WSP Structures Pty Ltd v Liberty Mutual Insurance Company t/as Liberty Specialty Markets

Registry: New South Wales

National Practice Area: Commercial and Corporations

Sub-area: Commercial Contracts, Banking, Finance and Insurance

Number of paragraphs: 174

Date of hearing: 15 and 17 March 2023

Counsel for the Applicant: Mr J Neal with Mr A Barnett

Solicitor for the Applicant: Crichton & Co Legal

Counsel for the First Respondent: Mr I Griscti

Solicitor for the First Respondent: Lander & Rogers Lawyers

Counsel for the Second and Third Respondents: Mr D Weinberger with Mr A Jordan

Solicitor for the Second and Third Respondents: McCabes Lawyers

BETWEEN: WSP STRUCTURES PTY LTD Applicant

AND: LIBERTY MUTUAL INSURANCE COMPANY TRADING AS LIBERTY SPECIALTY MARKETS First Respondent

CHUBB INSURANCE AUSTRALIA LIMITED Second Respondent

TOKIO MARINE & NICHIDO FIRE INSURANCE CO LTD (ABN 80 000 438 291) (AFSL 246548) Third Respondent

order made by: COLVIN J DATE OF ORDER: 28 september 2023

1. On or before 4.00 pm AWST on 5 October 2023, the parties do provide to the Court a joint minute of orders (including as to costs) to give effect to these reasons, alternatively competing minutes together with short written submissions of no more than three pages as to why the orders proposed by the party are appropriate. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

COLVIN J: 1 Opal Tower is a residential building in Sydney. In December 2018, it suffered considerable structural damage. Three sets of legal proceedings ensued in the Supreme Court of New South Wales. They were all settled in 2022. One of the parties to their settlement was WSP Structures Pty Ltd. It had been the structural engineer for the project to construct the building. The design and construct contract for the project had been awarded to Icon Co (NSW) Pty Ltd. It was Icon who engaged WSP Structures as structural engineer. It did so by a consultant agreement made in 2015. Icon was also a party to the settlement. 2 WSP Australia Pty Ltd is the holding company for WSP Structures. 3 The overall settlement of the Supreme Court proceedings involved WSP Structures accepting liability to pay an amount to Icon and also to pay a proportion of an amount paid to settle a class action. The first amount was paid by WSP Australia to Icon on 10 June 2022 (WSP Payment). The second amount was paid by WSP's professional indemnity insurers (WSP Indemnity Insurer Payment). 4 The legal costs of conducting the defence of the claims against WSP Structures the subject of the Supreme Court proceedings have been paid by its parent, WSP Australia. 5 WSP Structures has sought indemnity from Liberty Mutual Insurance Company (Liberty) in respect of the WSP Payment and its legal costs in respect of the claims made against it as structural engineer for the project. In addition, on the basis that the limit of indemnity will be exhausted by the claim, WSP also makes claims in respect of the WSP Payment against Chubb Insurance Australia Limited (Chubb) and Tokio Marine & Nichido Fire Insurance Co Ltd (Tokio Marine) on the basis of the excess layers of cover provided by each of them on the same terms as the Liberty policy. 6 WSP Structures seeks various declarations including a declaration that it is covered by the Liberty policy and that Liberty is liable to indemnify WSP in respect of its defence costs and its liability to make the WSP Payment. It also seeks declarations as against Chubb and Tokio Marine on the basis of the excess layers of coverage. It seeks judgment against them in respect of the payment by way of indemnity of the amount of the WSP Payment. 7 The insurance cover provided by Liberty was afforded by an instrument described as a 'Third Party Liability Policy'. It was obtained by Icon Co Nominee Pty Ltd through Chase Underwriting Pty Ltd. The Liberty policy names various entities within the Icon group of companies as the 'Insured'. They include Icon. 8 By the insuring clause for the Liberty policy, the insurer(s) agreed, amongst other things, to 'defend at their expense in the name of and on behalf of the Insured any claim or suit against the Insured to recover compensation in respect of and/or arising out of Occurrences covered hereby' and also to pay, in addition to the Limit of Liability ($20,000,000 any one Occurrence) 'all expenses incurred by or with the permission of Insurers(s) for investigation, negotiation and defence of claims and suits'. 9 An order has been made for the reasonableness of the defence costs as claimed to be determined separately after all other questions have been determined, if required. 10 Broadly speaking, there are four issues to be resolved: (1) Upon the proper construction of the policy terms, is WSP Structures covered for the amounts in respect of which it seeks indemnity, namely the WSP Payment and its legal costs? (2) If WSP Structures is covered, has it already been indemnified in respect of those amounts by its professional indemnity insurer such that it has no loss to claim, or has it elected to claim against those insurers? (3) Is WSP Australia the correct applicant in respect of any claim to reimbursement of the amount of the WSP Payment (because it is the party who paid the WSP Payment)? (4) In circumstances where the WSP Payment and the legal costs have been paid by WSP Australia, has there been a loss suffered by WSP Structures in respect of which it may seek indemnity? 11 The position of the respondents is not the same as to these issues. 12 As to issue (1), Liberty accepts that WSP Structures is covered by the policy terms. Chubb and Tokio Marine take a different position. They maintain that the policy wording under their excess layer policies (which is afforded on the basis of the wording under Liberty's policy) does not cover WSP Structures. 13 As to issue (2), Liberty accepts that the WSP Payment is covered but maintains that there is no liability to meet legal costs because WSP Structures has elected to proceed with a claim for indemnity as to those costs under its own professional indemnity policy. Chubb and Tokio Marine maintain that WSP Structures has been granted indemnity under its own professional indemnity policy and in those circumstances, it is the application of principles as to double insurance that would determine the extent to which the professional indemnity insurer could itself pursue contribution. 14 As to issue (3), Chubb and Tokio Marine claim that as the WSP Payment was paid by WSP Australia it is the proper party to bring any claim in respect of the WSP Payment. By reason that Liberty accepts that the WSP Payment is covered, no such issue arises on the claim against Liberty. 15 As to issue (4), Liberty claims that no recoverable loss as to legal costs exists on the part of WSP Structures because the legal costs have been paid by WSP Australia. Chubb and Tokio Marine make a general submission to the same effect concerning the claim by WSP Structures for indemnity in respect of the WSP Payment. They say that WSP Structures has suffered no economic loss because the payment by WSP Australia has extinguished the full extent of that loss and consequently the extent of the indemnity that must be afforded under the policy.

Issue (1): The proper construction of the Chubb and Tokyo Marine policies 16 The parties advanced their submissions by reference to the terms of the Liberty policy which was in evidence. They did so on the basis that the excess layers of insurance were extended on the same terms as the Liberty policy.

The relevant insurance provisions 17 The Schedule to the Liberty policy identifies the Insured as Icon Co Nominee Pty Ltd and various other named Icon entities and concludes with the following words: and/or subsidiary and/or controlled and/or joint venture companies and/or principals and/or financiers and/or contractors and subcontractors, all for their respective rights, interests, and liabilities. 18 The Schedule describes the 'Insured's Business' as: Principally, all business undertakings and activities of the Insured including, but not limited to builders, engineers, construction contractors, project managers, construction managers, property developers, plant and equipment owners/operators and hirers, property owners and occupiers, lessees and lessors; and all incidental and associated operations, trades, businesses and activities, including the provision of canteen, social, sports, welfare organisation of first aid facilities, fire or ambulance services, relative to the above. 19 The Liberty policy also has a definition provision which states: 'Where appearing in this Policy the following definitions apply'. The definition for 'Insured' is in the following terms: Insured means: 1. the Insured named in the Schedule and/or; 2. joint ventures (incorporated or not) in which the Insured is a co-venturer and is responsible for arranging insurance; and/or 3. principals and/or owners; and/or 4. sub-contractors engaged by any of the above; and/or 5. lender and/or financiers for their respective rights and interests; and/or 6. directors, officers and employees of any of the above but only in respect of the Business and/or Activities of the Insured; and/or 7. manufacturers and suppliers, but only in relation to their manual on-site activities; and/or 8. architects, engineers and other professional consultants, but only in relation to their manual on-site activities and/or Any other company for which the Insured assumes management together with all other parties for whom the Insured is required under contract or any other legally binding agreement to provide insurance protection are also included as an Insured. 20 It is the above provision that was the focus of the submissions although there was also reference to the definition of Insured in the Schedule, particularly whether the reference to 'contractors and subcontractors' in that definition supports the claim by WSP Structures that it is covered by the terms of the Liberty policy.

The positions of the parties 21 WSP Structures accepts that it does not fall within item 8 of the above definition because it did not carry out manual on-site activities. Nevertheless, relying on the terms of item 4 of the definition, it claims to be covered. 22 Chubb and Tokio Marine say that as WSP Structures are engineers they are only covered under item 8 and the concession that the claims are not in relation to their manual on-site activities means that WSP Structures is not covered. They deny that WSP Structures was a subcontractor to Icon within the meaning of the term subcontractor as used in the policy. 23 Liberty admits that WSP Structures is an insured under the Liberty policy because it was a subcontractor engaged by Icon on the project. 24 Chubb and Tokio Marine are not bound in any way by the admission made by Liberty. Contrary to a submission advanced for WSP Structures, the admission by Liberty is not evidence of what a reasonable person in the position of the parties would have understood the Liberty policy to mean. There are many reasons why Liberty may accept the claim by WSP. They may include a view as to its wider interests as an insurer in the market. I draw no conclusion from the fact that Liberty has taken a different position to that of Chubb and Tokio Marine.

The construction issues 25 Two construction issues emerged from the way in which the competing cases were developed. First, is WSP Structures a subcontractor for the purposes of item 4 of the wording of the definition of Insured? If not, then the concession by WSP Structures concerning item 8 would lead to the conclusion that WSP Structures is not covered. If so, then the second issue arises, namely, assuming WSP Structures is a subcontractor, on the basis that it is an engineer is it only covered to the extent of item 8 of the definition of Insured? This raises a question as to whether item 8 prevails in some way over item 4 on the basis that it is expressly directed to engineers. 26 Liberty also advanced oral submissions to the effect that it was a subcontractor as named in the schedule. Therefore, it was covered as a named insurer irrespective of the terms of the definition of insured. Reliance was placed upon reasoning by Peden J in Mie Force Pty Ltd v Allianz Australia Insurance Limited [2022] NSWSC 1606 where her Honour concluded that the inclusion of 'subcontractors' of the insured in the description of the named insured meant that subcontractors with a direct legal relationship with the named insured were covered by the policy, but otherwise subcontractors (and sub-subcontractors) were only covered if they came within the terms of a provision (akin to the definition of Insured in the present case) that referred to coverage for a subcontractor of any tier. 27 The above alternative submission was met by the same reasoning advanced by Chubb and Tokio Marine in relation to the interpretation of the word 'subcontractor' as used in the definition of Insured, namely that WSP Structures was not a subcontractor within the meaning of that term in an insurance policy that referred particularly to engineers (there being no dispute that WSP Structures was an engineering company).

The relevant principles 28 There was no real difference between the parties as to the relevant principles to be applied in construing commercial policies of insurance. They are well established. They were summarised in Chubb Insurance Company of Australia Limited v Robinson [2016] FCAFC 17; (2016) 239 FCR 300 at [98]-[104] (Foster, Robertson and Davies JJ); and, more recently, in Star Entertainment Group Limited v Chubb Insurance Australia Ltd [2022] FCAFC 16 at [8]-[15] (Moshinsky, Derrington and Colvin JJ). Important amongst them is the need to adopt a business-like construction informed by the commercial purpose that is served by the whole of the policy. Further, in the absence of evidence that words are used in some technical sense or have acquired some established meaning amongst the contracting parties (or the market in which the agreement is concluded), words used are to be given their natural and ordinary meaning, that is a meaning of that description that they would be given by a reasonable person in the position of the parties. 29 Whether there is ambiguity sufficient to justify regard to the context in which the instrument was concluded in resolving ambiguity in meaning is 'not to be assessed by reading the words of the contract disembodied and removed from their context': Liberty Mutual Insurance Company Australian Branch trading as Liberty Specialty Markets v Icon Co (NSW) Pty Ltd [2021] FCAFC 126 at [45] (Allsop CJ, Besanko and Middleton JJ). No issue was raised by the parties as to whether it was appropriate to have regard to surrounding circumstances, including the commercial context in which the insurance was obtained. In limited respects, all parties referred to aspects of context to support their contentions. 30 Whilst submitting that there was no need to resort to the contra proferentem principle, WSP Structures relied upon it in the event that any ambiguity could not be resolved by resort to other principles of construction.

Meaning of subcontractor 31 The term subcontractor has a relatively plain meaning when used by lawyers to describe a particular legal relationship. It refers to a party who has been contracted to perform the contractual obligations of another party under a contract that it has made with a third party. 32 Adopting that usage, architects, engineers and other professionals may be subcontracted by the principal contractor (to the extent that they are engaged to perform work that the principal contractor has agreed to perform) or they may be engaged as contractors, suppliers or consultants (to the extent that they are engaged to perform work for the project that the principal contractor has not agreed to perform). Indeed, the same party may be a subcontractor in respect of part of the work and a contractor in respect of some other part. All will depend upon the scope of the work to be undertaken by the principal contractor. 33 However, there are other possibilities. 34 It may be accepted that the term subcontractor may be used in a more general way to refer to any party other than the main contractor who undertakes some aspect of the work that is required as part of a large project irrespective of the party's precise legal relationship with the principal contractor. 35 It may also be accepted that, in the context of a construction project, the term contractor or subcontractor may be used to refer to a party who has been engaged by the main or head contractor to undertake some part of the construction works required to complete the project as distinct from activities which support or facilitate undertaking those works. In a context where there is reason to differentiate between those undertaking the works and those providing materials and equipment or related services to enable those works to be undertaken, the terms contractors or subcontractors may be used to differentiate those parties undertaking the construction works (on the one hand) from suppliers and consultants who are engaged by the main or head contractor to provide materials and equipment or to supply services that are needed in order to undertake the construction works (on the other hand). 36 The issue in the present case concerns the contextual meaning objectively intended by the parties to the insurance policies. 37 Chubb and Tokio Marine relied upon two matters to support their contention that the reference to subcontractor did not include an engineer. First, as has been mentioned, it relied upon what it contended was a distinction between subcontractors and consultants said to be evident from the terminology used in the policy. Second, it claimed that in a construction context, the term subcontractor did not include consultants such as architects and engineers.

Evidence of meaning 38 Chubb and Tokio Marine sought to rely on parts of a report from Mr Carolan, said to be an expert opinion. Mr Carolan was asked to answer the following question: Are architects, engineers and other professional consultants generally regarded as 'subcontractors' (within the natural and ordinary meaning of the word) within the building and construction industry? 39 In doing so he was asked to respond to a report that had been disclosed by WSP Structures as a report that it may rely upon at the hearing. In the result, WSP Structures did not seek to adduce that report. Nevertheless, Chubb and Tokio Marine sought to adduce the parts of the report of Mr Carolan in which he concluded that architects, engineers and other professional consultants are not regarded as subcontractors (within the natural and ordinary meaning of the word). 40 WSP Structures objected to the admission of the report into evidence. It did so on the basis that the opinions expressed were not based upon demonstrated specialist knowledge, did not disclose any reasoning to support the conclusion and the opinions were irrelevant in any event. I upheld the objection and indicated that I would provide my reasons for doing so. My reasons are as follows. 41 It was not disputed that Mr Carolan is an engineer who has considerable experience in the building industry. The relevant part of his report was brief. In substance it did no more than express a view as to what he thought were the ordinary meanings of the words subcontractor and consultant based upon his own experience in the building industry. He did not suggest that the terms had acquired a specialised or technical meaning that was generally observed. He did not seek to describe in any way the circumstances or context in which, in his experience, the terms had been used in the way he described. He made reference to a single resource to support his conclusion being the glossary of terms in the resources section of the Australian Institute of Architects website. He quoted the definitions of architect, consultant and contractor from that website as supporting his opinion. The definitions were as follows: Architect A person who is registered with the relevant Architects Registration Board (or equivalent) in their state or territory Consultant A person who is consulted for paid, expert advice and related services Contractor A builder or other trade who carries out the construction work under a construction contract. A contractor can be a head contractor or a subcontractor 42 There is no indication that these definitions were anything other than definitions adopted by the website to understand the resources provided. Further, the definitions did not engage with the issue at the heart of the present proceedings, namely whether an engineer who is subcontracted to undertake the design work under a design and construct contract is a subcontractor for the purposes of the insurance policy. 43 The opinions as expressed were unfounded, unreasoned and irrelevant. They were no more than an expression of Mr Carolan's own view as to the natural and ordinary meaning of the words subcontractor and consultant. The opinion expressed paid no regard to whether there was significance in the design and construct context in which Icon conducted its business. It was a matter for the Court to determine the natural and ordinary contextual meaning of the words used in the policy adopting the perspective of reasonable business people entering into the policy.

The policy as a whole 44 The policy is styled as a third party liability policy. It is issued to Icon Co Nominee Pty Ltd. In the policy schedule it describes both the insured and the insured's business in terms that extend beyond the activity of undertaking construction (see above). It includes within the definition of the insured's business in the policy schedule all business activities of the insured which are stated to be not limited to 'engineers' (amongst others). The express reference to engineers in the schedule appears to be intended to reflect a particular aspect of the business conducted by Icon because the defined term 'Insured Business' (in the Definitions section of the policy) does not refer to engineers but says that the term means, amongst other things, 'all of the Insured's businesses, occupations and/or activities as described in the Schedule'. Therefore, the structure of the policy requires the business of Icon to be described in the schedule to the policy and the description in the schedule includes 'engineers'. 45 The definition of Insured in the Definitions section of the policy has been quoted (see above). It refers to 'sub-contractors' (item 4) and 'architects, engineers and other professional consultants' (item 8). 46 The insuring clause provides for indemnity in respect of all amounts which the insured shall become legally liable to pay in respect of 'Personal injury', 'Property Damage' and 'interference with traffic or to property or the enjoyment of use thereof by obstruction, trespass, loss of amenities, nuisance, happening during the Period of Insurance as a result of an Occurrence in connection with the Insured's Business'. The term 'Occurrence' is defined in the Definitions section of the policy in terms that include 'an event … which results in … Property Damage'. Property Damage is defined in terms that encompass any loss of or damage to or destruction of tangible property. 47 The insuring clause also covers 'expenses incurred by or with the permission of Insurer(s) for investigation, negotiation and defence of claims and suits'. 48 There are a number of exclusions none of which are said to be relevant to the issues raised in the present proceedings. 49 The conditions include a limit upon liability 'for each Occurrence'. There is an express condition that each of the parties comprising the insured 'shall … be considered as a separate and distinct unit' such that the words 'the Insured' apply to each of them in the same manner as if a separate policy had been issued to each of them. It may be recalled that the definition of the insured (see above) includes 'contractors and subcontractors' of each named insured. 50 The policy includes provision for run off cover and it is common ground that the run off coverage was invoked. 51 Finally, it may be observed that regard to the overall wording of the policy indicates that it was intended to apply to insureds who were carrying on business in the construction industry. It uses the term 'Construction Operations' and has run off cover on the basis of a premium calculated on 'rates applied to value of works declared for completion of projects' after the period of insurance. It defines 'Turnover' in terms that indicate expected application of the policy to insureds in the construction industry. 52 However, no aspect of the policy adopts terminology which indicates that it is intended to apply only to insureds who are construction contractors as distinct from those who may take on responsibilities for development and design as well as construction. Rather, the nature and extent of coverage depends to a considerable degree upon the description of the 'Insured's Business' as stated in the Schedule. This may be expected to be crafted to reflect the nature of the business of the particular insured. In the present case, that description is not limited to the business of 'builders' or 'construction contractors' but is much more broadly expressed in the following phrase: … builders, engineers, construction contractors, project managers, construction managers, property developers, plant and equipment owners/operators and hirers, property owners and occupiers, lessees and lessors … 53 In consequence, the nature and extent of subcontractors to Icon insureds under the policy may be expected to be responsible for work and activities that extend well beyond construction work, though still undertaken in what may be described as the construction industry. Having regard to the breadth of the business of the Icon entities named as insureds in the policy, Icon's subcontractors may be engineers, construction managers or plant and equipment operators, amongst others. This is a significant aspect of the policy that is evident from regard to the way in which the whole of the policy is expressed to operate. 54 Accordingly, the definition of Insured in the Definitions section of the policy should not be approached on the basis that the policy concerns an indemnity to be extended to insureds undertaking only construction work.

Matters of context 55 The quotation slip by which the underwriters were invited to quote for renewal of the relevant policy was in evidence. It was provided to the underwriters under cover of an email dated 4 September 2012 which also attached details of the company profile for Icon and directed the underwriters to the website for Icon's business. 56 The slip described the business of Icon in similar terms to those expressed in the Schedule and included the following: Principally, all business undertakings and activities of the Insured including, but not limited to: builders, engineers, construction contractors, project managers, construction managers, property developers, plant and equipment owners/ operators and hirers, property owners and occupiers, lessees and lessors … (emphasis added) 57 The 'Insured Operations' were described as: All Contracts or Works relating to residential and commercial building construction including all associated works undertaken by the Insured and not otherwise insured by the Principal/Owner or other parties in terms of the contract agreement, commenced and declared within the Period of Insurance. 58 The 'Underwriting Information' included the following: Contractors ICON engages sub-contracting firms to perform standard tradesmen's activities including plumbing, electrical, bricklaying, glazing, carpentry etc. with ICON performing the Construction / Project Management role. A program is maintained to ensure strict control over any subcontractors engaged with the sub contractors required to hold their own liability insurance. Contracts paid to sub-contracting firms constitute approximately 80% of project costs. 59 The Company Profile document included a statement describing Icon's design and construct methodology. 60 Much was sought to be made by WSP Structures of the terms of Icon's design and construct contract with the developer for the project. It was an Australian standard form contract. The preface to the contract (as prepared by Joint Standards Australia/Standards New Zealand Committee) identified the contract as general conditions of contract for design and construct. It was said to cover 'the following types of procurement methods: (a) design and construct; (b) design development and construct; and (c) design, novate and construct'. It was also identified as a document that may be used for 'construct only projects'. As may be expected, it contained provisions dealing with the design obligations for the works the subject of the contract. 61 However, it was not suggested that the precise contractual arrangements that Icon concluded in relation to its design and construct contracts were known to Icon and the underwriters at the time the insurance was proposed and written. Therefore, I am not persuaded that the particular terms of the design and construct contract forms part of the context to which there may be regard in construing the policy terms. 62 The only relevance of the design and construct contract as well as the contract between Icon and WSP Structures is that it is necessary to understand those arrangements when it comes to determining whether, having construed the policy terms, on the facts in the present case, WSP Structures is an insured. In that respect, there was no real issue between the parties as to the nature of relationships that were established by those contracts. In particular, the relevant work that WSP Structures was engaged by Icon to undertake was engineering design work that Icon had contracted to deliver as part of its design and construct contract with the developer. It was the alleged liability of WSP Structures arising from undertaking that engineering design work that was compromised by the settlement of the Supreme Court proceedings and which gave rise to the liability to make the WSP Payment.

The authorities 63 The parties referred to various authorities that were said to assist with the question whether the references to subcontractor in the Liberty policy included an engineer such as WSP Structures. None of those authorities were concerned with the proper construction of an insurance policy expressed in the same or similar terms to the policy under consideration in these proceedings. Therefore, those authorities are of little relevance to the determination of the present construction questions. Nevertheless, to the extent that particular reliance was placed upon some authorities as indicating the approach that should be adopted in the present case, I will address them. 64 Chubb and Tokio Marine relied upon reasoning in Pasminco Metals-Sulphide Pty Ltd v Brambles Aust Ltd [1998] NSWCA 169 for the proposition that the natural and ordinary meaning of a subcontractor is someone who carries out physical work and that an engineer is not such a subcontractor. Pasminco had entered into a contract for Brambles to carry out construction work at a factory. The case concerned a provision in the contract that required Brambles to arrange insurance 'Contractors' All Risks insurance in the name of Pasminco 'and any sub-contractors' for the full contract value of the work done and goods delivered to the site during the period of the contract. Pasminco claimed that a person who came onto site as the employee of another company (Allman) was a subcontractor who should have been insured under a policy with a $5,000 excess as stated in the contract between Pasminco and Brambles. In dismissing the appeal, Mason P observed: 'Merely because Allman supplied labour to Brambles would not necessarily make it a subcontractor any more than the fact that a supplier of steel wool would necessarily become a subcontractor'. 65 Spigelman CJ agreed and reasoned: 'The natural and ordinary meaning of the word 'sub-contractor' suggests a person or firm that performs some part of the work, rather than a person or firm that supplies services or equipment for use in the work'. Powell JA agreed with both. 66 Even assuming that the above observations are applicable to the present circumstances, they do not assist. In the present case 'the work' to be conducted by Icon includes the engineering design work for the project. I do not understand their Honours to be saying anything more than a subcontractor is one who agrees to undertake work that another person is contracted to perform. Their Honours were doing no more than distinguishing between a supplier and a person who is performing the contractual obligation of another. 67 Reliance was also placed by Chubb and Tokio Marine upon the decision in Hopewell Project Management Ltd v Ewbank Preece Ltd [1998] 1 Lloyd's Rep 448 which concerned the proper construction of a contractor's all risks policy. Simplifying the facts somewhat, Hopewell entered into an agreement to build, operate and transfer a power station. Hopewell then entered into an agreement with one of its subsidiaries (Slipform) to oversee and manage the design and construction of the power station. Ewbank Preece entered into an agreement to provide certain engineering services to Slipform. It was not subcontracted to undertake any part of the design obligation for the power station nor was it subcontracted to undertake the oversight and management obligation of Slipform. Rather, it was contracted to provide technical and engineering services to Hopewell in accordance with a 'scope of services'. The contract was described as 'body-shopping', being a means by which Hopewell could secure the services of engineering staff 'who would not undertake any design function or role of authority or supervision with regard to the carrying out of the works, but supplement the existing in-house engineering expertise of Hopewell'. A director of Ewbank Preece at the time gave evidence that: We undertook no obligation to deliver a finished product, or undertake specific duties in relation to, or manage, the works. In this case, [Ewbank Preece], like any other supplier, contracted to supply engineering expertise which Hopewell was free to use as it thought fit within the confines of the agreed scope of services. 68 On the basis of the above evidence, the recorder concluded that the relationship between Hopewell and Ewbank Preece 'was that of client and consulting engineer' (at 453). 69 Hopewell and Slipform were named as insureds under a contractor's all risks policy. By an endorsement to the policy the name of the insured was amended to include, amongst others, 'and/or all contractors or subcontractors'. During commissioning of the turbines they were damaged and it was claimed that the damage was due to the negligence of Ewbank Preece. 70 Expert evidence was received 'on insurance matters'. The expert report included the following: It is not common market practice' to include professional consultants for non-manual exposures, when carrying out what is regarded as their usual role. Such parties are not (normally) party to, or sub-contracted to, the main contract, but the present case is an unusual one. The essential difference here is that Ewbank Preece were subject to the conditions of a sub-contract awarded under the provisions of the main contract and their fees formed part of the overall contract value. 71 Here, WSP Structures was subcontracted to the main contract. It was required to carry out the engineering design work that Icon was required to undertake under its design and construct contract with the developer. 72 The reasons of the recorder include the consideration of a report on construction insurance which described the extent of the indemnity 'usually' afforded by a construction policy. It referred to 'subcontractors' as persons who may be undertaking the same activities as architects, engineers and other professional advisors or contractors. It noted that inclusion of architects, engineers and other professionals as 'subcontractors is not obvious and can easily be overlooked'. Having made that observation, the report as quoted then stated that a construction policy 'does not usually cover professional … liabilities arising out of professional negligence'. The quotation from the report then stated: Some insurers are content to indemnify professional advisors under a construction policy against liability other than liability arising out of their professional negligence. Others feel that the separate professional indemnity policy and public liability policy needed by professional advisers should be adequate in themselves, and should not be overlapped by cover under the construction policy. If the intention is to provide a limited form of cover to them, an exclusion is required as indicated in chapter 2.30. 73 After referring to this and other evidence the recorder then said (at 455), in a passage relied upon by Chubb and Tokio Marine: I am bound to say that in my experience the terms 'contractor' and 'subcontractor' are invariably used to refer to persons, firms or companies who carry out physical works of construction. Sometimes such persons, firms or companies also carry out professional work. For example, some building contractors offer a design service as well. Moreover, it is commonplace for specialist subcontractors to offer a design service within the area of their specialization. Nevertheless, in all these instances, design services are offered as an adjunct to construction work. It is not normal practice to describe a professional firm as a contractor or a subcontractor, even though that firm enters into contracts with its clients. In the light of the evidence as a whole, I find that it would be most unusual for the term 'contractor' or 'subcontractor', appearing in a contractors' all risk policy, to mean or to include within its meaning a firm providing professional services. Moreover, if the term were used in this sense, I would expect to find in the policy an exclusion clause of the type set out at par. 2.30 of 'Construction and Erection Insurance' or of the type referred to by Mr. Carden in cross-examination. (emphasis added) 74 Later, after referring to a number of other decisions, the recorder concluded (at 456): In my view, the phrase 'contractors and subcontractors' in the definition of the insured under each policy refers to persons, firms or companies whose activities involved, or at least included, physical construction work. In my judgment, having regard to the services which the defendants were intended to perform and did perform, the defendants did not fall within the definition of 'insured'. 75 In important respects, the circumstances considered in Hopewell v Ewbank Preece may be distinguished. First, it was not a case where engineering design obligations had been subcontracted. Rather, the contractual arrangements with Ewbank Preece were determined to require the provision of engineering services or expertise (and not the performance of any of Hopewell's own obligations). Second, it was a case in which the recorder received expert evidence as to insurance practice and brought that to account. Finally, it was a case that recognised that there may be instances where design services are offered as an adjunct to construction work and such cases were in a different category to the case to be determined by the recorder. For those reasons, the decision does not assist in resolving the present case. It does no more than expose the importance of considering the particular circumstances in each case. 76 Although the reasoning of Williams J in GPS Power Pty Ltd v Gardiner Willis & Associates Pty Ltd [2000] QCA 495 at [32] was relied upon by WSP Structures, it concerned a very differently worded policy and the observations of her Honour were made in circumstances where there does not appear to have been particular focus in the case upon questions of the kind that fall for determination in the present case. 77 Finally, WSP Structures relied upon Thiess Pty Ltd v Parsons Brinckerhoff Australia Pty Ltd [2016] NSWSC 173. The construction risks policy under consideration in that case included within the definition of 'insured' the following: All sub-contractors of any tier but not: … suppliers (other than in relation to their on site work); … architects and consultants as regards their activities performed off-site and design work performed on site. 78 Again, the wording is quite different to that used in the present case. Like the present case, it did concern a policy obtained by a design and construct contractor. McDougall J did not agree with a contention that the engineer was not a subcontractor. His Honour expressed that view on the basis that the engineer had subcontracted part of their design obligations to the rock mechanics engineer claiming coverage: at [531]. He found that consultants such as the engineer may be subcontractors for the purposes of the clause, accepting the express limits on the coverage: at [532].

The terms of other policies 79 The parties, particularly WSP Structures, referred to the terms of other policies with some similarities to the present policy that were in evidence. In my view, regard to those policies demonstrates nothing more than the existence of other policies with different terminology being used to describe the circumstances in which indemnity is extended to other insureds for risks broadly of the kind covered by the policy in the present case. 80 A general and products liability policy issued by Lockton included a definition of insured with some similarities to the terms of the definition in the present case (but many differences). In particular, it did not include the words 'and/or' at the end of each listed item in the definition. It included as item d 'contractor or sub-contractor of any tier subject to the limitations in e and f'. Items e and f were similar to items 7 and 8 in the present case. Plainly, the definition expressly limited the coverage of subcontractors under item d to the coverage under items e and f. There is no such language in the present case. 81 A contract works and legal liability policy issued by CGU referred to the 'Named Insured' and any 'Additional Insured'. The definition of the latter term included the following item iv: all contractors and sub-contractors not being the Named Insured but with whom the Named Insured has entered into a Construction Contract and provided their interests are required to be insured jointly by the Named Insured, and then only to the extent required by such Construction Contract, and only in respect of work performed as a part of the Contract Works whilst at the Contract Site. For the purposes of this Policy any contractor and sub-contractors shall not mean suppliers, manufacturers, design consultants or consultants of any kind whatsoever. 82 Item vi was expressed in the following terms: any professional consultants being a legal entity who is required under a Construction Contract to be included as an Insured, but only in relation to their manual activities associated with such Contract Works and only whilst at the Contract Site. 83 Again, the terminology is materially different and deals expressly with the extent to which the expression subcontractor includes 'design consultants or consultants of any kind'. 84 An annual construction policy issued by SURA Construction also defined additional insureds in terms that covered contractors or subcontractors but then stated expressly that the definition does not include 'an architect or engineer except in respect of their physical activities whilst on the Contract Site'. The language used was quite different to that used in the present case. 85 A Willis Towers Watson Construction third party liability insurance policy included the following wording in the schedule as part of a much longer provision expressed in very different terms to the policy in the present case: All contractors and sub-contractors of any tier contractors (excluding professional consultants and sub-consultants) in connection with the Insured Project but only for their manual on site activities and/or; 86 A draft AON construction risks - general liability insurance policy included the following in the definition of insured: (c) any contractor or sub-contractor of any tier, other than those categories more specifically defined elsewhere in this Policy; (d) any architect, engineer or other consultant, but only in relation to their manual activities associated with the Insured Property and only whilst at the project site (such parties not being deemed to be contractors and sub-contractors in (c) above); 87 The above wording is another example of an express qualification of the coverage for a subcontractor of a kind not expressed in the policy in the present case. 88 Finally, reference was made to the wording of a Willis Construct third party liability policy. The definition of insured included 'Contractors and Sub-contractors engaged on any tier' at item (e), but then stated (item (j)) that the term 'shall not mean': Architects and/or surveyors and/or consulting engineers and/or any other similar or related organisation, for liabilities associated with the discharge of their professional service; 89 For the above reasons, I am unable to see the relevance of any of these policy wordings one way or the other for the issues of construction to be resolved in the present case. To the extent that the above policy wordings might be said to indicate that, in many other policies, there is an express provision dealing with the issue that arises for determination in the present case, two observations may be made. First, in the absence of evidence to the effect that the present policy was drawn having regard to such other policy terms, I cannot see how the failure to adopt express wording to the same effect in the present case supports the possibility that the policy in the present case was intended to operate in a different way. Second, there is no suggestion that any of the above policies were specifically directed to dealing with a case where the named insured, like Icon in the present case, was entering into design and construct contracts. There was also the possibility that there may be some adjustment to the policy wording of the other policies in evidence to cater for such instances in the case of a particular named insured. 90 Therefore, I have had no regard to the other policy wordings in construing the terms of the policy in the present case.

The proper construction 91 For the following reasons, on the proper construction of the terms of the Liberty policy (which were also the terms of the cover provided by Chubb and Tokio Marine) WSP Structures was an insured. 92 First, there is the use of the words 'and/or' that appear at the end of each item listed in the definition. As was accepted by Chubb and Tokio Marine in their written submissions, that form of words means that an insured may fall 'within one or more' of the 8 items. In consequence, the fact that a person is an architect, engineer or other professional consultant (as described in item 8) does not mean that they cannot be a subcontractor. 93 Second, items 7 and 8 include identified categories of persons 'but only in relation to their manual on-site activities'. A construction of the term subcontractors as used in item 4 that was so broad as to encompass the categories in 7 and 8 irrespective of whether they were undertaking manual on-site activities would make those provisions redundant. Although the words and/or indicate overlapping categories, the deliberate inclusion of items 7 and 8 strongly indicates that there was a category of cases where those described in items 7 and 8 would not be covered by item 4 (or the other items). An interpretation of subcontractors that included architects and engineers but only where they were contracted by an insured to carry out work that the insured was contracted to undertake would leave room for the operation of item 8. It would mean that an engineer who was engaged by the principal directly or by an Icon entity to provide engineering services that the Icon entity had not itself contracted to provide would only be covered under item 8 (and therefore only in relation to manual on-site activities). 94 Competing scenarios were advanced as to whether there were circumstances in which item 8 might have work to do if item 4 was applied to WSP Structures (as subcontracted design engineer) and item 8 also applied to 'engineer'. However, item 8 and not item 4 would apply to any engineer who was not subcontracted to undertake engineering work that an Icon entity had contracted to undertake. Further, it was not suggested that the policy wording was specific to Icon's circumstances. The evidence before the Court showed that the policy was one that was provided to the market generally by underwriters and that the Schedule was used to customise the operation of the policy to the circumstances of the particular insured. In those circumstances, I was not persuaded that any of the competing scenarios, none of which was suggested to be particularly in view when the policy terms were agreed, were of any assistance in construing the policy terms. 95 Third, as has been explained, the broad definition of the insured's business in the Schedule to the policy in the present case, particularly the inclusion of 'engineers' in that definition, means that there is wider scope for the category of subcontractors in item 4. It is not the case that the policy provides for every contracted engineer providing services to a 'builder' or 'construction contractor' to come within the definition. Rather the scope of coverage depends upon the event giving rise to the relevant legal liability to pay being one which happens 'as a result of an Occurrence in connection with the Insured's Business'. The structure of the policy and the capacity for an Insured's Business to be broad or narrow in scope will determine the extent to which that business has obligations which may be subcontracted. In a context where the policy is structured so that it may apply to an insured whose business includes contracting to supply engineering services as well as construction services, it would be inconsistent with the overall structure of the policy to confine the meaning of the term subcontractor to those parts of the business which involved the subcontracting of physical construction work. 96 Regard to the quotation slip and the accompanying company profile for Icon as contextual matters does not establish a basis for concluding that the business of Icon as described in the policy excludes the provision of engineering services, particularly engineering design. On the contrary, the company profile refers to Icon's design and construct methodology stating that it is: 'To encapsulate the full requirements of design and to incorporate into a compliant high quality building product'. Also, as has been noted, the description of the insured's business in the quotation slip includes 'engineers'. 97 Fourth, plainly the policy sought to extend the scope of those who were insured beyond those who were named as insureds. It did so in circumstances where the policy terms expressly and separately stated that 'all other parties for whom the Insured is required under contract or any other legally binding agreement to provide insurance protection are also included as an Insured'. Therefore, the other categories of insureds are not named in order to fulfil obligations of that kind. 98 It is most unlikely that the Icon entities sought the additional coverage for altruistic reasons. The policy is clearly a commercial instrument that addresses commercial interests. Evidently, the inclusion of other insureds was seen to be in the commercial interests of the Icon entities. The Icon entities could have secured insurance that extended covered only to the extent of any legal liability that Icon entities may have for the acts of others. They did not do so. Rather, they obtained coverage for other insureds for amounts that those insureds became legally liable to pay in respect of (relevantly for present purposes) 'Property Damage'. The evident interest of the Icon entities in obtaining that insurance was to ensure that there was coverage for those entities and consequently less room for disputes between parties concerning where the liability ultimately lay, including issues of apportionment of responsibility; in effect there was a form of project coverage for liability arising from the activities that the Icon entities would be undertaking as part of the business as defined in the Schedule to the policy (specifically the engineering and construction of buildings). In my view, a reasonable businessperson in the position of the parties to the policy would discern from the policy terms as a whole an objective intention of that kind. 99 Coverage for those who had been subcontracted to undertake any part of the works that the relevant Icon entity had undertaken to perform was obviously necessary to obtain that kind of coverage. Indeed, it would be a most uncommercial result if there was coverage for some aspects of the works that an Icon entity had contracted to undertake as part of a particular project (relevantly for present purposes, construction work) but not other aspects of those works (relevantly for present purposes, engineering design). It would expose the Icon entity to the risk that it would be liable for the activities of its own subcontractor but would itself have no insurance coverage for that liability. It would also be exposed to the cost of having to pursue its subcontractor where it considered that it was responsible and the risk that it would not have the funds to meet the liability. The evident purpose of achieving a form of comprehensive cover of others in the interests of the Icon entities would be compromised. Having regard to the evident commercial purpose of the policy, there was every reason not to confine the words 'subcontractors engaged by any of the above [being the Insured, the Insured's co-venturers and the principals and/or owners] to a subcontractor undertaking construction works or onsite works. 100 The terms of items 7 and 8 are explained by a different aspect to the way in which liability for the risks covered by the policy may arise. Liability may be attributed to an Icon entity having regard to the nature of the business as described in the policy on the basis that the Icon entity has overall responsibility for activities undertaken on a project site. It is that separate and distinct way in which liability may arise that explains the terms of items 7 and 8 of the definition of Insured. The existence of that separate rationale for those items (which is consistent with the evident purpose of the policy described above) is not a reason for construing item 4 as being subject to items 7 and 8. 101 Fifth, this is not an instance where it is evident from the language used in the policy considered in the overall context that the term subcontractor is being used to differentiate those who are undertaking the construction works from consultants. Also, as has been noted, the reference in item 4 is to 'sub-contractors engaged by any of the above' (emphasis added). Those named above include 'the Insured named in the Schedule'. This is not an 'any tier' provision that refers to subcontractors of subcontractors. It is confined expressly to those subcontractors engaged by a named Insured. 102 Each of these matters points to the term subcontractor being used in its legal sense to encompass any party undertaking work that an Icon entity (and others named 'above') had contracted to undertake. The effectiveness of the policy as providing cover for all liability for damage to property which may be attributed to some extent to an Icon entity (or about which there may otherwise be dispute as to attribution of responsibility) would be substantially compromised if it did not cover WSP Structures who had been subcontracted to undertake the engineering design obligations of Icon under its own contract. The inclusion of the express reference to 'contractors and subcontractors' in the description of the Insured in the Schedule to the policy also supports this conclusion. 103 Against the above considerations which favour WSP Structures construction of the policy, there is the general commercial availability of professional indemnity insurance and the possibility of an expectation amongst those participating in the construction industry that professionals such as architects, engineers and professional consultants would have their own professional insurance. In consequence, any coverage for their activities under a third party liability policy of the kind in issue in the present case would be likely to result in double insurance and the burden of additional premiums in respect of the risks associated with undertaking particular construction works. There was no evidence as to these matters or the extent to which they were part of the market context in which the insurance was arranged by Icon. 104 In the end, there must be regard to the language used by the parties in the present instance. For reasons I have given the structure of the policy as a whole and the terms in which the definition of insured is expressed in the policy in this case lead to the conclusion that WSP Structures is an insured within item 4 of the definition of Insured. It is also leads to the conclusion that item 4 should not be read as being subject to item 8. Rather, the interaction between item 4 'and/or' item 8 should be construed to mean that the reference to engineers in item 8 is to engineers who are not subcontractors engaged by an Insured to undertake work that the Insured is itself contracted to perform. 105 It follows that there is no need to resort to the contra proferentem principle.

Issue (2): Has WSP Structures been indemnified by its professional indemnity insurer such that it has no loss to claim? 106 It is a matter for an insured who suffers a loss that is covered under two policies of insurance as to whether to pursue a claim to recover a loss under one policy or the other (noting that some policies may have express provisions that seek to deal with what is to occur if an insured has coverage for a particular risk under more than one policy). However, it may be accepted that where there are two insurers covering the same risk and the loss has been met by one insurer then, in answer to a claim by the insured against the other insurer, the insurer may plead the indemnity as a valid defence: Lambert Leasing Inc v QBE Insurance (Australia) Ltd [2016] NSWCA 254; (2016) 93 NSWLR 166 at [215] (Payne JA, Ward and Gleeson JJA agreeing). It is a separate question between insurers as to whether there is a right to seek contribution: at [216]. 107 The issue presented by the present case concerns how far matters have to proceed in respect of the claim made under one policy before the insurer under another policy can plead an indemnity under the first policy as a defence. In particular, is there a point in time before actual discharge of the liability to indemnify by one insurer (by payment to or at the direction of the insured) at which the plea of indemnity will be a valid defence to any claim brought by the insured against the second insurer. 108 There was no dispute as to the relevant facts which may be shortly stated: (1) in October 2021, WSP Structures' professional indemnity insurer confirmed cover subject to policy terms and conditions; (2) in November 2021, those professional indemnity insurers confirmed coverage in respect of the liability of WSP Structures as to the claims made in each of the three proceedings in the Supreme Court; (3) in July 2022, there was a communication from lawyers for the professional indemnity insurers inviting a claim for reimbursement for defence costs incurred by WSP Structures in the Supreme Court proceedings; and (4) and in November 2022 the professional indemnity insurers paid the WSP Indemnity Insurer Payment agreed to be paid by WSP Structures as part of the settlement of the Supreme Court proceedings. 109 Further, in an email dated 28 September 2022 from lawyers acting for WSP Structures to lawyers acting for its professional indemnity insurers after the present proceedings were on foot, the consequences for WSP Structures of pursuing its claim in the present proceedings were addressed. In the email, statements to the following effect are made: (1) 'WSP seeks [its indemnity insurers] provide the funds for the [WSP Payment] … If [its professional indemnity insurers] pay that amount, WSP will not be able to recover that amount from the Icon insurers'; and (2) irrespective of the outcome of the present proceedings in this Court, 'WSP' has an entitlement to indemnity from its professional indemnity insurers. 110 The submission advanced by Chubb and Tokio Marine was to the effect that, in practical terms, WSP Structures has received a full indemnity from its professional indemnity insurers in respect of the liability to make the WSP Payment. That was said to be the case because (a) WSP Structures has made a claim under its professional indemnity insurance for the liability the subject of the claims in the Supreme Court proceedings; (b) indemnity under that policy had been confirmed in writing by the insurer; and (c) the WSP Indemnity Insurer Payment has been made by the professional indemnity insurer. In those circumstances, the only reason, so it was submitted, that the professional indemnity insurer has not also paid the WSP Payment is because WSP Structures has told its insurer to hold off making the payment. It was said that all that WSP Structures has to do is ask its professional indemnity insurer to make payment and it will do so because of the grant of indemnity, the fact that it had made the WSP Indemnity Insurance Payment and the fact that it is evident from the terms of the email of 28 September 2022 that WSP Structures seeks that indemnity. 111 Particular reliance was placed by Chubb and Tokio Marine upon the reasoning in The Mayor, Councillors and Citizens of the City of Footscray v The New Zealand Insurance Co Ltd (Unreported, VSC, 24 June 1992). The decision concerned an objection to answering an interrogatory. The question asked was whether any insurance company had indemnified or agreed to indemnify the plaintiff in respect of any liability that the plaintiff may have incurred arising out of proceedings referred to in its statement of claim. There were allegations in the statement of claim to the effect that the plaintiff was entitled to indemnity under the terms of a public liability policy issued by the defendant for the liability established by those proceedings. The defence included a claim that the plaintiff was entitled to indemnity in respect of any liability under a professional indemnity policy. Tadgell J described the way in which the issue had been joined as between the plaintiff and the defendant in the following terms: Although the defence does not say so in explicit terms, the defendant appears to rely on the principle of double insurance and to contend that, to the extent that the plaintiff was entitled to indemnity under a professional indemnity policy, it cannot recover under the policy issued by the defendant. No issue of contribution between insurers arises upon the pleadings. 112 The plaintiff's chief ground of objection to answering the interrogatory was that it did not relate to any question between the parties. As to that objection, Tadgell J reasoned (para 3): I think the objection cannot be sustained in that form. Upon the pleadings, any indemnity that the plaintiff has received, or which it is entitled to receive, under any other policy of insurance in respect of its liability referred to in para 12 of the statement of claim would (or at least could) pro tanto provide a defence to its claim: Sydney Turf Club v. Crowley (1972) 126 CLR 420, at 424, per Barwick, C.J. Interrogatory 54 is in my opinion fairly to be understood to ask whether the plaintiff has received or is entitled to receive any such indemnity. Insofar as the interrogatory asks whether the plaintiff has received any such indemnity the plaintiff should answer it by saying either that it has received indemnity in a stated sum under a specified policy or that it has received none. Insofar as the interrogatory asks whether the plaintiff is entitled to receive such indemnity the plaintiff is entitled to respond to the effect that the interrogatory seeks an opinion on a matter of law; but the plaintiff should also, I think, properly refer to any relevant professional indemnity policy that it has disclosed on discovery and invite the defendant to draw its own conclusions as to the plaintiff's entitlement thereunder. 113 In the passage referred to in Sydney Turf Club v Crowley (1972) 126 CLR 420 at 424, Barwick CJ referred to 'the well established principle that in a case where there are two promises of indemnity in respect of the same liability the promisee can only recover once and not twice. Being paid pursuant to one such promise, he cannot recover on the other'. Reference was made to McGillivray on Insurance Law, 5th ed (1961). Importantly, the court was there concerned with an instance where the liability under one policy had been paid out. 114 Returning to the decision in the City of Footscray case, it was contended for the defendant that the interrogatory also required the plaintiff to say on oath whether the plaintiff had reached any agreement with the professional indemnity insurer as to indemnity in respect of the plaintiff's liability to third parties. That aspect of the interrogatory was found to be 'too wide to be admissible and need not be answered' (at para 4). 115 It must also be observed that the defence advanced in the City of Footscray case sought to invoke a rateable contribution clause the scope of which depended not upon whether there had been payment by another insurer but whether the plaintiff was entitled to indemnity under any policy of insurance for which the defendant had contracted to afford indemnity (see paras 4-5). Therefore, the interrogatory had relevance for that purpose. 116 In the above circumstances, I do not understand the reasoning in the City of Footscray case to support the conclusion that the availability of indemnity or the 'grant of indemnity' or even an agreement to indemnify reached by way of compromise of a claim (as distinct from an actual payment pursuant to the indemnity) may provide a basis for a defence to a claim against a second insurer. It was not concerned with that question. Further, to the extent that the interrogatory was allowed on the basis that it was relevant to ask whether the plaintiff was 'entitled to indemnity' it was an issue in the proceedings by reason of the dispute as to the application of the rateable contribution clause. Therefore, it does not assist for present purposes. 117 Chubb and Tokio Marine also placed reliance upon the following reasoning in Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [298] (Allsop P, Beazley and Campbell JJA agreeing), after referring to established authority stated: The basal principles contained in these cases include the proposition that where several insurers have severally insured a risk, the insured can only receive one indemnity for its loss. Upon the receipt of that full indemnity from one insurer, the others are discharged against the insured. They remain, however, liable to contribute to the insurer that has paid. They are discharged because the insured can have no claim, because it has received full reparation for its loss. 118 In my view, the reference to 'receipt of that full indemnity from one insurer' must mean actual payment by the insured to or at the direction of the insured. It is the actual receipt of full reparation that gives rise to the discharge of the second insurer from any claim by the insured. Earlier in the reasons of Allsop P in Baulderstone, reference was made to the different ways in which the terminology 'grant of indemnity' may be used: at [290]-[292]. Importantly, as there explained, a grant of indemnity may operate as an admission of liability based upon known facts and on the basis that the grant was in terms of the policy or as an agreement to compromise a disputed claim. There is no suggestion in the present case that WSP Structures had reached an enforceable agreement that required payment to WSP Structures by its professional indemnity insurers of an amount to indemnify it for the WSP Payment. Rather, the present case was an instance where the grant of indemnity was an admission of a kind that gave an insurer a capacity 'to seek to alter their position should the known facts materially change': Baulderstone at [292]. In any event, even if there had been such an agreement, indemnity would not be received until that agreement was performed. It is the receipt of the indemnity from one insurer that means there is nothing for the second insurer to indemnify. Until then, the insured may pursue both insurers until indemnity is received. So much is confirmed by s 76(1) of the Insurance Contracts Act 1984 (Cth) which provides: (1) When 2 or more insurers are liable under separate contracts of general insurance to the same insured in respect of the same loss, the insured is, subject to subsection (2), entitled immediately to recover from any one or more of those insurers such amount as will, or such amounts as will in the aggregate, indemnify the insured fully in respect of the loss. (2) Nothing in subsection (1) entitles an insured: (a) to recover from an insurer an amount that exceeds the sum insured under the contract between the insured and that insurer; or (b) to recover an amount that exceeds, or amounts that in the aggregate exceed, the amount of the loss. (3) Nothing in this section prejudices the rights of an insurer or insurers from whom the insured recovers an amount or amounts in accordance with this section to contribution from any other insurer liable in respect of the same loss. 119 Significantly for present purposes, the statutory language is expressed in terms of actual recovery of the loss, not in terms of any recognition or admission of liability or separate agreement to indemnify. 120 Further, until actual payment, there is always a financial risk (possibly only a remote risk) associated with whether the grant of indemnity by the professional indemnity insurance may result in payment. Although there was no suggestion of any such risk in the present case, as a matter of principle there are difficulties with the notion that a 'grant of indemnity' by one insurer that has yet to result in payment may, of itself, be sufficient to give rise to a valid defence to a claim under the second policy. It would mean that in circumstances where a party has not in fact been indemnified by another insurer, that party could nevertheless be deprived of a claim against the second insurer. The insured, being entitled to indemnity from the second insurer would lose that right to indemnity in circumstances where indemnity had not been received from the other insurer. 121 For those reasons, it is the actual discharge by another insurer of the loss the subject of the claim that gives rise to the availability of the valid defence on the part of the second insurer to the effect that indemnity has been afforded to the insured. Unless and until there has been payment to the insured or at the direction of the insured there has been no indemnity in fact and no basis for a defence by the second insurer that indemnity has been given. 122 To the extent that the submission advanced by Liberty as to the legal costs relied upon the same contentions it should be rejected for the same reasons because it is common ground that the legal costs have not been paid by WSP Structure's professional indemnity insurer. To the extent that the submission by Liberty was expressed in terms that there had been an election by WSP Structures to recover those costs from its professional indemnity insurers, it should be rejected for the reasons that follow. 123 As to the factual matters relied upon to support the submission, it is not contentious that (a) the professional indemnity insurers have communicated to those acting for WSP Structures that they are satisfied that the policy responds to the claims made against WSP Structures in the Supreme Court; (b) they have done so noting the provision that concerns payment of costs and expenses; and (c) the professional indemnity insurance policy provides coverage for legal costs and expenses. In addition, to the extent that it is relevant, I find that the evidence demonstrates a willingness on the part of the professional indemnity insurers to meet the legal costs of WSP Structures if called upon to do so. 124 As has been noted, it is also the case WSP Structures has sought and obtained confirmation from its professional indemnity insurers that there is coverage under the policy for liabilities arising from the claims made in the Supreme Court (the subject of the overall settlement). Liberty also relies upon the fact that it has received the benefit of the WSP Indemnity Insurer Payment and did so after being aware of the existence of the Liberty policy. 125 In the above circumstances, Liberty claims that WSP Structures has made an election between its rights under its policy of professional indemnity insurance and the Liberty policy. It claims that the rights against the two insurers are relevantly inconsistent for the purposes of the doctrine of election. I do not accept that proposition. 126 The doctrine of election does not operate as a matter of intention. 'It is an effect which the law annexes to conduct which would be justifiable only if an election had been made one way or the other': Tropical Traders Ltd v Goonan (1964) 111 CLR 41 at 55 (Kitto J, Taylor and Menzies JJ agreeing). It is the existence of inconsistent rights that gives rise to the application of the doctrine: Agricultural and Rural Finance Pty Limited v Gardiner [2008] HCA 57; (2008) 238 CLR 570 at [58]. 127 There is no inconsistency in pursuing rights under two policies of insurance covering the same risk. This position is confirmed by the terms of s 76(1) of the Insurance Contracts Act which, as has been noted, allows for recovery from one or more insurers of such amount as will, in the aggregate, fully indemnify the insured. Inconsistency only arises when it comes to receiving the benefit of the indemnity under one policy and continuing to maintain that there is an obligation to indemnify for the same loss under a second policy. For reasons that have been given, the appropriate analysis at that point is not an application of the doctrine of election but rather the existence of a valid defence on the part of the second insurer because there is no longer a loss to indemnify. 128 For reasons that have been given, performance of the indemnity under one policy will mean that the holder of the other policy will have a valid defence to any further claim (noting the possibility of the insurer who has performed the indemnity seeking contribution). However, obtaining a grant of indemnity from one insurer does not involve making an election between inconsistent rights. It involves pursuing one of two coordinate rights which may be pursued by an insured up until it is has been indemnified.

Issue (3): Is WSP Australia the correct applicant in respect of any claim to reimbursement of the amount of the WSP Payment (because it is the party who has paid the WSP Payment)? 129 The position of Chubb and Tokio Marine was that the WSP Payment had been made by WSP Australia and not by WSP Structures with the consequence that any loss had been incurred by WSP Australia which was the proper party to be bringing any claim for indemnity. 130 The relevant facts were not in dispute. By the terms of the settlement of the legal proceedings in the Supreme Court, WSP Structures accepted liability to make the WSP Payment. It was its obligation to pay. However, the payment was made by its parent WSP Australia. 131 The written submission advanced for Chubb and Tokio Marine was to the effect that the payment by WSP Australia operated to discharge the liability that WSP Structures had to make the WSP Payment. It was further submitted that the payment was made in circumstances where the monies were not advanced by way of loan to WSP Structures, and in consequence, WSP Structures has no legal obligation to repay the WSP Payment. 132 It was also submitted by Chubb and Tokio Marine that, once the payment was made by WSP Australia, WSP Structures was not legally liable to pay the WSP Payment and, in consequence, there had been no economic loss to WSP Structures for which it could seek indemnity. It was not entirely clear whether this further submission was maintained orally. To the extent that it was, it is dealt with as part of issue (4). 133 In oral submissions, Chubb and Tokio Marine put its submission as to the effect of the payment by WSP Australia of the WSP Payment in slightly different terms. It said that it was WSP Australia who had taken on the burden of payment. On the assumption that it failed on issues (1) and (2), Chubb and Tokio Marine submitted that the amount paid by WSP Australia would otherwise have fallen upon the excess layer insurers and WSP Australia may seek to pursue a right of recoupment as against them. In those circumstances, it was submitted that WSP Australia was 'the proper plaintiff' and its pathway to recovery was by seeking recoupment. 134 Reliance was placed upon the reasoning in Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 at [239]-[240] (Giles JA, Handley and Stein JJA agreeing) as to recoupment. The reasoning in that case was concerned with the circumstances in which an equitable assignee of a lease might be the subject of an order by way of 'recoupment' where rent payable by the assignee was required to be paid by one party under the terms of an indemnity and another party under the terms of a guarantee. 135 Recoupment may be used to refer to a right to resort to a particular fund or security. It may also be used to refer to the right which equity recognises in circumstances where it is just for a person who has discharged the liability of another person to be able to look to that person who would otherwise have been called upon to meet that liability to do so. One example is where a guarantor has discharged the liability of the principal debtor to the creditor. 136 The submission concerning recoupment was not developed by reference to any authorities concerned with policies of insurance or by reference to broader principle. It appears that the submission sought to invoke instances where equity allows a party who has discharged the liability of another to be able to look to that person for payment. 137 With respect, the submission proceeds on the false premise that the payment by WSP Australia performed or satisfied an obligation by Chubb and Tokio Marine to indemnify. The policy required the insurers to indemnify 'the Insured in respect of all amounts which the Insured shall become legally liable to pay'. In circumstances where the payment was not made by another insurer, any obligation of Chubb and Tokio Marine to indemnify had not been performed or satisfied. The payment by WSP Australia discharged the liability to make the WSP Payment to those entitled to receive the payment under the terms of settlement, but that did not alter the fact that it was WSP Structures that was legally liable to pay the WSP Payment and it was therefore an amount that was covered by the indemnity. If WSP Australia could look to anyone for recoupment that party would be WSP Structures. It was not the 'proper plaintiff' in any claim against Chubb or Tokio Marine in respect of the WSP Payment. 138 There is a separate body of case law concerned with instances where a payment has been made to or for the benefit of an insured which has the consequence that there is no loss to be indemnified under a policy of insurance. Liberty relied upon those authorities to support a contention that the payment of legal costs by WSP Australia meant that there was no loss to recover pursuant to the indemnity. Chubb and Tokio Marine did not refer to those authorities but, as has been noted, did put a general written submission to the effect that extinguishment by WSP Australia of WSP Structures' liability to pay the WSP Payment meant that there was no loss left against which they could be called upon to provide indemnity. To the extent that aspect was pressed by Chubb and Tokio Marine (which was not clear) it is addressed below in dealing with issue (4). 139 It follows that WSP Australia is not the correct applicant for a claim under the policy.

Issue (4): In circumstances where the WSP Payment and the legal costs have been paid by WSP Australia, has there been a loss suffered by WSP Structures in respect of which it may seek indemnity? 140 Reference has already been made to the insuring clause in the Liberty policy. For convenience of reference, I set out again the relevant parts: The Insurer(s) agree to: 1. Indemnify the Insured in respect of all amounts which the Insured shall become legally liable to pay in respect of: … 1.2 Property Damage; … happening during the Period of Insurance as a result of an Occurrence in connection with the Insured's Business … 3. pay in addition to the Limit of Liability expressed in the Schedule: … 3.2 all expenses incurred by or with the permission of Insurer(s) for investigation, negotiation and defence of claims and suits; 141 The principal indemnity is expressed to apply to all amounts which the Insured 'shall become legally liable to pay' in respect of identified events. It is not expressed as an indemnity for a particular category of loss. 142 The additional indemnity for defence costs is in respect of 'all expenses incurred by or with the permission of Insurer(s)'. It was not contended that they were not recoverable because of some failure to obtain the permission of Liberty. No doubt a contention of that kind would have given rise to other issues. Rather, it was said that the payment by WSP Australia meant that there was nothing for Liberty to indemnify.

WSP Payment 143 As has been explained, the legal liability to pay the WSP Payment was a liability of WSP Structures. There is no suggestion that WSP Structures was relieved of that liability such that it might be said that it never became legally liable to pay it. Rather, its parent satisfied that liability after it had been incurred. It did so by making the payment for its subsidiary. By reason of that relationship, it should not be inferred that it paid the WSP Payment on the basis that it would not look to WSP Structures to continue to pursue any rights that it had under the policy and to account for any amount recovered to WSP Australia. By its submissions, WSP Structures stated that it would account for any amount received to WSP Australia. 144 The authorities concerned with what is sometimes referred to in an insurance law context as the indemnity principle and the manner in which they may bear upon the claim by WSP Structures by reason of the making of the WSP Payment by WSP Australia are addressed below.

Legal costs 145 As to the legal costs, it is Liberty that is exposed to any liability. Liberty's position was that the legal costs have been paid by WSP Australia and therefore WSP Structures has suffered no loss. As to that claim, it is necessary to make some factual findings. 146 Mr Smallhorn, the general counsel for WSP Australia, gave evidence as to the circumstances in which legal costs had been incurred and paid. He provided an affidavit on which he was cross-examined. He gave his evidence in clear terms and there was no reason to doubt the veracity of his evidence. Having regard to his evidence and the documents in evidence, I make the following findings: (1) in early 2019, solicitors were retained to act for WSP Structures and the letter of engagement was with WSP Structures, signed by Mr Smallhorn; (2) those solicitors rendered invoices to WSP Structures that were paid by WSP Australia; (3) there was no loan agreement or agreement of that nature in place between WSP Australia and its subsidiary WSP Structures concerning the amounts paid by WSP Australia to those solicitors; (4) in June 2021 new solicitors were engaged; (5) the new solicitors rendered invoices to WSP Australia; (6) in around August 2021, Mr Smallhorn became aware of the existence of the Liberty policy; (7) in November 2021, Liberty granted indemnity under the policy, including as to defence costs; (8) on 1 December 2021, the new solicitors agreed written terms of engagement with WSP Structures; (9) despite the grant of indemnity, WSP Australia continued to pay the invoices rendered by the new solicitors; (10) Mr Smallhorn approved the payment of the invoices rendered by both firms of solicitors to ensure the continuing legal representation of WSP Structures; (11) the legal fees paid by WSP Australia were claimed as an expense by WSP Australia; (12) neither WSP Australia nor WSP Structures has been reimbursed for the legal fees paid to the two firms of solicitors; and (13) the firms of solicitors were on the record and acted for WSP Structures in the Supreme Court proceedings and their settlement. 147 The change in solicitors occurred when the partner responsible for the instructions from WSP Structures moved firms. 148 In the above circumstances, I find that both firms of solicitors were retained by WSP Structures and WSP Structures incurred the liability to pay the fees incurred. 149 The liability of WSP Structures was satisfied by WSP Australia paying the invoices rendered by the firms. In consequence, WSP Structures having incurred the obligation now has no continuing or ongoing liability to the firms of solicitors to pay the legal fees. Further, there is no evidence to suggest that WSP Structures has any liability to reimburse WSP Australia for the payments it has made. For example, there is no evidence to the effect that WSP Australia made the payments in the discharge of some form of treasury or service function on behalf of WSP Structures. There is no evidence that a loan account has been created as between WSP Australia and WSP Structures. The only evidence in that regard is to the effect that the payments, when made, were treated as expenses of WSP Australia. In those circumstances, WSP Structures has not established any liability to make any payment by way of reimbursement to WSP Australia. 150 However, that does not mean that the payments by WSP Australia were made on the basis that WSP Structures would refrain from pursuing Liberty. Having regard to the relationship between the companies, it should be inferred that WSP Australia made the payments on the basis that WSP Structures would pursue any and all rights that it may have to recoup or recover the costs and account for those monies to WSP Australia. 151 The fact that some of the invoices were rendered by the new solicitors to WSP Australia does not affect the position in relation to the incurrence of the liability. On the whole of the evidence, the retainer was by WSP Structures. Therefore, it incurred the liability to pay the fees. 152 In the above circumstances, I am satisfied that the legal fees were 'expenses incurred [by WSP Structures] for … defence of claims and suits' for the purposes of the insuring clause. If and when recovered there will be a liability to account for the monies to WSP Australia, but that does not mean that the legal fees were not expenses incurred by WSP Structures. 153 Which leaves only the authorities concerned with the indemnity principle.

Authorities concerned with the indemnity principle 154 The remaining issue is whether the fact that the liabilities of WSP Structures to make the WSP Payment and to meet the legal costs has been met by WSP Australia means that there is no longer anything for the three insurers to indemnify. 155 It is well established that if an insured has in fact received payments which are in the nature of indemnification for the same loss for which indemnification is sought from an insurer under an policy by way of indemnity then no further indemnity may be sought from the insurer because the nature of such insurance is that it is a promise to ensure full indemnity but not more than full indemnity. The relevant principles were stated in the following terms by Ashley JA (Chernov and Redlich JJA agreeing) in Insurance Australia Ltd v HIH Casualty & General Insurance Ltd (in liq) [2007] VSCA 223; (2007) 18 VR 528 at [150]-[152] (Chernov JA): … if the payments were an indemnification, it would not seem to matter whether they had been paid under a contract of indemnity insurance, a contract of indemnity otherwise, or simply constituted an indemnity in fact. In any of those situations, the relevant consideration would be [the insured] is entitled to one (full) indemnity, but no more. The principle is of long-standing. In the case of an amount paid in the first instance otherwise than under an insurance contract, it is illustrated by Castellain v Preston; and see the observations of Wheeler J in Speno Rail Maintenance Australia Pty Ltd v Hamersley Iron Pty Ltd, referring to Caledonia North Sea Ltd v London Bridge Engineering Ltd. Again, if the insurer has indemnified its insured first, and then the insured recoups money from another source - for example, by recourse to a contractual indemnity - the insurer has a right of recoupment in turn from its insured. This was described in Castellain as the exercise of a right of subrogation. The use of that description in such circumstances was criticized in British Traders Insurance Co Ltd v Monson. But that is not to deny the soundness of the substance of the proposition, which was said in Transport Accident Commission v CMT Construction of Metropolitan Tunnels to have been long accepted. (footnotes omitted) 156 In British Traders' Insurance Co Ltd v Monson (1964) 111 CLR 86 at 94 (Kitto, Taylor and Owen JJ) considered a case where a claim was made under a policy of fire insurance which was to be 'construed as a contract for indemnification only'. Their Honours explained the rationale for the decision in Castellain v Preston (1883) 11 QBD 380 which they described as a case where the insured had been indemnified by the insurer and subsequently received 'a payment which eliminated the loss' (emphasis added). Their Honours then said: If the insured in that case had received the payment [that is, the payment which eliminated the loss] from the third party while still unpaid by the insurer, and had thereafter sued the insurer on the policy, we should be of opinion…that the fact of his having received the payment from the third party would have constituted a bar to his claim, as distinguished from affording the insurer a right by way of cross-action to have him account for the amount so received. 157 Significantly, the payment referred to was characterised as a payment by another party that was made to eliminate the loss. That is to say, it was not simply the provision of the necessary funds to enable the party to be able to make the payment. Rather, it was a payment made on the basis that the third party had a responsibility to pay for the underlying loss the subject of the claim for indemnity from the insurer. 158 Whether a payment received by an insured is referable to the liability indemnified by the insurer such that it may be concluded that it affords the indemnity that is sought against the insurer is factually dependent. 159 For example, in Merrett v Capitol Indemnity Corporation [1991] 1 Lloyd's Rep 169, Steyn J was concerned with a case where an insurance broker had paid an amount to his client to cover part of the loss in respect of which a claim was made under a policy of reinsurance. The broker was under no legal obligation to make the payment and made the payment 'for their own commercial purpose, namely to save themselves work and keep [their client's] goodwill': at 170. An assurance was given to the Court that to the extent that the amount paid by the broker was recovered under the policy of reinsurance it would be accounted for to the broker. Steyn J reasoned in the following way (at 171): The point is a short one. The payment by the brokers was a gift, albeit a gift made for commercial rather than purely disinterested purposes. The contracts of reinsurance are contracts of indemnity. The question is, therefore, whether the payment diminishes the loss. Not every gift to an assured by a broker diminishes his loss. It is a question of fact in each case whether a gift has or has not been paid in diminution of the loss, and if it is established that the payment was intended solely for the benefit of the assured, it has not been paid in diminution of the loss. In that event it must be disregarded in assessing the assured's recoverable loss. 160 Liberty made reference to a number of other authorities concerned with a range of factual circumstances. 161 In Burnand v Rodocanachi Sons & Co (1882) 7 App Cas 333, the insured recovered an agreed amount under a policy of insurance that covered damaged cargo. The insured received compensation from the United States government for the difference. The insurer claimed that this additional amount should have been paid to the insurer. Lord Blackburn expressed the relevant principle in the following terms at 339: The general rule of law (and it is obvious justice) is that where there is a contract of indemnity…and a loss happens, anything which reduces or diminishes that loss reduces or diminishes the amount which the indemnifier is liable to pay; and if the indemnifier has already paid it, then, if anything which diminishes the loss comes into the hands of the person to whom he has paid it, it becomes an equity that the person who has already paid the full indemnity is entitled to be recouped by having that amount back. 162 Then, in applying the principle to the facts in the case, his Lordship said at 341: In the present case the Government of the United States did not pay it with the intention of reducing the loss. And later, … it was not paid in such a manner as to reduce the loss against which the [insurers] had to indemnify the defendants … 163 The claim by the insurers failed. 164 In Castellain v Preston, Brett LJ (at 386) stated what was said to be the very foundation of every rule with regard to insurance law, namely 'the contract of insurance contained in a marine or fire policy is a contract of indemnity, and of indemnity only, and that this contract means that the assured … shall be fully indemnified, but shall never be more than fully indemnified'. The view was then expressed that any proposition that was inconsistent with that position 'must certainly be wrong'. 165 Then in Colonia Versicherung AG v Amoco Oil Co [1995] 1 Lloyd's Rep 570, reference was made to payments being 'truly a gift or windfall so far as the insured was concerned' as not being payments by way of indemnity. It was determined that the payment made in that case had been made to make good the loss for which indemnity had been given under the policy of insurance and therefore the insurers were entitled to the benefit of that payment and the claim against the insurers failed. 166 In Talbot Underwriting Ltd v Nausch, Hogan & Murray Inc [2006] 2 Lloyd's Rep 195 a vessel was damaged in a shipyard. The vessel owners' insurance did not cover the shipyard owner due to error by the vessel owners' broker. The owner of the shipyard incurred expense repairing the vessel. The owner of the vessel then entered into an agreement to pay an amount to the owner of the shipyard on the basis that it would pursue insurance claims (that could not be pursued by the shipyard owner), including a claim against its broker. 167 Moore-Bick LJ (Richard and Walker LJJ agreeing) reviewed the authorities (including those mentioned above). At [66], Moore-Bick LJ concluded that the line between whether a payment was one which reduced any liability of the insurer to indemnify or did not reduce that liability was whether 'the payment was [or was not] intended to make good the loss against which the underwriters were obliged to indemnify the insured'. A submission to the effect that the fact that the damage had been made good by the shipyard owner at its own expense was not something of which the insurers could take advantage in reducing the extent of the indemnified loss was not accepted: see [62]-[66]. There was no suggestion that the shipyard owner had carried out the repairs with the intention of obtaining payment for the cost of the repairs. Therefore, it intended to 'make good the loss in respect of [the vessel owner] was entitled to claim on the insurers': at [66]. It followed that by the time the claim was made on the insurers, the vessel owner had not suffered any loss that could be recovered from the insurers. 168 It can be seen that the issue is whether the payment made by the third party was one which was made to reduce the same liability for which indemnity is provided under the policy of insurance. 169 In the present case, the payments were made by a parent to meet the obligations of a subsidiary. There is no evidence to suggest that the payments were made to diminish or redress the loss incurred by WSP Structures in the form of the liabilities to make the WSP Payment and the legal costs. There was no submission advanced as to why the payments made by WSP Australia might be properly viewed as being made by WSP Australia on the basis that it had some liability or responsibility to make the payments or to somehow take on the burden of the consequences of the conduct of WSP Structures that had caused it to incur the liabilities for those amounts or to provide some form of redress for loss suffered in the form of the liabilities to pay the WSP Payment and the defence costs. WSP Australia was simply the source of the funds that were used to make the payments. In those circumstances, the only available inference is that the payments were made as a means of putting WSP Structures in funds to meet the liabilities. The inference is supported by the evidence given by Mr Smallhorn to the effect that the amounts were paid in accordance with the usual system for approval of such payments. That is to say, there is nothing to suggest that there was some characteristic of the underlying liability that was the reason why WSP Australia made the payments. 170 On the facts in the present case, I find that the payments were not made by way of indemnity. Therefore, WSP Structures is entitled to claim indemnity from the insurers.

Condition 5 of the Tokio Marine policy 171 Finally, in their written submissions, Chubb and Tokio Marine referred to condition 5 in the Tokio Marine excess policy which stated: All salvages, recoveries or payments from third parties will be applied first to reduce the amount paid or payable by the Company under the Policy. 172 WSP Structures responded by submitting that there was no pleaded reliance upon the condition. It said that if the point had been pleaded then it would have relied upon s 54 of the Insurance Contracts Act. There was no reference to the point in the oral submissions for Chubb and Tokio Marine. The making of the WSP Payment by WSP Australia was not a payment to WSP Structures from a third party to redress or compensate WSP Structures in respect of the liability to pay the WSP Payment. As has been noted, the payment did not put WSP Structures in the position where its liability to make the WSP Payment did not arise. Nor did it reduce or ameliorate that liability. 173 For those reasons, the reference to condition 5 in the Tokio Marine Policy is not an answer to the claim by WSP Structures.

Orders 174 I will direct the parties to propose the terms of orders to give effect to these reasons. If they are unable to agree then they should submit competing minutes of orders together with short submissions of no more than three pages as to why the orders are the appropriate orders to be made. The proposed orders should also deal with the question of costs. I certify that the preceding one hundred and seventy-four (174) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Colvin.