Council of the City of Gold Coast v Reeves & Ors [1993] QSC 93

~£0{ I . "tiJ State Reportin ·Bureau TRANSCRIPT OF PROCEEDINGS (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the wTitten authority of the Director, State Reporting Bureau.) SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION MACKENZIE J No 2051 of 1989 COUNCIL OF THE CITY OF GOLD COAST and PETER REEVES, KENNETH PARISH SCOTT, ANTHONY DEREK SWIFT MANGNALL, WILLIAM THOMAS NOEL REEVE, JOHN RICHARD EDWARD KENT trading as 11 GIBB AUSTRALIA" and CARDNO & DAVIES AUSTRALIA PTY LIMITED and C E HEATH UNDERWRITING & INSURANCE (AUSTRALIA) PTY LTD (sued in its own right and as representatives of certain Lloyds' Underwriters), ASSICURAZIONI GENERAL DI TRIESTE E VENIZID (UK) and EAGLE STAR INSURANCE COMPANY LIMITED and GIBB AUSTRALIA PTY LTD and 1 Plaintiff First Defendants Second Defendant First Third Party Second Third Party 4th Floor. ThP. Law Courts. Georve Street. Brisbane. 0. 4000 Telenhon.J?..' f07l 227 4:~1in. Fac~imilP! {()7) ??7 ;:;.<;~? -- 1 of 9 -- GIBE AUSTRALIA PTY LTD BRISBANE .. DATE 05 I 04/93 .. JUDGMENT Third D'efendant 2 10 20 30 40 50 60 -- 2 of 9 -- 50493 D.1 Turn 1 CAJ (Mackenzie J) HIS HONOUR: These are mirror image applications for declarations concerning the scope of professional indemnity of a professional indemnity insurance policy. The matter involves having that issue, which arises as between the second defendant and the first third party, determined before trial. Notwithstanding that the trial date is set for 17 May and several weeks have been set aside for it, all parties express reasons, including the saving of time at the trial, in favour of having the point heard now rather than at trial. Notwithstanding my misgivings over the risk associated with the possibility of an appeal against this decision delaying the trial, the parties indicated that they were desirous of keeping the trial date and, if an appeal were advised, would approach the Court of Appeal for an expedited hearing which they felt was feasible because of the narrow point of construction involved. The brevity of the reasons that follow reflects the objective of maximising the time available for the appeal process should any party be advised to appeal. The point in issue is whether the first third party, which I shall call "Heath", is liable to indemnify the second defendant, which I shall call "Cardno Davies", under a professional indemnity insurance policy entered into on or about 30 June 1987. It seems to be common ground that Cardno Davies and the first defendant, which I shall call "Gibb", were joint venturers under the name of Damcorp in a project involving works on the Hinze Dam, and that the negligence alleged by the plaintiff, Gold Coast City Council, which I shall call "The council" arose from activities of Gibb and not 3 10 20 30 40 50 60 -- 3 of 9 -- 50493 D.1 Turn 1 CAJ (Mackenzie J) Cardno Davies. Mr Gore soughb leave to appear on beha~f of the council on this hearing on the basis that his client had a sufficient interest in the outcome, principally by reason of the 10 difference in sums available to meet damages, if awarded, if one or other views of Heath's liability prevailed and the effect of this on the plaintiff's consideration of possible settlements if there was a shortfall. 20 I took the v~ew, notwithstanding an objection from Mr Sofronoff, that Mr Gore's client had sufficient interest to justify leave being granted and such leave was given. The proposal for the insurance cover contained three questions 30 whichare conveniently referred to hereafter as "Question 19". They were, "Does the proposer require coverage for: (a) Their whole liability in joint venture? (b) Liability in respect of work physically performed by them? ~ (c) Liability of joint venture?" There were boxes provided so that a "Yes" or "No" answer could be indicated and Cardno Davies indicated "Yes" to each of those questions. Cardno Davies accepted, by the execution of the proposal, that: "The proposed form shall be the basis of the contract and shall be deemed a part of the policy/certificate as if annexed thereto and deemed a part thereof." The certificate of insurance declared that Heath was bound in accordance with the terms and conditions contained in the 4 50 60 -- 4 of 9 -- 50493 D.1 Turn 1 CAJ (Mackenzie J) certificate and in accordance with the insurance clauses attached to it. The preamble in the document so described recited that the insured, ''Named in the proposal being the basis of this insurance'' had made a written proposal containing particulars and statements which it was agreed were the basis of the contract and were to be considered as incorporated therein. I should mention that there was nothing between the time of the proposal and the time of finalising the policy that suggested that the request for joint venture coverage had been refused or, for that matter, even discussed, although Mr Sofronoff submitted that what was offered by Heath did not, on its face, refer to joint venture cover. One can see that if what was sought to be covered in the proposal was varied by the insurer, but that the policy incorporated the proposal into the agreement, there would be a question about the extent to which the remainder of the proposal was incorporated into the policy. However, that is not this case. It is in that context that the critical issue in the application is to be viewed. By Clause 1(a) of the insuring clauses the insurer undertakes to indemnify the insured for breach of professional duty by reason of any negligent act, error or omission, whenever and wherever committed, on the part of the insured or its employees. Mr Sofronoff, for Heath, submitted that the construction of Clause 1 (a) is that it does not extend to liabilities for which Cardno Davies is contractually liable by reason of 5 10 20 30 40 50 60 -- 5 of 9 -- 50493 D.1 Turn 1 CAJ (Mackenzie J) its participation in the joint venture agreement. It extended only to breach of professional duty by Cardno Davies itself. He relied on a line of authorities to the effect that, where there is inconsistency between the proposal form and the policy, the terms of the policy prevail. The authorities to which he referred are conveniently set out in paragraph 6 of his outline and I will not read them into the record. Mr Gotterson, for Cardno Davies, submitted that the proposal had, by express words, been incorporated into the policy. He submitted, in effect, there was no express exclusion of joint venture liability and that there was, at worst, an ambiguity in Clause 1 (a) which should be resolved in favour of his client by resorting to the terms of the proposal. He co:r:1eentrated on the phrase, "On the part of", submitting that it was-not a term of art and that, therefore, it was .&ppropriate, by reference to Clause 1(a) and question 19 in the proposal, to construe it as extending to acts on the part of the joint venturer for whose negligent acts, errors or omissions the insurer was liable. Alternatively, he submitted that words to like effect should be imported into Clause 1 (a) to effect the true intent of the parties. He relied on a line of cases, which are set out in paragraph 5 of his outline, for the proposition that where the proposal and the certificate of insurance both incorporate the proposal into the contract, they should be read and construed together to arrive at the true contract. Mr Gore supported the proposition that the policy extended to cover Cardno Davies. He submitted that the three separate 6 20 30 40 50 60 -- 6 of 9 -- 50493 D.1 Turn 1 CAJ (Mackenzie J) questions in question 19 could only be sensibly read as being directed to coverage for joint venture liabilities. He submitted that the words of Clause 1 (a) were, in any event, without the help of the proposal, wide enough to cover Cardno Davies. He submitted that even if Cardno Davies' liability was in contract and founded on acts or omissions of Gibb, the policy defined the type of claim and not the type of legal liability. In substance the claim was for breach of professional duty on the part of Cardno Davies by reason of any negligent act, error or omission. He submitted, on the basis of the authorities in paragraph 9 of his outline, that a narrow or pedantic approach should not be taken to the construction of professional indemnity clauses. It is not necessary to refer to other refinements of his argument in view of the conclusion that I reach. In my view, the case falls within the category of cases where the true meaning of the contract can be determined by reading the proposal and the words of the insuring clauses together. When that is done any ambiguity or lack of clarity within the meaning of Clause 1 (a) disappears in favour of interpretation that the policy extends to cover any liability that Cardno Davies may be found to have incurred as joint venturer. It is not a case where the conflict between the words of the proposal and the words of the policy are of such a nature that the principle relied on by Mr Sofronoff applies. I will therefore formally determine that the issue of 7 iO 20 30 40 50 60 -- 7 of 9 -- 50493 D.1 Turn 1 CAJ (Mackenzie J) construction should be determined separately from the question of election, which is another issue on the pleadings. The orders that I make are the following: that the Heath summons is dismissed. On the Cardno Davies summons I make a declaration in terms of paragraph 1 . I order that the respondent pay the applicant's costs to be taxed on the council summons. I grant leave to Mr Gore to appear. I order that the costs of the application be the council's costs in the cause against Heath. HIS HONOUR: That is my intention, that having been given leave to appear, he should have the costs of the application. The view I take is it was not unreasonable for the council to appear on the matter with a view to protecting its interests in the matter and, having given leave, I think that that order is appropriate. HIS HONOUR: Yes, I propose to allow the order to stand. If there is any question of appeal and you wish to appeal against that as well, I will give you leave. MR BRANDIS: I ask for leave. 8 10 20 30 40 50 60 -- 8 of 9 -- 50493 0.1 Turn 1 CAJ (Mackenzie J) HIS HONOUR: I will give you leave to appeal against costs, if you wish, in that respect. MR BRANDIS: Thank you, Your Honour. 9 10 20 40 50 60 -- 9 of 9 --