Vero Insurance Ltd v Australian Prestressing Services Pty Ltd

The application of the dewatering exclusion 38This provision excludes from the cover provided under s 1 "costs associated with the installation and operation of any dewatering equipment or any other costs of dewatering operations". Vero submits that the ordinary and literal meaning of "dewatering" is "to remove water from" a place or thing, and that the word should be given that meaning when used in cl 5 of the endorsement. It argues that the clause has two parts and that its application should be considered by reference to each part. The first excludes costs associated with the "installation and operation of any dewatering equipment". The expression "dewatering equipment" describes any equipment or implement capable of being used to remove water from a place or substance. Suction pumps and siphons answer that description and accordingly are "dewatering equipment" as that expression is used in the first part of the clause. The pumps and siphons do not cease to answer that description if they are being used to lower the level of water in a place as distinct from being used to remove it so as to leave that place, as far as practicable, free of water. Nor do they cease to answer that description if they are being used to move water from one place to another, although not for the purpose of leaving the first place free of water. Vero submits that this is so because the description "dewatering equipment" is not concerned with the purpose for which the equipment is being installed or operated. 39In relation to the second part of the clause, Vero submits that the expression "dewatering operations" describes the activity of moving water from one place to another. It is not concerned with the purpose for which that activity is undertaken. Accordingly, it does not matter that its purpose is not to leave the place from which the water is moved free of water. 40Before considering these arguments and the construction of the exclusion clause, it is necessary to note some relevant principles. The language of a particular provision in a contract of insurance must be construed having regard to its other terms, the commercial circumstances which it addresses and the objects which the parties can be presumed to have intended to secure by making their contract: McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; 203 CLR 579 at [22]; Wilkie v Gordian Runoff Ltd [2005] HCA 17; 221 CLR 522 at [15]. Words used in a contract which have an ordinary or literal meaning will usually be given that meaning unless consideration of the text and context provide a principled basis for adopting some other meaning. For example, words will not be given their ordinary or literal meaning if they have another specialised meaning and, by reference to the text and admissible evidence of surrounding circumstances, reasonable persons in the position of the parties would be presumed to have intended that the words have that specialised meaning: Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; 149 CLR 337 at 350-352; Holt & Co v Collyer (1881) 16 Ch D 718 at 720. 41As has already been noted, when addressing the construction of this exclusion, the primary judge had regard to the terms of the Works Contract and evidence of lay and expert witnesses as to the meaning of "dewatering". Vero contends that her Honour erred in admitting this evidence because there was no ambiguity or uncertainty about the meaning of that word and because, in relation to the Works Contract, its terms, as distinct from its existence, were not known to both parties: Codelfa Construction Pty Ltd at 350-352. The first of these arguments involves the proposition that this Court was wrong to conclude in Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; 76 NSWLR 603 that, on the current state of High Court authority, the identification of ambiguity is not a pre-condition to receiving otherwise admissible evidence of surrounding circumstances. 42It is possible to deal with the issues which arise as to the construction of this exclusion without regard to the terms of the Works Contract or the lay and expert evidence referred to by the primary judge (at [81]-[103]). If it was necessary to have regard to contextual facts known to both parties it would be sufficient to consider the information provided by APS's insurance broker, Marsh Ltd, to Vero at the time the endorsement was negotiated and agreed. That information included a general description of the scope of the works called for under the contract, including those for the reconstruction of Kensington culvert. 43The ordinary and literal meaning of "dewater" is, as appears to be common ground, to remove water from a place or thing. In cl 5 "dewatering" is used in the description of the costs excluded from the cover in s 1. They are costs "associated with the installation and operation of any dewatering equipment" or "any other costs of dewatering operations". The use of "other" in the second part of the clause indicates that the costs described in the first fall within the description "dewatering operations". That has the consequence that the reference to "dewatering equipment" in the first part is to equipment being used for the purpose of dewatering and not merely to equipment capable of being so used. It remains necessary to determine what is meant by "dewatering operations". Adopting the literal meaning of those words, they describe activities the purpose or object of which is to remove water from a place or thing. Reference to the definition of "dewater" in The Oxford English Dictionary, Volume IV, 2nd ed (1989) Clarendon Press, which is relied upon by Vero, confirms that when used in relation to the dewatering of culverts, roadways, canals or tunnels, dewatering refers to the removal of water in the sense of draining or taking it away. 44Whilst accepting that the ordinary meaning of "dewatering" is removing water from a place, Vero says that in the exclusion clause the description is not to be understood as referring to the draining or taking away of all, or practically all, water from a place or thing. Nor is it to be understood as only describing activities involving the removal of water so as to permit construction or other works to proceed or continue. This argument suggests that there is a question as to whether the literal meaning of "dewater" unambiguously captures its meaning as used in the exclusion. There it is used to describe costs excluded from cover under the material damage section of a contract works policy. The subject matter of that cover includes loss or damage to property which is part of the works, including temporary works, constructed under an insured building contract. On the occurrence of such loss or damage the insurer agrees to pay the costs of repairing, replacing or reinstating the lost or damaged property to its condition when new or as it existed immediately prior to the loss or damage. Thus, the costs sought to be excluded may be costs incurred in reinstating or restoring construction works or they may be costs incurred in cleaning up or demolishing or protecting insured property, under one of the extensions to the cover under s 1. In either event, the costs excluded are costs referable to "dewatering operations" as that expression is ordinarily to be understood in the context of construction operations. 45To the extent that the meaning which that expression has in that context is different from its ordinary meaning, evidence was admissible to prove that specialised meaning. The decision of Mocatta J in Scragg v United Kingdom Temperance & General Provident Institution [1976] 2 Lloyd's Rep 227 provides an example of the application of the relevant principles in the context of the interpretation of an insurance policy. The primary judge admitted, for that purpose, evidence of the parties and of qualified engineers as to the ordinary meaning of "dewatering" when used in the context of construction operations. That evidence was that it describes the activity of removing water from an area to enable construction works to commence or continue in that area: Reasons at [84], [87], [92], [93], [98], [102]. 46The information provided by APS's insurance broker to Vero at the time the endorsement was agreed also shows that the words "dewatered" and "dewater" were used to refer to the removal of water from a part of the works site to enable construction to proceed in that area. That information included a general description of the scope of the works called for in the reconstruction of Kensington culvert. Having referred to the construction of the cofferdam, that description noted that once "dewatered, the existing works will be demolished, except the heritage brickwork that will be salvaged and stored". There were two other references to "dewater" or "dewatering" in the documents provided to Vero. They were in the Contractor Programme and in an attachment to a DPWS report which reviewed the drainage system in the Parklands and provided options for the redesign of the stormwater flow control structure. In the Contractor Programme, the timeline for tasks in relation to the remediation of the Busby and Randwick Ponds includes, for February 2003, "Dewater Ponds". In the attached Douglas Partners Report those remediation works are described as including drawing the water level in those ponds down "to the lowest practicable level". In the cost estimates attached to the DPWS report one item of works provided for is described as "stormwater diversion, dewatering and flood protection during construction". 47In its terms, the exclusion only applies to costs incurred or involved in the activity of "dewatering". Adopting the ordinary and literal meaning of "dewater", that activity is the removal of water from a place. The evidence indicated that the expression "dewatering operations" has the same meaning when used in the context of construction operations. The expression was also used in that sense in the information provided to Vero. So understood the activity of "dewatering" is different from, and likely to be more restricted than, the activities of monitoring and maintaining water levels or flood control or water diversion. Whilst these activities may involve the movement or diversion of water from one place to another, they describe a broader range of activities than "dewatering". 48The costs and expenses in issue are not within the dewatering exclusion so construed. Whilst many of those costs were associated with the installation and operation of suction pumps and siphons, that equipment was not being used for the purpose or object of removing water from a particular place so as to enable an activity or work to proceed in that place. That is so notwithstanding that the removal of water from Kensington Pond protected the cofferdam and ultimately permitted work to continue on the Alison Road side of that wall, after the period of excessive rain had passed. Although the removal of water from Kensington Pond allowed water to be released from the Busby and Randwick Ponds so as to reduce their water levels, the activities conducted in and around Kensington Pond were not undertaken for the purpose or object of removing water from either of those ponds, as Vero contends in its written submissions in reply. 49The primary judge was correct to conclude that the dewatering exclusion did not apply.