Abstract

Article

Costs of Multi-Party Proceedings

If the claimant sued an insured who cross-claimed against his insurer, and the claimant failed against the insured, who failed against his insurer, whether the climant should be ordered to pay the insured the amount of costs which the insured is ordered to pay the insurer will depend on the privacy of the issue between them.  DIF III Global Co-Investment Fund LP v Babcock & Brown International Pty Limited (No 2) [2019] NSWSC 1578.

 

Trigger of Cover – Awareness of Circumstances

 

If the Policy promises to indemnify the insured against liability arising out of claims “first made during the Policy Period”, and by definition provides that claims are deemed to be to be “made” when the insured first became “aware of any fact, circumstance or event which could reasonably be anticipated to give rise” to a claim, and of which  written notice of the pleaded claim, or any such fact, circumstance or event of which it was a “direct result”, would be given to the Insurers within a specified time from the expiration of the Policy, while a breach of the condition precedent as to notice might be relieved by s. 54 of the Insurance Contracts Act 1984 (Cth), the absence of the insurer’s necessary awareness during the policy period could not be cured by the Section, and the cover would not have been triggered. DIF III Global Co-Investment Fund LP v Babcock & Brown International Pty Limited (No 2) [2019] NSWSC 1578; affd DIF III Global Co-Investment Fund L.P v DIF Capital Partners Limited [2020] NSWCA 124.

 

Extension of the Jones v Dunkel Principle

The Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 principles may extend to a party’s failure to examine a witness in chief on a topic, since it implies that he fears to do so, which is then some evidence that such examination would have exposed facts unfavourable to him. Commercial Union Assurance Company of Australia v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418. The reasoniing might be applied when an expert witness does not address a particular topic otherwise within his expertise. Ta Ho Ma Pty Ltd v Allen [1999] NSWCA 202; (1999) 47 NSWLR 1 at 4; [1999] NSWCA 202; Gordon Martin Pty Limited v State Rail Authority of New South Wales [2008] NSWSC 343 at [322]; Aristocrat Technologies Australia Pty Ltd v Global Gaming Supplies Pty Ltd [2009] FCA 1495 at [417]; Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2010] FCA 1211 at [462]; Australian Securities and Investments Commission (ASIC) v Rich (2009) 236 FLR 1; [2009] NSWSC 1229 at [478]- [480]; Harris v Bellemore [2010] NSWSC 176 at [136]), but has not yet attained  the level of principle. Global Co-Investment Fund LP v Babcock & Brown International Pty Limited (No 2) [2019] NSWSC 1578.

 

Exclusions

If the terms of an exclusion are met, it should be applied. Burns Philp Hardware Ltd v Howard Chia Pty Ltd (1987) 8 NSWLR 642; MetLife Insurance Ltd v RGA Reinsurance Company of Australia Ltd [2017] NSWCA 56; XL Insurance Co SE v BNY Trust Company of Australia Limited [2019] NSWCA 215.

Construction

Construction by Appellate Court

As a contract has only one true construction, the task of an appellate court in an appeal concerning the construction of a contract is to determine for itself the correct construction of the contract: Life Insurance Company of Australia Ltd v Phillips [1925] HCA 18; (1925) 36 CLR 60; Minister for Immigration and Border Protection v SZVFW [2018] HCA 30; (2018) 92 ALJR 713 at [154]. When the court has identified the competing constructions, each should be tested against the text, context and purpose of the contract. XL Insurance Co SE v BNY Trust Company of Australia Limited [2019] NSWCA 215

Process of ConstructionV

For a complex commercial document the starting point is the literal or grammatical meaning, followed by its legal meaning, which is then applied to the facts. Zhang v ROC Services(2016) 93 NSWLR 561; [2016] NSWCA 370. As it is a commercial contract, the Court should construe it as a reasonable businessperson would have understood it to mean. It objectively identifies the imputed intention of the parties through its text and in the light of its circumstantial context, which may be discerned from the entire text, and purpose. Ordinarily, this is possible by reference to the contract alone, and if an expression is unambiguous, evidence of surrounding circumstances cannot be adduced to contradict its plain meaning. Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; Victoria v Tatts Group Ltd [2016] HCA 5; (2016) 90 ALJR 392; Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85. But the canons of construction provide a starting point, or preference, not an absolute rule. XL Insurance Co SE v BNY Trust Company of Australia Limited [2019] NSWCA 215,

Business Commonsense

Caution is necessary as to a finding of of commercially unlikely consequences to depart from the parties’ language. Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd [2019] NSWCA 185; Jireh International Pty Ltd v Western Exports Services Inc [2011] NSWCA 137 at [55]; Cushman & Wakefield (NSW) Pty Ltd v Farrell [2017] NSWCA 24 at [71]; Lindsay-Owen v Winton Partners Funds Management Pty Ltd [2017] NSWCA 78 at [20]. Persons may differ as to business commonsense, and a lawyer’s surmise may be erroneous., He or she may lack a general understanding of commerce, or have inadequate information information of the parties’ commercial positions and larger commercial concerns. In litigation, each remains convinced that a business commonsense happens to coincide with its own commercial interests: From Text to Context: Contemporary Contractual Interpretation - Spigelman CJ (2007) 81 ALJ 322 at 330. Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181; Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407; XL Insurance Co SE v BNY Trust Company of Australia Limited [2019] NSWCA 215.

Attraction of Construction Bringing Convenience and Certainty

A construction will be attractive if it provides commercial certainty to the parties by being readily applied rather than by generating inconvenience by creating the need for such as a causal inquiry. AFC Holdings Pty Ltd v Shiprock Holdings Pty Ltd [2010] NSWSC 985; (2010) 15 BPR 28; XL Insurance Co SE v BNY Trust Company of Australia Limited [2019] NSWCA 215.

Where the language is open to two constructions, preference will be given to a construction that avoids consequences which appear to be “capricious, unreasonable, inconvenient or unjust, ‘even though the construction adopted is not the most obvious, or the most grammatically accurate’”: Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109 (Gibbs J); [1973] HCA 36. XL Insurance Co SE v BNY Trust Company of Australia Limited [2019] NSWCA 215

Ambiguity and Contra Proferentem

Ambiguity is an ambiguous reference: Allstate Explorations NL v Beaconsfield Gold NL [1999] NSWSC 832. It may arise from doubt as to the construction in their totality of the ordinary and in themselves well-understood English words the parties have employed. Life Insurance Company of Australia Ltd v Phillips (1925) 36 CLR 60. It means having two or more plausible meanings when the context is taken into account by an ordinary intelligent and reasonable business person. Burns Philp Hardware Ltd v Howard Chia Pty Ltd (1987) 8 NSWLR 642. It can arise only when, after the meaning of the words has been ascertained and the canons of construction applied, they still convey a double or multiple meaning. But it is not mere difficulty of construction, even such as to result in a difference of judicial opinion. L Schuler AC v Wickman Machine Tool Sales Ltd  [1974] AC 235 at 261; State Lotteries Office v Burgin (unrepted, NSWCA 19 May 1993).

Whether words are ambiguous requires  the court to test the competing constructions against text, context, purpose and commercial consequences and preference is given to a construction supplying a congruent operation to the various components of the whole. Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; MetLife Insurance Ltd v RGA Reinsurance Company of Australia Ltd [2017] NSWCA 56; Re Sigma Finance Corp (in administrative receivership) [2009] UKSC 2; [2010] 1 All ER 571; Rainy Sky SA v Kookmin Bank [2011] UKSC 50; [2011] 1 WLR 2900 at [28]. XL Insurance Co SE v BNY Trust Company of Australia Limited [2019] NSWCA 215

Outside the special area of contracts of guarantee, the contra proferentem rule is one of last resort and the rule applies only when ambiguity remains after all other avenues of construction have been exhausted.  Beefeater Sales International Pty Ltd v MIS Funding No 1 Pty Ltd [2016] NSWCA 217 at [66]; Zhang v ROC Services (2016) 93 NSWLR 561; [2016] NSWCA 370 XL Insurance Co SE v BNY Trust Company of Australia Limited [2019] NSWCA 215.

Redundancy

Words should be construed to give them an effect rather than to make them redundant: North v Marina [2003] NSWSC 64 at [45]; Davuro Pty Ltd v Wilkins [2000] FCA 1902, (2000) 105 FCR 476 at [152], [230], but this is not an invariable rule. It may be appropriate to do so if the alternative construction is inconsistent with other provisions or with the contract’s commercial purpose or where it appears that the words have been included out of abundant caution: see Re Strand Music Hall Co Ltd; Ex parte European and American Finance Co Ltd  55 ER 853; Dryden Construction Co Ltd v New Zealand Insurance Co Ltd [1959] NZLR 1336; Beaufort Developments (NI) Ltd v GilbertAsh NI Ltd [1999] 1 AC 266 at 273-4. XL Insurance Co SE v BNY Trust Company of Australia Limited [2019] NSWCA 215

Prior Policy

As a matter of construction, the presence or absence of the provision under construction in any previous policy issued to the insured is not to the point  and is not a relevant reason for not giving effect to the natural meaning of the provision, which reflects the bargain the parties made. XL Insurance Co SE v BNY Trust Company of Australia Limited [2019] NSWCA 215

Premature Declaratory Judgment

The court should not usually make a declaration as to an insurer’s liability to indemnify an insured when the liability of the insured to a claimant has not yet been established by judgment. AMP Financial Planning Pty Ltd v CGU Insurance Limited (No 2) at [4]-[12]; University of New South Wales v Moorhouse (1975) 133 CLR 1; Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564 at 582;; AMP Fire & General Insurance Co Ltd v Dixon [1982] VR 833; XL Insurance Co SE v BNY Trust Company of Australia Limited [2019] NSWCA 215.