Abstract

Article

Exclusion of Soil Movement

Heave constitutes soil movement. Guastalegname v Australian Associated Motor Insurers Ltd [2017] VSC 420.

Construction of Exclusions

The task of contractual interpretation involves consideration of the text, context and purpose of the relevant provision. State of Victoria v Tatts Group Ltd (2016) 328 ALR 564. In the construction of a contractual term, including an exclusion, the words are the primary focus is on its words. If they are unambiguous and not commercially nonsensical or commercially inconvenieny, they must be given effect to, despite that it may be suspected that the parties intended another meaning.^[ Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109. In accordance with the objective approach those matters are resolvd by what persons in the position of the parties would have reasonably understood to be the meaning of the language at the making of the contract.  The Court does not strain to find ambiguity in exclusion clauses. It is only appropriate to apply the contra proferentem principle when ambiguity remains after applying accepted principles of contractual interpretation. Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500, 507–11; CE Heath Underwriting & Insurance (Australia) Pty Ltd v Edwards Dunlop & Co Ltd [1993] HCA 21; (1993) 176 CLR 535, 548; GL Nederland (Asia) Pty Ltd v Expertise Events Pty Ltd [1999] NSWCA 62 [27]; Bank of Queensland Ltd v Chartis Australia Insurance Ltd [2013] QCA 183 [71]. It is assumed that the parties intended to produce a commercial result in a commercial contract. Re Golden Key Ltd [2009] EWCA Civ 636 [28]; Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640, 656–7 [35]. If an exclusion is reasonably open to competing constructions, the one that avoids capricious, unreasonable, inconvenient or unjust consequences will be preferred. Australian Broadcasting Commission v Australasian Performing Rights Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109; Bank of Queensland Ltd v Chartis Australia Insurance Ltd [2013] QCA 183 [70]; Guastalegname v Australian Associated Motor Insurers Ltd [2017] VSC 420. The interpretation of an exclusion clause “is to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in case of ambiguity.”: Darlington Futures Ltd v Delco Australia Pty Ltd  (1986) 161 CLR 500; BNY Trust Company of Australia Limited v MMJ Real Estate (WA) Pty Ltd (No 2) [2018] NSWSC 1938. Whilst an exclusion should not be unreasonably constrained, there should be a construction which conforms to the policy’s operation as a whole: Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522, avoiding capricious, unreasonable, inconvenient or unjust consequences (Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, having regard to the risks covered by the policy and its purpose: Major Engineering Pty Ltd v CGU Insurance Ltd (2011) 35 VR 458; Kyriackou v ACE Insurance Ltd [2013] VSCA 150. There is also a general tendency to resolve exclusion clauses in favour of the insured where the clause allows it: Kyriackou (at [89]). A court will endeavour to construe an exclusion consistently with the commercial purpose of the contract of insurance and where possible to avoid the exclusion’s operating so as to defeat the indemnity substantially and render the policy practically illusory: Ashmere Cove Pty Ltd v Beekink [2009] FCA 564; Kaboko Mining Limited v Van Heerden (No 3) [2018] FCA 2055. An exclusion clause must be read in light of the contract as a whole, thereby giving due weight to the context in which it appears. Selected Seeds Pty Ltd v QBEMM Pty Ltd [2010] HCA 37; (2010) 242 CLR 336 at 344 [29]
As the onus of proof of its applicability rests upon the insurer, if it is is open to two interpretations, one of which would inappropriately circumscribe the cover provided by the insuring clause and one which would not, the latter is to be preferred: Fitzpatrick v Job and Job t/as Jobs Engineering [2007] WASCA 63; (2007) 14 ANZ Insurance Cases 61-731 at 76,076-76,077 [268].

Surplusage

The ejusdem generis rule does not apply in commercial documents. Rather, if general words have an unrestricted meaning the enumerated items are surplusage. The presumption against surplusage is of little value in ascertaining the intention of the parties to commercial documents. It is appropriate to inquire whether there is anything in the text of the contract or in the circumstances in which it was made which would lead to the conclusion that the parties intended the general words to have some limited meaning. Chandris v Isbrandtsen Moller Co Inc [1951] 1 KB 240; Guastalegname v Australian Associated Motor Insurers Ltd [2017] VSC 420.

Damages Against Broker

When the insured has entered into a prior settlement with the insurer relating to the same loss, the insureds’ damages against his broker is the difference between the amount that the insured would have recovered under the insurance that the broker should have arranged and the amount the he recovered from the insurer. The insured has the onus of proving the amount of the settlement. A court should approach the task objectively having regard to the circumstances existing at the time of settlement including the material available to the parties; the legal and other advice proffered, the course of negotiations; and an assessment of the chances of the parties succeeding in their respective claims.SKM Recycling Pty Ltd v Aust Reliance Pty Ltd (2017) VSC 159.