CIC Insurance, Re; Re Hygeia Dianthus Industries Pty Ltd [1991] QSC 222

IN THE SUPREME COURT OF QUEENSLAND Before Mr. Justice Moynihan CATCHWORDS: Counsel: Solicitors: Hearing Date: O.S. NO. 601 of 1991 IN THE MATTER of the Rules of the Supreme Court 0. 64 r. 1A - and - IN THE MATTER of a Contract of Insurance between CIC INSURANCE (as Insurer) and HYGEIA DIANTHUS INDUSTRIES PTY. LTD. (as Insured) JUDGMENT - MOYNIHAN J. Delivered the 29th day of July, 1991. Mr M. Forde Mr A. Morris Andersen & Co., Solicitors 27th June, 1991 -- 1 of 7 -- IN THE SUPREME COURT OF QUEENSLAND O.S. No. 601 of 1991 IN THE MATTER of the Rules of the Supreme Court O. 64 r. 1A - and - IN THE MATTER of a Contract of Insurance between CIC INSURANCE (as Insurer) and HYGEIA DIANTHUS INDUSTRIES PTY. LTD. (as Insured) JUDGMENT - MOYNIHAN J. Delivered the 29th day of July, 1991. The applicant insured the respondent under what is described as an Industrial Special Risks Insurance Policy. It was not in issue that the applicant is obliged by the policy to indemnify the respondent in accordance with its terms in respect of damage as therein defined. There is however a difference between the parties as to the construction to be given to certain of the terms. Relevantly for present purposes the following facts are accepted by the parties. The respondent developed and supplied carnation plants to growers who in turn supplied carnations to florists. In the course of its business and for the purpose of producing plants to the high standard demanded by professional growers the respondent utilised a system designed to:- (i) regulate the temperature of the plants; -- 2 of 7 -- 2 (ii) control the intensity of sunlight to which the plants are exposed; (iii) regulate the quantity of water applied to the plants; (iv) regulate the quantity of fertiliser supplied to the plants; (v) protect the plants from insect infestation; and (vi) protect the plants from exposure to soil diseases. As part of the system to which I have referred the respondent maintained a number of structures which can conveniently be referred to as greenhouses. These were constructed by means of an aluminium frame enclosed with a thick translucent plastic material marketed under the name "solar weave". The solar weave was spread over the aluminium frame of the greenhouse and connected at the joints by a special aluminium extrusion which had a locking piece. Where separate sheets of solar weave met they were overlapped and fused. The process of connection, overlapping and fusion held the solar weave taut over the aluminium frame. On the afternoon of 21 January, 1991 a severe storm accompanied by high winds struck the Birkdale area in which the respondents greenhouses were located. In the course of the storm a large area Qf the solar weave covering was torn away from the aluminium frame exposing plants to the elements. Water and soil particles washed through the breached solar weave from the roof of the greenhouse carrying with it inoculum for the disease fusarium oxysporum. It was subsequently discovered that the plants in the greenhouse had become infected with the disease which spread through the whole of the mother stock plants -- 3 of 7 -- 3 contained in the relevant greenhouse. The plants propagated from the mother stock will be infected by the same disease and thei~ sale is prohibited by legislation. As a consequence the respondent had to destroy the whole of the mother stock and replace it with infection-free mother stock. By cl. 1 of the policy the applicant is bound to indemnify the respondent in the event of "any physical loss, destruction or damage . . . not otherwise excluded". Section 2 deals with consequential loss in terms of "any cause or event not hereinafter excluded". The policy contains provisions for exclusions which, relevantly for present purposes, provide that the applicant is not liable to indemnify the respondent in terms of ell. 1 and 2 in respect of:- " ... physical loss, destruction or damage occasioned by or happening through:- (a) moths, termites or other insects, vermin, rust or oxidation, mildew, mould, contamination or pollution, wet or dry rot, corrosion, change of colour, dampness of atmosphere or othervariations in temperature, evaporation, disease, inherent vice or latent defect, loss of weight, change in flavour, texture or finish, smut or smoke from industrial operations (other than sudden and unforeseen damage resulting therefrom). (b) etc. Provided that this Exclusion 4(a) to (e) shall not apply to subsequent loss, destruction of or damage to the Property Insured occasioned by a peril (nototherwise excluded) resulting from any event or peril referred to in this exclusion." The facts as I have set them out having been accepted by the parties. They are nevertheless in dispute as to whether the respondent's loss is a loss for which it is entitled to be -- 4 of 7 -- 4 indemnified in terms of the policy. In this context the applicant relies on the perils exclusion the relevant terms of which I have set out. Subject to that, which it seems to me may be fairly regarded as a dispute as to the construction given to the policy in the circumstances as they stand, there are no other issues between the parties save as to the quantification of the amount of the respondent's loss. That is not a matter with which I am concerned. The applicant insurer has brought a summons pursuant to O. 64 r. 1 A seeking a declaration that upon the true construction of the policy it is not liable to indemnify the respondent for the loss or damage suffered by the respondent as a result of its "mother stock" being infected by the disease fusarium oxysporum. It seems to me that the proximate cause, in the insurance sense, of the damage suffered by the respondent was the storm which tore away the solar weave "exposing the plants ... to the elements" as a result of which the inoculum for the infection of the disease gained entry by means of the water and soil particles washed from the roof of the greenhouse through the breached solar screen. This was the cause "to which may be ascribed the qualities of reality, predominance and efficiency": Leyland Shipping Co. v. Norwich Union Fire Insurance Society [1918] A.C. 350 at 369-370 and Wood v. Associated National Insurance Co. Ltd [1985] 1 Qd. R. 297 (Full Court). At 306 of the latter case McPherson J. remarked that the authorities showed that "proximate" meant "not latest in time but the predominant in efficiency" which necessarily involving "a process of selection -- 5 of 7 -- 5 from among the co-operating causes to find out what is the proximate cause in the particular case". It seems to me that in the present case one probably does not even arrive at a process of selection from among co-operating causes because the cause was the storm breaching the roof fabric through which entered the water and soil particles carrying the source of the infection of the plants. As I say in any event it seems to me that it was the predominant cause. On the view I take of the matter then the applicant must rely on the exclusion provision the relevant terms of which I have set out earlier. It may be accepted that the fusarium oxysporum which necessitated the destruction of the respondent's mother stock was a disease in terms of the clause. I have concluded however the proximate cause of the respondent's loss was the storm damage and consequent introduction of the contaminating matter. The disease was subsequent to the insured peril. Other considerations aside the damage would in any event have satisfied the requirements of being sudden and unforeseen and I do not understand it to have been suggested otherwise. On this view then the subsequent infection comes within the proviso to the exclusion provided for by cl. 4(a); cf. Spika Trading Pty. Limited v. Royal Insurance of Australia Limited ( 1985) Australian and New Zealand Insurance Cases 60-663. In the circumstances the appropriate course seems to be to declare the applicant liable to indemnify the respondent for loss or damage suffered by it as a result of the loss of mother stock infected by the disease fusarium oxysporum and to order the -- 6 of 7 -- 6 applicant to pay the respondent's costs of and incidental of the application to be taxed. -- 7 of 7 --