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[2026] NSWCA 154
respondent. Appeal dismissed with costs. [52]
The policy did not cover these costs merely because asbestos fibres had been released during the work. The costs were incurred because asbestos was found in soil and the law and the Improvement Notice required SWC to manage that hazard and provide a safe system of work. Those obligations would have applied even if no fibres had actually been released. The Policy required the claimed Loss to arise from a defined Pollution Condition, so the distinction between asbestos being present and asbestos being released was decisive. The Court dismissed SWC's appeal with costs.
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2,445 words · generated 07/10/2026
Seymour Whyte Constructions Pty Limited (SWC) was engaged by VicRoads on 22 February 2017 to undertake work associated with upgrading part of the Chandler Highway in Melbourne. The project required excavation of a large amount of fill for pier foundations near the Yarra River. The contract allocated to SWC the costs of investigating, removing, remediating and disposing of contaminated material, while also containing provisions addressing latent conditions and identifying some areas known to contain asbestos. [5]-[7]
3 cited instruments linked from this judgment.
Excavation started in May 2017 at the Pier 1 and Northern Abutment Site. Because material could not be stockpiled in the river flood zone, SWC arranged for material to be stockpiled on the adjacent Glenvill Site. Between 8 and 14 August 2017, excavated soil was transported there. Glenvill informed VicRoads on 14 August that bonded asbestos had been found in a stockpile. [7]-[9]
SWC stopped work north of the river, began airborne dust monitoring, retained a hygienist and engaged a licensed asbestos contractor. WorkSafe Victoria inspected the site and issued an Improvement Notice on 17 August 2017. The notice stated that WorkSafe reasonably believed SWC had contravened ss 21(1) and 21(2)(a) of the Occupational Health and Safety Act 2004 (Vic). It identified the failure to provide a safe system of work for managing asbestos-contaminated soils and required SWC to provide such a system across the entire construction site. It also prohibited further work in the North Abutment work zone until an asbestos management plan was developed and implemented. [10]-[12]
The notice referred to the risk that failure to control asbestos could expose employees to fibres and cause adverse health effects. It did not state that fibres had already been released into the air. The distinction between a risk of future exposure and an actual release became central to the appeal. [11], [32], [41]-[43]
SWC incurred costs for removal work, equipment, personnel, hygienist services, legal costs and Glenvill's removal of contaminated material. It claimed relevant amounts under a Contractor's Pollution Legal Liability Policy issued by Liberty International Underwriters, identified in the proceedings as LIU. The policy promised payment of sums the insured became legally obliged to pay for Loss arising from Pollution Conditions caused by Covered Operations. Pollution Conditions included the emission, discharge, dispersal, migration, release or escape of pollutants. The parties accepted that asbestos could be a pollutant and that SWC's work was Covered Operations. [20]-[24], [29]
The primary judge dismissed the claim. SWC appealed, challenging the construction and application of the Insuring Agreement. The Court of Appeal dismissed the appeal with costs. [2]-[3], [37], [52]
The Court approached the Policy as a commercial contract, applying the proposition that interpretation requires attention to the language, commercial circumstances and objects of the document. Ball JA referred to McCann v Switzerland Insurance Australia Ltd and CGU Insurance Ltd v Porthouse in stating that approach. [38]
The Policy's central promise was not a general indemnity for the costs of dealing with contaminated soil encountered in construction. The text required Loss to arise from Pollution Conditions, and Pollution Conditions required an emission, discharge, dispersal, migration, release or escape of pollutants. The Court understood the Policy as principally addressing certain losses arising from pollution, including third-party bodily injury and property damage claims, defence expenses, and some fines or penalties. It also recognised cover for specified clean-up and related costs, but found that the wording of those heads of loss was convoluted and did not establish a general purpose of covering additional costs arising from latent conditions. [39]-[40]
The essential problem with SWC's case was causation. Its claimed costs were associated with complying with the Improvement Notice and occupational health and safety duties. The Court found those obligations arose from the presence of asbestos in soil that SWC was excavating and the need for a safe system of work. They did not arise from the fact that asbestos fibres had already been released into the air. The legislation required the safe system whether or not any release had occurred. [41]-[43]
The Improvement Notice extended across the entire construction site. SWC sought to claim only a portion of costs, attributed to the Pier 1 and Northern Abutment Site. The Court found that this apportionment did not resolve the causal difficulty. On SWC's construction, the notice and resulting costs were said to arise from the release of fibres, but the notice required costs across the whole relevant area. The Court considered that there was no rational basis for limiting the covered costs in the way SWC proposed on that construction. [44]
SWC argued that “arising from” required only a causal connection and that a release could be one cause of the costs, even if contractual obligations also existed. The Court accepted that the existence of a separate contractual obligation would not, by itself, prevent costs from also arising under the notice. But it held that the actual release was irrelevant to the statutory obligations and the issuing of the notice. That meant the necessary connection to Pollution Conditions was absent. [45]
The separate Glenvill claim encountered distinct problems. The notice required a safe system of work for SWC's employees; it did not require SWC to remove stockpiles that Glenvill was dealing with. Nor did the legislation require SWC to reimburse Glenvill's costs. SWC had not pleaded or explained the basis of its liability to Glenvill. The Court therefore did not decide whether such a liability, if established on some basis, might constitute Property Damage arising from a relevant Pollution Condition. SWC no longer relied on transport of contaminated material as the relevant Pollution Condition. [46]-[49]
Finally, SWC relied on the policy definition of Environmental Damage, “the injurious presence of Pollutants resulting in Clean-up Costs”. The Court acknowledged the difficulty of the drafting but read that definition within the Insuring Agreement as a whole. Environmental Damage remained a form of Loss, and Loss still had to arise from Pollution Conditions. The presence of asbestos could satisfy part of the Environmental Damage definition, but it did not itself establish that the loss arose from an emission, discharge, dispersal, migration, release or escape. [50]-[51]
The judgment does not announce a new general rule of insurance law or displace a prior doctrinal test. It applies established principles of contract interpretation to the particular Policy wording and factual circumstances. The interpretive approach was drawn from McCann and CGU, with attention to the text, commercial setting and purpose of the contract. [38]
The legally significant clarification in this case concerns how that approach applied to this particular pollution policy. The Policy separately referred to the “injurious presence” of pollutants in defining Environmental Damage, while the Insuring Agreement required Loss to arise from Pollution Conditions. The Court treated those as distinct parts of the policy structure. Presence could be relevant to Environmental Damage, but it could not eliminate the separate requirement that the Loss arise from a defined Pollution Condition. [26], [51]
The decision also illustrates that a factual connection between construction work and contamination does not, without more, meet a policy's particular causal language. The Court did not decide that the release of a pollutant could never be a cause of regulatory compliance costs. Its conclusion was narrower: on these facts, the Improvement Notice and statutory duties arose from the presence of asbestos and the need for safe work practices, independently of any actual release. [42]-[45]
The judgment discusses State Government Insurance Commission v Stevens Bros Pty Ltd in the context of SWC's submission about the meaning of “arising from”. It accepts the general point that a causal connection may be sufficient, but concludes that the actual release made no relevant contribution to the obligations generating the costs. [45] It therefore applies the causal requirement to the evidence and the particular duties involved, rather than stating a broader rule that concurrent causes are always excluded.
At [39], the Court says the Policy was designed to protect SWC against certain losses arising from the “emission, discharge, dispersal” and related events involving pollutants. In plain English, the policy's focus was not simply contamination existing at a worksite. It was on losses connected to one of the specified pollution events.
At [40], the Court rejects the idea that the Policy generally covered additional costs caused by latent conditions affecting construction operations. It considered a more plausible reading to be cover, in certain circumstances, for clean-up costs after pollutants had been released or discharged and could give rise to third-party claims. This is a construction of this policy, not a statement that every pollution policy has the same scope.
At [42], the Court identifies the decisive factual distinction: costs had to be incurred to comply with legislation and contractual obligations independently of any release of fibres. In plain English, the existence of an actual release did not explain why the legal duties required SWC to develop and implement a safe system of work.
At [43], the Court states that the notice and legislation required action because asbestos was present, not because it had been released. The notice addressed the management of asbestos-contaminated soils and future excavation work. The Court treated the danger of possible exposure as sufficient to explain the safety requirements, without treating that risk as proof that the costs arose from an actual release.
At [45], the Court accepts that a loss may have a causal connection with a pollution condition even if another obligation also exists. But it finds that this did not assist SWC because the actual release was irrelevant to the legislative duties and the notice. The key question was not whether SWC had more than one obligation, but whether the defined Pollution Condition caused the covered Loss.
At [51], the Court explains why Environmental Damage did not provide an alternative route to indemnity. Although the definition referred to the injurious presence of pollutants, the Insuring Agreement still required Loss to arise from Pollution Conditions. The Court's plain-English distinction is between costs caused by asbestos being present and costs caused by asbestos being emitted, discharged, dispersed, migrated, released or escaped.
The decision is most directly relevant where an insurance policy makes cover conditional on loss arising from a defined pollution event, but the claimed expenditure is driven by a regulatory or contractual duty to manage contamination already present at a site. The comparison would be particularly close where a safety notice requires a system of work, investigation, removal or monitoring because a pollutant is present, and the same duty would apply whether or not pollutant material had actually been released. [41]-[45]
It may also be relevant when a policy contains separate definitions for “Environmental Damage”, “Clean-up Costs” and “Pollution Conditions”. This judgment shows that a broad definition of one type of Loss does not necessarily override a separate causal condition in the Insuring Agreement. The wording must be read as a whole. [25]-[28], [50]-[51]
The case is not a blanket rule that pollution clean-up costs are never covered, that a regulatory notice can never produce covered Loss, or that latent-condition costs are categorically outside pollution insurance. The Court examined the actual policy terms, the source of the obligations and the causal relationship between those obligations and the alleged release. Its reasoning also left the potential coverage analysis of the Glenvill payment unresolved because SWC did not maintain the relevant transport-based Pollution Condition argument on appeal. [40], [45]-[49]
For professional review of a different policy or factual pattern, the judgment highlights the importance of identifying the exact insured event, the precise source of the legal obligation, the work and costs required by that obligation, and whether those costs would still have been incurred without the alleged pollution event. Those are analytical considerations reflected in the reasons, not a determination of other claims.
The supplied judgment does not identify any later court decisions that have applied, followed, distinguished or otherwise treated this decision. It was decided on 31 July 2026, and the text contains no account of subsequent cases. No claim about its later judicial treatment can therefore be made on the material provided.
The judgment itself refers to earlier authorities. McCann and CGU are cited for the businesslike approach to interpreting insurance contracts. State Government Insurance Commission v Stevens Bros Pty Ltd is considered in relation to the causal language “arising from”. Forbes Shire Council v AG Australia Holdings Ltd is mentioned by comparison in relation to whether movement of contaminated material between areas could amount to dispersal, but the Court expressly says that issue did not need to be considered further given SWC's position on appeal. [38], [45], [49]
The Court also refers to the primary judgment, Seymour Whyte Construction Pty Ltd v Liberty Mutual Insurance Company t/as Liberty Specialty Markets [2025] NSWSC 1597, as the decision under appeal. That first-instance judgment is background to the appeal, rather than later treatment of the Court of Appeal's reasoning. [2]-[3]
The Court did not decide whether transporting asbestos-contaminated soil from the Pier 1 and Northern Abutment Site to the Alphington Site constituted the “emission, discharge, dispersal” or another Pollution Condition. SWC did not press that argument on appeal, and the Court therefore did not determine its proper application to these facts. [31], [49]
The Court also did not decide whether a liability to Glenvill could, on properly pleaded and established facts, amount to Property Damage arising from a Pollution Condition. It noted possible legal bases for a claim by Glenvill but found that SWC had not explained the basis of its liability. The possible issue of whether moving contaminated soil between work areas amounted to dispersal was expressly left unresolved. [49]
The reasons describe the Policy's heads of cover as convoluted and circular, and state that the precise scope of some of them was difficult to ascertain. The Court resolved the appeal by reference to the Insuring Agreement's principal causal requirement, rather than comprehensively defining the boundaries of Clean-up Costs, Environmental Damage, Emergency Response Costs and Mitigation Expense for all circumstances. [40], [50]-[51]
The judgment also does not resolve how the Policy would apply where a release itself materially generates regulatory costs, or where costs would not have been incurred but for the release, even though a separate duty to manage the pollutant exists. The reasoning turns on the finding that the actual release was irrelevant to the duties and costs in this case. [42]-[45]
This is general legal information, not legal advice. Zoe can make mistakes. Before acting on or relying on this analysis, have it checked by a qualified Australian lawyer.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Seymour Whyte Constructions Pty Limited v Liberty Mutual Insurance Company t/as Liberty Specialty Markets [2026] NSWCA 154
Hearing dates: 21 July 2026
Date of orders: 31 July 2026
Decision date: 31 July 2026
Before: Payne JA at [1]
Ball JA at [2]
Free JA at [53]
Decision: Appeal dismissed with costs.
Catchwords: INSURANCE – liability insurance – contractor’s pollution legal liability policy – claim by contractor for indemnity for costs incurred in dealing with asbestos-contaminated soil during excavation works – where costs said to be incurred as a result of the dispersal of asbestos fibres into the air – where claimed costs incurred in satisfaction of contractor’s legislative and contractual obligations arising independently of any release of asbestos fibres into the air – loss did not arise from dispersal of asbestos
Legislation Cited: Occupational Health and Safety Act 2004 (Vic), ss 21, 111
Occupational Health and Safety Regulations 2017 (Vic), rr 210, 214, 238
Cases Cited: CGU Insurance Ltd v Porthouse (2008) 235 CLR 103; [2008] HCA 30
Forbes Shire Council v AG Australia Holdings Ltd [2007] NSWSC 847
McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; [2000] HCA 65
Seymour Whyte Construction Pty Ltd v Liberty Mutual Insurance Company t/as Liberty Specialty Markets [2025] NSWSC 1597
State Government Insurance Commission v Stevens Bros Pty Ltd (1984) 154 CLR 552; [1984] HCA 32
Category: Principal judgment
Parties: Seymour Whyte Constructions Pty Limited (Appellant)
Liberty Mutual Insurance Company t/as Liberty Specialty Markets (Respondent)
Representation: Counsel:
JE Sexton SC with S Bradbury (Appellant)
SR Donaldson SC with ER Kovacs (Respondent)
Solicitors:
Hall & Wilcox (Appellant)
Carter Newell Lawyers (Respondent)
File Number(s): 2026/16966
Publication restriction: Nil
[This headnote is not to be read as part of the judgment]
In February 2017, Seymour Whyte Constructions Pty Limited (SWC) was engaged by VicRoads to perform work associated with the upgrade of a section of the Chandler Highway in Melbourne. That work required the excavation of a large quantity of fill, which was found to be contaminated with asbestos. WorkSafe Victoria issued SWC with an Improvement Notice (the Improvement Notice) under s 111 of the Occupational Health and Safety Act 2004 (Vic) (OH&S Act), requiring SWC to provide a safe system of work associated with the management and removal of asbestos-contaminated soil “within the entire construction site located at 2-6 Chandler Hwy, Kew”.
SWC held a Contractor’s Pollution Legal Liability Policy (the Policy) issued by Liberty International Underwriters (LIU), under which LIU agreed to pay those sums SWC became legally obliged to pay for “Loss arising from Pollution Conditions caused by Covered Operations performed by” SWC. SWC made a claim under the Policy for costs referable to the removal of asbestos from the Pier 1 and Northern Abutment Site, where it had commenced excavation, together with an amount paid to Glenvill for the removal of asbestos-contaminated material which had been stockpiled on a nearby site owned by Glenvill. LIU rejected SWC’s claim.
SWC commenced proceedings seeking damages for breach of contract or indemnity under the Policy. SWC’s case before the primary judge was that its excavation work caused asbestos to be dispersed or released either because the excavation work itself caused asbestos fibres to be released into the air or because the transport of material containing asbestos to the land owned by Glenvill involved the dispersal of material containing asbestos. The primary judge dismissed the proceedings, relevantly concluding that: (1) the Improvement Notice did not arise from the dispersal of asbestos fibres into the air; (2) the OH&S Act required SWC to provide the same safe system of work, and SWC would have incurred the same costs of providing it, in any event.
The Court (Ball JA, Payne and Free JJA agreeing) held, dismissing the appeal with costs:
McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; [2000] HCA 65; CGU Insurance Ltd v Porthouse (2008) 235 CLR 103; [2008] HCA 30, cited.
PAYNE JA: I agree with Ball JA.
BALL JA: This is an appeal from a judgment of McHugh JA sitting at first instance (the primary judge) holding that the appellant, Seymour Whyte Constructions Pty Limited (SWC), was not entitled to recover under a Contractor’s Pollution Legal Liability Policy (the Policy) issued by the respondent, Liberty International Underwriters (LIU), for costs it incurred in dealing with asbestos contamination on a site on which it was working: see Seymour Whyte Construction Pty Ltd v Liberty Mutual Insurance Company t/as Liberty Specialty Markets [2025] NSWSC 1597 (the primary judgment or PJ).
The primary judge delivered reasons on 23 December 2025. At that time, his Honour gave directions to deal with one outstanding issue and costs. Final orders dismissing the claim with costs were made on 30 March 2026.
The relevant facts are not in dispute. The following summary is taken largely from the primary judgment and a statement of agreed facts that was admitted into evidence before the primary judge.
On 22 February 2017, SWC entered into a contract (the Contract) with VicRoads for works associated with the upgrade of a section of the Chandler Highway in Melbourne (the Project). As part of the work, SWC was required to excavate a large quantity of fill for the purpose of constructing pier foundations near the northern bank of the Yarra River.
Under the terms of the Contract, SWC was liable to pay the costs of investigating, removing, remediating and disposing of contaminated material and soil. The Contract contained detailed provisions concerned with how the material and soil were to be dealt with, including provisions requiring the preparation of an environmental management plan (EMP). The Contract also identified parts of the area to be excavated that were known to be contaminated with asbestos. Under the terms of the Contract, VicRoads assumed the risk of latent conditions, which was defined in cl 12 of the General Conditions in these terms:
Latent Conditions are:
(a) physical conditions on the Site or its surroundings, including artificial things but excluding climatic conditions or conditions arising from climatic conditions, which differ materially from the physical conditions which should reasonably have been anticipated by a competent and experienced contractor at the time of the Contractor’s tender if the Contractor had
(i) examined all information made available in writing by the Principal to the Contractors for the purpose of tendering;
(ii) examined all information relevant to the risks, contingencies and other circumstances having an effect on the tender and obtainable by the making of reasonably [sic] enquiries; and
(iii) investigated the Site and its surroundings…
Excavation work commenced in May 2017 in an area referred to as the “Pier 1 and Northern Abutment Site”. Adjacent to that site was the site of the former Alphington Paper Mill (the Alphington Site). Part of that site was being redeveloped by Glenvill (the Glenvill Site). The remainder had been acquired by VicRoads in connection with the Project. As material could not be stockpiled in the flood zone of the Yarra River, SWC arranged with Glenvill for material to be stockpiled on the Glenvill Site and for access to a road on that site to facilitate transport of the material. The list of known asbestos contaminated sites in the Contract did not include the Alphington Site or the Pier 1 and Northern Abutment Site.
Between 8 and 14 August 2017, excavated soil was loaded onto trucks in the vicinity of the Pier 1 excavations and transported to the Glenvill Site. Some, but not all of the fill material was placed in two stockpiles. One stockpile was on the Glenvill Site, and the other stockpile was placed substantially on land that had been acquired by VicRoads, but partly encroached on the Glenvill Site.
On 14 August 2017, Glenvill informed VicRoads which in turn informed SWC that bonded asbestos had been identified in the stockpile on the Glenvill Site.
On 15 August 2017, SWC ceased all work north of the Yarra River and shortly after that time installed airborne dust monitoring equipment to monitor air quality of the site. It also engaged a hygienist, Bureau Veritas, to undertake testing of the stockpiles at the Alphington Site and infill material in the vicinity of Pier 1 and to prepare an asbestos management plan (AMP). In addition, SWC engaged a licensed contractor, AAH Contracting Pty Ltd (AAH), to handle and to dispose of contaminated fill to be excavated in the course of the Project works consistently with Bureau Veritas’s recommendations.
Bureau Veritas inspected the site on 15 and 16 August 2017 and reported that “[a]sbestos cement sheet debris was located along the north side of the Yarra River construction area”. In accordance with the terms of the Contract, WorkSafe Victoria was notified of the discovery of the asbestos and inspected the site on 17 August 2017. On the same day, it issued an Improvement Notice under s 111 of the Occupational Health and Safety Act 2004 (Vic) (OH&S Act) (the Improvement Notice). The notice relevantly said:
| Provision of this Act and/or the Regulations that is being contravened: | I reasonably believe that [SWC] is in contravention of Section 21(1) and 21(2)(a) of the [OH&S Act] | | Basis for this belief: | I observed a safe system of work associated with the management of identified asbestos contaminated soils within this construction site located at 2-6 Chandler Hwy, Kew has not been provided based on the following factors: An incident has occurred at this site where unidentified excavated asbestos contaminated soil stockpiles have been relocated to the former Amcor paper mills construction site [that is, the Alphington Site] Prior to works beginning at this site a soil contamination report had been obtained entitled ENVIRONMENTAL SITE CONDITION: CHANDLER HIGHWAY UPGRADE, EASTERN FREEWAY-GRANGE ROAD, KEW & ALPHINGTON. Based on this report, it is [SWC’s] understanding that there was no asbestos contaminated soil within the construction zone. However David Hughes (WorkSafe, Hygienist) had a brief read of the summary of the report and it was not clear if identification of asbestos was part of the scope of the soil contamination report [SWC] were only made aware of the contamination of the soils once site hygienists employed at the [Alphington Site] identified it in the stockpiled material, that had been relocated from the North abutment to the [Alphington Site] At this point of [sic] time the extent and what type of contamination in the soil located on the North abutment is yet to be determined and a plan to manage the asbestos contamination has not been developed for the future works at this site Failure to control risks associated with asbestos in the workplace may lead to employee exposure to asbestos fibres and the potential adverse health effects associated with asbestos related diseases. | | Directions as to the measures to be taken to remedy the contravention: | [SWC] must provide a safe system of work associated with the management and removal of asbestos contaminated soils within the entire construction site located at 2-6 Chandler Hwy, Kew. One means of compliance may be but not limited to Identify all remaining asbestos contaminated soil that will be disturbed by future excavation work Engaging a hygienist to develop an asbestos management plan for the remainder of the works Engaging a licensed asbestos removalist to remove asbestos contaminated soils Developing a procedure for dealing with the inadvertent discovery of asbestos contamination in the soil. Guidance is available from the Code of Practice for Removal of Asbestos from Workplaces. | | Interim directions or conditions on the carrying on of an activity(s) to which this notice relates: | no further works are to take place on the North abutment work zone until an asbestos management plan has been developed and implemented This contravention must be remedied by 24/08/2017. |
The “construction site located at 2-6 Chandler Hwy, Kew” is a reference to the whole of the site the subject of the Contract and included the Pier 1 and Northern Abutment Site.
Section 21 of the OH&S Act relevantly provides:
Duties of employers to employees
(1) An employer must, so far as is reasonably practicable, provide and maintain for employees of the employer a working environment that is safe and without risks to health.
Penalty: 1800 penalty units for a natural person;
9000 penalty units for a body corporate.
(2) Without limiting subsection (1), an employer contravenes that subsection if the employer fails to do any of the following—
(a) provide or maintain plant or systems of work that are, so far as is reasonably practicable, safe and without risks to health;
(b) …
…
210 Control risk of exposure—employer or self-employed person
(1) An employer or self-employed person must ensure that a person is not exposed to an atmospheric concentration of asbestos fibres arising from the conduct of an undertaking of the employer or self-employed person in excess of the asbestos exposure standard.
(2) For the purposes of subregulation (1), the employer or self-employed person must, so far as is reasonably practicable, eliminate the exposure of persons at the workplace to airborne asbestos fibres, arising from the undertaking of the employer or self-employed person.
…
214 Asbestos removal work
(1) An employer, a self-employed person or a person who manages or controls a workplace must not perform asbestos removal work, or arrange for asbestos removal work to be performed, in respect of the workplace except in accordance with Division 7.
Penalty: 100 penalty units for a natural person;
500 penalty units for a body corporate.
…
238 Control of risk
(1) An employer must, so far as is reasonably practicable, eliminate any risk associated with the presence of asbestos that is under the management or control of the employer by removing the asbestos.
(2) If it is not reasonably practicable to remove the asbestos, the employer must reduce the risk associated with the presence of asbestos so far as is reasonably practicable by enclosing the asbestos.
…
WorkSafe Victoria also issued a second Improvement Notice on 17 August 2017. However, neither party submitted that it affected the outcome of the case, and nothing further needs to be said about it.
Between 17 August 2017 and 3 October 2017, Bureau Veritas issued an AMP and several reports, which concluded that the area where SWC had commenced excavation works contained both bonded and friable asbestos. The AMP observed that “It is not the intention of this AMP to undertaken [sic] extensive remediation through excavation of soils containing Asbestos. The intention of this AMP is to undertake sufficient asbestos abatement works to provide a site that is safe for the continuation of the construction program.”
During the period between August 2017 and April 2018, SWC incurred expense in connection with the management and removal of contaminated fill in accordance with the AMP prepared by Bureau Veritas. It made a claim on VicRoads for the recovery of the direct costs of removing material that had been stockpiled on that part of the Alphington Site that had been acquired by VicRoads and the area where excavation work had commenced on the basis that they were costs arising from latent conditions. The successor to VicRoads, the Major Road Projects Authority, ultimately accepted liability for that part of the direct costs that were associated with the removal and handling of contaminated material on that part of the Alphington Site that it had acquired. However, it rejected the balance of SWC’s claim on the basis that the presence of asbestos in that area should reasonably have been anticipated by a competent and experienced contractor.
SWC incurred the following costs in connection with the removal of asbestos:
(a) An amount paid to AAH totalling $5,273,690.15 of which $2,448,147.10 (excluding GST) is agreed to be attributable to the Pier 1 and Northern Abutment Site; (b) Expenses relating to the rental of equipment, machinery and personnel needed in the amount of $407,784.17 of which $176,255.73 (excluding GST) is agreed to be attributable to the Pier 1 and Northern Abutment Site; (c) An amount paid to Bureau Veritas of $769,181.07 of which $366,766.89 (excluding GST) is agreed to be attributable to the Pier 1 and Northern Abutment Site; (d) An amount of $252,502.16 (excluding GST) charged by Glenvill for the removal of asbestos-contaminated material from the Glenvill Site; and (e) Legal costs of $93,250.50 of which $9,250 (including GST) is agreed to be attributable to the Pier 1 and Northern Abutment Site.
1. Insuring Agreement
LIU will pay to or on behalf of the Insured those sums the Insured becomes legally obliged to pay for Loss arising from Pollution Conditions caused by Covered Operations performed by the Insured or any entity for which the Insured is legally liable.
This insurance applies only for Loss for:
a. Bodily Injury, Environmental Damage or Property Damage that occurs during the Period of Insurance; and
b. Emergency Response Costs and Mitigation Expense that are first incurred by the Insured during the Period of Insurance.
…
a. Monetary awards or settlements of compensatory damages arising out of Bodily Injury or Property Damage, and where allowable by law punitive, exemplary, aggravated, liquidated or multiple damages for such Bodily Injury and Property Damage;
b. Civil fines, civil penalties and enforceable undertakings where allowable by law;
c. Clean-up Costs;
d. Environmental Damage;
d. Emergency Response Costs; or
e. Defence Expense.
f. Mitigation Expense.
“Pollution Conditions” is relevantly defined to mean “the emission, discharge, dispersal, migration, release or escape of Pollutants”. “Pollutants” is defined to include “any solid … contaminant”. It is common ground that it includes asbestos. “Covered Operations” is defined broadly. It includes the work undertaken by SWC for VicRoads under the Contract.
“Clean-up Costs” is defined to mean:
… costs, charges and expenses including reasonable and necessary legal expense incurred with LIU’s written consent to investigate, test, neutralise, remove, remediate, monitor or dispose of Pollutants to the extent required by Environmental Laws or costs, charges and expenses that have actually been incurred by any governmental entity duly acting under the authority of Environmental Laws, or that have actually been incurred by third parties. “Clean-up Costs” also includes Restoration Costs and Emergency Response Costs.
“Environmental Damage” is defined to mean “the injurious presence of Pollutants resulting in Clean-up Costs”.
“Environmental Laws” is defined to mean “any legislatively or administratively enacted law, rule, regulation or order applicable within the jurisdiction in which Covered Operations are being or have been performed”. “Emergency Response Costs” is defined to mean “reasonable and necessary expenses, including legal expenses for the remediation of soil, surface water, groundwater, or other contamination in connection with any Loss for which the Insured is indemnified by this Policy. Provided that LIU shall not be liable for reasonable and necessary expenses, including legal expenses where indemnity is not provided by this Policy.”
“Mitigation Expense” is defined to mean:
a. Reasonable and necessary costs incurred to mitigate Pollution Conditions constituting an emergency situation whereby in the absence of such mitigation, Bodily Injury or Property Damage to third parties is imminent; or
b. Clean-up Costs which are incurred pursuant to Environmental Laws.
It was common ground that the excavation, removal and stockpiling of soil were “Covered Operations” and that asbestos may be a “Pollutant” within the meaning of the Policy: PJ[49]. SWC’s case before the primary judge was that its excavation work caused asbestos to be dispersed or released either because the excavation work itself caused asbestos fibres to be released into the air or because the transport of material containing asbestos to the Alphington Site involved the dispersal of material containing asbestos. SWC claimed that the costs it incurred in connection with the asbestos abatement works recommended by Bureau Veritas were sums that SWC became legally obliged to pay for “Loss” arising from that dispersal or release. They were “Loss” because they were “Clean-up Costs” resulting from “the injurious presence of [asbestos]”. They were “Clean-up Costs” because they were costs required to be incurred by Environmental Laws to “remove, remediate, monitor or dispose of” the asbestos. And they were required by Environmental Laws because they were required either by the Improvement Notice or by the OH&S Act and OH&S Regulations themselves.
The primary judge began his consideration of SWC’s case by observing that the effect of its argument “would be to render [LIU] liable to indemnify [SWC] for [SWC’s] costs of performing work (excavation or removal of contaminated fill) which [SWC] was required to perform under [the Contract]”, which his Honour considered was “a somewhat surprising proposition in light of the Policy language”: PJ[53].
His Honour dealt first with the question whether it could be said that the transportation of asbestos-contaminated soil to the Alphington Site could itself be said to be the dispersal of asbestos caused by Covered Operations. It is not necessary to deal with his Honour’s consideration of this aspect of the claim, since it was not pressed on appeal – that is, on appeal, SWC did not press the argument that asbestos was dispersed when material containing asbestos was transported to the Alphington Site.
In relation to the first limb of SWC’s argument (that Pollution Conditions arose from the release of asbestos fibres into the air), it was common ground that, on the balance of probabilities, SWC’s operations did cause asbestos fibres to be released into the air: PJ[49](3). However, the primary judge concluded that SWC’s argument failed “at the first hurdle” because it could not be said that the Improvement Notice had arisen from those circumstances. That was so because “there was no suggestion in the [Improvement] Notice, which was dated 17 August 2017, that as at that date asbestos fibres had in fact been released into the air, still less that the Notice was issued in response to that having occurred”: PJ[90]. The measures set out in the Improvement Notice were not directed to remedying the consequences of the release of asbestos fibres into the air. Rather, “[t]hey were instead directed to requiring [SWC] to provide a safe system of work, into the future”: PJ[95].
[111] … To the extent that [SWC] incurred costs in providing a safe system of work, it cannot sensibly be said that those were costs for which it became liable as a consequence of (that is, “arising from”) the [Improvement] Notice, still less as a consequence of the Pollution Conditions. The fact that [SWC] had caused the Pollution Conditions made no material contribution to the fact that [SWC] was obliged to provide a safe system of work. Section 21 [of the OH&S Act] would have required [SWC] to provide the same safe system of work, and [SWC] would have incurred the same costs of providing it, in any event. (emphasis in original)
The primary judge next dealt with the question whether SWC was entitled to recover the amount claimed by Glenvill for dealing with the asbestos in the material that had been stored on the Glenvill Site and for legal costs that had been claimed by SWC. His Honour rejected those claims. In relation to the costs claimed by Glenvill, he pointed out that SWC had not pleaded how it had become liable for those costs, but that even assuming it was liable, that liability was not “Loss” within the meaning of the Policy. That was because any liability that SWC had arose in tort and was not required to be incurred by Environmental Laws: PJ[121]. The position would have been different had, for example, the Environment Protection Authority issued a remedial environmental action notice that required SWC to clean up the asbestos-contaminated stockpiles on the Alphington Site. However, no such notice was issued: PJ[124].
In relation to the legal costs claimed by SWC, the primary judge concluded that legal costs incurred in obtaining advice to determine what the Improvement Notice required were Loss arising from Pollution Conditions caused by SWC’s Covered Operations. However, legal costs incurred in complying with the notice itself were only covered if costs of that type generally were covered, which they were not. The quantification of costs falling within the first category was left to the parties. Ultimately, it appears that it was agreed that no costs fell within the first category, which led to the orders made on 30 March 2026.
Finally, the primary judge addressed SWC’s alternative case that the Environmental Laws were not the Improvement Notice but the relevant provisions of the OH&S Act and OH&S Regulations. His Honour concluded that that case failed because there was no connection between the two identified Pollution Conditions and the obligation imposed by the legislation:
[131] The difficulty with this formulation of the case is that in order to come within the insuring clause, it remains necessary to show that the Loss arose from Pollution Conditions caused by [SWC’s] operations. The s 21 requirement to take the steps necessary to provide a safe system of work arose not from the escape of asbestos fibres into the air or from the transportation or stockpiling of contaminated soil before 17 August 2017. Instead, the obligation to take those steps arose from a combination of s 21, the presence of asbestos in the soil, and the fact that [SWC] was conducting construction operations involving excavation of a large amount of that soil. That obligation was completely independent of the two identified Pollution Conditions. (emphasis in original)
SWC advances ten grounds of appeal. They all concern the proper construction of the Insuring Agreement (Clause 1 of Section I) of the Policy and its application to the facts of this case. As both parties recognised in their submissions, those issues were best addressed by considering the Insuring Agreement and its application to the facts as a whole rather than by reference to the individual grounds of appeal. These reasons follow that approach.
SWC took as the starting point for its submissions the uncontroversial proposition that the Policy should be given a businesslike interpretation which “requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure”: see McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; [2000] HCA 65 at [22] per Gleeson CJ quoted with approval in CGU Insurance Ltd v Porthouse (2008) 235 CLR 103; [2008] HCA 30 at [43] (Gummow, Kirby, Heydon, Crennan and Kiefel JJ). It submitted that the Policy should be understood as one that was designed, among other things, to protect it against the additional costs of work arising from latent conditions affecting Covered Operations, and that understood in that way there was, contrary to the view expressed by the primary judge, nothing surprising in the fact that the Policy covered the costs of performing work that SWC was required to perform under the Contract.
However, that submission cannot be reconciled with the wording of the Policy. On its face, the Policy is designed to protect SWC from certain types of loss arising from the “emission, discharge, dispersal” etc of a broad range of pollutants caused by its construction-related activities. The relevant loss is primarily, but not limited to, loss arising from third-party claims for Bodily Injury and Property Damage (both of which expressions are defined expansively), including the costs of defending claims of those types (those costs fall within the expression “Defence Expense”), and loss consisting of civil fines and penalties etc arising from the “emission, discharge, dispersal” etc of pollutants to the extent that SWC is entitled to be indemnified for losses of those types. Understood in that way, the Policy fills a gap that often exists in contract works insurance arising from the frequent exclusion in policies of that type of loss or liability arising from pollution.
The Policy also provides cover in respect of “Clean-up Costs”, “Environmental Damage”, “Emergency Response Costs” and “Mitigation Expense”. Because of the convoluted and circular way in which those covered heads of loss are defined, the precise scope of what was intended by those heads is not easy to ascertain. However, it could not be said on the basis of those that the purpose of the Policy was to provide cover for additional costs incurred as a consequence of latent conditions affecting Covered Operations. A more plausible explanation is that those heads of loss were intended to provide cover in certain circumstances for the costs of cleaning-up after the release or discharge of pollutants that could give rise to third-party claims. Against that background, his Honour was correct to say that it would be somewhat surprising if the Policy covered the costs of work which it must be assumed SWC allowed for in tendering for the Contract or which it was entitled to recover from VicRoads under cl 12 of the General Conditions in the Contract on the basis that they arose from latent conditions. It was appropriate for his Honour to approach the correct construction of the Policy bearing those matters in mind.
LIU will pay to or on behalf of the Insured those sums the Insured becomes legally obliged to pay for the injurious presence of a solid contaminant resulting in costs, charges and expenses including reasonable and necessary legal expense incurred to investigate, test, neutralise, remove, remediate, monitor or dispose of any solid contaminant to the extent required by Environmental Laws arising from the emission, discharge, dispersal, migration, release or escape of a solid contaminant. [emphasis added by SWC]
It follows that, in my opinion, the orders of the Court should be that the appeal be dismissed with costs.
FREE JA: I agree with Ball JA.
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Seymour Whyte Constructions Pty Limited
Liberty Mutual Insurance Company t/as Liberty Specialty Markets
[2008] HCA 30
(2008) 235 CLR 103
(2000) 203 CLR 579
(1984) 154 CLR 552
Appeal dismissed with costs. [52]
Moreover, albeit in the context of discussion of the second limb of SWC’s argument (that dispersal occurred during transportation of the excavated material), the primary judge said:
As the primary judge recognised, an essential element of SWC’s argument is the proposition that the costs that it incurred in complying with the Improvement Notice and with the OH&S Act and OH&S Regulations arose from the dispersal or release of asbestos into the air during the excavation work at the Pier 1 and Northern Abutment Site, since it was that event that constituted “Pollution Conditions”. That proposition, however, cannot be accepted.
It seems clear that it was not the dispersal or release of asbestos fibres into the air that gave rise to the Improvement Notice or the obligations under the OH&S Act and OH&S Regulations. Rather, it was the discovery of asbestos in the material that had been and that was proposed to be excavated by SWC. It is true, of course, that the risk was that, unless the asbestos was dealt with properly, the excavation work would cause asbestos fibres to be released into the air and the likelihood was that that had already happened, and it was that risk that was intended to be addressed by the AMP prepared by Bureau Veritas. But that does not mean that the costs incurred in addressing that risk arose from the fact that asbestos fibres had been released into the air. The costs had to be incurred to comply with the legislation and SWC’s contractual obligations independently of any release of asbestos fibres into the air.
Put slightly differently, the Improvement Notice was issued and the OH&S Act and OH&S Regulations required certain action to be taken because of the presence of asbestos, not because of its release. It is clear from the terms of the Improvement Notice that it was issued not because of the release of asbestos fibres into the air but because on the discovery of asbestos at the Glenvill Site, it became apparent that SWC had not complied with its obligations to provide a safe system of work in relation to the management of material contaminated with asbestos. And as the primary judge pointed out, the legislation required SWC to implement a safe system of work, which the AMP was designed to achieve, irrespective of whether any asbestos fibres had been released into the air.
The difficulty with SWC’s argument is highlighted by the fact that the Improvement Notice and the legislation required SWC to incur costs that went beyond those claimed by SWC. SWC’s obligations under the legislation extended to the whole of the area to be excavated by it under the Contract and its obligations as a result of the Improvement Notice covered “the entire construction site located at 2-6 Chandler Hwy, Kew”. SWC sought to deal with this problem by apportioning the costs between the Pier 1 and Northern Abutment Site and the balance of the area covered by the Project. However, the difficulty with that approach is that there is no rational basis to do so on its construction of the Policy. On its construction of the Policy and characterisation of events, the Improvement Notice was issued because of (that is, arising from) the release of asbestos fibres into the air caused by Covered Operations, which triggered the obligation to pay costs etc falling within the definition of “Clean-up Costs”. But the costs that had to be paid because of the Improvement Notice were not limited to the costs claimed by SWC under the Policy. They were all the costs that SWC had incurred in dealing with asbestos in the area the subject of the Contract.
SWC submitted, citing among other authorities State Government Insurance Commission v Stevens Bros Pty Ltd (1984) 154 CLR 552; [1984] HCA 32 at 555, 559, that the connection required by the expression “arising from” only required that there be a causal connection between the Loss and the Pollution Conditions – that is, in this context, the dispersal of asbestos fibres into the air needed only be a cause of the costs incurred as a consequence of the Improvement Notice or legislation. Accordingly, according to SWC, the fact that it may have been under a separate obligation under the Contract to undertake the work for which it claims an indemnity does not mean that the obligation could not also arise under the Improvement Notice. So much may be accepted. The point, however, is that properly analysed the actual release of asbestos fibres into the air was irrelevant to the legislative obligations imposed on SWC and to the issuing of the Improvement Notice. As a result, it could not be said that any Loss arose from Pollution Conditions. As has already been explained, that conclusion is entirely consistent with the purpose of the Policy when it is properly understood.
SWC submitted that the amount claimed by, and paid to, Glenvill fell within the scope of the Policy because “the removal of the contaminated soil stockpiles from the Alphington Site was expressly the subject of the [Improvement Notice]”. There are, however, two main difficulties with that submission.
First, it is not correct to say that the Improvement Notice required SWC to remove the contaminated stockpiles from the Alphington Site. What the Improvement Notice required was that SWC provide a safe system of work. It is apparent that on discovery of the asbestos in the stockpiles, Glenvill was no longer willing to permit SWC onto its land to deal with the stockpiles and chose instead to deal with the stockpiles itself and claim the costs of doing so from SWC. On any view, the requirement placed on SWC by the Improvement Notice to provide a safe system of work for its employees did not require it to do anything in relation to the stockpiles that were being dealt with by Glenvill.
Second, and related to the first point, it is difficult to see how the amount claimed by Glenvill could properly be described as “costs, charges and expenses … to investigate, test, neutralise, remove, remediate, monitor or dispose of Pollutants to the extent required by Environmental Laws”. Neither the Improvement Notice nor the legislation required SWC to compensate Glenvill for costs that Glenvill incurred in dealing with asbestos-contaminated material on its land, even if that material had been placed there by SWC.
It is possible that, as a consequence of what had happened, Glenvill had a claim against SWC either in nuisance or for breach of an implied term of the licence that permitted SWC to store waste on the Glenvill Site. However, as the primary judge pointed out, SWC did not plead, nor did it seek in its submissions to explain, the basis on which it was liable to pay the amount claimed by Glenvill. Assuming that difficulty could be overcome, the question would then arise whether that liability arose from “Property Damage” arising from the “emission, discharge, dispersal, migration, release or escape” of asbestos (so as to fall within the definition of “Pollution Conditions”). Plainly, the only relevant dispersal was the movement of the material from the Pier 1 and Northern Abutment Site to the Alphington Site. However, SWC no longer advances a case that that was a relevant Pollution Condition. Moreover, if it did, that would raise the question whether the movement of asbestos‑contaminated material from one area where SWC was performing Covered Operations to another area where it was performing Covered Operations amounted to the “emission, discharge, dispersal” etc of the asbestos: cf Forbes Shire Council v AG Australia Holdings Ltd [2007] NSWSC 847 (where the issue is considered in the context of an exclusion). In view of the position taken by SWC, these issues need not be considered further.
SWC advanced an alternative argument put most clearly in its written submissions in reply that the amount it claims is Loss because it falls within the definition of “Environmental Damage”. It points out that substituting the definitions for the defined terms the Insuring Agreement reads: