be extended to Orica. Any other interpretation would involve a failure to give primacy to the text and to give the clause a meaning that it cannot fairly or reasonably bear.

• [29] It can be seen that counsel for ROTC relied on clause 21.3's cross-reference to clause 21.2(b) and (c). The purpose of that cross-reference was to identify the particular policies of insurance which ROTC was obliged to extend to Orica. Under clause 21.2 ROTC was obliged to take out four categories of insurance: workers compensation, broadform public and product liability, motor vehicle and all risks property insurance. Clause 21.3 obliged ROTC to extend the second and third of those categories of insurance policies to Orica. Thus, it is true that the two clauses are inter-connected. But the operation of clause 21.3 is not "constrained" by clause 21.2 other than to simply identifies the two categories of insurance that ROTC must extend to Orica.
• [30] It is a mistake, in my view, to read down the operation of clause 21.3 so that it limits or constrains the nature of the policy to be effected. The evident purpose of the cross-reference is merely to identify the two categories of insurance policies that are required to extend to Orica. To read down, or to 'constrain' the operation of clause 21.3 in other ways would be to fail to give effect to what a reasonable businessperson would have understood that clause to mean.

• [31] It can be seen that counsel for ROTC also relied on various authorities. Principally, the authorities relied on were Erect Safe Scaffolding v Sutton,[19] and two cases that were followed by that case, Canberra Formwork Pty Ltd v Civil and Civic Ltd,[20] and Steele v Twin City Rigging Pty Ltd.[21]
• [32] The first problem is that, as explained, the court needs to be cautious in using prior decisions of the court as helpful in interpreting different contracts in a different context.
• [33] The second problem is that, as also explained, the ordinary and literal meaning of the words of clause 21.3 are clear and free of any ambiguity.
• [34] The third problem is that the core passage from Erect Safe Scaffolding v Sutton relied on by ROTC is not particularly helpful and is idiosyncratic to the contract in that case.
• [35] In Erect Safe Scaffolding v Sutton the NSW Court of Appeal was required to consider two broad issues. The first was the proper interpretation of an indemnity clause. The indemnity clause was as follows:

The Subcontractor must indemnify Australand Constructions against all damage, expense (including lawyers' fees and expenses on a solicitor/client basis), loss (including financial loss) or liability of any nature suffered or incurred by Australand Constructions arising out of the performance of the Subcontract Works and its other obligations under the Subcontract. [emphasis added]

• [36] The interpretation of the words emphasised above was in issue. Giles JA and McClellan CJ at CL (Basten JA dissenting) decided that:

(a) The indemnity clause, by which the subcontractor agreed to indemnify the head contractor against all damage that the head contractor suffered "arising out of the performance of the subcontract works and its other obligations under the subcontract", only imposes a liability on the subcontractor for damage occasioned by any act or omission which it committed;

(b) Where damage was caused, in part, by the negligence of a subcontractor bound by such an indemnity clause, but was also caused, in part, by the independent act of negligence by its head contractor, the latter's liability was as a result of its own negligent act rather than arising out of the performance of the subcontract works by the subcontractor, and the indemnity clause was not engaged.

• [37] Thus, the case was concerned with an indemnity clause which required the subcontractor to indemnify the head contractor for damage arising out of the performance of the subcontract work. The court considered a large number of authorities, particularly on the meaning of the words "arising out of". The court decided that that the words "arising out of the performance of the subcontract works and its other obligations under the subcontract" did not require the subcontractor to indemnify the head contractor for the head contractor's own negligence.
• [38] The second broad issue considered by the court was the insuring clause. Clause 12 of the contract obliged the subcontractor to obtain insurance to cover both the head contractor and the subcontractor "for their respective rights and interests against liability to third parties for loss of or damage to property and the death of or injury to any person". This second issue concerned the breadth of the obligation imposed by the insuring clause.
• [39] McClellan CJ in CL said this:

Clause 12, of course, follows cl 11 and I have already concluded that the liability of [the subcontractor] under cl 11 is confined. It would be surprising if, notwithstanding that limitation, the parties intended [the subcontractor] to obtain insurance for any liability of [the head contractor], even that arising from its own negligence. [emphasis added]

• [40] And so, His Honour's view was that the indemnity clause was narrow and did not require the subcontractor to indemnify the head contractor for the head contractor's own negligence. His Honour read the insuring clause as similarly limited in scope.
• [41] The paragraph quoted above was plainly not intended as a statement of principle. The interpretation was specific to the particular contract before the court in that case. Indeed, I am unable to see any clauses or phrases or wording in the contract in Erect Safe Scaffolding v Sutton that are present in the TSA.
• [42] Similarly, in GIO General Ltd v Centennial Newstan Pty Ltd the NSW Court of Appeal distinguished Erect Safe Scaffolding v Sutton because the words of the agreements were "quite different".[22]
• [43] And yet, counsel for ROTC submits that:

ROTC submits that, properly construed and having regard to the above case authorities, the TSA did not require ROTC to take out insurance which extended to cover Orica for its own negligence.

• [44] The underlying premise in that submission is that there is a principle that the TSA should be construed on the basis that clause 21.3 should not be read as requiring ROTC to provide insurance cover for its own negligence. That is based on Erect Safe Scaffolding v Sutton and similar cases. In my view, because the process of interpretation requires consideration of the text, context and purpose the exercise will necessarily be different for different contracts. And there is no principle that requires the natural and ordinary meaning of clause 21.3 be suppressed in favour of an interpretation that the parties are taken to not have intended that ROTC would be obliged to effect liability insurance which provided cover for ROTC's own negligence. One of the purposes of liability insurance is to provide cover for an insured's risk that the insured may be liable to third parties. And, the trigger for the engagement of the insurance is the happening of a defined 'Occurrence' during the period of insurance, rather than any particular party's negligence. Thus, a liability policy is engaged to provide insurance cover in the event that the defined 'Occurrence' occurs. The fact that a liability policy responds irrespective of the insured's negligence makes it unlikely that the intention of the parties to the TSA was to exclude coverage in the event that one or other of the parties was negligent.
• [45] In short, the relevant policies do not speak in the language of negligence. That makes it unlikely that the parties can be taken to have intended to exclude coverage for a particular subset of liability, particularly in the absence of any mention of the subset.

ROTC not required to cover Orica's own negligence

• [46] Counsel for ROTC argued that nothing in the TSA required ROTC to cover Orica's own negligence and so such a term could not and should not be implied or read into the TSA.[23] However, what the TSA required had nothing to do with Orica's own negligence - except in an incidental way. What the TSA required was that:

(a) pursuant to clause 21.2, ROTC take out four categories of insurance: workers compensation, broadform public and product liability, motor vehicle and all risks property insurance; and

(b) pursuant to clause 21.3, ROTC ensure that the insurance policies it took out, in order to satisfy the second and third of those categories, be extended to Orica as an additional insured or as an entity to whom the benefit of the insurance extended.

• [47] Each category of insurance may happen to cover a liability that was incurred by reason of either ROTC's negligence, or by reason of Orica's negligence, or possibly both. But the policies required were particular species of policies. The fact that those policies may respond in the event of the negligence of one or other party is merely a consequence of the species of policy. Certainly, it is true that nothing in the TSA required TSA to cover Orica's own negligence. But nothing in the TSA descended into the detail of what was and was not to be covered by the particular species of policies.
• [48] And, of course, the problem with this argument is that it assumes that Orica seeks to imply or read into the TSA a term to the effect that ROTC was required to effect cover for Orica's own negligence. The TSA operates on a completely different level. A reasonable businessperson, reading the TSA, would simply conclude that ROTC was required to ensure that the second and third categories of insurance policies it was obliged to take out be extended to Orica.
• [49] For those reasons, I reject ROTC's interpretation of the TSA. The TSA required that ROTC extend the cover of the broad form public and product liability policy to Orica.

• [50] ROTC sought to rely on affidavits of Bryan Thomas Smith and Michael Donaldson. Those affidavits and the evidence of those two witnesses were subject to objections on the grounds of relevance. I reserved my ruling on those objections. Having considered the evidence there is, in my view, no relevance to the evidence of those two men. Mr Smith's evidence is that:

(a) There were some negotiations involving him that led to the TSA and its predecessor agreements;

(b) Whilst he does not recall it, he is likely to have sent the TSA to ROTC's broker;

(c) That is confirmed by the policy schedule;

(d) He had a "clear understanding" with Mr Donaldson, ROTC's broker, that ROTC's contractual liability would be covered by insurance;

(e) There was never a discussion with Orica that ROTC would take liability for Orica's negligence;

(f) He would take advice from ROTC's solicitors and brokers;

(g) If Orica had insisted on ROTC taking out insurance covering Orica for their own liability, he would have ascertained the cost and made a commercial decision;

(h) He was advised by Mr Donaldson that the TSA insurance clause was covered by ROTC's existing insurance arrangements;

(i) He has some views about the respective bargaining power of Orica and ROTC.

• [51] None of that has any relevance to the issues in dispute. Much of it also records either 'background' or subjective views of ROTC, or its arrangements with its broker, none of which qualifies as mutually known facts.[24] Mr Donaldson's affidavit is similarly irrelevant.
• [52] Mr Donaldson's affidavit also purports to say that he is unaware of any insurer that would have covered Orica for its own negligence, or who would have been prepared to have Orica named as an additional insured. He says this segment of the insurance market is small. If it were relevant the evidence does not go very far. It is little more than Mr Donaldson's subjective views rather than proper evidence that the insurance could not be placed, or even that it may be difficult to place. However, Mr Donaldson's views are not relevant at all. As I have explained, the TSA required that ROTC extend the cover of its broad form public and product liability policy to Orica. The fact that extending the policy to Orica may be difficult, or even impossible, does not matter. What matters is the contractual obligation.
• [53] The evidence of the two men is irrelevant to the issues and is inadmissible.

• [54] It follows from these reasons that Orica is entitled to judgment.

[1] Only clause 21.2(b) is relevant here, although the obligation to extend the insurance included the motor vehicle policy under clause 21.2(c).

[2] The two documents were tendered as exhibits 3 and 6.

[3] The document was tendered as exhibit 2.

[4] The document was tendered as exhibit 6.

[5] That was expressly specified in the definitions section of the policy which stated that: "The Customer is not an insured party under this policy, is not a person to whom insurance cover provided by this policy extends...".

[7] ROTC argues that it has satisfied the requirements of clause 21.3. Those arguments are considered below.

[8] [2022] NSWSC 1775; (2022) 163 ACSR 562, [18].

[9] [2015] HCA 37; (2015) 256 CLR 104, [46]-[49]. This case was relied on by counsel for ROTC.

[10] Perry Herzfeld and Thomas Prince_, Interpretation_ (Thomson Reuters, 3rd ed, 2024) [19.60] ('Herzfield and Prince'). This passage, in the previous edition, was quoted with approval by Stevenson J in Heavy Plant Leasing Pty Ltd (In Liq) v McConnell Dowell Constructors (Aust) Pty Ltd (No 2) [2022] NSWSC 1775; (2022) 163 ACSR 562, [19].

[11] Richard Calnan, Principles of Contract Interpretation (Oxford University Press, 2nd ed, 2017) 27 ('Calnan'), quoting from Johan Steyn, 'The Intractable Problem of the Interpretation of Legal Texts' [2003] SydLawRw 1; (2003) 25(1) Sydney Law Review 5.

[12] Calnan (supra) quoting from Christopher Staughton, 'How Do the Courts Interpret Commercial Contracts' (1999) 58(2) Cambridge Law Journal 303, 305.

[13] Herzfeld & Prince (supra) at [19.90]; WorkPac Pty Ltd v Rossato (2021) 271 CLR 456, [63]. Of course, in some cases, words and even whole clauses may be rejected if they are inconsistent with the main object of the contract, as ascertained from a reading of it as a whole: see the discussion by Kim Lewison and David Hughes, The Interpretation of Contracts in Australia (Thomson Reuters, 2012), [9.09].

[14] [2008] NSWCA 114; (2008) 72 NSWLR 1.

[15] Erect Safe Scaffolding v Sutton [2008] NSWCA 114; (2008) 72 NSWLR 1, [89], [154].

[16] Herzfeld & Prince (supra) at [19.100].

[17] Herzfeld & Prince (supra) at [19.100]. The authors also suggest that previous decisions may form part of the background circumstances against which the document in question was created, knowledge of which may be inferred. Of course, that will be a rare case.

[18] Transcript of the hearing, T 1-37.

[19] [2008] NSWCA 114; (2008) 72 NSWLR 1.

[20] (1982) 67 FLR 66.

[21] (1992) 114 FLR 99.

[22] [2014] NSWCA 13, [139].

[23] Third party's written outline, [45].

[24] DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 at 429.