JDGD v Allianz Australia Insurance Limited

1. [1]

   The plaintiff, a company, commenced proceedings against the defendant, an insurance company, with the filing of a statement of claim on 10 October 2022.

2. [2]

   A further amended statement of claim was filed on 29 June 2023. The following background is taken from a Memorandum of Agreed Facts and Issues filed on 11 April 2024.

3. [3]

   The plaintiff was the lessee of commercial premises (the Premises) in Fyshwick in the Australian Capital Territory. The lessor was H.H. & W. Pty Ltd.

4. [4]

   On or about 4 January 2016, H.H. & W. Pty Ltd sold the Premises to Papas Investments (ACT) Pty Ltd (Papas Investments), so that Papas Investments became the lessor.

5. [5]

   Another company, Papas Painting Contractors Pty Ltd (Papas Painting) had a public liability insurance cover with the defendant. Papas Painting was deregistered on 19 February 2021, leaving the defendant susceptible to being sued, if otherwise appropriate, pursuant to s 601AG of the Corporations Act 2001 (Cth).

6. [6]

   The amended statement of claim asserts that on 27 and 28 October 2016 the new lessor, Papas Investments, engaged Papas Painting to “clean and paint the roof” of the Premises occupied by the plaintiff.

7. [7]

   In carrying out the cleaning and painting work, Papas Painting used a high-pressure water spray which:

8. [8]

   I understand “friable” to mean “easily broken up; crumbly.” (Collins Dictionary, online ed, accessed 17 April 2024).

9. [9]

   On 2 November 2016 WorkSafe ACT issued a Prohibition Notice which required the Premises to be quarantined and the area made safe. This was because, according to WorkSafe ACT:

10. [10]

    During the make-safe works the plaintiff was unable to trade and therefore suffered loss and damage. The plaintiff was a purveyor of bedding and soft furnishings operating under the name Bed Shed Fyshwick.

11. [11]

    On 7 February 2017, not having re-entered the premises, the plaintiff terminated the lease. It started up its business in different premises in March 2017. 128 days had elapsed between the issuing of the Prohibition Notice and the business starting up again.

12. [12]

    In addition to losses caused by not trading, the plaintiff had also incurred expenses associated with asbestos contamination of some stock, clean up fees and some “unsalvageable fit out materials it had installed in the premises.”

13. [13]

    Compensation for the loss and damage is sought in these proceedings. The plaintiff says that the loss and damage was caused by the negligence of Papas Painting. The defendant admits that Papas Painting was negligent.

14. [14]

    The plaintiff says that because Papas Painting was insured under a public liability policy which covered its negligence, then, responding to the policy, the defendant should pay the compensation to the plaintiff. The compensation has been agreed at $900,000 inclusive of interest to the date of any judgment given in favour of the plaintiff.

15. [15]

    The defendant admits that a policy was in place at the relevant time but says that it is not responsible for the negligence of Papas Painting because of an exclusion clause in the policy.

16. [16]

    The policy is called an Allianz Business Pack and was in place from 2 February 2016 to 28 February 2017.

17. [17]

    The named plaintiff has actually been compensated for its losses by its own insurer and has subrogated its rights to that insurer (CGU). This fact has no relevance other than the plaintiff referring, for comparative purposes, to a differently worded exclusion clause in the CGU policy.

18. [18]

    The event having occurred in the ACT, the law of that territory is applicable. However, any distinction does not arise in this matter. I note that, if the legislation was applicable, there is no difference between the relevant provisions of the Civil Liability Act 2002 (NSW) and the Civil Law (Wrongs) Act 2002 (ACT).

The issue to be decided

1. [19]

   As a result of the agreements and admissions only one issue was left to be decided:

The insurance policy

1. [20]

   The insured is covered for its public liability. “Public liability means Your legal liability covered by the Policy but not arising out of Your Products.”

2. [21]

   The cover is stated in this way:

3. [22]

   The relevant exclusion clause states:

4. [23]

   The parties agree that the onus lies on the defendant to establish that the exclusion applies.

Does the exclusion apply?

1. [24]

   I think the starting point is in the Statement of Agreed Facts and in particular at [22]:

2. [25]

   I have already stated that the Prohibition Notice related to an area which had been contaminated by asbestos.

3. [26]

   My initial reaction from [22] of the agreed facts was that the whole of the damage and losses suffered by the plaintiff were in some way, to be neutral at this stage, connected to asbestos. There was no, for example, water damage caused by overzealous cleaning.

4. [27]

   Counsel for the plaintiff submitted however, that the plaintiff’s case did not concede that [22] was an exclusive statement of damage. It was conceded that any non-asbestos related damage, for example due to water damage alone, could not be distinguished from the asbestos linked damage and would have been a minor component. The point was not made to excise an amount from the $900,000 and attribute it to non-asbestos related damage, but rather to strengthen its construction argument which I will return to below.

5. [28]

   In Darlington Futures Ltd v Delco Australia Ltd (1986) 161 CLR 500; [1986] HCA 82, the High Court said, at p 510:

6. [29]

   The NSW Court of Appeal applied Darlington Futures in G L Nederland (Asia) Pty Ltd v Expertise Events Pty Ltd [1999] NSWCA 62 and added this in respect of the contra proferentum rule, at [27]:

7. [30]

   As I understood the plaintiff’s argument, it arose from two primary points, to some degree overlapping, together with a series of secondary submissions.

8. [31]

   The primary points were:

   1. (1)

      It was necessary to read the introductory words under the heading “Exclusions” together with, as one effective sentence, the specific exclusion. Therefore, the exclusion clause should be read as:

   2. (2)

      Read in this way the relevance of asbestos was to be seen as part of the requirement creating a liability and not as a component of the damages flowing from liability. On this basis, in the circumstances of this case, the liability arose from the application of high pressure water hosing to the roof and had nothing to do with asbestos. The fact that the damage flowing from the liability stemmed from the presence of asbestos, was irrelevant.

   3. (3)

      The wording of the exclusion, in particular the reference to “arising” was not sufficient to import into the exclusion wording such as “in connection with” which would have had the result of undeniably linking the damage to the liability.

9. [32]

   In support of the above primary points the plaintiff referred me to different parts of the policy including the definition of “occurrence” and “property damage”. The intent of these references was to distinguish the act of high pressure hosing from the presence of asbestos which had been in the roof for many years before the work was done.

10. [33]

    The plaintiff submitted that there were four distinct parts to the establishment of liability:

    1. (1)

       high pressure water spraying was applied to the roof;

    2. (2)

       material containing asbestos was dislodged from the roof;

    3. (3)

       the material including water and debris entered the building; and

    4. (4)

       the material dripped into or around the building.

11. [34]

    The plaintiff submitted that it was only the first of the four parts that was necessary to establish liability so that whatever relationship damages may have had to asbestos, that relationship was not relevant because the exclusion applied only to the manner in which liability had been established.

12. [35]

    I understand the distinction the plaintiff was endeavouring to make but I think it is undone by the agreed facts at [23]-[25] as to the basis of Papas Painting’s negligence:

13. [36]

    It can be immediately seen from, in particular [23], that the basis for liability was not just the use of a high-pressure water spray but also from the use of the spray on a roof which was “likely to be asbestos containing material (“ACM”), or should be assumed to be ACM … .” In other words, it was a fundamental ingredient of the agreed negligence that the high pressure hosing was applied to this particular roof.

14. [37]

    Thus, the negligence creating the liability included the spraying of a roof likely to contain asbestos. Without this element, at least on the agreed facts, negligence would not necessarily have been established. This is stated in the clearest of terms in [25] of the agreed facts, quoted above.

15. [38]

    I think my conclusion also deals with the plaintiff’s second point concerning the use of the word “arising” as opposed to, for example, “in connection with”, asbestos. Once the asbestos is seen as part of the negligence, and in turn the basis for liability, then it easily follows that the liability arises from, and is caused by, or contributed to by, asbestos.

16. [39]

    The plaintiff submitted that “the exclusion does not apply to the circumstances of this case.” The plaintiff continued:

17. [40]

    In my view there are no competing constructions. Once liability is seen as arising from a factor which includes asbestos the exclusion is straightforward and not ambiguous.

18. [41]

    Besides ambiguity, the plaintiff also referred to the nature of the insurance policy, being one which, as a “Business Pack,” was designed to protect the insured from public liability as it went about its normal business, in this case painting and cleaning. This submission is consistent with this passage from Horsell International Pty Ltd v Divetwo Pty Ltd [2013] NSWCA 368 where the Court of Appeal, after confirming the principles stated in Darlington Futures, added, at [192]:

19. [42]

    I completely agree with the plaintiff that business efficacy is a relevant consideration. If the purpose of the Business Pack is to allow the insured to go about its normal business of cleaning and painting, then an exclusion that prevents this conduct should not be interpreted to prevent that occurring.

20. [43]

    However, I do not see the consideration as one which necessarily prevents an exclusion from certain events or factors that might arise in the course of the insured’s normal business. It is the very essence of an exclusion clause that it excludes an occurrence or event that might otherwise occur while the insured was going about its normal business.

21. [44]

    Both parties made submissions about the structure of the exclusion clause from a grammatical standpoint. For example, the plaintiff submitted:

22. [45]

    The defendant countered with:

23. [46]

    While this type of analysis can have a place in interpretation of a clause, such an analysis will only come after a conclusion that there is some ambiguity in the clause and that its meaning is not obvious from the words used.

24. [47]

    In addition, as stated in Selected Seeds Pty Ltd v QBEMM (2010) 242 CLR 336; [2010] HCA 37, at [29]:

25. [48]

    I think that reading this “contract of insurance as a whole” results in a clear objective intention to insure the business activities of the insured subject to the insurance not covering any risk in which asbestos is a contributing element.

26. [49]

    The plaintiff referred to the exclusion in respect of “pollution” which is cl 19 in the exclusion clauses. The plaintiff said that what had occurred in this case was pollution, but this did not result in an exclusion because of the qualifications to sub pars (a) and (c) which are stated in cl 19.

27. [50]

    The fact that the damage in this matter may have also fallen under the definition of pollution does not negate the same facts being subject to the exclusion clause about asbestos. Without any comment as to whether there was pollution under the policy, I do not see the relevance of the point to whether or not the asbestos exclusion clause is applicable.

28. [51]

    The plaintiff also referred me to the “Wayne Tank” principle. In Sheehan v Lloyds Names Munich Re Syndicate Ltd [2017] FCA 1340. At [81] Allsop CJ expressed the application of the principle in this way:

29. [52]

    The plaintiff drew aid from the principle in this way:

30. [53]

    The defendant submitted that the Wayne Tank principle acted in its favour:

31. [54]

    I agree with the defendant. Going back to [23]-[25] of the agreed facts, as I have said before, there can be little doubt that the actions of Papas Painting on a roof possibly containing asbestos was a proximate ingredient of its negligence and in turn of the loss and damage.

32. [55]

    I hope I have dealt with all of the plaintiff’s points, most of which emanated from the plaintiff’s submission that liability arose, alone, from the negligent use of a high-pressure hose on the roof. I have rejected this proposition, in particular because of its inconsistency with the agreed facts.

33. [56]

    The result is that the plaintiff’s claim must fail. I make the following orders:

    1. (1)

       The further amended statement of claim filed on 29 June 2023 is dismissed.

    2. (2)

       The plaintiff is to pay the defendant’s costs of the proceedings.

    3. (3)

       I will hear the parties if any alternative costs order is sought.