Vero Insurance Limited v Power Technologies Pty Ltd

CATCHWORDS: APPEAL - former adjudication of matters - contribution proceedings followed by indemnity proceedings - whether trial judge should have found insured had actual knowledge of dangers of asbestos in subsequent proceedings given prior findings on knowledge - INSURANCE - use of findings of fact from previous decision - whether trial judge used findings of fact without parties being given opportunity to consider and respond to material - if trial judge did use previous findings of fact, whether there was evidence in this case that supported that fact finding - INSURANCE - public liability insurance policy - Condition of policy that insured take all reasonable precautions to prevent bodily injury - onus of proof on insured to prove compliance with Condition - whether insured had actual knowledge of the risk of exposure to asbestos - INSURANCE - public liability insurance policy - Condition of policy that insured take all reasonable precautions to prevent bodily injury - onus on insured to prove they had not deliberately courted a risk - whether there was evidence that insured complied with standard industry practice - whether trial judge erred by having found that insured complied with standard industry practice, that constituted prima-facie evidence that a tortfeasor had not deliberately courted a risk - INSURANCE - public liability insurance policy - Condition of policy that insured exercise reasonable care that only competent employees are employed - whether trial judge failed to deal with whether insured satisfied its onus of proving it had only employed competent employees - INSURANCE - public liability insurance policy - policy excluded claims arising out of a breach of the duty owed in a professional capacity by the insured - whether insured owed a professional duty to worker suffering damage - INSURANCE - public liability insurance policy - policy responded in respect of bodily injury occurring during period of insurance - inhalation of asbestos fibres resulting in mesothelioma - time at which injury occurred - injury occurred at time of initial inhalation and penetration of asbestos - INSURANCE - public liability insurance policy - liability of insured covered by policy in respect of which it became liable to pay compensation - injury to worker during terms of different policies - liability of insured arose only once at time of initial exposure

Civil Procedure Act 2005 (NSW) s 22 LEGISLATION CITED: Dust Diseases Tribunal Act 1989 (NSW) ss 11, 25(3), 25B, 32 Workers Compensation Act 1926 (NSW) s 6

Albion Insurance Co Limited v Body Corporate Strata Plan No 4303 [1983] 2 VR 339 Australian Securities Commission v Marlborough Gold Mines Limited (1993) 177 CLR 485; [1993] HCA 15 Babcock Australia Ltd v Eraring Energy (No 2) (2001) 22 NSWCCR 141 Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430 Bendix Mintex Pty Ltd v Barnes (1997) 43 NSWLR 307 Bryan v Maloney (1995) 182 CLR 609; [1995] HCA 17 Carr v Inland Revenue Commissioners [1944] 2 All ER 163 Chemetics International Ltd v Commercial Union Assurance Company of Canada (1984) 11 DLR (4th) 754 CSR Ltd & Anor v Della Maddalena (2006) 80 ALJR 458; [2006] HCA 1 CSR v Wren (1997) 44 NSWLR 463 EM Baldwin & Son Pty Limited v Plane (1998) 17 NSWCCR 434; (1989) Aust Tort Reports 81-499 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 81 ALJR 1107; [2007] HCA 22 Favelle Mort Limited v Murray (1976) 133 CLR 580; [1976] HCA 13 Fitzpatrick v Robert Norman Job and Wendy Barbara Job t/as Jobs Engineering & Ors [2007] WASCA 63 Fraser v BN Furman (Productions) Ltd [1967] 3 All ER 57 GIO General Ltd t/as GIO Australia v Newcastle City Council (1996) 38 NSWLR 558 CASES CITED: GRE Insurance Ltd v Bristile Ltd (1991) 5 WAR 440 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Kodak (Australasia) Pty Ltd v Retail Traders Mutual Indemnity Insurance Association (1942) SR (NSW) 231 Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390 Martindale v Burrows [1997] 1 Qd R 243 Mead v Allianz Australia Limited [2006] NSWSC 366 National & General Insurance Company Limited v South British Insurance Company Limited & Ors (1982) 149 CLR 327; [1982] HCA 62 Orica Ltd & Anor v CGU Insurance Ltd (2003) 59 NSWLR 14; [2003] NSWCA 331 Payne v Parker (1976) 1 NSWLR 191 Plasteel Windows Australia Pty Limited v Sun Alliance Insurance Limited (1989) 5 ANZ Ins Cas 60-918 Raif v SG Sayer Pty Ltd (1996) 13 NSWCCR 393 Sandtara Pty Ltd v Abigroup Ltd (1997) 42 NSWLR 5 State Government Insurance Commission v Lane & Anor (1997) 68 SASR 257 Suncorp Metway Insurance Ltd v Landridge Pty Ltd (t/as LJ Hooker Hampton Park) [2005] VSCA 223 Toomey v Scolaro's Concrete Constructions Pty Ltd (in liq) No 5 (2002) 12 ANZ Ins Cas 61-519 VACC Insurance Limited v BP Australia Limited (1999) 47 NSWLR 716; [1999] NSWCA 427 Voli v Inglewood Shire Council (1963) 110 CLR 74; [1963] HCA 15

PARTIES: Vero Insurance Limited (Appellant) Power Technologies Pty Ltd (Respondent)

COUNSEL: B Walker SC; D Talintyre (Appellant) P Webb QC; T Rowles (Respondent)

SOLICITORS: Church & Grace (Appellant) Carroll & O'Dea (Respondent)

LOWER COURT JURISDICTION: Dust Diseases Tribunal of New South Wales

LOWER COURT FILE NUMBER(S): DDT325 of 2000/4

LOWER COURT DATE OF DECISION: 22 March 2006

LOWER COURT MEDIUM NEUTRAL CITATION: (Re Barlow) Power Technologies Pty Ltd v Vero Insurance Ltd [2006] NSWDDT 6

• 66 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40174/06

BEAZLEY JA CAMPBELL JA HARRISON J

29 August 2007 VERO INSURANCE LIMITED v POWER TECHNOLOGIES PTY LIMITED

Headnote Facts Between 1968 and 1973, a Mr Barlow had been employed by certain transport companies to work at Vales Point and Munmorah power stations which were operated by the Electricity Commission of New South Wales. During the course of his employment, he was required to tend to the fly ash hoppers and loading trucks, which carried away the fly ash. During this work, Mr Barlow inhaled asbestos dust and fibres, which were released when employees of the Electricity Commission and the respondent carried out maintenance and repair work on the boiler tubes that were insulated with asbestos and maintained by it in conjunction with others. The boilers had been designed, manufactured and installed by the respondent. Mr Barlow brought proceedings against his employers and Delta Electricity for damages for their negligence in causing him to contract mesothelioma. This claim was settled. Subsequently, Delta Electricity successfully brought contribution proceedings against the respondent. The respondent instituted a claim against the appellant seeking indemnity under its insurance policy with the appellant in respect of the judgment amount arising from the contribution proceedings. The appellant refused to indemnify the respondent under the policy. The indemnity proceedings were heard by Curtis J. His Honour held the appellant was liable to indemnify the respondent under the policy. This appeal was brought from his Honour's determination. The appeal is in respect of an error of law only: s 32(1) of the Dust Diseases Tribunal Act 1989 (NSW). Four essential issues were argued on the appeal. First, the appellant contended that the respondent did not discharge its onus of proving that it had complied with Condition 4 of the policy which provided that the insured was to take reasonable care that only competent employees were employed and reasonable precautions to prevent bodily injury. Secondly, the appellant argued that the claims arose out of a breach of duty owed in a professional capacity so as to fall within an exception clause in the policy. Thirdly, the appellant said that Mr Barlow did not sustain bodily injury during the period of insurance so that the policy did not respond to the claim for indemnity. Fourthly, it was contended that his Honour erred by regarding the evidence as capable of distinguishing between the last relevant period of insurance and the preceding periods of insurance. Held per Beazley JA (Campbell JA and Harrison J agreeing):

In relation to whether the respondent satisfied its onus of proving it complied with Condition 4 of the policy

(1) It was necessary to determine the appeal on the basis of the findings made which were not inconsistent with or different from the finding that the trial judge made in the contribution proceedings. Accordingly, the question whether the respondent satisfied the evidentiary onus that it had satisfied Condition 4 of the policy had to be judged, not against a finding of actual knowledge of the dangers of asbestos, but against the findings that it ought to have known of the dangers of asbestos and had cause to know of those dangers: [39]-[40]

Sandtara Pty Ltd v Abigroup Ltd (1997) 42 NSWLR 5; VACC Insurance Limited v BP Australia Limited (1999) 47 NSWLR 716; [1999] NSWCA 427 (considered)

(2) In any event, his Honour's finding in the indemnity proceedings was that the respondent ought to have known of the danger of asbestos, not that it had actual knowledge of the danger: [69] (3) There is no difference in substance between an insured with actual knowledge of a danger deliberately courting the danger by taking measures that the insured knows are inadequate to avert it and the insured making a deliberate decision to court the danger. The trial judge did not introduce any additional or extraneous considerations into the proper construction of Condition 4. The additional wording used by his Honour was as a matter of emphasis, which, while strictly unnecessary, was not erroneous: [60]-[61] Fraser v BN Furman (Productions) Ltd [1967] 3 All ER 57; Albion Insurance CO Limited v Body Corporate Strata Plan No 4303 [1983] 2 VR 339 (considered) (4) In order for the appellant to have the benefit of Condition 4, a finding of actual knowledge by the respondent of the danger was necessary. There was no finding of actual knowledge in the respondent or recognition of the risk by it: [63], [69]

Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390; Plasteel Windows Australia Pty Limited v Sun Alliance Insurance Limited (1989) 5 ANZ Ins Cas 60-918 (considered); State Government Insurance Commission v Lane & Anor (1997) 68 SASR 257; VACC Insurance Limited v BP Australia Limited (1999) 47 NSWLR 716; [1999] NSWCA 427; Mead v Allianz Australia Limited [2006] NSWSC 366 (cited)

(5) Having found that the respondent complied with standard industry practice, the trial judge considered that that constituted prima-facie evidence that the respondent had not deliberately courted a risk. In the circumstances, where there was no finding that the respondent had actual knowledge, and having regard to the evidence before the trial judge, that finding was open: [77]-[78], [88]

(6) The trial judge did not use his findings from a previous decision as evidence of the matters he had found in these proceedings without giving the parties an opportunity to consider and respond to that material. Assuming, however, that the trial judge did use his previous decision for the purposes of fact finding, there was ample evidence in this case that supported that fact finding: [92]-[95]

(7) The trial judge's finding of negligence was a finding that fell short of the respondent having actual knowledge. In those circumstances, the respondent could not have courted the danger of the risk of injury to which Mr Barlow was exposed. Therefore, the trial judge's finding that the respondent had discharged its onus of proving that it was not in breach of Condition 4 of the policy was not shown to be erroneous in point of law: [112]

(8) The trial judge failed to deal with the question whether the respondent had satisfied its onus of proving that it had employed only competent employees as required by Condition 4. As a result, the appellant established an error of law. As the issue raised a discrete question, both of policy and of fact, the issue should be remitted for determination by the trial judge: [120], [125] Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430; CSR Ltd & Anor v Della Maddalena (2006) 80 ALJR 458; [2006] HCA 1 (cited) In relation to whether the claim arose out of a breach owed by the respondent in a professional capacity

(9) The policy provided by the appellant was a public liability policy excluding claims arising out of a breach of duty owed in a professional capacity by the respondent. The respondent did not owe a professional duty to Mr Barlow. Rather it owed him a duty of care as a third party in respect of whom it was reasonably foreseeable might suffer damage as a result of its negligence. Accordingly, the exclusion did not operate so as to disentitle the respondent to indemnity under the policy: [149]-[150] Chemetics International Ltd v Commercial Union Assurance Company of Canda (1984) 11 DLR (4th) 754 (considered); Fitzpatrick v Robert Norman Job and Wendy Barbara Job t/as Jobs Engineering & Ors [2007] WASCA 63 (followed)

In relation to whether the bodily injury suffered by Mr Barlow occurred during the period of insurance

(10) The policy responded in respect of bodily injury, which occurred during the period of insurance, and in respect of which the insured became legally liable to pay compensation. In the case of Mr Barlow, his injury occurred at the time of inhalation and penetration of asbestos fibre, which occurred during the respondent's period of insurance: [177] Orica Ltd & Anor v CGU Insurance Ltd (2003) 59 NSWLR 14; [2003] NSWCA 331 (distinguished) In relation to whether the first or last policy responded to the claim (11) The liability that was covered by the policy was in respect of sums for which the respondent became liable. That was a liability, which arose only once. The liability of the respondent arose upon Mr Barlow's injury, which occurred at the time of his initial exposure. This liability was covered by the policy on foot upon Mr Barlow's initial inhalation of asbestos: [181]

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40174/06

BEAZLEY JA CAMPBELL JA HARRISON J

29 August 2007 VERO INSURANCE LIMITED v POWER TECHNOLOGIES PTY LIMITED Judgment 1 BEAZLEY JA: The respondent, a designer and manufacturer of power station equipment was insured under a public liability insurance policy (the policy) issued by the appellant. The respondent claimed indemnity under the policy for monies the respondent was held liable to pay by way of contribution in a damages claim brought by a Mr Barlow, who between 1968 and 1973, had been employed by certain transport companies to work at Vales Point and Munmorah power stations, which were operated by the Electricity Commission of New South Wales. 2 The appellant refused to indemnify the respondent under the policy. 3 The corporate entities in these and related proceedings have either had changes of name or been taken over, or had their liabilities assumed by other corporate entities. These matters are not relevant other than to record that any reference in this judgment to Elcom or the Electricity Commission of New South Wales relates to Delta Electricity's responsibilities. A reference to ICAL relates to the respondent's liabilities.

The proceedings 4 During the course of Mr Barlow's employment, he was required to tend to the fly ash hoppers and to load the trucks which carried away the fly ash. During the course of this work, he inhaled asbestos dust and fibre which was released when employees of the Electricity Commission of New South Wales and the respondent carried out maintenance and repair work of the boiler tubes, which were covered in asbestos lagging, and which were located above the fly ash hoppers. The boilers had been designed, manufactured and installed by the respondent. 5 Mr Barlow brought proceedings against his employers and Delta Electricity for damages for their negligence in causing him to contract mesothelioma. Mr Barlow's claim against his employers and Delta Electricity was settled. Delta Electricity successfully brought contribution proceedings against the respondent (the contribution proceedings): Delta Electricity v Power Technologies Pty Ltd, 3 December 2004, DDT 325 of 2002. I will refer to the judgment in the contribution proceedings as the contribution judgment. 6 The respondent in turn brought a claim against the appellant claiming it was entitled to indemnity under the policy in respect of the judgment amount (the indemnity proceedings). All claims were brought in the Dust Diseases Tribunal pursuant to the provisions of s 11 of the Dust Diseases Tribunal Act 1989 (NSW) (the Dust Diseases Tribunal Act). Section 11 provides in general terms that proceedings for damages for a dust related condition arising out of a breach of duty must be brought before the Dust Diseases Tribunal: s 11(1). Contribution proceedings between tortfeasors may also be brought in the Tribunal: s 11(1A); as may proceedings which are ancillary or related to proceedings brought under s 11(1) or s 11(1A): s 11(3). 7 The indemnity proceedings were heard by Curtis J in March 2006. His Honour held that the appellant was liable to indemnify the respondent under the policy. This appeal is brought from his Honour's determination. The appeal is in respect of an error of law: see s 32(1) of the Dust Diseases Tribunal Act.

The policy 8 The policy issued by the appellant to the respondent provided, relevantly: " Now This Policy Witnesseth that in consideration of the payment of the premium and subject to the terms conditions exceptions and memoranda contained herein endorsed hereon or attached hereto the Company will pay to or on behalf of The Insured all sums which The Insured shall become legally liable to pay for compensation in respect of

(a) bodily injury (which expression includes death and illness)

occurring during the Period of Insurance as a result of an accident and happening in connection with The Business carried on at and from any Place specified in The Schedule.

(l) claims arising out of a breach of the duty owed in a professional capacity by The Insured …

4. The Insured shall exercise reasonable care that only competent employees are employed and shall take all reasonable precautions to prevent bodily injury …

Schedule-Particulars of Insurance: The Business: 'Engineers', Places to which this policy applies: 'South Street Rydalmere'."

Issues on the appeal 9 Four essential issues were argued on the appeal. First, the appellant contended that the respondent did not discharge its onus of proving that it had complied with Condition 4 of the policy which provided that the insured was to take reasonable care that only competent employees were employed and reasonable precautions to prevent bodily injury. Secondly, the appellant argued that the claims arose out of a breach of duty owed in a professional capacity so as to fall within an exception clause in the policy. Thirdly, the appellant said that Mr Barlow did not sustain bodily injury during the period of insurance so that the policy did not respond to the claim for indemnity. Fourthly, it was contended that his Honour erred by regarding the evidence as capable of distinguishing between the last relevant period of insurance and the preceding periods of insurance (the last insurer rule).

First issue on the appeal: Did the respondent satisfy its onus of proving that it complied with Condition 4 of the policy? 10 A number of issues emerged in the appellant's challenge to his Honour's determination that Condition 4 had been satisfied. It is convenient to summarise those matters at the outset so as to set the framework in which to consider the appellant's arguments. However, before dealing with the individual issues, a number of preliminary observations should be made in respect of the operation of Condition 4. 11 The appellant had submitted at trial that Condition 4 was a condition precedent to its obligation to indemnify the respondent under the policy so that the onus was on the respondent to prove compliance with its terms: see Kodak (Australasia) Pty Ltd v Retail Traders Mutual Indemnity Insurance Association (1942) SR (NSW) 231 where Jordan CJ, in delivering the judgment of the Court said at 237: "As to such conditions, it is pointed out in Benanti v Delaware Insurance Co . 86 Conn. 15, 18 cited in Williston on Contracts (1936) III, p. 97, n. 5, that although slight evidence of general compliance with conditions precedent may be sufficient in the plaintiff's case in chief, and the defendant may offer proof of breaches which the plaintiff may in turn rebut, 'this burden of proof never shifts. Upon the whole evidence it is where it was at the beginning, upon the plaintiff, to prove his compliance with the terms and conditions precedent of the policy."

See also Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390. 12 The trial judge accepted that Kodak (Australasia) Pty Ltd governed this question. 13 The respondent had made a formal submission to the trial judge that Kodak (Australasia) Pty Ltd was wrongly decided (trial judgment at [21]) and filed a Notice of Contention in this Court raising this point. However, no argument was advanced on the appeal in support of the Notice of Contention. Accordingly, the determination of issues raised on the appeal in respect of Condition 4 should proceed on the basis that the respondent bore the onus to prove compliance with Condition 4. 14 The appellant also recognised that Condition 4 of the policy did not exclude the respondent's entitlement to indemnity on the basis that it had been negligent. To construe the clause in that way would deprive the policy of its commercial purpose: see Fraser v BN Furman (Productions) Ltd [1967] 3 All ER 57. 15 Returning then to the questions that the appellant raised in its challenge to the trial judges finding that Condition 4 of the policy had been satisfied, they may be summarised briefly as follows. First, it was submitted that his Honour had erred in failing to make a finding that the respondent had actual knowledge of the dangers of asbestos, contrary to his finding in the contribution proceedings. Secondly, it was submitted that his Honour had applied a wrong legal test as to the construction of Condition 4. Thirdly, it was submitted that his Honour had made a finding that Condition 4 had been satisfied when there was no evidence that that was the case. It was further submitted in relation to Condition 4 that the trial judge had denied the appellant procedural fairness by relying on a previous decision of his as a basis for his fact finding, without giving the appellant an opportunity to deal with that material. Fourthly, it was submitted that his Honour had failed to deal with the appellant's contention that there was no evidence that the respondent had employed "only competent employees" as required by Condition 4. It was also submitted that the trial judge should have drawn a 'Jones v Dunkel inference' against the respondent having regard to its failure to call evidence: Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8. There were a number of other issues raised under Ground 1. Having regard to the conclusion I have reached in respect of the first and second of the issues I have just identified, it will not be necessary to deal with them.

Should the trial judge have found that the respondent had actual knowledge of the dangers of asbestos? 16 In approaching his determination of the question whether the respondent was in breach of Condition 4 of the policy, the trial judge, at [22] in these proceedings, repeated a portion of the findings that he had made in his contribution judgment at [17] where he had said: "It strains [credulity] to suppose that at the time the contracts were entered for the construction of these boilers ICAL was ignorant of the dangers posed by uncontrolled liberation of asbestos material during repair and maintenance work which would inevitably follow construction of the boilers. ICAL is to be blamed for failing to communicate to the Electricity Commission, at the time the contracts were let, in the clearest terms, those dangers and the necessity to adopt stringent precautions against workers inhaling asbestos fibres when the asbestos installed in accordance with the design was disturbed. That culpability was aggravated by the failure of ICAL to itself maintain a safe system for its own workers handling asbestos so that predictably the maintenance processes adopted by ICAL were adopted by Elcom workers. This culpability of ICAL is compounded because asbestos and water tube boilers were central to the business of ICAL but only secondary to the business of Elcom." 17 His Honour concluded at [18] of the contribution judgment that the respondent, as the designer and manufacturer of the boiler and the initial controller of maintenance, was equally as culpable for the injury to Mr Barlow as Elcom, whose role had been as controller of the site. 18 His Honour then said at [27] in these proceedings that it was "patent that ICAL had cause to know", both at the time that the contracts to erect the boilers were let and during the course of the maintenance operations, that persons who were exposed to certain concentrations of asbestos "faced a risk of injury". His Honour observed that there was no evidence that the respondent took any precaution to obviate that risk. His Honour then summarised the findings he had made in respect of the respondent's negligence in these terms at [28]: "I have found that the negligence of ICAL consisted of: (a) Failing, at the time it secured the contract for the erection of the boilers, to warn the Electricity Commission of the need to adopt stringent precautions when asbestos was handled in the repair and maintenance of the boilers. (b) Failing, at the time that ICAL employees performed maintenance and repair work on the boilers, to maintain a safe system for working with asbestos." 19 The appellant contends that these findings constitute a finding of actual knowledge of the respondent of the risk that the inhalation of asbestos fibres gave rise to a risk of injury. 20 Alternatively, it was submitted that on the findings that were made in the contribution proceedings, a finding of actual knowledge was the only finding open and that his Honour should have made such a finding: see s 11 of the Dust Diseases Tribunal Act; Sandtara Pty Ltd v Abigroup Ltd (1997) 42 NSWLR 5; VACC Insurance Limited v BP Australia Limited (1999) 47 NSWLR 716; [1999] NSWCA 427. 21 Before dealing with this submission, it is helpful to understand its relevance. A central issue on the appeal is whether all reasonable precautions were taken for the purposes of satisfying Condition 4, having regard to the construction which has been given to a clause in such terms in Fraser v BN Furman and the authorities which have followed that decision. As I explain later, the authorities establish that actual knowledge of the danger is fundamental for the purposes of the operation of the clause. The appellant sought to rely on the principles stated in Sandtara v Abigroup and in VACC Insurance to establish that the trial judge was required to make a finding of actual knowledge. 22 In Sandtara v Abigroup the Court held that a third party to a cross claim who became a party to the principal proceedings by operation of s 78 of the Supreme Court Act 1970 (NSW) (the Supreme Court Act) was entitled to rely on issue estoppels flowing from the findings made in the principal proceedings. A brief examination of the facts demonstrates the application of the principle. Sandtara Pty Ltd (Sandtara) leased commercial premises to Cenrin (Pty Ltd) (in liq) (Cenrin). Cenrin's obligations under the lease were guaranteed by Abigroup Limited (Abigroup), which in turn was indemnified by other parties. Cenrin defaulted in its payments of rent and Sandtara commenced proceedings against Abigroup, as the guarantor of Cenrin's obligations, for the unpaid rent. Abigroup cross-claimed against Cenrin and the other parties for a declaration that they were liable to indemnify it in respect of any liability it was held to have to Sandtara. Cenrin cross-claimed against Sandtara, but the cross-claim was withdrawn. Sandtara did not bring proceedings against Cenrin for the unpaid rent. 23 The matter proceeded to a hearing and Sandtara obtained judgment against Abigroup for the unpaid rent in a specified amount. Abigroup in turn obtained the declarations and orders it had sought against Cenrin and the other parties pursuant to their indemnity. Abigroup paid Sandtara the judgment sum. Subsequently, Sandtara asserted that it had made a mistake in the original proceedings as to the amount of rent and said that it was owed additional rental for the period for which it had obtained judgment. It thus brought further proceedings against both Abigroup and Cenrin for the additional sum. Sandtara's claim against Abigroup for the additional sum was dismissed on the basis that there was a res judicata between Sandtara and Abigroup and that the rights that Sandtara had against Abigroup for rent had merged in the judgment sum. That then left the question of the claim against Cenrin. 24 A question had arisen in the subsequent proceedings as to whether the principles in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45, or any logical extension of those principles, barred Sandtara from claiming the additional rental sum from Cenrin. The Court considered that this issue was not finally determined by the High Court. The Court, therefore, decided the matter on a narrower basis and determined that an issue estoppel applied where, because of the effect of s 78 of the Supreme Court Act which allowed a cross-claim to be brought by a third party in the original proceedings, the third party thereby became a party to the first proceedings. 25 The Court concluded that Cenrin could not rely on any res judicata based on merger of the cause of action in the judgment because no judgment had been given against it on the cause of action for rent brought by Sandtara against Abigroup. However, because, pursuant to s 78 of the Supreme Court Act, it was a party to the earlier proceedings, Cenrin could rely on issue estoppels flowing from that judgment, which included an estoppel as to the amount of rent up to the specified date. This was so, notwithstanding that Cenrin did not participate in the proceedings between Sandtara and Abigroup. The Court concluded, therefore, that the claim by Sandtara against Cenrin for additional rent necessarily contained the assertion that the former decision as to quantum, was erroneous. However, because of the operation of the principles of issue estoppel, Sandtara was barred from claiming any different amount and was thus estopped from claiming the alleged shortfall in the rent from Cenrin. 26 As the terms of s 11 of the Dust Diseases Tribunal Act are relevantly equivalent to the provisions of s 78 of the Supreme Court Act, it was submitted that the principles in Sandtara v Abigroup applied a fortiori in this case where the appellant had claimed directly against the respondent. That is, the respondent had not merely been brought into the proceedings by way of a cross-claim brought by the original defendant, but had been sued by the original plaintiff. 27 The appellant further submitted that the principle in Sandtara v Abigroup applied even more directly in this case, given that s 22 of the Civil Procedure Act 2005 (NSW) (the Civil Procedure Act) provides that if a cross-claim is brought against a party who is not already a party to the first proceedings, then that party becomes a party to the first proceedings: s 22(3)(b)(i). The section further provides, in subpara (ii) that unless the court otherwise orders, the person who becomes a party pursuant to the provisions of subpara (i) is bound by any judgment or decision on any claim for relief in the proceedings. 28 However, in my opinion, the provisions of s 22(3)(b) do not advance the appellant's case in the sense of strengthening the basis for the application of the principle in Sandtara v Abigroup. Subpara (ii) refers specifically to being bound by any "judgment or decision". The word "decision" is not defined, but does not, in my opinion, include a finding of fact upon which a decision of the court, whether interlocutory or final, is made. 29 I will return to the appellant's reliance on the principle in Sandtara v Abigroup shortly. It is first useful to understand the appellant's reliance on VACC Insurance Limited v BP Australia Limited. 30 In VACC Insurance a plaintiff, Mr Clark, sustained severe burns when a petrol bowser malfunctioned and sprayed petrol over him. Mr Clark sued the owner of the petrol station (Geselle) and BP Australia Limited (BP), who owned and had supplied the pump. The trial judge held that the pump had malfunctioned because of an inherent design fault which should have been known to BP and held that both Geselle and BP had breached their duty of care to Mr Clark and awarded damages accordingly. Later, in contribution proceedings brought by BP against Geselle, the trial judge held that BP was 25 per cent responsible for Mr Clark's damages and that Geselle was 75 per cent responsible. 31 Geselle was insured by VACC Insurance Limited (VACC). The insurance policy contained a clause in the same terms, relevantly, as Condition 4 of the policy in issue in these proceedings. In subsequent proceedings brought by BP against VACC pursuant to s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) to recover the moneys it had been ordered to pay to the plaintiff, VACC pleaded that the special condition of the policy had been breached, so that it was not liable to provide indemnity under the policy. 32 The proceedings brought by BP against VACC were heard by a different trial judge, who contradicted the findings which had been made by the trial judge in the original negligence proceedings. In the negligence proceedings, the trial judge had found that Geselle knew of the potential for the pump to malfunction and although it had arranged for the pump to be serviced, it continued to allow the pump to be used in full knowledge of its faults and without giving any warnings as to the potential for malfunctioning. 33 In the indemnity proceedings, the trial judge found Geselle had no reason other than to think that the operation was being carried out in a reasonable manner. He said that whilst there may have been oversights and neglect, there was no deliberate courting of danger and no contumelious disregard for the safety of customers. VACC argued that because of the findings that had been made in the original negligence proceedings, the findings made by the trial judge in the insurance proceedings were not open to be made. 34 Fitzgerald JA (Meagher JA agreeing), accepted this submission. His Honour pointed out at [32]: "[A] plaintiff is not permitted to 'approbate and reprobate': Verschures Creameries Ltd v Hull & Netherlands Steamship Co Ltd [1921] 2 KB 608 at 612."

His Honour observed at [33] that it was unnecessary to decide whether the principle was part of the doctrine of estoppel in pais or an independent doctrine. His Honour then said at [34]: "Irrespective of whether VACC should or could have been joined in the proceeding between BP and Geselle by either BP and Geselle (or both of them), it would not be conscionable for Geselle, and it is not conscionable for BP, to allege against VACC a matter … which contradicts the basis upon which the amount which BP is entitled to recover from Geselle was determined … The unconscionability is reinforced if VACC could have been joined in the proceeding between BP and Geselle, in which event the present inconsistency of findings would have been avoided and, if Geselle was not reckless, the extent of its responsibility for Mr Clark's damages, as between it and BP, would have been reduced." 35 Although the decisions in Sandtara v Abigroup and VACC Insurance Limited v BP Australia Limited espouse quite different principles - Sandtara v Abigroup relates to questions of issue estoppel, whilst VACC Insurance Limited v BP Australia Limited raises questions of unconscionability, the application of either would produce the same result. 36 The respondent submitted that the decision of this Court in VACC Insurance Limited v BP Australia Limited was irrelevant to the issues in these indemnity proceedings. In particular, it was submitted that Curtis J made no findings in the contribution proceedings that the respondent had actual knowledge of the dangers of exposure to asbestos, although he had made a finding that Delta Electricity had actual knowledge. Accordingly, in the absence of a finding of actual knowledge in the earlier proceedings, the only relevant findings were those made in these proceedings and, in particular, his Honour's finding at [27] that: "ICAL had cause to know … that persons who were exposed to certain concentrations of asbestos dust liberated in the course of maintenance activities faced a risk of injury".

It was submitted that this was not a finding of actual knowledge. 37 To reinforce his submission that in the contribution proceedings there was no finding of actual knowledge, senior counsel for the respondent directed the Court's attention to an exchange between counsel for the respondent and the trial judge in the contribution proceedings, when the question of whether the respondent had actual knowledge and the proposed finding by his Honour was debated. I do not propose to set out that exchange. There may be occasions where resort to the transcript of such exchange is required. A claim that a trial judge was biased is one example where it may be necessary to have regard to the transcript. Another may be whether a statement made in the transcript clearly explains an ambiguous statement in the reasons. The circumstances where this could be done, however, in my opinion, would be exceptional. This is not such an occasion. Debate between the court and counsel is an important part of the process whereby issues for determination are analysed. However, such debate is not the place where the court's findings and reasons are located. A judge's preliminary view, expressed during the course of such argument, may change because of the argument. That is the very point of the process. In this case, his Honour's findings are to be found in his reasons. 38 Although his Honour clearly considered that it "strains [credulity]" that the respondent did not have actual knowledge, I consider that he did not go so far as to make a finding of actual knowledge in the contribution judgment. Rather, he made a finding of negligence in the respondent's failure to communicate the dangers of asbestos and the need to take stringent precautions with its use in circumstances where it should have known of the danger. The language of "had cause to know" is quite different, conceptually, from a finding that an entity "knew" of a particular state of affairs. I am of the opinion that the finding in these proceedings at [27] that it was "patent that [the respondent] had cause to know of the risks of injury due to exposure to asbestos", likewise, was not a finding of actual knowledge. Indeed, on the application of the principles in Sandtara v Abigroup, his Honour may have been constrained not to make a finding of actual knowledge. 39 In my opinion, it is necessary to determine this case on the basis of the findings made which were not inconsistent with or different from the finding that his Honour made in the contribution proceedings. It follows, therefore, that the principles upon which the appellant relied in Sandtara v Abigroup and VACC Insurance Limited v BP Australia Limited do not impact upon his Honour's findings of fact. 40 Accordingly, the question whether the respondent satisfied the evidentiary onus that it had satisfied Condition 4 of the policy has to be judged, not against a finding of actual knowledge of the dangers of asbestos, but against the findings that it ought to have known of the dangers of asbestos and had cause to know of those dangers. That then leads to the next question as to the proper approach to the construction of Condition 4.

Proper approach to the construction of Condition 4 41 Curtis J considered that upon the proper construction of Condition 4 as established by cases such as Fraser v BN Furman and Albion Insurance Co Limited v Body Corporate Strata Plan No 4303 [1983] 2 VR 339, the appellant was liable to indemnify the respondent under the policy. 42 The appellant submitted that in Albion Insurance Co Limited, McGarvie J, had added an additional consideration to the proper construction of the clause which was not warranted by the judgments in Fraser v BN Furman. The appellant further contended that Curtis J then applied a different test, which, in effect, added an additional consideration to the construction of the clause, which was in the respondent's favour. The appellant submitted, therefore, that his Honour erred in his approach to the construction of Condition 4. 43 In Fraser v BN Furman at 60-61, Diplock LJ approached the construction of a condition that "the insured shall take reasonable precautions to prevent accidents and disease" as follows: "The first point to consider is the question of construction of that condition. It must be construed, of course, in the context of a policy of insurance against specified risks.

'Reasonable' does not mean reasonable as between the employer and the employee. It means reasonable as between the insured and the insurer having regard to the commercial purpose of the contract, which is, inter alia, to indemnify the insured against liability for his (the insureds) personal negligence." 44 I have already referred to this approach at [14] above as being the underlying basis upon which a condition in these terms is to be construed. Importantly, for the matter presently under consideration, Diplock LJ further said, at 61: "What, in my judgment, is reasonable as between the insured and the insurer, without being repugnant to the commercial purpose of the contract, is that the insured, where he does recognise a danger should not deliberately court it by taking measures which he himself knows are inadequate to avert it . In other words, it is not enough that the employer's omission to take any particular precautions to avoid accidents should be negligent; it must be at least reckless, ie, made with actual recognition by the insured himself that a danger exists, and not caring whether or not it is averted . The purpose of the condition is to ensure that the insured will not refrain from taking precautions which he knows ought to be taken because he is covered against loss by the policy." (Emphasis added) 45 In Albion Insurance Co Ltd v Body Corporate Strata Plan No. 4303, McGarvie J, in applying Diplock LJ's judgment, said at 345: "The test is whether the insured deliberately courts the danger by refraining from taking any measures or by taking measures which he knows to be inadequate to avert it. The word 'deliberately' indicates intentional, considered action or inaction. The verb 'court' suggests action or inaction which invites the danger of accident. The test requires more than a recognition of the danger and failure to take any measures or any measures known to be adequate to avert it. It requires that this be due to a deliberate decision to court the danger ." (Emphasis added). 46 Curtis J at [24] and [25] set out both of these passages. His Honour said at [26] that "perception of the risk" was to be determined based on the subjective view of the insured, even if that view was foolish: see Plasteel Windows Australia Pty Limited v Sun Alliance Insurance Limited (1989) 5 ANZ Ins Cas 60-918. His Honour then at [27] posed the question for his determination in these terms: "The question is then whether the failure on the part of [the respondent] to take precautions was the result of a deliberate and conscious decision by its proper officer to court the risk." 47 The appellant contended that, in the terms stated in Fraser v BN Furman, Condition 4 operated in circumstances where: "… the insured, where he does recognise the danger should not deliberately court it by taking measures that he himself knows are inadequate to avert it". 48 It was submitted that McGarvie J elevated this in Albion Insurance to requiring the insured to make a "deliberate decision to court the danger" and that Curtis J, in posing the question in the terms he did at [27], added a further qualification that such decision to "court the danger" be both "deliberate" and "conscious". 49 In Fraser v BN Furman, Diplock LJ explained what he meant when he said the insured should not "deliberately court the danger". His Honour pointed out that negligence on the part of the insured was not sufficient for a claim for indemnity to fall outside the cover provided by the policy. Rather, as he explained, the insured's conduct had to be: "… at least reckless, ie, made with actual recognition by the insured himself that a danger exists, and not caring whether or not it is averted." 50 Two things should be noticed about Diplock LJ's approach to the circumstances which need to exist before a clause is engaged, such as Condition 4. The first is the emphasis on actual knowledge of the danger. That is apparent from his Lordship's initial statement that: "What in my judgment is reasonable as between the insured and the insurer … is that the insured, where he does recognise a danger, should not deliberately court [the danger] ,.by taking measures which he .. knows are inadequate to avert it." (Emphasis added) 51 Then, in further explaining what would constitute a courting of the danger, he excepted negligence, but included in his explanation an omission to take any particular actions in circumstances of "actual recognition by the insured himself that a danger exists, and not caring whether or not it is averted". It is important to note that in this explanation his Lordship again focussed on knowledge. He said that the decision to court the danger must be "made with actual recognition … that a danger exists". His Lordship then explained how in that circumstance, that is, in the case of actual knowledge or recognition of the existence of a danger, "recklessness" of the insured, as explained, will be sufficient for such a clause to operate. 52 In Albion Insurance, McGarvie J repeated the approach to construction taken by Diplock LJ in Fraser v BN Furman. His Honour then focussed on the word "deliberately" in the phrase "should not deliberately court the danger" and gave an explanation of what that meant in the context of a clause such as Condition 4, stating that "deliberate" indicated "intentional, considered action or inaction". He said: "The test requires more than a recognition of the danger and failure to take any measures or any measures known to be adequate to avert it. It requires that this be due to a deliberate decision to court the danger." 53 The reference to "deliberate decision" is said to be the 'additional element introduced by his Honour and which is not found in the approach taken by Diplock LJ. I will return to whether this is so later. 54 McGarvie J noted that his construction, save for one exception, had been adopted in other cases, and then explained why the notion of recklessness did not apply to the proper construction of the clause. The relevant passages at 345-6 are lengthy but need to be set out in full so as to properly demonstrate his Honour's reasoning: "With one exception, the construction I have adopted is consistent with the cases which have considered Fraser v B. N. Furman (Productions) Ltd . The exception is Roberts v State Insurance General Manager , [1974] 2 NZLR 312 where the condition in the policy required the insured to take all reasonable steps to safeguard a motor vehicle from loss or damage and to maintain it in efficient condition. Counsel for the parties agreed that the test was whether the insured had been reckless. McMullin, J. declined to follow Fraser v B. N. Furman (Productions) Ltd . He applied the meaning given by Megaw, J. to the word 'recklessly' when it was used in a shipping contract. Megaw, J. held that a party who was grossly careless could act recklessly without actual recognition of the danger: Shawinigen Ltd. v Vokins and Co. Ltd ., [1961] 1 WLR 1206; [1961] 3 All ER 396.

As Diplock, LJ defined what he meant by the word 'reckless' the use of the word added nothing to his reasons. A large part of the appellant's submissions on this appeal was based on the meaning to be given to that word. I consider, with respect, that the only ambiguity in the statement by Diplock, LJ of the principle of construction is introduced by the use of that word. The meaning given to the word does not correspond with what the House of Lords has recently decided to be its ordinary meaning: R v Caldwell , [1981] 2 WLR 509; [1981] 1 All ER 961; R v Lawrence , [1981] 2 WLR 524; [1981] 1 All ER 974. In my respectful opinion there is no place in the relevant principle of construction for either the word 'reckless' or the concept of recklessness.

The construction I have adopted is likely to correspond with the expectations of the parties to the contract of insurance. Such a condition gives efficacy to the transaction. Its most important function is to confine the indemnity to liability for breaches of duty by the insured which are not caused by the fact that the insured has insurance cover." 55 McGarvie J's reference to there being no place for the notion of recklessness in the construction of the Condition, is a reference to "recklessness" as that word was used in the criminal sense. That was the purpose of his reference to the two criminal cases in the second of the paragraphs set out above. 56 McGarvie J then turned to the facts. He said at 346: "To show that it has complied with the condition the body corporate also has to establish that within the meaning of the condition it took all reasonable measures to keep the premises and fittings in a condition of proper maintenance and repair. It will establish this if it shows that it was not due to a lack of desire and concern to prevent bodily injury that it failed to take reasonable measures by way of maintenance and repair ." (Emphasis added) 57 Young CJ agreed substantially with the reasons of McGarvie J. His Honour noted that the insurer had argued that the word "reckless" as used by Diplock LJ in Fraser v BN Furman meant "grossly careless" as that word had been construed in the shipping contract under consideration in Shawinigan Ltd v Volkins & Co Ltd [1961] 3 All ER 396. His Honour then observed, however, that the Court was not concerned with the construction of the word "recklessly" in a contract. Rather, the question at issue was the proper construction of a condition in an insurance contract and the application of the test propounded by Diplock LJ to a clause in those terms. In referring to that test, Young CJ expressly referred to that portion of Diplock LJ's statement relating to "recklessly", observing that his Lordship had defined what he meant by the use of that word. 58 Young CJ held that the trial judge had applied the correct test. He said at 341: "Kaye, J. applied the correct test and concluded that Mr. Wilson's state of mind was not such that he did not care whether the danger was averted. This conclusion was clearly open to his Honour on the evidence. The appellant contended that his Honour was in error because the 'not caring' phrase in Diplock, LJ's test should be taken to mean 'indifferent to the consequences which may ensue having regard to the danger'. Even on that test I should have thought Kaye, J. would have reached the same conclusion, but be that as it may, the appellant's argument in my opinion again tends to attempt the construction of Diplock, LJ's judgment as though it were a statute rather than to look at the test as a whole and apply it to the condition in question." 59 Anderson J agreed with the reasons of both Young CJ and McGarvie J. 60 In my opinion, the approach taken by McGarvie J does not introduce any additional factor or test to that stated by Diplock LJ. There is no difference in substance between an insured with actual knowledge of a danger "deliberately [courting the danger] by taking measures that [the insured] knows are inadequate to avert it", as Diplock LJ articulated the test, and the insured making a "deliberate decision to court the danger", as the test was stated by McGarvie J. The taking of measures known to be inadequate to deal with a danger which is itself known involves making a deliberate decision to court the danger for the reason that a decision has to be made to implement the steps which are known to be inadequate, or to not implement adequate steps. 61 I am also of the opinion that the question posed by Curtis J at [27] does not introduce any additional or extraneous consideration into the approach to the proper construction of Condition 4. In the manner in which his Honour has used the term "conscious and deliberate" he can only mean "deliberate". A deliberate decision must be a conscious one. The additional wording used by his Honour would appear to be a matter of emphasis which is strictly unnecessary, but not, in my opinion, erroneous. 62 If I am correct in my understanding of the approach taken by McGarvie J in Albion Insurance and by Curtis J here, then the appellant has not established the error alleged. 63 Before leaving this particular topic however, it is important to emphasise that in order for the appellant to have the benefit of Condition 4, a finding of actual knowledge of the danger is necessary. Otherwise, the prerequisite for the operation of the exclusion, that with actual knowledge of the danger, the insured failed to take adequate measures or knowing that a danger existed, did not care whether the danger was averted, does not exist. 64 That this is so is also apparent from the decision of this Court in Legal & General Insurance Australia Ltd v Eather and the decision of Cole J in Plasteel Windows Australia v Sun Alliance Insurance. In Legal & General Insurance Australia Ltd v Eather the Court was concerned with a policy of insurance which contained a requirement that the insured "take all reasonable precautions to avoid or minimise injury, loss or damage". Glass JA at 403 said that: "The insured person will not be in breach if he shows either that he did not recognise that a danger existed or that perceiving its existence he took some action to avoid it and was not indifferent to whether the danger was averted or not: Fraser v B N Furman (Productions) Ltd …" (Emphasis added) 65 McHugh JA, after referring to Fraser v BN Furman and noting its "great influence in subsequent cases", concluded at 407 that the condition in the policy meant that: "[T]he insured must be concerned to protect the property from loss or damage and must take such steps to protect the property as he thinks are reasonable having regard to dangers which he recognises ." (Emphasis added) 66 In Plasteel Windows Australia v Sun Alliance Insurance Cole J was dealing with a condition under an industrial special risks insurance policy which again, relevantly, required the insured to take "all reasonable precautions to prevent loss". Cole J identified the question in issue in that case as being: "… whether the test of existence of risk is to be determined by the perception of the insured, or the perception of a reasonable third person."

His Honour considered that the authorities established that: "… the enquiry in relation to perception of risk is into the perception of the insured, whether foolishly held or not."

He considered that this was primarily because such a condition in a policy had to be reconciled with the contractual purpose of the insurance policy, that is, such words had to be: "… 'read down to give effect to the commercial purpose of the contract, which is to indemnify the insured against liability for personal negligence': Legal & General v Eather per McHugh JA at 405". 67 Cole J next referred to the passages to which I have already referred in Fraser v BN Furman, Albion Insurance and Legal & General v Eather. His Honour considered that it was apparent from those authorities that the test was "a subjective one" and that "recognition of risk" was essential. 68 Likewise, in VACC Insurance Limited v BP Australia Limited, Brownie AJA, after a consideration of Fraser v BN Furman, Albion Insurance and Legal & General v Eather, stated that the test as to whether the condition had been satisfied was a subjective one, personal to the insured. (Brownie AJA was in the minority in VACC Insurance Limited v BP Australia Limited. However, Fitzgerald JA, with whom Meagher JA agreed, did not deal with the matter on this basis.) See also State Government Insurance Commission v Lane & Anor (1997) 68 SASR 257; and Mead v Allianz Australia Limited [2006] NSWSC 366 at [56]. 69 In this case, there was no finding of actual knowledge in the respondent or recognition of the risk by it. Rather, Curtis J found that the respondent should have been aware of the dangers of asbestos. In my opinion, that finding is not sufficient for the appellant to be entitled to the benefit of Condition 4.

The no evidence submission 70 The appellant contended that, in circumstances where his Honour found that there was no evidence that the respondent took any precaution to obviate the risk of injury from the inhalation of asbestos, the respondent had not satisfied its onus of demonstrating compliance with Condition 4 of the policy. This submission was based upon the premise that the trial judge had made, or, having regard to his findings in the contribution proceedings, was obliged to make, a finding of actual knowledge in the respondent of the dangers of inhaling asbestos. As I consider that his Honour did not make that finding, nor did he make such a finding in the contribution proceedings, that part of the appellant's challenge can be put to one side. The finding that his Honour made, that the respondent "ought to have known" of the dangers, was open to him on the evidence. There was no error of law in his Honour not making a finding of actual knowledge. 71 However, there are two further aspects of this particular issue upon which the appellant relied which do require consideration. First, it was contended that his Honour failed to have regard to uncontested scientific evidence contradictory to his findings concerning scientific understanding about the existence of safe levels of exposure to asbestos. Secondly, it was alleged that his Honour had used findings of fact in Babcock Australia Ltd v Eraring Energy (No 2) (2001) 22 NSWCCR 141, contrary to procedural fairness and without statutory authority. The reference to statutory authority is a reference to s 25B of the Dust Diseases Tribunal Act. These contentions essentially challenge his Honour's reasons in [30], [31] and [33] of his judgment. 72 This part of the appellant's case involves an understanding of certain of the processes in the Dust Diseases Tribunal. The first is the procedure under s 25(3) of the Dust Diseases Tribunal Act whereby the historical evidence and general medical evidence concerning dust exposure and dust diseases admitted in any proceedings in the Tribunal, may, by leave, be received as evidence in the proceedings. The second is the procedure under s 25B. Pursuant to that section, issues of a general nature determined in proceedings before the Tribunal may not be re-litigated or re-argued without the leave of the Tribunal, whether or not the parties before the Tribunal were parties to those proceedings. Matters proceed before the Tribunal by a party giving a "s 25B Notice" of the issue of a general nature that it says has been determined. 73 As developed in oral argument on the appeal, two central criticisms of his Honour's judgment emerged on the questions presently under consideration. The first was that the evidence at trial, including the evidence adduced pursuant to the provisions of s 25(3) of the Dust Diseases Tribunal Act, did not support the trial judge's findings in these paragraphs. The second criticism was that his Honour had stated during the hearing that there was a previous decision of his, the name of which he could not remember, in which he had remarked upon the lack of communication between experts and persons on the factory floor, of the dangers of exposure to asbestos. He said that if he proposed to use the decision he would first inform the parties. It appears that the decision was Babcock Australia to which his Honour referred at [33]. However, contrary to his intimation during the hearing, he did not give notice to the parties of his intention to do so. 74 The first complaint commenced with his Honour's findings at [30] where his Honour found that upon the evidence of Mr Barlow, Mr Davis and Mr Gorsuch, the respondent's "… engineers and employees complied with the standard industry practices followed by the various corporations engaged in the construction and maintenance of coal-fired generators for Elcom."

His Honour added: "Their evidence is sadly consistent with evidence frequently before this tribunal. It may be accepted that compliance with industry standards is no defence to a case brought in negligence. I believe however that, on another plane, industry practice reflects the general standards of civilised behaviour accepted in both the community at large and within any given industrial community. Observance by a tortfeasor of work practices general in an industry is, to my mind, prima-facie evidence that the tortfeasor has not deliberately courted a risk." 75 His Honour's comment that compliance with industry standards was not a defence to a case brought in negligence is correct. However, the issue with which his Honour was dealing in this paragraph was not whether the respondent was negligent. He had already determined that question in the terms I have discussed above. The issue he was dealing with was whether the respondent had deliberately courted the danger of exposure to asbestos. Nonetheless, his Honour's reference to negligence was not an unreasonable observation to make at that point. He was doing no more than drawing a distinction between what was relevant in relation to a finding of negligence and what was relevant in relation to the question he had under consideration, namely whether the respondent had deliberately courted the danger of exposing its employees to asbestos, and more particularly, the related question whether it had taken reasonable precautions to prevent bodily injury as required by Condition 4 of the policy. 76 I make a more particular reference to the second of these points, because, on the way I have understood his Honour's judgment, having determined that the basis of the respondent's negligence was that it had cause to know that persons exposed to asbestos were at risk of injury, rather than because it had actual knowledge, the question whether the respondent had deliberately courted the danger had, in effect, been determined. However, that still leaves the question as to what the appellant needed to prove so as to satisfy its onus under Condition 4. Before dealing directly with that question, it is convenient first to turn to the appellant's contentions presently under consideration. 77 As is apparent from the last sentence of [30], his Honour, having found that the respondent complied with standard industry practice, considered that that constituted prima-facie evidence that a tortfeasor had not deliberately courted a risk. In the circumstances, that finding was open to his Honour. If an employer followed the standard industry practice relating to the use of or exposure to a particular product or process, or had acted in the same way as other employers in similar circumstances, there is an available inference that that employer had not deliberately courted the risk involved in exposing employees to that product or process. That inference would only be available, however, provided the employer did not have actual knowledge of the dangers associated with the use of the particular product or process. 78 In this case, there was no finding by his Honour that the respondent had actual knowledge. It is apparent from his Honour's finding that compliance with industry practice was prima facie evidence that a tortfeasor had not deliberately courted the risk, it is likely that he appreciated that if there was a finding of actual knowledge, the requirement would not be made out. 79 The balance of the comments in paragraph [30], should, in my opinion, be read as surplusage. The first, that the evidence of the witnesses was "sadly consistent with evidence frequently before this tribunal" may well have accurately reflected his Honour's judicial experience, although it was irrelevant to the factual and legal issues that his Honour was required to determine. His Honour's further observation, that "industry practice reflects general standards of civilised behaviour", appears, when regard is had to the words "on another plane", to be in the nature of a philosophical musing, but was also irrelevant to the issues that he was required to determine. Being mere surplusage to his Honour's reasoning, neither observation bespeaks error. 80 The appellant contended, however, that there was no evidence that the respondent complied with standard industry practice. That submission requires an examination of the evidence of Mr Barlow, Mr Davis and Mr Gorsuch to which his Honour referred. 81 Mr Barlow was the injured employee. He gave evidence of the conditions in which he worked at the Vales Point and Munmorah power stations. In summary, his evidence was that there was a significant exposure to asbestos, sometimes to the point of its being "just like walking through a dust storm". He said that the floors were swept, but that only had the effect of causing more dust to circulate in the area where he was working. He said at night-time after the dust had accumulated, he and the other employees were given a fire hose to hose the place down. He said that whilst working at Vales Point, he was not given any protective clothing or respiratory protective equipment, nor was he given a warning about the dangers of asbestos. The conditions were largely the same at Munmorah, although Mr Barlow said the conditions there were better because it was a new power station. 82 In about 1969, his employer was taken over by Pozzolanic Pty Limited, who provided "a nurses gauze type mask". He understood that this was to protect against the fly ash and nothing was said about protection against asbestos. He said, however, that the mask became clogged and it was difficult to work whilst wearing it. 83 Mr Davis was a trades assistant who had worked at the Vales Point and Munmorah power stations between 1953 and 1998. During that time he worked for three different employers. Between 1953 and 1957, he was employed at Vales Point power station by Bailey Meters & Controls Pty Ltd. Between 1957 and 1967, he was employed by International Combustion Australia Ltd as a boilermaker's assistant at Munmorah power station and from then until his retirement with the Electricity Commission of New South Wales at both Vales Point and Munmorah power stations, for the most part as a trades assistant. Mr Davis' description of the work conditions was similar to that given by Mr Barlow. He also said that no safety masks, breathing equipment, or other protective clothing, was provided by any of his employers and he was not warned of the dangers of asbestos. 84 Mr Gorsuch's evidence was contained in an affidavit in proceedings that he had brought against Babcock Australia, the respondent, Pacific Power and Delta. He gave evidence of exposure to asbestos at a number of power stations including Vales Point and Munmorah with different employers from 1955 until 1979. He said that he was not provided with any protective clothing or warned of any dangers. 85 There was other evidence to the same effect, adduced pursuant to the provisions of s 25(3) of the Dust Diseases Tribunal Act. Mr Naughton, who also had been employed by the respondent and who brought proceedings against it, gave evidence that he was exposed to asbestos between 1951 until his retirement in 1983. He said that he had worked at a number of power stations, including Vales Point and Munmorah, as well as at other premises where he was exposed to asbestos during that period. He said that whilst working at the various power stations the respondent was not the only contractor working on the premises. He said that he was not provided with any protective clothing or equipment until 1976, when, whilst working at Vales Point, he was provided with a mask when working in the area where asbestos removal was taking place. However, when he was not working in that area, masks were not supplied, notwithstanding that he was still working in the proximity of the asbestos removal operations and was still exposed to asbestos dust. 86 The evidence of Graham Jones-Mashman was to similar effect. His exposure to asbestos arose because his father had worked at various power stations for a number of employers including the respondent, and who came home wearing his work clothes covered in asbestos dust. Mr Jones-Mashman gave evidence that his father had described work conditions such as have been described above and that he was not provided with protective clothing or equipment or warned of the dangers of exposure to asbestos. 87 There was also evidence given by Boris Osman, consulting engineer, in proceedings McRae v Bestobell Overseas Ltd & Ors. Mr Osman gave evidence that the asbestos exposure of the plaintiff in that case occurred whilst working for a number of different employers between 1966 and 1986. Again, the evidence was that no steps were taken by the employers to protect against the effects of exposure. Evidence from proceedings Marks v Australian Asbestos Installations Pty Ltd & Ors was also in evidence and was to the same effect. 88 The evidence above indicated that at different power stations, as well as in other places of employment where asbestos was used, employers, during the period of Mr Barlow's exposure, did not provide protective clothing or respiratory equipment to safeguard against exposure to asbestos. It is in this sense that it appears his Honour considered that the respondent "complied with" standard industry practices followed by the various employers engaged in the construction and maintenance of coal-fired generators for Elcom. In other words, the respondent's practices were the same as those of other employers in the relevant section of industry. Understood in that way, there was evidence to support his Honour's conclusion. It is in this sense, as I have understood it, that his Honour considered that the fact that this was the general practice in the industry constituted prima-facie evidence that "the tortfeasor" (who in this case was the respondent) did not deliberately court a danger. 89 It must be said, however, that the use of the word "complied" is not particularly apt in the circumstances, given that the evidence was that nothing, or little, was done to protect employees from the dangers associated with exposure to asbestos. "Compliance" usually denotes the doing of something. 90 His Honour, at [31] then drew a number of inferences, leading to a conclusion that the work practices were not the result of any deliberate decision to court known dangers. The inferences that he drew were that it was improbable that the engineers employed by the respondent were uniformly unconcerned with the health of the respondent's employees. Rather, he considered that "because they acted in common in the development and acceptance of what proved to be unsafe work practices", those work practices were not the result of a deliberate decision to court a known danger, namely the dangers arising from exposure to asbestos. 91 As I understand his Honour's reasoning, he was doing no more than concluding that work conditions in industry where asbestos was used were, overall, the same. In the main, precautions were not taken to protect employees and others working in the vicinity of asbestos from the dangers of exposure. His Honour inferred from the fact that this was common that there had not been a deliberate decision to court the danger by relevant personnel. However, as I have said, that determination flowed, in any event, from the nature of the findings that he made in respect of negligence for the reasons I discussed. It might be said however that the reasoning does confirm that in finding that the respondent was negligent his Honour had not made a finding of actual knowledge. 92 The appellant next complained that his Honour utilised findings of fact from his decision in Babcock Australia Ltd v Eraring Energy (No 2) in circumstances where the parties had not been given an opportunity to consider and respond to that material. 93 At [33] his Honour stated that at the time of Mr Barlow's exposure to asbestos, it was not thought that the substance was inherently dangerous and the scientific community had not yet concluded that there was no safe level of exposure. He commented that expert guidance was necessary to assess the gravity of the risk in each case. It was at that point that his Honour made reference to his judgment in Babcock Australia Ltd v Eraring Energy (No 2). His Honour then commented at [34] that "seen in this light", the failure of the respondent "was an organisational failure". 94 Contrary to the appellant's submission, I am not satisfied that his Honour used his decision in Babcock Australia Ltd v Eraring Energy (No 2) as evidence of the matters that he had found and to which I have referred above. Rather, it appears that he was using his decision in Babcock Australia Ltd v Eraring Energy (No 2) by way of reiteration of what he had found in this case. Indeed, it appears that the 'findings' were in fact inferences and conclusions of the same type that were made and reached in [31]. 95 However, assuming that his Honour did use his judgment in Babcock Australia Ltd v Eraring Energy (No 2) for the purposes of fact finding, there was ample evidence in this case that supported that fact finding. For example, there was a report of Michael Kottek, occupational and environmental health consultant in the case of Bowman. 96 Kottek undertook a review of the literature relating to asbestos exposure from 1900. He found records of over 340 articles published between 1900 and 1952, being the commencement of Mrs Bowman's exposure to asbestos, and 1000 articles between 1900 and 1970 when her exposure ceased. He referred to a number of these articles, many of which were papers that had been given at scientific or medical conferences. 97 Kottek stated that from 1960 onwards, it became recognised that exposure to asbestos was associated with mesothelioma. This observation was based upon the fact that an article appeared in 1960 in the British Journal of Industrial Medicine (Wagner et al) where it was reported that of 33 mesothelioma cases, 32 had involved an exposure to asbestos. 98 Importantly, the first Australian case of mesothelioma was reported in 1962 in the Medical Journal of Australia. 99 In 1964, there was an international conference held by the New York Academy of Sciences at which a paper was presented in respect of a study of 45 cases of mesothelioma, which found that the majority had a history of intermittent or casual exposure to asbestos. There was an associated meeting of the Working Group on Asbestos and Cancer convened under the auspices of the International Union Against Cancer. That committee noted that asbestos exposure was associated with lung cancer and diffuse mesothelioma of the pleura and peritoneum. 100 In 1965, an article by Elmes et al published in the Postgraduate Medical Journal considered that transient exposure to asbestos could be an important factor in the cause of mesothelioma. 101 Regulations had been introduced over the years, commencing in 1933 in the United Kingdom, dealing for the most part with the saturation levels of dust in the work environment or with work practices such as ventilation and the use of wet methods for dry asbestos. Not all of these regulations covered asbestos affected environments. Further, the regulatory regimes tended to be limited in their effect and operation either to concentrations of dust in the atmosphere, or to particular industries. In 1969, the Asbestos Regulations 1969 (UK) were introduced, although in 1967, in anticipation of these Regulations, the Asbestosis Research Council published a recommended code of practice for asbestos cement. This was supplemented, in 1970 (revised in 1973), with a code of practice for the stripping and fitting of insulation. It was not until 1975 that the Scaffolding and Lifts Act 1912 (NSW) was amended to ban asbestos insulation by means of spraying. 102 There was also the evidence of KS Basden, Retired Senior Lecturer, Department of Mineral Processing & Extractive Metallurgy, University of New South Wales, that reviewed much of the same material. 103 The appellant further submitted that his Honour's finding at [33] appears to be designed to excuse the respondent's failure to take any reasonable precautions and was inconsistent with the appellant's s 25B case. The import of this submission was that it was not open as a matter of law for his Honour to make a different determination to those that had been made in the decisions relied upon in the s 25B notice. 104 In its s 25B Notice the appellant relied, inter alia, upon the determinations in Bendix Mintex Pty Ltd v Barnes (1997) 43 NSWLR 307; EM Baldwin & Son Pty Ltd v Plane (1989) Aust Tort Reports 81-499 at 65, 645; CSR v Wren (1997) 44 NSWLR 463; and Raif v SG Sayer Pty Ltd (1996) 13 NSWCCR 393. In summary, those cases determined that there was a body of knowledge in the scientific, medical and industrial communities including knowledge of the precautions available to reduce the dangers of exposure to asbestos. 105 The effect of the determinations in those cases was that it was established that, as at 1968, when Mr Barlow was first exposed to asbestos, asbestos posed a foreseeable risk of injury and that industry should have known of those risks and taken available precautions to reduce the risk. However, as the evidence in this case established, those precautions were not being taken by a significant body of operators in the industry. The authorities relied upon in the s 25B Notice did not establish to the contrary. 106 It is in this sense, as I understand it, that his Honour considered that there was a dichotomy between professional and expert knowledge on the one hand, and practices in industry on the other. Indeed, the fact that effective governmental regulation of this danger came at a fairly late stage, and in New South Wales not until 1975, demonstrates that although there was evidence of the dangers of exposure to asbestos for a significantly long period, there was little or no industry response or relevant regulation until the mid-1970's. 107 As I have said, the existence and availability of the material to which Kottek and Basden referred would be sufficient, and as the caselaw in this area demonstrates, has frequently led to findings against employers and others that they ought to have known of the dangers. However, those authorities did not constitute determinations of the question with which his Honour was concerned, namely, whether the respondent had discharged its onus of establishing that it had taken reasonable precautions to prevent bodily injury for the purposes of satisfying the precondition to indemnity in Condition 4. 108 For these reasons, I am of the opinion that the appellant's claim that it was denied procedural fairness and its claim that the trial judge failed to take into account uncontested evidence and determinations to the contrary of his findings therefore, fail. It follows that as there was no failure to take these matters into account, the additional complaint that his Honour failed to give reasons for not doing so, also fails. 109 That brings me back to a consideration of the question of what was required for the respondent to prove compliance with Condition 4. That issue has to be examined having regard to the nature of the appeal. Curtis J at [34] made a finding of fact that: "… no one person who constituted the guiding mind of [the respondent] at any relevant time made a deliberate decision to court that danger to which Mr Barlow was exposed."

His Honour at [35] then found that the respondent had "… discharged its onus of proving that he was not in breach of the condition of the policy that it take all reasonable precautions to prevent bodily injury to Mr Barlow." 110 His Honour's fact-finding in these paragraphs involved a process of reasoning whereby, not having been satisfied that the respondent deliberately courted the danger of exposing Mr Barlow to asbestos, it followed, in the sense that it was to be inferred, that it had discharged its onus under Condition 4. Although the question was not precisely formulated in this way by the appellant, it seems to me that that is the question which falls to be resolved by the issues raised by the appellant. In other words, can an insured discharge its onus to demonstrate compliance with Condition 4, by demonstrating that it did not have actual knowledge of the relevant danger that exposed persons to bodily injury? 111 There is an unusual tension, on the one hand, in bearing an onus to prove, by way of precondition to recovery, that reasonable precautions had been taken, and on the other, the requirements of what is necessary for the clause to operate. The purpose of the clause is to preclude recovery of the indemnity otherwise provided by the insurance policy in circumstances first of actual knowledge, and then, with such knowledge deliberately courting the risk. Where the evidence does not establish the very matters that preclude recovery, I am of the opinion that an inference may be drawn that the precondition has been satisfied. 112 Curtis J's finding of negligence was a finding that fell short of the respondent having actual knowledge. In those circumstances, the respondent could not have courted the danger of the risk of injury to which Mr Barlow was exposed. It follows, in my opinion, that his Honour's finding at [35] has not been shown to be erroneous in point of law.

The competent employees submission 113 That leaves the final question which was raised in respect of the satisfaction of Condition 4, namely whether the respondent had satisfied its onus of proving that it had employed "only competent employees" as required by Condition 4. 114 The appellant contends that the trial judge should have found that the respondent had failed to satisfy Condition 4 of the policy because it failed to adduce any evidence to demonstrate that it had exercised reasonable care that only competent employees are employed. The appellant also complained that the trial judge failed to deal with this requirement in his reasons. In oral argument on the appeal the appellant emphasised the failure of the trial judge to deal with the matter in his reasons. 115 There was no issue between the parties that this question was raised on the pleadings and in argument. In paragraph 18 of the amended defence, the appellant pleaded that the respondent was "in breach of the conditions of the policy, failed to take reasonable care that only competent employees were employed". 116 The respondent accepted that the trial judge did not deal at all with this issue. It points out, however, that in the way in which the appellant, at trial, approached the question as to the satisfaction of Condition 4, the requirement that the respondent "exercise reasonable care that only competent employees are employed" and the requirement that the respondent "shall take all reasonable precautions to prevent bodily injury" were dealt with together. The respondent submitted that both breaches were pleaded in the same paragraph of the amended defence and the written submissions at trial dealt with both issues together. 117 The written submissions of the appellant were in these terms: "5. [The respondent] failed to comply with condition 4 of the policy by failing to exercise reasonable care that only competent employees were employed and failing to take all reasonable precautions to prevent bodily injury to the plaintiff. [The respondent] also failed to take all reasonable measures to maintain all premises, furnishing, fittings, appliances and plant in a sound condition and failed to comply with all statutory obligations and bylaws or regulations imposed by any public authority for the safety of persons. [The respondent] deliberately courted danger to the plaintiff of bodily injury from exposure to asbestos at the power stations.

6. [The respondent] bears the onus of proving that its liability to the plaintiff is something which falls within the policy. [The respondent] also bears the onus of proving compliance with condition 4 and that the loss was ' a result of an accident and happening' within the meaning of the policy." 118 The respondent also referred to the appellant's further written submissions at trial where the appellant set out Condition 4 in its entirety and did not distinguish between the individual requirements imposed by it and, later, at para 38 where the component parts of Condition 4 were dealt with in the one paragraph. The respondent accepted that in the oral submissions at trial, counsel for the appellant made a separate submission in respect of the "competent employees" aspect of Condition 4, but, according to the respondent, did so in the context of overall compliance with the Condition, and without any separate distinction being drawn between that requirement and the requirement that the respondent "take all reasonable precautions to prevent bodily injury". 119 In my opinion, the appellant's submissions at trial as to the "competent employees" requirement of Condition 4 do not demonstrate that it failed to make any independent submission in respect of that requirement, or included it as a constituent element of the requirement that the respondent "take all reasonable precautions to prevent bodily injury". On the contrary, I am of the opinion that the appellant at all times advanced that proposition. 120 As there is no doubt that the trial judge failed to deal with this matter, the appellant has established error of law. The question is what ought to flow from that. 121 In the usual course, where a trial judge has failed to deal with any issue that was argued and which is relevant to the overall determination of the matter, it is necessary to remit the proceeding to the trial judge for determination of that issue. That, however, is not an automatic result. If only one conclusion is open on the evidence then the appellate court may decide the matter. In Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430 at 444, Meagher JA said this was the case if the only conclusion was that reached by the trial judge. I am of the opinion that that principle also operates if the only conclusion open is to the opposite of that found by the trial judge. 122 That raises the question whether there was any evidence on this question. The respondent referred to two items of evidence. First, there are statements made in the respondent's advertising material to the effect that it engaged experienced personnel for the carrying out of all aspects of its work. Secondly, the respondent submitted that it could be inferred from the fact that there was widespread industry failure to take reasonable precautions at the time of Mr Barlow's exposure, that the individual employees of the respondent were not incompetent, and it would follow, were therefore competent. 123 It is possible that each of those matters could be evidence relevant to proof of satisfaction of this aspect of Condition 4. Whether those matters constitute sufficient evidence, either at all or sufficient to place some evidentiary onus on the appellant raises a separate question. The appellant did not address any submissions on this point and, as the trial judge gave no reasons on the matter, the trial judge did not consider whether that was so or not. 124 There may be other relevant considerations to the determination of the question. For example, would the respondent have to prove that it employed competent employees throughout its organisation, or would it be sufficient to prove that the employees engaged in the maintenance work at the power station where Mr Barlow inhaled the asbestos were competent? There are, of course, other combinations of these particular questions. There are also other questions. For example, how do the notions of "competent employees" and negligence operate in respect of the operation of the Condition so as to be able to determine whether the respondent had satisfied the Condition? Does "competence" operate at the commencement of the policy or does it have an ongoing operation? None of these matters were considered by the trial judge. 125 Although I have not found this issue easy to decide, I have decided on balance that the matter should be remitted for determination by the trial judge. In my opinion, this issue raises a discrete question, both of construction of the policy and of fact. In that circumstance, I am of the opinion that a new trial on this one issue can be had without encountering the difficulties discussed by the High Court in CSR Ltd & Anor v Della Maddalena (2006) 80 ALJR 458; [2006] HCA 1.

The Jones v Dunkel submission 126 The appellant also submitted that his Honour should have drawn a Jones v Dunkel inference in relation to the failure to call witnesses relating to proof of compliance with Condition 4. In Payne v Parker (1976) 1 NSWLR 191, Glass JA, at 201, pointed out that if the conditions for the operation of the principle existed, the principle should be applied. Those conditions were that the witness would be expected to be called by one party rather than the other; that the witness would elucidate a particular matter; and the failure to call the witness was unexplained. 127 The respondent pointed out that the case was being conducted 33 years after Mr Barlow's exposure and submitted that there was no evidence that any managerial staff were available or had any relevant recollection. That, of course, reverses the respondent's own onus if it wishes to resist a Jones v Dunkel submission. Evidence could have been called from current management of the respondent that witnesses and records were no longer available. In my opinion, those conditions existed in this case. However, having regard to my conclusions, it is not necessary to deal with this particular issue in relation to the requirement that the respondent "take all reasonable precautions". 128 The position in relation to the "competent employees" issue is more complicated because the trial judge did not deal with that issue or gave no reasons. Accordingly, if there is a Jones v Dunkel point to be made, it is only relevant if this Court considered that it ought to determine that issue. However, as I have already explained, I consider that that question ought to be remitted for determination.

Second issue on the appeal: did the claim arise out of a breach of duty owed by the respondent in a professional capacity? 129 This issue arises out of the exclusion to the policy which provided that the policy did not provide for "claims arising out of a breach of the duty owed in a professional capacity by The Insured". 130 The respondent's claim was for indemnity in respect of a sum which the respondent became legally liable to pay as a result of bodily injury suffered by Mr Barlow. Having regard to the terms of the exclusion the question arises as to what was the basis of that legal liability. The respondent's legal liability arose because Mr Barlow was required, during the course of his employment with third parties, to work in the vicinity of the coal-fired water-tube boilers in power stations operated by Elcom. In the course of maintenance work on the boiler tubes, asbestos fibre was released, and which, because Mr Barlow worked nearby, he ingested. The maintenance work was carried out by employees of both Elcom and the respondent. 131 In the contribution proceedings, the trial judge at [17] held that the respondent's liability arose because it had failed to communicate to the Electricity Commission, at the time the contracts were let, of the dangers of asbestos and the necessity to adopt stringent precautions against workers inhaling the asbestos fibres when the fibres were disturbed. 132 His Honour summarised those findings in these proceedings in the terms to which I have referred above at [16]. The trial judge then, at [38], after referring to Carr v Inland Revenue Commissioners [1944] 2 All ER 163 and GIO General Ltd t/as GIO Australia v Newcastle City Council (1996) 38 NSWLR 558 at 568, accepted that the respondent, when contracting for the construction of the boilers, owed professional duties to Elcom, to ensure that the boilers were skilfully designed. His Honour reached this conclusion because he found that the respondent had held itself out as providing professional engineering services. His Honour then went on to make two findings about which complaint is made. The first was that in circumstances where, in the 1960s when the contract for the construction of the boilers was entered into and the dangers associated with asbestos were very much in the public domain, that the respondent, when discharging its professional duties to Elcom, owed a further duty to Elcom to warn against the dangers of asbestos. His Honour found at [39] that: "The duty to warn was a common law duty owed to Mr Barlow against the foreseeable possibility that Elcom would itself be negligent, not a professional duty owed to Elcom." 133 The appellant submitted that the relationship between the respondent and Delta Electricity was one of the provision of professional engineering services. It designed, specified, constructed and partly maintained Delta Electricity's power stations, where Mr Barlow was exposed to asbestos material. The asbestos material itself had been installed by the respondent in an engineering capacity. 134 The appellant submitted that none of this appeared to be in dispute at trial, but, in any event, was supported by the uncontested evidence found in ICAL's publicly available documents, such as its "Experience list" which was a document which set out a summary of its major installations and stated its area of expertise, including "design, manufacture, erection, commissioning and maintenance of" major plants such as steam generating plants, coal handling plants, ash and dust collection and transportation plants. 135 The respondent's promotional literature was to like effect. In that documentation, the respondent promoted itself as a company "outstanding in its fields" with success based on, inter alia, "engineering expertise and organisational ability". 136 The appellant submitted that it is apparent from the way in which the courts have defined a profession or professional capacity in various circumstances that engineering is a recognised profession. The appellant referred to the fact that an architect has been considered to be working in a professional capacity: see Voli v Inglewood Shire Council (1963) 110 CLR 74; [1963] HCA 15. The appellant also relied upon Bryan v Maloney (1995) 182 CLR 609; [1995] HCA 17. 137 Those cases, however, were not concerned with the question of an exception to a policy of insurance as is under consideration here. Rather, the Court was concerned with the duty of care owed in respective circumstances, in the one case, that of an architect in Voli v Ingelwood Shire Council and in the other, of a "professional builder" in Bryan v Maloney. In Bryan v Maloney, the builder was carrying on business as a builder and in that sense was identified in the judgment as being "a professional builder". 138 There are other authorities which in my opinion, provide greater assistance in the determination of this question. As a number of the authorities to which I propose to refer themselves rely upon the Canadian decision of Chemetics International Ltd v Commercial Union Assurance Company of Canada (1984) 11 DLR (4th) 754 it is convenient to commence with a consideration of that case. 139 Chemetics International Ltd (Chemetics) was insured under a liability policy which contained an exclusion clause in terms: "This policy shall not cover the liability … for damage to or destruction of, or loss of use of property caused directly or indirectly by … error or omissions in the rendering of professional services." 140 Chemetics had a contract with a customer for the engineering, design and supply of equipment and material for a pulp mill. The contract also provided (cl 1.3) that Chemetics would provide: "… the onsite services of … a competent supervisory operating engineer at such time as the Plant is substantially completed, for the training of the owners/operators in the operation of the Plant and for supervising the performance test run for the acceptance of the Plant by the owner ..." 141 It was accepted, for the purposes of the case, that Chemetics had failed to give full and adequate operating instructions, either orally to the customer's operating personnel, or in writing in the operating manual, and in particular, had failed to give a warning with respect to the particular risk that caused the damage. That risk was that overfilling of the tower could cause damage to or a rupture of the tower's conical roof. It was held that the services which Chemetics was required to provide by way of a competent supervisory operating engineer, as stated, was the omission which was the foundation of the liability imposed on Chemetics in the claim brought by the customer. The question which arose, therefore, was whether those services were "professional services" within the meaning of the exclusion. 142 The employee who had supervised the writing of the operational manual and who was responsible for the provision of the services called for in the clause was a qualified professional engineer. The Court of Appeal of British Columbia held that the failure to give proper instructions to the customer in the operation of the equipment was not an error or omission in the rendering of professional services within the meaning of the exclusion clause. The fact that the employee charged with the supervisory task was a professional engineer was also not determinative. The Court said at [11]: "… the insurer has not shown that the training of operators called for by cl 1.3 was the provision of professional services. In the words of the contract, it was the provision of services of a competent supervisory operating engineer. That requirement could have been satisfied by providing a person experienced in the operation of plants and knowledgeable as to the operating characteristics of this particular plant. That person would more appropriately be described as a technician. No doubt he would have to be a professional as distinguished from an amateur. But that is not the meaning of 'professional' as used in the exclusion. In that context, it is intended to refer to the kind of services, such as design of the plant, which could normally be expected to be provided only by a professional engineer." 143 At [12] the Court said that the service that Chemetics had provided was as a vendor of the equipment. The Court said that it was irrelevant that, to provide an adequate manual, Chemetics would no doubt have had to access professional services. The Court concluded that: "… the provision of operating instructions or a warning as to a risk of overfilling the tower would not be the provision of professional services." 144 In Fitzpatrick v Robert Norman Job and Wendy Barbara Job t/as Jobs Engineering & Ors [2007] WASCA 63, the Court was concerned with a public liability and products liability insurance policy. The policy excluded indemnity for liability "arising out of a breach of duty owed in a professional capacity". After referring to Chemetics International, Buss JA (Steytler P agreeing) observed, at [264], that: "… the context in which the term 'professional' is used in an insurance policy may be significant in determining its meaning." 145 Buss JA pointed out, the term "professional" in a professional indemnity policy did not necessarily bear an identical meaning in an exclusion clause of public or products liability: see Toomey v Scolaro's Concrete Constructions Pty Ltd (in liq) No 5 (2002) 12 ANZ Ins Cas 61-519 per Eames J at [66]-[69]: [2002] VSC 48. See also Suncorp Metway Insurance Ltd v Landridge Pty Ltd (t/as LJ Hooker Hampton Park) [2005] VSCA 223, where Nettle JA at [27] observed that: "… the criterion of professionalism in one context is virtually bound to be different to that in another, and hence there is little utility in attempts at transposition." 146 Mr Fitzpatrick had been injured when his foot became trapped in a wood processing machine which had been designed and manufactured by Jobs Engineering. Jobs Engineering was not the direct supplier to Mr Fitzpatrick. Rather, it had sold the machine through a third party. At the time that it sold the machine, Jobs Engineering instructed the third party in its safe use. The third party, in turn, instructed Mr Fitzpatrick in the safe use of the machine. Buss JA observed that Jobs Engineering's core business comprised the design, manufacture and supply of machinery and equipment such as the machine purchased by Mr Fitzpatrick. His Honour pointed out that under the products liability insurance policy, Jobs Engineering was insured in respect of sums which it: "… shall become legally liable to pay for compensation in respect of bodily injury or damage to property as a result of an occurrence … caused by 'the nature, condition, or quality' of any goods or products sold or supplied by it." 147 Buss JA stated that it was important, when construing the exclusion clause, that the intended cover under the indemnity provisions of the policy were not inappropriately circumscribed. His Honour concluded that the exclusion of professional indemnity cover, in the context of a product's liability policy, was limited to claims made against Jobs Engineering arising out of breaches of duty owed to persons who had retained it to perform work or services in the course of its business. His Honour said at [270]: "The exclusion does not extend to breaches of duty owed to third parties who may suffer foreseeable loss or damage as a result of negligent acts or omissions by Jobs Engineering in designing, manufacturing or supplying machinery and equipment, including the negligent failure to give advice of the kind which it should have given to V & D Ridolfo. My construction of exclusion 10(a) is consistent with the evident object of the products liability cover, namely, to provide indemnity, of real and not negligible value, in respect of claims for personal injury and property damage caused by defective goods and property designed and manufactured by Jobs Engineering, and put into circulation within Australia." 148 In my opinion, the approach taken by Buss JA in Fitzpatrick should be applied here. The exclusion clause considered here is sufficiently identical to that in Fitzpatrick and the type of policy involved was relevantly similar, in the sense that it was to provide specific cover to the respondent for claims for sums which it became legally liable to pay for bodily injury. The construction given to the exclusion clause by the Western Australian Court of Appeal enables the policy to provide the indemnity which the parties undoubtedly intended the policy to have. To adopt a different construction would have significantly undermined the commercial purpose of the policy. Insurance policies are rarely confined in their terms by state boundaries and it is important that the clauses which are relevantly the same should be given the same construction. Finally, this Court should apply the decisions of a court of equal status unless the Court considers that the decision is wrong and should not be followed: see Australian Securities Commission v Marlborough Gold Mines Limited (1993) 177 CLR 485 at 492; [1993] HCA 15; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 81 ALJR 1107; [2007] HCA 22 at [135]. 149 The policy was a public liability policy. It excluded claims arising out of a breach of duty owed in a professional capacity by the respondent. The respondent did not owe a professional duty to Mr Barlow. Rather, it owed him a duty of care as a third party in respect of whom it was reasonably foreseeable might suffer damage as a result of its negligence in designing and supplying plant and equipment to Delta and its predecessors and in the manner in which it carried out maintenance on that plant and equipment. 150 Accordingly, I am of the opinion that the exclusion does not operate in this case so as to disentitle the respondent to indemnity under the policy.

Third issue on the appeal: did the bodily injury suffered by Mr Barlow occur during the period of insurance? 151 The appellant is only liable under the policy in respect of such sums that the respondent became "legally liable to pay for compensation in respect of bodily injury … occurring during the Period of Insurance". 152 The trial judge found at [13] that the "bodily injury" suffered by Mr Barlow "occurred during each of the several periods of insurance effected from 1 October 1967 to 1 October 1974". That finding was based upon the medical evidence before his Honour and the reasoning of Derrington J in Martindale v Burrows [1997] 1 Qd R 243 at 245-246 and Nicholson J in GRE Insurance Ltd v Bristile Ltd (1991) 5 WAR 440. 153 As to the medical evidence, his Honour referred to the evidence of Professor Martin Tattersall, Dr James Leigh, Professor Douglas Henderson and Dr Michael Burns. His Honour said that certain conclusions could be drawn from that evidence. Whilst acknowledging that the precise mechanism by which mesothelioma is caused remains unknown on current medical knowledge, his Honour observed that it is known that it commences with the inhalation of asbestos fibres which lodge in the parenchyma of the lung, from where some fibres migrate to the surface of the pleura. Genetic damage is caused around the site of the lodgement in the pleura, which, shortly before the presentation of the symptoms of mesothelioma, results in the uncontrolled proliferation of mutant cells, which constitutes the disease itself. His Honour concluded at [8] that: "[i]n every case the mesothelioma develops as a result of the challenge to the immune system created by the total fibre burden"

and referred at [9] to Dr Burns' evidence that: "in medical terms penetration of the lung by asbestos fibres constitutes injury." 154 Senior counsel for the appellant conceded that the fibres responsible for Mr Barlow's mesothelioma had been inhaled by him during the period of risk. At trial, the appellant had submitted, however, that "injury" for the purposes of the indemnity provision of the policy only occurred when the genetic changes in the pleural cells became irreversible. That occurs much later, typically 20-30 years after the penetration of the lung by the asbestos fibre. Curtis J observed that a submission in those terms had been rejected in Martindale v Burrows. In Martindale v Burrows, Derrington J observed that mesothelioma is but one of a number of pathologies which may arise as a result of exposure to asbestos fibres, but which is quite distinct from other pathologies. Derrington J, at 245-246, then said, in the passage relied upon by Curtis J at [10]: "… although the harm in this case was in fact caused from that exposure, not everyone would have suffered the same result. It is irrelevant that in some cases there is no progress to the malignant transformation. It is relevant that in those cases where it does so, its course can be traced back through the harm that has led to it by a natural progression in that case. The tendency to refer to hypothetical alternatives that may possibly have occurred with someone else can lead into error if it is used for more than to mark the unpredictability of the plaintiff's condition in its early stages …

Here, there was an ongoing established injury, imperceptible in its beginning and incremental nature, that has led to a cumulative result which [is] perceptible and identifiable … The harm done to him in causing the changes to his body that would lead to such a result amounted to an injury. This cannot be insubstantial if it is part of a total process with such a catastrophic result, and it would be artificial to analyse the totality by reference to its discrete parts.

The appearance [of mesothelioma] establishes that the earlier morbid changes were indeed so serious as to be productive of mesothelioma at the later stage and were not merely potentially so." 155 In GRE Insurance Ltd v Bristile Ltd Nicholson J also considered that the "injury" occurred when the fibres entered the plaintiff's body. Curtis J also relied upon the approach taken by Barwick CJ in Favelle Mort Limited v Murray (1976) 133 CLR 580 at 587; [1976] HCA 13, that "an external excitement initiating a morbid condition of the body would … be an injury". 156 On the appeal, the appellant accepted that the "insult" to the body caused by the lodgement and migration of asbestos fibres would amount to an "injury". However, it submitted that what was in issue in this case was when the injury for which the respondent was held liable to pay compensation occurred. The appellant contends that, in finding, at [13] that Mr Barlow suffered "bodily injury" during each of the relevant periods of insurance, his Honour failed to apply the decision of this Court in Orica Ltd & Anor v CGU Insurance Ltd (2003) 59 NSWLR 14; [2003] NSWCA 331. 157 Curtis J considered that the decision in Orica Ltd v CGU Insurance was irrelevant to his determination because of the differences in the terms of the policy in Orica Ltd as compared to the terms of the policy in this case. In particular, the policy in Orica Ltd fixed upon the date of liability, whereas in the policy here, the indemnity applied should the insured become legally liable to pay compensation for an injury that occurred during the period of cover provided by the policy. His Honour concluded at judgment [16] that upon a proper construction of the subject policy, the appellant was liable to indemnify the respondent: "… in respect of a liability which is in respect of bodily injury occurring during the period of insurance but which liability need not itself occur during that time ". (Emphasis added) 158 The appellant contends that his Honour erred in making this finding, in that he departed from the contractual description of "the injury" which, under the policy had to be 'an injury' in respect of which there was a liability to pay compensation. The appellant submitted, therefore, that under the terms of the policy it was necessary to identify the date of occurrence of the injury. The date of injury, it was submitted, as established in Orica Ltd was the date when the actual damage occurred, that is, when the symptoms of mesothelioma exhibited themselves. This was because the nature of the liability which the respondent became legally liable to pay was a cause of action sounding in negligence where damage is the gist of the action. There is thus one and one only time at which the liability is incurred namely, when the symptoms of mesothelioma become apparent. 159 The appellant submitted that his Honour fell into error in distinguishing between the occurrence of bodily injury and the occurrence of liability. The expression "occurrence of liability" was not the language of the policy. The policy spoke in terms of the respondent "becoming legally liable" to pay. The respondent had not become legally liable to pay any moneys to Mr Barlow during the periods of insurance in respect of the undoubted multiple insults by asbestos fibres lodged in Mr Barlow's pleura. That legal liability did not arise until Mr Barlow's symptoms had emerged. The appellant submitted that its construction of the policy was supported by this Court's decision in Orica Ltd and, in particular, the judgment of Spigelman CJ. 160 In Orica Ltd v CGU Insurance the Court was concerned with the question of whether certain policies of insurance responded to an employer's claim for indemnity arising out of its liability to a worker who experienced the first symptoms of mesothelioma approximately 40 years after his exposure to asbestos in 1959-1961. The employer (Orica) held successive one year policies of insurance during those years. The terms of the relevant policy were: "If, between … and … the Employer shall be liable to pay compensation under the Act to or in respect of any person who is or is deemed by the Act to be a worker of such Employer or to pay any … amount not exceeding twenty thousand pounds in respect of his liability independently of the Act for any injury to any … person … Then, and in every such case the Insurer will indemnify the Employer against all such sums for which the Employer shall be so liable."

The policy then provided: "[T]he Insurer shall be … directly liable to any worker … to pay the … amount for which the Employer is liable and in respect of which the Employer is indemnified under this Policy". 161 The policy was in the form required by the Workers Compensation Act 1926 (NSW) (the Workers Compensation Act) and Regulations. Spigelman CJ at [6] considered that the word "injury" in the policy had to be given its statutory definition as found in s 6(1) of the Workers Compensation Act. "Injury" was defined to mean: "… personal injury arising out of or in the course of employment, and includes -

(a) a disease which is contracted by the worker in the course of his employment whether at or away from his place of employment and to which the employment was a contributing factor; and (b) the aggravation, acceleration, exacerbation or deterioration of any disease, where the employment was a contributing factor to such aggravation, acceleration, exacerbation, or deterioration." 162 The issue in the case related to the insurer's obligation to indemnify the employer against sums the employer was liable to pay with respect to its liability at common law. In that context, the Chief Justice at [32] said: "Damage is the gist of the action in negligence. The 'injury' occasioned at the time of penetration of the lung by a fibre, if it be injury within the meaning of the policy at all, which I doubt, is so negligible in and of itself, as distinct from its potential, that it does not constitute damage that is compensable at common law." 163 His Honour then stated, at [57] in a passage relied upon by the appellant here: "Only one cause of action will arise at common law against the employer for the development of mesothelioma, despite there having been multiple 'injuries' within the meaning of the policy. There will be only one occasion on which the employer will become 'liable to pay.'" 164 In my opinion, these statements do not provide any particular assistance to the appellant's argument. The policy under consideration in Orica Ltd v CGU Insurance was in different terms to the policy here. In particular, the policy in Orica Ltd required, as a condition of the indemnity provided under the policy, that the liability should occur within the period of the cover provided by the policy. Here, the policy required that the injury occur during the period of insurance. 165 There was a second aspect of the policy in Orica Ltd v CGU Insurance which was critical to the Chief Justice's consideration of the issues in that case. The policy provided for an indemnity where an employer became liable during the period of insurance to pay compensation under the Workers Compensation Act, or to pay common law damages. A particular difficulty which confronted the Court in construing that policy was the meaning of "liability" as it applied to the two separate types of compensation. As Spigelman CJ pointed out at [21] the authorities establish that an employer's liability under the Workers Compensation Act accrues when injury occurs. The liability did not arise when consequential incapacity arose. That was when compensation fell to be paid. As his Honour said, "[t]he statutory policy responds at the time of injury, even if incapacity arises later". This was, however, to be contrasted with the circumstance where there was to be a disease of gradual onset, where liability arose at the time of incapacity: see [22]. 166 Spigelman CJ's statements at [32] and [57] which are reproduced above relate to the question when liability accrues in respect of a common law claim, being the second type of liability for which the policy provided indemnity. In seeking to determine how the policy operated in circumstances of such differential jurisprudence, the Chief Justice looked at those cases which had specifically dealt with mesothelioma. Thus, at [24], the Chief Justice noted that there was authority for the proposition that injury occurs upon inhalation of fibres. He observed that the reasoning in Favelle Mort Limited v Murray was to the effect that the entry of a virus into the body was itself an injury within the meaning of the Workers Compensation Act and thus within the terms of the policy in so far as the policy provided indemnity for liability for a workers compensation claim. 167 Spigelman CJ further observed that the same reasoning had been applied in GRE Insurance in relation to the inhalation of asbestos fibres, where it was held that the inhalation of those fibres was the "injury" and not the subsequent commencement of mesothelioma. His Honour noted, however, at [25], that older authorities suggest that injury constituted by penetration of the lungs by fibres was not sufficiently material to constitute "damage" in determining whether a cause of action in negligence was complete at that time, although it was not necessary to decide that question. Rather, the matter in issue was when an "injury" had occurred within the meaning of the policy, not when damage had occurred for the purposes of the tort of negligence. The Chief Justice accepted, at [26], on the authority of American Home Assurance v Saunders (1987) 11 NSWLR 363 at 378 and 384 (cf 372) and Martindale v Burrows at 245 that it "may be" that injury occurred at the time of inhalation of the asbestos fibre and its penetration of the lungs, even if the disease of mesothelioma itself commenced at a later date, when the malignancy develops on the lung. 168 At [28], Spigelman CJ accepted that there may be an "injury" within the meaning of the policy at the time of inhalation of the fibres. However, he said that it did not follow that at that time, "an employer is 'liable to pay an amount in respect of his liability' at common law 'for that injury'", being the specification for indemnity under the policy. The Chief Justice observed that in the policy that was under consideration in that case, "the relevant insured peril is 'liability' rather than the occurrence of the injury". That comment, in itself, starkly throws up the distinction between Orica Ltd and the policy in this case. 169 Spigelman CJ, at [29], noted that the authorities which determine that a liability to pay compensation under the Workers Compensation Act arises even before incapacity do not as such turn on the question as to when injury occurs. Rather, they turn on the fact that the statute creates a liability or a right at the time of injury. In that sense, those cases involve findings based upon questions of statutory construction. The Chief Justice demonstrated this point further at [31] when referring to the caselaw. It is not necessary to set out those references. It is sufficient to note that in the cases referred to, the rights of the worker to be paid compensation and the relevant liability of the employer to pay compensation, arose because as a matter of statutory construction, a vested right to compensation arose at the time of injury, or, to use another phrase that had emerged from the caselaw, there was, as a result of the statutory provision "an accrued right", or "an accrued liability" upon the occurrence of injury, notwithstanding that there was at that stage no incapacity in respect of which payment had to be made. 170 It was against that background that Spigelman CJ made the comments that he did at [32] in the passage set out above. However, the Chief Justice's comment was not confined to the passage upon which the appellant relies. Rather, the full text of that paragraph was as follows: "If the words of the policy - 'liable to pay' - mean the same with respect to the two circumstances to which they apply - that is, 'compensation under the Act' and 'in respect of his liability independently of the Act' - then the policy responds in the latter case only if the employer's liability has, within the relevant period, "vested" or "accrued". In my opinion, that does not occur earlier than the time of onset of mesothelioma. Damage is the gist of the action in negligence. The 'injury' occasioned at the time of penetration of the lung by a fibre, if it be injury within the meaning of the policy at all, which I doubt, is so negligible in and of itself, as distinct from its potential, that it does not constitute damage that is compensable at common law." 171 It followed, on Spigelman CJ's reasoning, that the policy in Orica Ltd did not respond during its currency. That disposed of the appeal on his Honour's reasoning. However, as two further issues had been argued on the appeal, his Honour gave consideration to them, on the assumption that his view that the policy did not respond was not correct. 172 One of those issues was whether, if the policy did respond, Orica was entitled to recover the maximum amount of indemnity under the policy in each of the three years in which the worker had been exposed to asbestos. In considering that issue, the Chief Justice noted the agreement of the parties to proceed on the basis that the relevant facts relating to the aetiology of mesothelioma was set out in the judgment of Fitzgerald AJA in EM Baldwin & Son Pty Limited v Plane (1998) 17 NSWCCR 434 at 477. The Chief Justice thus proceeded on the assumption that there had been penetration of asbestos fibres of the worker's lung in each of the three years of the policy and that the cumulative effect of that penetration was that the worker had contracted mesothelioma. 173 Again, Spigelman CJ had regard to the caselaw as to when the employer's liability arose. At [54], the Chief Justice observed that the relevant line of authority had concluded that in the case of incapacity which resulted from a number of injuries sustained during the course of employment with the same employer, the liability to pay compensation for incapacity under the Workers Compensation Act was "properly to be seen as flowing from the last injury and as having arisen at the time of that injury": see National & General Insurance Company Limited v South British Insurance Company Limited & Ors (1982) 149 CLR 327 per Deane J at 335; [1982] HCA 62. Spigelman CJ then referred to the cases in which that reasoning had been applied and observed that, for the respective purposes to which those authorities related, only one "injury" had the requisite consequence of attracting liability to pay compensation. 174 The relevance of the consideration of those matters for Spigelman CJ's purposes was to determine the question whether, in the circumstances before him, where there had been multiple insults by the ingestion of asbestos during three periods of insurance, each policy responded. In considering that question, it is important to keep in mind that the Chief Justice only had regard to this question should he have been in error in his primary finding to which I have referred at [169] above. With that in mind, the Chief Justice pointed out at [55] that each of the cases turned on the particular section of the statute in issue and that a similar result was appropriate when considering the question of the liability for the purposes of the insurance policy under consideration. He said: "The 'liability' arises only once. My conclusion fits no more elegantly into the words of the policy than the cases to which I have referred fit into the various statutory contexts where the result has been as I have indicated. Nevertheless, this is, in my opinion, a proper construction of the policy." 175 Spigelman CJ observed that the employer became "liable to pay" upon a single penetration with respect to the whole of his liability at common law. Subsequent exposures did not change an employer's liability in the sense of the liability to pay, although the subsequent exposures may have made it more likely for the liability at common law to come home as a result of the cumulative effect of the exposures. However, as the Chief Justice pointed out, the state of being "liable" is not affected by other exposures. It was at that point that his Honour made the observation, at [57], upon which the appellant relies and which is set out above at [161]. It is not necessary to repeat it. It suffices to say that the Chief Justice had under consideration an entirely different issue to that which arises here. 176 That, indeed, is pointed out by Mason P. Whilst agreeing with Santow JA that the inhalation of asbestos fibres was itself an injury, Mason P pointed out that the policies under consideration required the employer's liability to pay compensation or to pay common law damages "for the injury to accrue" during the term of the policy. His Honour agreed with Spigelman CJ that the word "liable" in the policy had to have "a common core of meaning" when appearing in a single phrase, such as "liable to pay", as appeared in the policy under consideration. Mason P considered that "liable" in the context of the policy could never mean something falling short of an accrued legal liability. However, as his Honour pointed out, when that liability accrued was different for the purposes of compensation under the Workers Compensation Act and damages at common law. Mason P said at [76]: "As the Chief Justice points out, a long line of cases establish that the statutory policy responds (qua compensation) at the time of injury, even if future events have to occur before the worker's enjoyment of various statutory entitlements that are compendiously described as compensation 'fructify'." 177 Although this exegesis has been lengthy, it has been necessary to examine the context in which the Court made its comments in Orica Ltd. As is apparent from an examination of the judgments of both the Chief Justice and the President, the comments made in respect of the time at which a cause of action accrues for the purposes of determining liability was a consideration that had to be undertaken in the context of a policy which indemnified for liability incurring in the period of the policy. It becomes, therefore, almost trite to point out that the policy in this case which provides indemnity for sums that the respondent "shall become legally liable to pay for compensation in respect of bodily injury occurring during the period of insurance" is a policy which responds in respect of a bodily injury which occurs during the period of insurance and in respect of which the insured shall become legally liable to pay compensation. In that regard, the judgments in Orica Ltd, including that of Santow JA, to which I have made only passing reference, were to the same effect, namely that, in the case of mesothelioma, it is accepted that 'injury' occurred at the time of inhalation and penetration of asbestos fibre. 178 It follows, in my opinion, that the respondent's submission that the decision in Orica Ltd is irrelevant to the determination of the cover provided by this policy is correct. That being so, it becomes unnecessary to consider the specific medical evidence upon which the appellant relied in support of its argument in respect of this particular issue. However, the medical evidence is relevant to the alternative argument raised by the appellant and which is the fourth issue on the appeal, that it was the first policy of insurance which responded. This is important because the cover provided by the insurance increased from $200,000 in the first relevant period of insurance to $500,000 in the last year. The trial judge dealt with this aspect of the claim at [43]-[47].

Fourth Issue on the appeal: Which policy responded to the claim - the first or last? 179 The appellant had argued, relying upon the dicta of Spigelman CJ in Orica Ltd at [56] and [57] to which I have just referred, that if it was liable to indemnify the respondent, it was only liable in respect of one policy and that was the policy on foot when Mr Barlow first suffered injury upon inhaling asbestos in 1968. 180 Curtis J had distinguished this case from Orica Ltd on the basis that in that case the parties had proceeded on an agreed basis as to the aetiology of mesothelioma. He considered that having regard to the additional medical evidence in this case, being the evidence of Professor Tattersall given in the matter of Hoyle DDT 71 of 1994, Mr Barlow's mesothelioma resulted from the totality of his asbestos inhalation. His Honour considered that the effect of Professor Tattersall's evidence was that it was not possible to conclude upon the probabilities that he would have developed mesothelioma without the impact of the ingestion of asbestos fibres in the final year of exposure. His Honour concluded, therefore, that it was not possible to demonstrate that the respondent would have been liable "in respect of bodily injury occurring during" any previous year of cover. On that basis, his Honour considered that the only probability was that the mesothelioma and, therefore, the respondent's liability, was caused by the final year of exposure. The indemnity under the policy in that year was $500,000. 181 In my opinion, the appellant's submission must be upheld. There was no suggestion in this case that the policies in each of the years of cover responded so as to provide indemnity up to the amount of the policy in each year. It is in this regard that I consider that the conclusion at which I have arrived in respect of the last issue determines the question as to which policy responded. The liability that was covered by the policy was in respect of sums for which the respondent "shall become liable". That was a liability that arose once only. On the construction which I have given to this policy, that liability arose upon the first exposure, because that was the injury in respect of which the respondent came under a legal liability to pay compensation and to which the policy responded. It is apparent from the received medical knowledge in this area, by which I mean "received" in the authorities, that the greater the exposure, the more likely it is that the risk will come home: see Spigelman CJ at [56] of Orica Ltd. But that is not the question which arises under the policy. 182 In any event, I am of the opinion that his Honour's conclusion that Mr Barlow's mesothelioma was caused by all of his exposure does not accord with Professor Tattersall's evidence. In order to understand the evidence, it is necessary to set it out in some detail, including the passage upon which the trial judge relied at [46] of his judgment. Professor Tattersall said that the "exposure [to asbestos] gives rise to the presence of retained particles in the lung and it's that which causes the tumour to develop later". Professor Tattersall was then questioned about exposure over, for example, a 10 year period. Professor Tattersall said the probability of developing mesothelioma was related "to a retained dose". He observed that the "dose retained will be highest in year 10 of that exposure". He said that if there was equal exposure in each of the 10 years then: "… since there's a relationship between the amount retained in the lung and the risk, there will be a greater risk in the 10th year than in the first year." 183 Professor Tattersall explained this further in the passage upon which the trial judge relied. He said: "What I'm saying is that there is a relationship between the lung quantity of fibre and the risk of mesothelioma being diagnosed and so in answer to your question 'Was the first year of a 10 year exposure as likely as the 10th year of a 10 year exposure to cause it' I said 'No, the 10th year of a 10 year exposure is associated with a greater quantity being retained in the lung and that correlates with risk."

The evidence continued as follows: "MR McCLINTOCK Q. In fact, it follows, does it not, from the evidence in relation to the period it takes to develop mesothelioma that the length of time the fibre is in the lung is also a significant factor. A. Absolutely.

Q. It follows, does it not, that is another way of saying that the longer the fibre is there, the higher the risk of developing the disease. A. There are a number of data looking at that relationship, including data referred to in Professor Berry's report which I have received and have read.

Q. But it does follow, does it not, that the longer the fibres are there, the more likely they are to prompt development of mesothelioma. A. The longer that fibre is likely to cause it, not the fibres .

Q. When you say 'that fibre', you mean an individual fibre. A. I do.

Q. It follows, does it not, from the evidence you have been giving, that taking our man with the 10 year exposure again, that the fibres inhaled in the first year and retained are more likely to prompt the disease than the fibres inhaled and retained in the last year for the reason they have been there longer. A. If the total content of fibre retained in the lung is identical, that is correct. On the other hand, since in the 10th year you're getting an increased content, the risk goes up with increased content. The individual risk related to that fibre depends upon how long it's been there and the first fibre will have a higher risk per unit time than the last fibre.

HIS HONOUR Q. But doctor, as I understand it then, the first fibre has a higher potentiality because of the lapse of time, but the last fibre has a greater potentiality because of its incremental effect upon an already high fibre burden. A. Because there are more fibres.

Q. So the last fibre also has an increased potentiality because of everything that's gone before. A. That's the conclusion I would draw from the relationship between cumulative retention and risk.

MR McCLINTOCK Q. If I modify the 10 year example, Professor Tattersall, so that there was a heavy exposure in the first year, decreasing down over the 10 years to a very low exposure in the last year. Again, looking at the probabilities, it is going to be the fibres inhaled in the first year of exposure that are going to be likely to prompt mesothelioma in an individual. A. I believe in a population that that would be true. In an individual, I have no such knowledge ." (Emphases added) 184 Professor Tattersall also said the fact that an asbestos fibre lodged in the pleura did not automatically mean that the person would develop mesothelioma. Indeed, he said the probability from epidemiological reports was that from two per cent to perhaps ten per cent of individuals exposed to asbestos more than 30 years previously developed mesothelioma. He said that he had no way of knowing how to identify the two to ten per cent who would contract mesothelioma from the 90 to 98 per cent who did not. 185 However, the question whether it could be said whether Mr Barlow was one of the persons who would develop mesothelioma is not at issue in this case. He fell within that class of persons who did develop mesothelioma. The question for determination was, on the probabilities, which exposure was likely to have caused the mesothelioma which Mr Barlow in fact contracted. As I have said, I consider this question has been determined by my finding that injury occurred at the time of initial exposure. Consistently with that, having regard to the dicta in Orica to which I have referred and having regard to Professor Tattersall's evidence, the likelihood is that it was the initial exposure which caused the mesothelioma in circumstances where in this case, the initial exposure was significantly heavier than the later exposure.

Conclusion and costs 186 I have found that, except in relation to the competent employee issue and the last issue, the appellant has not succeeded on the issues raised by the grounds of appeal. It follows that the appeal should be allowed in part, but be otherwise dismissed. The issue relating to competent employees should be remitted to the Dust Diseases Tribunal for determination. 187 That leaves the question of costs. On my conclusions, the appellant has succeeded on two issues on the appeal, so that the appeal should be allowed in part. The usual rule is that costs follows the event, but the Court may make some other order: see Uniform Civil Procedure Rules 2005, r 42.1. The matters on which the appellant succeeded took up a much lesser part of the written submissions and the hearing time than did the matters upon which it failed and, whilst important in themselves, were subsidiary parts of the appeal in the way it was conducted. Indeed, senior counsel for the appellant submitted that the main point on the appeal was the first and it was to that point that the significant portion of the appeal was devoted. 188 Having said that, the matters upon which it succeeded go to the heart of the trial judge's determination, both on liability and quantum. If the appellant is successful on the remitted matter, it will have succeeded in resisting the respondent's indemnity claim. If it is not successful, it will nonetheless have established that its liability is $200,000, not $500,000, as found by the trial judge. Nonetheless, the respondent has been put to significant costs in resisting, successfully, most of the issues raised by the appellant on the appeal. 189 In those circumstances, I consider that this is a case where, unusually, the appellant, although successful on the appeal, should not have its costs. I propose, therefore, that each party pay its own costs of the appeal. 190 The matters to which I have adverted at [188] are relevant to the costs in the court below. If the appellant is successful on the remitted issue, it will not only succeed on that hearing, it should have succeeded in the initial indemnity hearing. For that reason, I consider that the costs at first instance should be set aside and abide the decision of the trial judge on the remitted hearing. 191 Accordingly I propose the following orders:

2. Set aside the judgment and orders made by Curtis J;

3. Order that the matter be remitted to the Dust Diseases Tribunal of New South Wales for determination of the question whether the respondent had complied with its obligation under Condition 4 of the Policy of Insurance to " exercise reasonable care that only competent employees are employed ";

4. Order that each party pay its own costs of the appeal;

5. Costs of the hearing before Curtis J to abide the decision of the trial judge on the remitted hearing. 192 Campbell JA: I agree with Beazley JA. 193 Harrison J: I agree with Beazley JA. **********

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