Federal Court of Australia Chubb Insurance Australia Limited v WSP Structures Pty Ltd [2024] FCAFC 123 Appeal from: WSP Structures Pty Ltd v Liberty Mutual Insurance Company t/as Liberty Specialty Markets [2023] FCA 1157 File number: NSD 1419 of 2023 Judgment of: O'CALLAGHAN, DERRINGTON AND JACKMAN JJ Date of judgment: 20 September 2024 Catchwords: INSURANCE – whether first respondent an insured –where named insured a construction company – where first respondent provided engineering services to named insured – where definition of "Insured" included "sub-contractors" engaged by named insured – whether primary judge erred in construing "sub-contractors" to mean a party who has been contracted to perform contractual obligations of another party under a contract that it has made with a third party – whether "sub-contractors" should instead be limited to parties engaged to undertake construction work – appeal dismissed Cases cited: GPS Power Pty Ltd v Gardiner Willis & Associates Pty Ltd [2000] QCA 495 Hopewell Project Management Ltd v Ewbank Preece Ltd [1998] 1 Lloyd's Rep 448 Liberty Mutual Insurance Company Australian Branch trading as Liberty Speciality Markets v Icon Co (NSW) Pty Ltd [2021] FCAFC 126; (2021) 396 ALR 193 Liberty Mutual Insurance Company Australian Branch v Icon Co (NSW) Pty Ltd (2021) 154 ACSR 126 Mie Force Pty Ltd v Allianz Australia Insurance Ltd [2024] NSWCA 23 Onley v Catlin Syndicate Ltd (2018) 360 ALR 92 Pasminco Metals-Sulphide Pty Ltd v Brambles Aust Ltd [1998] NSWCA 169 Thiess Pty Ltd v Parsons Brinckerhoff Australia Pty Ltd [2016] NSWSC 173 Derrington, DK and RS Ashton, The Law of Liability Insurance (3rd ed, 2013) Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 96 Date of hearing: 20 May 2024 Counsel for the Appellants: Mr N Hutley SC, Mr D Weinberger and Mr A Jordan Solicitor for the Appellants: McCabes Lawyers Counsel for the First Respondent: Mr J Neal and Mr A Barnett Solicitor for the First Respondent: Crichton & Co Legal Counsel for the Second Respondent: Mr I Griscti Solicitor for the Second Respondent: Lander & Rogers Lawyers ORDERS NSD 1419 of 2023 BETWEEN: CHUBB INSURANCE AUSTRALIA LIMITED First Appellant TOKIO MARINE & NICHIDO FIRE INSURANCE CO LTD ABN 80 000 438 291 (AFSL 246548) Second Appellant AND: WSP STRUCTURES PTY LTD First Respondent LIBERTY MUTUAL INSURANCE COMPANY TRADING AS LIBERTY SPECIALTY MARKETS Second Respondent AND BETWEEN: LIBERTY MUTUAL INSURANCE COMPANY TRADING AS LIBERTY SPECIALTY MARKETS Cross-Appellant AND: CHUBB INSURANCE AUSTRALIA LIMITED (and others named in the Schedule) First Cross-Respondent order made by: O'CALLAGHAN, DERRINGTON AND JACKMAN JJ DATE OF ORDER: 20 September 2024 THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The cross-appeal be dismissed. 3. The appellants pay the first respondent's costs of the appeal. 4. The second respondent pay its own costs of the appeal and cross-appeal. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT O'CALLAGHAN AND JACKMAN JJ: Introduction 1 This is an appeal from the decision of the primary judge in WSP Structures Pty Ltd v Liberty Mutual Insurance Company [2023] FCA 1157. The proceedings concern a third party liability insurance policy issued by Liberty Mutual Insurance Company trading as Liberty Specialty Markets (Liberty) to Icon Co Nominee Pty Ltd for the policy period 20 September 2015 to 20 September 2016 (Liberty Policy). The Liberty Policy is an annual floater policy that covered all operations of the Icon group of companies (Icon Group). Chubb Insurance Australia Limited (Chubb) and Tokio Marine & Nichido Fire Insurance Co Ltd (Tokio) provided excess layers of cover on relevantly the same terms as the Liberty Policy. 1 The proceedings at first instance concerned four main issues, but the only one which arises on appeal is an issue of construction as to whether WSP Structures Pty Ltd (WSP) falls within the definition of "Insured" in the Liberty Policy, primarily on the ground that WSP contends that it was a "sub-contractor" as that word is used in Item 4 of the definition of "Insured" in the Liberty Policy. There remains to be determined by the primary judge an issue concerning the reasonableness of the defence costs as claimed, which has been ordered to be determined separately after all other questions have been determined, if required. Salient Facts 2 Icon Co (NSW) Pty Ltd (Icon) is a construction company, and a member of the Icon Group. In October 2015, Icon entered into a contract to design and construct the Opal Tower, a high-rise, mixed residential and commercial development at Sydney Olympic Park. In November 2015, Icon engaged WSP, a firm of consulting engineers, to undertake the engineering design work in relation to the Opal Tower development. In December 2018, serious structural damage was observed at Opal Tower. 3 Three sets of proceedings were subsequently commenced in the Supreme Court of New South Wales in relation to that property damage. Icon and WSP were parties to all three proceedings. The proceedings were compromised in 2022, with Icon and WSP agreeing to contribute to the settlement of the proceedings. 4 WSP sought indemnity under the Liberty Policy and excess policies. Liberty accepted liability to indemnify WSP under the Liberty Policy. Chubb and Tokio denied that they were liable to indemnify WSP under their respective excess liability policies. In the proceedings brought before the primary judge, declarations and orders were sought and obtained by WSP as to the obligation of Liberty, Chubb and Tokio to indemnify it. Salient Terms of the Liberty Policy 5 The Liberty Policy begins by stating that it has been issued to Icon Co Nominee Pty Ltd and then states (p 2): In Consideration of the Insured named in the Schedule (hereinafter called "the Insured") paying or agreeing to pay to the Insurer(s) who have subscribed to this Policy (hereinafter called "the Insurer(s)") the premium for or on account of the insurance hereinafter contained. The Insurer(s) agree subject to the terms, conditions, limitations, provisions and exclusions hereinafter contained to indemnify the Insured to the extent and in the manner hereinafter provided. 6 The Schedule contains the following under the subheading "Insured" (p 3): Icon Co Nominee Pty Ltd, Icon Co Pty Ltd, Icon Co (Vic) Pty Ltd, Icon Co (NSW) Pty Ltd, Icon Construction Australia (Qld) Pty Ltd, Icon Co Developments Nominee Pty Ltd, Icon Co Developments Pty Ltd, Kajima Australia Pty Ltd, Kajima Construction Australia Pty Ltd, Kajima Development Australia Pty Ltd, ICON Construction Australia Pty Ltd, ICON Construction Management Pty Ltd, ICON Construction Australia (NSW) Pty Ltd, ICON Construction Australia (QLD) Pty Ltd, 110AM Pty Ltd, 110NB Pty Ltd, ICON Developments Australia Pty Ltd, and/or subsidiary and/or controlled and/or joint venture companies and/or principals and/or financiers and/or contractors and subcontractors, all for their respective rights, interests, and liabilities. 7 The Schedule then states the following under the subheading "Insured's Business" (p 3): Principally, all business undertakings and activities of the Insured including, but not limited to builders, engineers, construction contractors, project managers, construction managers, property developers, plant and equipment owners/operators and hirers, property owners and occupiers, lessees and lessors; and all incidental and associated operations, trades, businesses and activities, including the provision of canteen, social, sports, welfare organisation or first aid facilities, fire or ambulance services, relative to the above. 8 The Insuring Clause provides relevantly that (p 6): The Insurer(s) agree to: 1. Indemnify the Insured in respect of all amounts which the Insured shall become legally liable to pay in respect of: … 1.2. Property Damage; … happening during the Period of Insurance as a result of an Occurrence in connection with the Insured's Business. 9 The term "Property Damage" is defined as follows (p 17): Property Damage means loss of and/or damage to and/or destruction of tangible property including the Loss of Use of tangible property, whether or not that tangible property has been lost and/or damaged and/or destroyed. 10 The conditions of the Liberty Policy contain a provision for the adjustment of premium (Condition 8) as follows (p 12): The premium for this Policy is provisional (unless otherwise agreed) and is based on the estimated Turnover for the Period of Insurance. The Insured shall, as soon as practicable after the expiry date of this Policy, declare to the Insurer(s) the Turnover during the preceding Period of Insurance. An adjustment premium shall be determined by calculating the difference between the provisional premium and the sum of the agreed rate applied to the Turnover. Notwithstanding the above, the maximum allowable return premium will be 25% of the provisional premium paid. 11 The term "Turnover" is defined as follows (p 18): Turnover is defined as the total value of work completed during the preceding 12 months period for the Insured's Business to which this Policy applies, including the value of principals supplied materials where appropriate. 12 In the Schedule (p 4), the Premium is stated to be "As Agreed." 13 The term "Insured's Business" is defined in the Definitions section as follows (p 15): Insured's Business means: 1. all of the Insured's businesses, occupations and/or activities as described in the Schedule; 2. the provision of canteen, social, sports, welfare organisation or child minding, first aid, fire or ambulance services; 3. private work undertaken by employees of the Insured for any director or senior executive of the Insured; 4. plant and equipment owners, operators and/or hirers; 5. property owners, occupiers, lessees, lessors and/or developers; and all other incidental and associated operations, trades and activities. 14 The definition of "Insured" in the Definitions section is at the heart of the present dispute and is as follows (p 16): Insured means: 1. the Insured named in the Schedule and/or; 2. joint ventures (incorporated or not) in which the Insured is a co-venturer and is responsible for arranging insurance; and/or 3. principals and/or owners; and/or 4. sub-contractors engaged by any of the above; and/or 5. lenders and/or financiers for their respective rights and interests; and/or 6. directors, officers and employees of any of the above but only in respect of the Business and/or Activities of the Insured; and/or 7. manufacturers and suppliers, but only in relation to their manual on-site activities; and/or 8. architects, engineers and other professional consultants, but only in relation to their manual on-site activities; and/or Any other company for which the Insured assumes management together with all other parties for whom the Insured is required under contract or any other legally binding agreement to provide insurance protection are also included as an Insured. Reasoning of the Primary Judge 15 The primary judge noted that WSP accepted that it does not fall within Item 8 of the definition of the "Insured", because it did not carry out manual on-site activities, but relied on Item 4 of the definition: [21]. The primary judge referred to the admission by Liberty that WSP is an Insured under the Liberty Policy on the basis that it was a subcontractor engaged by Icon on the project, but said that Chubb and Tokio are not bound in any way by the admission by Liberty and drew no conclusion from the fact that Liberty had taken a different position to that of Chubb and Tokio: [23]–[24]. 16 The primary judge said that there was no real difference between the parties as to the relevant principles to be applied in construing commercial policies of insurance: [28]. Among those principles is the proposition that, in the absence of evidence that words are used in some technical sense or have acquired some established meaning among the contracting parties (or the market in which the agreement is concluded), the words used are to be given their natural and ordinary meaning; that is, a meaning that they would be given by a reasonable person in the position of the parties: [28]. 17 The primary judge said that the term "subcontractor" has a relatively plain meaning when used by lawyers to describe a particular legal relationship, and refers to a party who has been contracted to perform the contractual obligations of another party under a contract that it has made with a third party: [31]. Adopting that usage, architects, engineers and other professionals may be subcontracted by the principal contractor (to the extent that they are engaged to perform work that the principal contractor has agreed to perform) or they may be engaged as contractors, suppliers or consultants (to the extent that they are engaged to perform work for the project that the principal contractor has not agreed to perform): [32]. The question depends upon the scope of the work to be undertaken by the principal contractor: [32]. 18 The primary judge then referred to other possible meanings of the term. His Honour said that the term "subcontractor" may be used in a more general way to refer to any party other than the main contractor who undertakes some aspect of the work that is required as part of a large project, irrespective of the party's precise legal relationship with the principal contractor: [34]. A further possibility is that, in the context of a construction project, the term contractor or subcontractor may be used to refer to a party who has been engaged by the main or head contractor to undertake some part of the construction works required to complete the project, as distinct from activities which support or facilitate undertaking those works: [35]. 19 In considering the Liberty Policy as a whole, the primary judge referred to the description of the Insured and the Insured's Business in the Schedule as extending beyond the activity of undertaking construction, and including within the definition of the Insured's Business all business activities of the insured, which are stated to be not limited to "engineers" (among others): [44]. The primary judge said that the express reference to engineers in the Schedule appears to be intended to reflect a particular aspect of the business conducted by the Icon Group, because the defined term "Insured Business" does not refer to engineers but says that the term means, among other things, "all of the Insured's businesses, occupations and/or activities as described in the Schedule": [44]. The primary judge said that the structure of the policy requires the business of the Icon Group to be described in the Schedule to the policy and the description in the Schedule includes "engineers": [44]. 20 The primary judge said that no aspect of the Liberty Policy adopts terminology which indicates that it is intended to apply only to Insureds who are construction contractors, as distinct from those who may take on responsibilities for development and design as well as construction: [52]. Rather, the primary judge said that the nature and extent of coverage depends to a considerable degree upon the description of the "Insured's Business" as stated in the Schedule, and that may be expected to be crafted to reflect the nature of the business of the particular Insured: [52]. The primary judge said that, in the present case, that description is not limited to the business of "builders" or "construction contractors" but is much more broadly expressed in the phrase "builders, engineers, construction contractors, project managers, construction managers, property developers, plant and equipment owners/operators and hirers, property owners and occupiers, lessees and lessors": [52]. As a result, the primary judge said that subcontractors under the policy may be expected to be responsible for work and activities that extend well beyond construction work, though still undertaken in what may be described as the construction industry: [53]. Having regard to the breadth of the business of the Icon Group entities named as insureds in the policy, the primary judge said that Icon Group entities' subcontractors may be engineers, construction managers or plant and equipment operators, among others. The primary judge regarded that as a significant aspect of the policy that is evident from the way in which the whole of the policy is expressed to operate: [53]. Accordingly, the primary judge concluded that the definition of Insured in the Definitions section of the policy should not be approached on the basis that the policy concerns an indemnity to be extended to Insureds undertaking only construction work: [54]. 21 The primary judge then referred to matters of context, beginning with the quotation slip by which the underwriters were invited to quote for renewal of the relevant policy. The quotation slip described the business of the Icon Group in similar terms to those expressed in the Schedule, and included express reference to "engineers" among the business undertakings and activities of the Insured: [56]. The "Underwriting Information" included reference to the Icon Group engaging subcontractors to perform standard tradesmen's activities, including plumbing, electrical, bricklaying, glazing, and carpentry, and referred to a program being maintained to ensure strict control over any subcontractors engaged, with the subcontractors required to hold their own liability insurance: [58]. The Company Profile document included a statement describing the Icon Group's design and construct methodology: [59]. 22 The primary judge said that WSP sought to make much of the terms of Icon's design and construct contract with the developer for the Opal Tower project, but noted that it was not suggested that the precise contractual arrangements that Icon concluded in relation to its design and construct contracts were known to Icon and the underwriters at the time the insurance was proposed and written: [61]. Accordingly, the primary judge was not persuaded that the particular terms of the design and construct contract formed part of the context to which there may be regard in construing the policy terms: [61]. The primary judge said that the only relevance of the design and construct contract, as well as the contract between Icon and WSP, is that it is necessary to understand those arrangements when it comes to determining whether, having construed the policy terms, WSP is an insured on the facts of the present case: [62]. In that respect, the primary judge noted that there was no real issue between the parties as to the nature of the relationships that were established by those contracts; in particular, the relevant work that WSP was engaged by Icon to undertake was engineering design work that Icon had contracted to deliver as part of its design and construct contract with the developer: [62]. The primary judge said that it was the alleged liability of WSP arising from undertaking that engineering design work that was compromised by the settlement of the Supreme Court proceedings, and which gave rise to the liability to make payments on the part of WSP: [62]. 23 The primary judge then dealt with various authorities relied on by the parties on the question whether the references to subcontractors in the Liberty Policy included an engineer such as WSP. The primary judge said that none of the authorities were concerned with the proper construction of an insurance policy expressed in the same or similar terms as the Liberty Policy, and therefore the authorities were of little relevance to the present construction question: [63]. 24 Chubb and Tokio relied upon reasoning in Pasminco Metals-Sulphide Pty Ltd v Brambles Aust Ltd [1998] NSWCA 169, in particular the statement by Spigelman CJ (with whom Powell JA agreed) that the natural and ordinary meaning of the word "sub-contractor" suggests a person or firm that performs some part of the work, rather than a person or firm that supplies services or equipment for use in the work. However, the primary judge stated that, in the present case, the work to be conducted by Icon included the engineering design work for the project, and the statement in Pasminco did not say anything more than that a subcontractor is one who agrees to undertake work that another person is contracted to perform, thereby distinguishing a supplier from a person who is performing the contractual obligation of another: [66]. 25 The primary judge also referred to the reliance placed by Chubb and Tokio upon the decision in Hopewell Project Management Ltd v Ewbank Preece Ltd [1998] 1 Lloyd's Rep 448. In that case, Hopewell entered into an agreement to build, operate and transfer a power station; Hopewell then entered into an agreement with one of its subsidiaries (Slipform) to oversee and manage the design and construction of the power station; and Ewbank Preece entered into an agreement to provide certain engineering services to Slipform. The primary judge noted that Ewbank Preece was not subcontracted to undertake any part of the design obligation for the power station, nor was it subcontracted to undertake the oversight and management obligation of Slipform; rather, it was contracted to provide technical and engineering services to Hopewell in accordance with a "scope of services": [67]. However, in the present case, the primary judge stated that WSP was subcontracted to the main contract, and it was required to carry out the engineering design work that Icon was required to undertake under its design and construct contract with the developer: [71]. The primary judge treated that as an important point of distinction from Hopewell, in that Hopewell was not a case where engineering design obligations had been subcontracted. Rather, the contractual arrangements with Ewbank Preece were determined to require the provision of engineering services or expertise (and not the performance of any Hopewell's own obligations): [75]. The primary judge also noted other points of distinction, namely that Hopewell was a case in which the court received expert evidence as to insurance practice and brought that to account, and it was a case that recognised that there may be instances where design services are offered as an adjunct to construction work and such cases were in a different category from the case before the court: [75]. 26 The primary judge also referred to cases concerning very differently worded policies: GPS Power Pty Ltd v Gardiner Willis & Associates Pty Ltd [2000] QCA 495 at [32] (Williams J) and Thiess Pty Ltd v Parsons Brinckerhoff Australia Pty Ltd [2016] NSWSC 173 at [531]–[532] (McDougall J). 27 Turning to the proper construction of the Liberty Policy, the primary judge held that WSP was an insured for the following five reasons: [91]. 28 First, the use of the words "and/or" that appear at the end of each item listed in the definition of "Insured" means that an insured may fall within one or more of the eight items, as Chubb and Tokio accepted in their written submissions: [92]. Accordingly, the fact that a person is an architect, engineer or other professional consultant (as described in Item 8) does not mean that they cannot be a subcontractor: [92]. 29 Second, the primary judge said that Items 7 and 8 identified categories of persons "but only in relation to their manual on-site activities", and that a construction of the term "subcontractors" as used in Item 4 that was so broad as to encompass the categories in Items 7 and 8 irrespective of whether they were undertaking manual on-site activities would make those provisions redundant: [93]. His Honour said that, although the words "and/or" indicate overlapping categories, the deliberate inclusion of Items 7 and 8 strongly indicates that there was a category of cases where those described in Items 7 and 8 would not be covered by Item 4 (or the other items): [93]. The primary judge said that an interpretation of subcontractors that included architects and engineers but only where they were contracted by an insured to carry out work that the insured was contracted to undertake would leave room for the operation of Item 8. That construction would mean that an engineer who was engaged by the principal directly or by an Icon Group entity to provide engineering services that the Icon Group entity had not itself contracted to provide would only be covered under Item 8 (and therefore only in relation to manual on-site activities): [93]. The primary judge said that Item 8 (and not Item 4) would apply to any engineer who was not subcontracted to undertake engineering work that an Icon entity had contracted to undertake: [94]. Further, the primary judge said that it was not suggested that the policy wording was specific to the Icon Group's circumstances, and the evidence showed that the policy was one that was provided to the market generally by underwriters, and that the Schedule was used to customise the operation of the policy to the circumstances of the particular insured: [94]. 30 Third, the primary judge said that the broad definition of the Insured's Business in the Schedule in the present case, particularly the inclusion of "engineers" in that definition, means that there is wider scope for the category of subcontractors in Item 4: [95]. The primary judge said that it was not the case that the Liberty Policy provided for every contracted engineer providing services to a "builder" or "construction contractor" to come within the definition; rather, the scope of coverage depends upon the event giving rise to the relevant legal liability to pay being one which happens "as a result of an Occurrence in connection with the Insured's Business": [95]. His Honour said that the structure of the policy and the capacity for an Insured's Business to be broad or narrow in scope will determine the extent to which that business has obligations which may be subcontracted. In a context where the policy is structured so that it may apply to an insured whose business includes contracting to supply engineering services as well as construction services, it would be inconsistent with the overall structure of the policy to confine the meaning of the term "subcontractor" to those parts of the business which involve the subcontracting of physical construction work: [95]. The primary judge said that the quotation slip described the Insured's Business as including "engineers", and the accompanying company profile for the Icon Group referred to its design and construct methodology: [96]. Accordingly, those contextual matters did not establish a basis for concluding that the business of the Icon Group as described in the policy excluded the provision of engineering services, particularly engineering design: [96]. 31 Fourth, the primary judge said that the policy plainly sought to extend the scope of those who were insured beyond those who were named as insureds, and referred to the concluding words of the definition of "Insured" which state that "all other parties for whom the Insured is required under contract or any other legally binding agreement to provide insurance protection are also included as an Insured": [97]. The primary judge said that, therefore, the other categories of insureds are not named in order to fulfil obligations of that kind: [97]. 32 The primary judge said that the inclusion of other insureds was seen to be in the commercial interests of the Icon Group entities, in obtaining coverage for other insureds for amounts that those insureds became legally liable to pay in respect of (relevantly for present purposes) Property Damage: [98]. The primary judge said that the evident interest of the Icon Group entities in obtaining that insurance was to ensure that there was coverage for those entities and consequently less room for disputes between parties concerning where the liability ultimately lay, including issues of apportionment of responsibility: [98]. In effect, the primary judge said that there was a form of project coverage for liability arising from the activities that the Icon Group entities would be undertaking as part of the business as defined in the Schedule to the policy (specifically the engineering and construction of buildings): [98]. Coverage for those who had been subcontracted to undertake any part of the works that the relevant Icon Group entity had undertaken to perform was necessary to obtain that kind of coverage, adding that it would be a most uncommercial result if there was coverage for some aspects of the works that an Icon Group entity had contracted to undertake as part of a particular project (such as construction work) but not other aspects of those works (such as engineering design): [99]. The primary judge said that such a result would expose the Icon Group entity to the risk that it would be liable for the activities of its own subcontractor but would itself have no insurance coverage for that liability, and would also be exposed to the cost of having to pursue its subcontractor where it considered that the subcontractor was responsible, and would then bear the risk that the latter would not have the funds to meet the liability: [99]. The primary judge said that the evident purpose of achieving a form of comprehensive cover of others in the interests of the Icon Group entities would then be compromised: [99]. The primary judge stated that, having regard to the evident commercial purpose of the policy, there was every reason not to confine the words "subcontractors engaged by any of the above" in Item 4 to a subcontractor undertaking construction works or on-site works: [99]. 33 The primary judge said that the terms of Items 7 and 8 are explained by a different aspect of the way in which liability for the risks covered by the policy may arise, stating that liability may be attributed to an Icon Group entity having regard to the nature of the business as described in the policy on the basis that the Icon Group entity has overall responsibility for activities undertaken on a project site. His Honour stated that it was that separate and distinct way in which liability may arise that explains the terms of Items 7 and 8, but the existence of that separate rationale for those items is not a reason for construing Item 4 as being subject to Items 7 and 8: [100]. 34 Fifth, the primary judge said that this was not an instance where it was evident from the language used in the policy considered in the overall context that the term subcontractor was being used to differentiate those who are undertaking the construction works from consultants: [101]. The primary judge added that the reference in Item 4 to "sub-contractors engaged by any of the above" meant that it was not an "any tier" provision that referred to subcontractors of subcontractors, but was confined expressly to those subcontractors engaged by a named Insured: [101]. 35 The primary judge concluded that each of these matters pointed to the term subcontractor being used in its legal sense to encompass any party undertaking work that an Icon entity (and others named "above") had contracted to undertake: [102]. The primary judge said that the effectiveness of the policy as providing cover for all liability for damage to property which may be attributed to some extent to an Icon Group entity (or about which there may otherwise be dispute as to attribution of responsibility) would be substantially compromised if it did not cover WSP, which had been subcontracted to undertake the engineering design obligations of Icon under its own contract: [102]. The primary judge added that the inclusion of the express reference to "contractors and sub-contractors" in the description of the Insured in the Schedule to the policy also supports this conclusion: [102]. 36 The primary judge noted that the general commercial availability of professional indemnity insurance, and the possibility of an expectation among those participating in the construction industry that professionals such as architects, engineers and professional consultants would have their own professional insurance, may be viewed as operating against the considerations which favour WSP's construction of the policy: [103]. The primary judge referred to the consequence that any coverage for such professional people for their activities under a third party liability policy of the kind in issue would be likely to result in double insurance and the burden of additional premiums in respect of the risks associated with undertaking particular construction works: [103]. However, the primary judge said that there was no evidence as to those matters or the extent to which they were part of the market context in which the insurance was arranged by the Icon Group: [103]. In the end, the primary judge said that there must be regard to the language used by the parties, which leads to the conclusion that WSP is an Insured within Item 4 of the definition of Insured, and Item 4 should not be read as being subject to Item 8: [104]. The primary judge said that the interaction between Item 4 "and/or" Item 8 should be construed to mean that the reference to engineers in Item 8 is to engineers who are not subcontractors engaged by an Insured to undertake work that the Insured is itself contracted to perform: [104]. Consideration of submissions made by the appellants 37 The oral submissions made by the appellants focused on the existence of two different definitions of the "Insured" in the policy. At the commencement of the policy (p 2), the Insured is defined by reference to "the Insured named in the Schedule", and that expression is again picked up in Item 1 of the definition of Insured in the Definitions section (p 16). By contrast, the full definition of "Insured" in the Definitions section (p 16) extends beyond the Insured named in the Schedule (being Item 1), and includes seven other items together with the additional category of other companies for which the Insured assumes management and all other parties for whom the Insured is required to provide insurance protection. The reference to the Insured in the Schedule (p 3) also extends beyond entities which were referred to by name (and relevantly includes "subcontractors"). 38 The appellants draw attention to Condition 8 dealing with the adjustment of premium, and submitted that the calculation of the Turnover must be by reference to the Turnover of entities in the Icon Group, because otherwise it would lead to an absurdly high calculation, noting that "financiers" are included in Item 5 of the definition of insured in the Definitions section. The definition of Turnover refers to the value of work completed during the preceding 12 months for the Insured's Business, which the appellants submit should be construed as a reference to the business undertakings and activities of the Icon Group entities which are referred to by name in the Schedule. 39 Those submissions are well made, but they do not diverge from the approach which is implicit in the primary judge's reasoning. The primary judge treated the term Insured's Business as a reference to the business undertakings and activities of the Icon Group entities which were referred to by name in the Schedule: see [44], [53], [56] and [95]. 40 It follows from the appellants' submission in this regard that Item 1 of the definition of Insured in the Definitions section (p 16), namely the Insured named in the Schedule, is a reference to the Icon Group entities which are referred to by name (rather than by description) under the heading "Insured" in the Schedule. The effect of that construction is that the entities referred to only by description as the Insured in the Schedule (such as "contractors and subcontractors") are not included in Item 1. On that construction, Item 4 does not include subcontractors of subcontractors of an Icon Group entity, but only those entities subcontracted directly by an Icon Group entity. That is exactly how the primary judge construed the policy. The primary judge said at [101] that the reference in Item 4 to "sub-contractors engaged by any of the above" meant that it was not an "any tier" provision that referred to subcontractors of subcontractors, but was confined expressly to those subcontractors engaged by a named Insured. Although WSP challenged that conclusion and submitted that a subcontractor such as WSP fell within Item 1, the primary judge was correct to construe Item 1 as limited to the Icon Group entities which were referred to by name (rather than by description) as the Insured in the Schedule. It should be noted that the New South Wales Court of Appeal in Mie Force Pty Ltd v Allianz Australia Insurance Ltd [2024] NSWCA 23 at [17]–[19] (Ward P, with whom White and Kirk JJA agreed) treated a subcontractor as falling with the "Named Insured" in that case, but that was because (unlike here) there was a definition of "Named Insured" which expressly included subcontractors, and there was accordingly no dispute between the parties on that point (see Ward P at [15]). 41 Accordingly, while the duality of the definition of the Insured in the policy was at the forefront of the appellants' submissions, that line of argument is consistent with the manner in which the primary judge construed the policy. 42 Turning to the real issue on the appeal, the appellants relied on statements by the Full Court concerning the Liberty Policy in Liberty Mutual Insurance Company Australian Branch trading as Liberty Speciality Markets v Icon Co (NSW) Pty Ltd [2021] FCAFC 126; (2021) 396 ALR 193 at [152]–[153], in which Allsop CJ, Besanko and Middleton JJ referred to the Liberty Policy as a market specific insurance policy, and said that the market context known to the parties to the policy (namely Icon and Liberty) and to their respective experienced intermediaries was the provision of third party liability cover in the construction industry. Those general statements have no bearing on the particular issue at hand. The "construction industry" involves not only physical construction work, but also the work of professional service providers such as engineers and architects. Generalised references to the context being the construction industry do not assist in resolving the question as to whether an entity providing engineering design services for a design and construct contract falls within the concept of subcontractors. 43 The appellants submitted that the primary judge's construction leaves Item 4 with no work to do to the extent that it refers to subcontractors engaged by principals or owners, being the subject of Item 3, which is picked up in Item 4 by the reference to "any of the above". The appellants submit that the primary judge construed "sub-contractor" in Item 4 as being one that has been "contracted by an insured to carry out work that the insured was contracted to undertake", and principals and owners are not Insureds that are "contracted to undertake" any work. 44 This submission was not put to the primary judge, and the appellants' criticism that the primary judge did not address the point is therefore misplaced. In their written submissions, WSP formulated an example of how an entity such as WSP may have been subcontracted by a "principal", which drew a response from the appellants that the example did not embrace the concept of a subcontractor having been engaged by "owners". However, even if one assumes that the reference in Item 4 to "any of the above" did not have any meaningful work to perform in relation to "owners", a reasonable person in the position of the parties would merely say that the shorthand drafting may have been over-inclusive in that minor respect. The shorthand drafting remains a useful drafting technique in order to reduce the length and complexity of the definition, and the benefits of that drafting efficiency may reasonably be thought to outweigh any shortcoming in precision. While the notion of owners being contracted to undertake work may have appeared to be only a theoretical possibility to a party who thought deeply about the point, the inclusion of that theoretical possibility in the formulation of Item 4 does not detract from the ordinary and natural meaning of Item 4. 45 The appellants submit that the primary judge's reasoning that Item 4 does not apply to subcontractors of subcontractors undermines one of the fundamental reasons advanced by the primary judge that the evident purpose of the Liberty Policy was to achieve a form of comprehensive cover. That is a reference to the fourth strand in the primary judge's reasoning set out above. However, the submission is too strongly stated. The primary judge referred at [99] to the Liberty Policy having the evident purpose of achieving "a form of comprehensive cover of others", and did not suggest that there was only one available form of comprehensive cover, let alone that the reference to comprehensive cover was intended to mean universal cover. A purpose of achieving a form of comprehensive cover is entirely compatible with there being qualifications or limitations on that cover. An even more comprehensive form of cover would have been to provide insurance for subcontractors of "any tier", but the fact that the parties chose not to extend cover in that way does not mean that they did not have a purpose of achieving a form of comprehensive cover. 46 The appellants next submit that the construction adopted by the primary judge involves inserting words in Item 8 after "architects, engineers and other professional consultants" to the following effect: "that are not subcontracted by an Insured to undertake work that an Insured had contracted to undertake". That proposition is said to be reflected in the primary judge's reasoning at [104] in which his Honour said that Item 4 should not be read as being subject to Item 8; rather, the interaction between Item 4 "and/or" Item 8 should be construed to mean that the reference to engineers in Item 8 is to engineers who are not subcontractors engaged by an Insured to undertake work that the Insured is itself contracted to perform. The appellants recognise in their written and oral submissions that the primary judge was there relying on the reasoning in [93]–[94]. That reasoning was directed to the question whether a broad construction of Item 4 would render Items 7 and 8 redundant, being the second strand in the primary judge's reasoning set out above. In that reasoning, the primary judge stated that the words "and/or" indicated overlapping categories, but was concerned to identify cases where the matters described in Items 7 and 8 would not be covered by Item 4 (or the other items). The primary judge recognised that architects, engineers and other professional consultants may well be subcontractors within the meaning of Item 4, but was identifying the fact that if they were not subcontractors, then they would still fall within Item 8 but only in relation to their manual on-site activities. In other words, Item 8 had an independent role to play which was not covered by Item 4 in circumstances where the architect, engineer or other professional consultant was not contracted by an Insured to undertake work that an Insured had contracted to undertake. When the primary judge's statement at [104] is read in the context which the appellants acknowledge to be applicable, the primary judge was not reading words into Item 8 to limit Item 8's operation. Instead, his Honour was correctly identifying the scope for Item 8 to have an independent operation in circumstances where Item 4 would not be applicable. 47 The appellants submit that the conjunction "and/or" as used in relation to the eight items in the definition of "Insured" in the Definitions section (p 16) is best understood as meaning that there can be more than one insured in any one situation. However, while it is no doubt true there can be more than one insured in any one situation, that has nothing to do the conjunction "and/or". Instead, the effect of the conjunction is that a particular person or entity may fall within more than one of those items, as the primary judge correctly found at [92]. That conclusion is reinforced by the primary judge's apt description of the categories described in those items as overlapping: [93]. In any event, the appellants appropriately described this submission as "a minor point". It also appears to be contrary to the acceptance by Chubb and Tokio at first instance that the words "and/or" mean that an insured may fall within one or more of the eight items, as the primary judge recorded at [92]. 48 The appellants submit that in the context of the fourth strand of reasoning identified above, the primary judge erred in stating at [99] that a failure to extend cover to WSP would mean that there was coverage for some aspects of the works that an Icon Group entity had contracted to undertake as part of a particular project (such as construction work) but not other aspects of those works (such as engineering design), and that such a result would expose the Icon Group entity to the risk that it would be liable for the activities of its own subcontractor but would itself have no insurance coverage for that liability. The appellants submit that that reasoning is erroneous because the Icon Group entity would have coverage under the Liberty Policy regardless of whether an entity such as WSP was also covered by the Liberty Policy. The appellants' submission is correct so far as it goes. But the alleged error is of no moment. Most notably, it does not detract from the primary judge's reasoning at [98] that the inclusion of other insureds was seen to be in the commercial interests of the Icon Group entities by obtaining coverage for other insureds for amounts that those insureds became legally liable to pay. In any event, it may be that the primary judge was doing no more than pointing out a logical corollary of the appellants' argument, in that if "sub-contractors" within Item 4 were only entitled to cover if they carried out construction work, then that would also appear to restrict the cover available to "the Insured named in the schedule" under Item 1 (such as Icon) to construction work. That problem does not arise if the Liberty Policy is construed as providing cover for those who had been subcontracted to undertake any part of the works that the relevant Icon Group entity had undertaken to perform. 49 The appellants also criticise the fourth strand of the primary judge's reasoning on the basis that there appeared to be "little commercial benefit" to the Icon Group in having architects, engineers and other professional consultants added as Insureds (at the Icon Group's expense) in circumstances where the Icon Group has coverage in any event, the professional consultants likely have their own insurance cover, and the Icon Group would bear an additional cost for the extended cover. However, whether the commercial benefit to Icon as identified by the primary judge in the fourth strand of his Honour's reasoning was sufficiently substantial to justify any additional cost to the Icon Group was a matter for the Icon Group's commercial judgment. There is no evidence as to the particular commercial parameters of that exercise of judgment, for example by way of evidence of the incremental premium paid by the Icon Group for the additional cover, and no basis on which the Court could conclude that such a commercial judgment would be so unreasonable that it points away from the ordinary and natural meaning of the language used by the parties. 50 Finally, the appellants submit that the result of the primary judge's construction is that a public and product liability insurance policy designed for the construction industry has been turned into an occurrence-based professional indemnity policy in favour of those who traditionally carry their own professional liability cover, with reference to DK Derrington and RS Ashton, The Law of Liability Insurance (3rd ed, 2013) at [8-202] and [10-138]. However, the proper construction of a particular policy is not determined by such generalised categorisations of policies. The Liberty Policy remains relevantly a policy for liability for Property Damage, which extends to subcontractors by the breadth of the definition of the Insured. That definition includes professional consultants such as architects and engineers in circumstances where they are subcontractors which are engaged by an Icon Group entity to perform work which that Icon Group entity has agreed to perform. The primary judge expressly acknowledged the general commercial availability of professional indemnity insurance and the potential for double insurance and additional premiums at [103], but also noted that there was no evidence as to those matters or the extent to which they were part of the market context in which the Liberty Policy was arranged. Conclusion 51 No material error has been established in the primary judge's reasoning. The appeal should therefore be dismissed with costs. 52 Liberty filed a notice of cross-appeal which arises only in the event that the appellants succeed in their appeal. In those circumstances, Liberty sought to have the matter remitted to the primary judge for consideration of an application to withdraw its admission of liability to WSP. As the appeal should be dismissed, the cross-appeal does not arise and should also be dismissed. Liberty should pay its own costs incurred in relation to the appeal and cross-appeal. I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices O'Callaghan and Jackman. Associate: Dated: 20 September 2024 REASONS FOR JUDGMENT DERRINGTON J: Introduction 53 In this matter I have had the considerable advantage of reading and considering at length the careful and thoughtful reasons of the learned primary judge and of O'Callaghan and Jackman JJ. With hesitation and much deference, I regret that I do not agree with their Honours' conclusions. Albeit that I do so in only some minor respects, the consequence is that I would reach a different conclusion as to the result of the appeal. The issue on appeal 54 The central issue on appeal turns on the competing approaches to the construction of policies of insurance and, in particular, the interpretive choices to be made where the same word used in different parts of a policy must be accorded different meanings. In this case the misused word is the pivotal term, "Insured", and its differential usage gives rise to competing outcomes as to the scope of cover available to non-contracting third parties. This results in a difference between a construction which affords comprehensive cover to third party professional consultants, including architects and engineers on the one hand, and a construction which affords more limited and directed cover to those persons on the other. 55 The other important question of insurance policy construction is the choice between the adoption of a literal meaning of the words used and an approach that accepts that modern policies are to be accorded a not insignificant degree of business-like operation. That latter approach sometimes necessitates jettisoning the view that policy terms are analogous to pieces of a mosaic that fit precisely together, and acceptance that the consequence of the operation of a policy's terms results in more of a pastiche or collage, with the commerciality of the competing outcomes often being the determining factor in construction. The relevant terms 56 Though the policy terms which are relevant to the present discussion are set out in the majority's reasons, they are repeated below for convenience. 57 The introductory words of the third party liability insurance policy issued by Liberty Mutual Insurance Company trading as Liberty Specialty Markets (Liberty) (the Policy) state: In Consideration of the Insured named in the Schedule (hereinafter called "the Insured") paying or agreeing to pay to the Insurer(s) who have subscribed to this Policy (hereinafter called "the Insurer(s)") the premium for or on account of the insurance hereinafter contained. The Insurer(s) agree subject to the terms, conditions, limitations, provisions and exclusions hereinafter contained to indemnify the Insured to the extent and in the manner hereinafter provided. 58 The "Insured" is described in the Schedule as: Icon Co Nominee Pty Ltd, Icon Co Pty Ltd, Icon Co (Vic) Pty Ltd, Icon Co (NSW) Pty Ltd, Icon Construction Australia (Qld) Pty Ltd, Icon Co Developments Nominee Pty Ltd, Icon Co Developments Pty Ltd, Kajima Australia Pty Ltd, Kajima Construction Australia Pty Ltd, Kajima Development Australia Pty Ltd, ICON Construction Australia Pty Ltd, ICON Construction Management Pty Ltd, ICON Construction Australia (NSW) Pty Ltd, ICON Construction Australia (QLD) Pty Ltd, 110AM Pty Ltd, 110NB Pty Ltd, ICON Developments Australia Pty Ltd, and/or subsidiary and/or controlled and/or joint venture companies and/or principals and/or financiers and/or contractors and subcontractors, all for their respective rights, interests, and liabilities. 59 This description of the Insured will be referred to as the "Schedule Description". 60 The "Insured's Business" is defined as being: Principally, all business undertakings and activities of the Insured including, but not limited to builders, engineers, construction contractors, project managers, construction managers, property developers, plant and equipment owners/ operators and hirers, property owners and occupiers, lessees and lessors; and all incidental and associated operations, trades, businesses and activities, including the provision of canteen, social, sports, welfare organisation or first aid facilities, fire or ambulance services, relative to the above. 61 The Insuring Clause reads: The Insurer(s) agree to: 1. Indemnify the Insured in respect of all amounts which the Insured shall become legally liable to pay in respect of: … 1.2 Property Damage; … happening during the Period of Insurance as a result of an Occurrence in connection with the Insured's Business … 62 "Property Damage" is defined as follows: Property Damage means loss of and/or damage to and/or destruction of tangible property including the Loss of Use of tangible property, whether or not that tangible property has been lost and/or damaged and/or destroyed. 63 The Policy Conditions, by Condition 8, provide for an adjustment of the premium in the following manner: The premium for this Policy is provisional (unless otherwise agreed) and is based on the estimated Turnover for the Period of Insurance. The Insured shall, as soon as practical after the expiry date of this Policy, declare to the Insurer(s) the Turnover during the preceding Period of Insurance. An adjustment premium shall be determined by calculating the difference between the provisional premium and the sum of the agreed rate applied to the Turnover. Notwithstanding the above, the maximum allowable return premium will be 25% of the provisional premium paid. 64 "Turnover" is defined as follows: Turnover is defined as the total value of work completed during the preceding twelve months period for the Insured's Business to which this Policy applies, including the value of principals supplied materials where appropriate. 65 The expression "Insured's Business" is defined in the following terms: Insured's Business means: 1. all of the Insured's businesses, occupations and/or activities as described in the Schedule; 2. the provision of canteen, social, sports, welfare organisation or child minding, first aid, fire or ambulance services; 3. private work undertaken by employees of the Insured for any director or senior executive of the Insured; 4. plant and equipment owners, operators and/or hirers; 5. property owners, occupiers, lessees, lessors and/or developers; And all other incidental and associated operations, trades and activities. 66 The term "Insured" is defined in the Definitions section as follows: Insured means: 1. the Insured named in the Schedule and/or; 2. joint ventures (incorporated or not) in which the Insured is a co-venturer and is responsible for arranging insurance; and/or 3. principals and/or owners; and/or 4. sub-contractors engaged by any of the above; and/or 5. lenders and/or financiers for their respective rights and interests; and/or 6. directors, officers and employees of any of the above but only in respect of the Business and/or Activities of the Insured; and/or 7. manufacturers and suppliers, but only in relation to their manual on-site activities; and/or 8. architects, engineers and other professional consultants, but only in relation to their manual on-site activities; and/or Any other company for which the Insured assumes management together with all other parties for whom the Insured is required under contract or any other legally binding agreement to provide insurance protection are also included as an Insured. 67 This definition of the word "Insured" will be referred to in these reasons simply as the "Definition". The principles of construction 68 As is reflected in the majority's reasons, there was no substantive dispute between the parties as to the general principles applicable to the construction of insurance policies. However, given the issues of construction which arise in this case, the following observations of the Full Court in Onley v Catlin Syndicate Ltd (2018) 360 ALR 92, 100 – 101 [33] ought to be kept in mind: General principles of construction [33] The Applicants' arguments before this Court concern the interpretation of the Advancement Extension in the context of the policy and, to some degree, the existence of an implication preventing the insurer from exercising its entitlements under s 28. Such arguments call for the application of the well-established principles concerning the construction of policies of insurance as commercial contracts. Those principles were not in dispute between the parties. Necessarily, a policy of insurance is assumed to be an agreement which the parties intend to produce a commercial result: Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640; 306 ALR 25; [2014] HCA 7 at [35]: as such, it ought to be given a businesslike interpretation being the construction which a reasonable business person would give to it: Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 343 ALR 58; [2017] HCA 12 (Ecosse Property Holdings) at [17]; Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; 339 ALR 200; [2016] HCA 47 at [78]; Todd v Alterra at Lloyd's Ltd (on behalf of underwriting members of Syndicate 1400) (2016) 239 FCR 12; 330 ALR 454; 112 ACSR 1; [2016] FCAFC 15 at [42]; Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100 at [52]. The contract is naturally enough interpreted, in a temporal sense, as at the date on which it was entered into: Ecosse Property Holdings at [16] per Kiefel, Bell and Gordon JJ; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; 325 ALR 188; [2015] HCA 37 (Mount Bruce Mining) at [47]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; 211 ALR 342; [2004] HCA 52 at [40]. The Courts frequently have regard to the contextual framework in which a contract is formed, to the extent to which it is known by both parties, to assist in identifying its purpose and commercial objective: McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; 176 ALR 711; [2000] HCA 65 per Gleeson CJ at [22]; Mount Bruce Mining at [47]; Franklins Pty Ltd v Metcash Ltd (2009) 76 NSWLR 603; 264 ALR 15; [2009] NSWCA 407 per Allsop P at [19]. It goes without saying that a construction that avoids capricious, unreasonable, inconvenient or unjust consequences, is to be preferred where the words of the agreement permit. The construction in the present case 69 At issue is whether WSP Structures Pty Ltd (WSP), a firm of consulting engineers engaged by Icon Co (NSW) Pty Ltd on the Opal Tower project, is entitled to be indemnified in respect of its liability under the Policy. That turns on whether WSP is entitled to limited cover under the Policy as an "engineer or other professional consultant", or whether it has the benefit of broader cover because it might also be characterised as a "sub-contractor". 70 As the learned primary judge and the majority have recognised, in construing the Policy it is, at times, necessary to depart from the literal or ordinary meanings of the words used. First and foremost, the description of "Insured's Business" in the Schedule cannot actually refer to "all business undertakings and activities of the Insured" in circumstances where the word "Insured" encapsulates all persons who have some indemnity under the Policy and who are referred to or designated as "the Insured". A literal application of the words would extend cover for liability arising from occurrences happening in the course of the businesses of contractors and sub-contractors, financiers and others. In the majority's reasons at [40], their Honours rightly accept the primary judge's conclusion that the concept of "Insured's Business" is only intended to be "a reference to the business undertakings and activities of the Icon Group entities which were referred to by name in the Schedule". 71 That obviously correct approach provides a commercial and business-like operation of the Policy from the perspective of the insurer and the Icon Group entities; the latter being the companies specifically named in the Schedule Description. The contract of insurance was between the insurer and Icon Co Nominee Pty Ltd and it is obvious that the Policy's intention is, primarily, to provide indemnity in respect of the liabilities of the companies of the Icon Group. Specifically, the Policy provides broad liability indemnity cover to those companies in respect of their business undertakings, being generally in the building and construction areas. Therefore, despite the ordinary meaning of the words, the Policy cannot be construed as providing indemnity in respect of the businesses of any third parties to whom some form of cover is provided. 72 A similar departure from the ordinary meaning of the words is necessary in relation to the operation of Condition 8, which provides for an adjustment to the premium based upon the reported turnover of "the Insured". Again, the literal or ordinary meaning of the words needs to be jettisoned in favour of a sensible commercial operation, being that the reference to the "Insured" is limited to the companies in the Icon Group. It is not probable that the turnover of others who might have some indemnity under the Policy would count in the assessment of turnover. 73 Pausing there, it sufficiently appears that the Policy draws a distinction between the companies in the Icon Group (which will be referred to as the "Named Insureds"), and others who benefit to some extent from the indemnity provided (which will be referred to as the "Other Insureds"). Yet, as is recognised by the majority and the primary judge, one commercial objective of the Policy is advanced by extending cover to those Other Insureds because they are involved in the Named Insureds' business activities. In broad terms, it can be accepted that the extension of cover to such third parties will often prevent disputation between the Named Insureds and the Other Insureds as to the liability for loss caused by any wrongful act in the course of the Named Insureds' businesses. It is well understood that disputes between the Named Insureds and Other Insureds such as contractors and sub-contractors and the like will be a significant distraction from the Insureds' business. The avoidance of such disputes allows the Named Insureds to fulfil their obligations to those who engage them, which thereby enhances their professional reputations. That does not mean that the Policy should be construed as one which intends to avoid all disputes between the Named Insureds and Other Insureds as to the liability for damage caused to third parties. The wider the scope of the indemnity granted to third parties and the more comprehensive it is, the greater becomes the risk borne by the insurer. There will necessarily be limits to the nature and extent of indemnity which an insurer will be prepared to provide to Other Insureds. Those limits will be reflected, in part, by the extent of damage for which the Other Insureds might become liable. The extension of cover to the Other Insureds 74 The extension of indemnity under the Policy to the Other Insureds is somewhat clumsy, and not only in the respect referred to above which necessitates a divergence from a natural or literal reading of the Policy. 75 The Other Insureds are referred to in the Schedule Description as: … subsidiary and/or controlled and/or joint venture companies and/or principals and/or financiers and/or contractors and subcontractors, all for their respective rights, interests, and liabilities. 76 On one view, this description is made up of three groups. The first being closely related companies where there exists some form of legal nexus to the Named Insureds. They are subsidiaries and controlled companies and joint venture companies, all of which might be expected to be legally related to or associated with the members of the Icon Group in one way or another for the purposes of the business operations. The second group consists of principals and/or financiers, with whom the Named Insureds might contract for the purposes of facilitating the building activities, though those third parties would not be involved in actual construction work. The last group, being contractors and sub-contractors, are third parties with whom the Named Insureds will contract in relation to the building work which they pursue. 77 The inclusion of those categories of Other Insureds, who are covered for their respective rights, interests and liabilities, substantially fulfils the purpose of the general extension of cover discussed above. 78 In the Policy's Definitions section, an attempt is made to articulate the extension of indemnity to third parties in a substantially more specific way. Before examining the words of the Definition, it is appropriate to observe that the Definitions section commences with the words, "Where appearing in this Policy the following definitions apply". In the ordinary course, it might be expected that where there is overlap, inconsistency or tension, the specific definition of the classes of entities insured contained in this section would take precedence over the more general description in the Schedule Description. 79 There is a lack of coherence between the meaning given to the term "Insured" in the Schedule Description and that given in the Definition. In Item 1 of the Definition, reference is made to "the Insured named in the Schedule", and it can be accepted that this refers to the Named Insureds which are specifically identified, as opposed to the Other Insureds who are described rather than named. However, no reference is made in the Definition to subsidiaries or companies controlled by the Named Insureds. If preference is given to the Definition, it might suggest that those types of companies were not to be accorded cover, though that would not align with the Policy's commercial purpose. At worst, this appears to be an unintended elision from the Definition, with a remedial approach being to treat the subsidiary or controlled companies as within the scope of the Named Insureds; there is no logic to their exclusion, as companies which are subsidiaries or controlled companies might naturally be regarded as being within the Icon Group of companies. On the other hand, it may be that those further companies are adequately described in the Schedule Description, such that they need not be otherwise addressed and are entitled to be fully indemnified under the Policy. In any event, the treatment of these companies suggests that some care is required in the Policy's construction. 80 The second group of additional insureds dealt with in the Definition are joint venturers and it will be recalled that "joint venture companies" are mentioned in the Schedule Description. However, in the Definition, the cover extended to joint venturers is circumscribed by the description "joint ventures … in which the Insured is a co-venturer and is responsible for arranging insurance". The inconsistency is resolved by according the Definition dominance over the Schedule Description. Though the mention of "joint venture companies" in the latter might initially point to all such companies having full cover, the Definition limits it to only joint ventures or joint venture companies in which a Named Insured is involved and, then, only where that Named Insured is responsible for arranging insurance. There is little to argue with about this construction. Importantly, it evidences that one of the functions of the Definition is to modify or limit the scope and effect of the cover that might be thought to have been provided by reason of the inclusion of an entity in the Schedule Description. 81 The Definition also makes reference to "principals and/or owners" which reflects the Schedule Description. Similarly, it also refers to lenders and/or financiers and, although lenders are not mentioned in the Schedule Description, the Definition puts it beyond doubt that they too are covered, at least for their respective rights and interests. 82 The Definition expands cover to include directors, officers and employees, even though they are not mentioned in the Schedule Description. This, perhaps, further emphasises the dominance that should be accorded to it in an interpretive sense. The limitation specified in relation to the cover afforded to directors, officers and employees also underscores the added role of the Definition of articulating the scope of the additional cover. 83 The same can be said of the reference to "manufacturers and suppliers" who are specifically included in the Definition but not in the Schedule Description. The indemnity provided to these insureds is specifically confined by reference to the limitation, "but only in relation to their manual on-site activities". That is obviously important in relation to damage that might be caused by a supplied or manufactured product which is incorporated into the building works undertaken by the Named Insureds. The expressed limit has the result that if any generic or specially manufactured product used in the construction of a project is defective and causes damage, the manufacturer or supplier is not covered in respect of liability for the resulting damage. From the insurer's perspective, the limitation makes commercial sense. It is notorious that the inclusion of defective products in major building works carries the potential for the occasioning of substantial damage. Defective concrete panels used in apartment buildings or combustible cladding are recent notorious examples of this. Conversely, while risks exist in the installation of product by manufacturers and suppliers in the course of their onsite activities, the likely amount of any resulting damage from that conduct is unlikely to be great in the context of major building work. 84 The limitation in relation to manufacturers and suppliers is important for the above reasons, but that is not to deny the fact that manufacturers or suppliers of product might also be considered sub-contractors. The Named Insureds engage in building and construction works and, where they enter into "supply and construct" or "design, supply and construct" contracts, the manufacturers and suppliers might well be characterised as sub-contractors. If, in that scenario, the manufacturers or suppliers are accorded unconditional cover by reason of their being sub-contractors — as is suggested in this case — the important and specifically included limitations would be circumvented. There is, with respect, nothing in the Policy which suggests that explicit limitations on the scope of cover provided were intended to be ignored merely because the manufacturer or supplier might also be characterised more broadly as a sub-contractor. 85 The same observations apply to "architects, engineers and other professional consultants" referred to in Item 8 of the Definition. Errors by such persons in the performance of their professional duties have the capacity to cause substantial loss and damage. It is unsurprising that an insurer would seek to avoid that type of exposure for non-contracting third parties and the reasons for that do not depend upon whether their services are provided simply as a consultant or as a sub-contractor. As is the case with cover afforded to manufacturers and suppliers, the liability which is specifically indemnified against is that which arises in relation to manual on-site activities. Similarly, while the potential for loss exists in relation to damage from on-site activities of engineers or architects, the amount of any likely damage is much less than that which might arise from negligent design or other similar conduct. 86 The observations of the majority are correct in that, whilst the Policy provides substantial cover in relation to the activities of the Named Insureds, it could have been more comprehensive, for example, by extending indemnity to sub-contractors of sub-contractors. However, the Policy ought not be viewed as some form of comprehensive floating "project works" policy providing indemnity for all persons who are involved on any building sites of the Named Insureds. Indeed, there is nothing to suggest that the Policy was intended to be that type of policy at all. Rather, it provides liability insurance to the members of the Icon Group and some limited extensions of cover to third parties on the basis that such cover affords derivative protection to the Named Insureds. 87 Ultimately, the question is identifying the degree to which cover is extended to those third parties and, particularly in this case, to consultant engineers and other professional consultants who were engaged on the Opal Tower project. The answer to that emerges from the Definition which specifies the limits of the extension of cover where it is necessary. That clause provides a substantially different picture of the extended cover from that which might otherwise be drawn from the wording of Schedule Description. The cover in respect of joint venturers is limited to particular circumstances, as is the cover in respect of sub-contractors. The scope of cover to company directors, officers and employees is prescribed, and the cover available to manufacturers, suppliers, architects, engineers and other professional consultants is limited to their on-site manual activities. Given the specificity of these extensions of cover, one might expect a need for the existence of a powerful rationale to obliterate the distinctions made merely because an architect, engineer, other professional consultant or, indeed, some other third party, might also be described as a sub-contractor. 88 A construction which affords relevance to the significance of the express limitations in the Items of the Definition is supported by a contextual approach to the task of interpretation. Though it might be possible to read Item 4, "sub-contractors engaged by any of the above", as having some overriding effect, it is not particularly clear that the Definition was intended to have a descending level of relevance or weight. The effect given to Item 4 should be assessed by both what goes before it and what goes after it. In the latter respect, that includes the clauses relating to manufacturers and suppliers as well as architects, engineers and other professional consultants in respect of which specific limits are applied. Other Items also include relevant limitations. In this light, the appropriate construction requires that the reference to sub-contractors in Item 4 should be understood as being subject to the particular insured not falling within the more specific extension. 89 It follows that I must respectfully disagree with the conclusion implicit in the majority's view that the words "and/or", as used in the Definition, were intended to be used as requiring that the more general Items were to dominate the more specific. In my view, that generic connecting phrase offers little more than an indication that an entity may fall within more than one item. It does not compel the conclusion that a third party consultant engineer whose off-site work has caused damage is to be afforded greater cover merely because the work done can be described as sub-contracted work. 90 Finally, emphasis has been given to the commercial benefit to the Named Insureds of a construction that provides unlimited cover for consultant engineers who were also sub-contractors. Namely, that such a construction would result in less room for dispute as between the Named Insureds and those who were engaged on the building projects. Although that certainly represents a benefit to the Named Insureds, it has a corresponding burden on the insurer. In circumstances such as the present, the issue is to identify the degree to which the insurer has granted cover to the liabilities of third parties in order to provide some commercial benefit to the insured. In this context it is appropriate to keep in mind that the Policy is a liability policy with an "occurrence" trigger. It results in the Named Insureds being entitled to indemnity for their liability to third party claimants, such as the building owners and residents, even where they might have claims against others in respect of their liability for the loss caused: see Liberty Mutual Insurance Company Australian Branch v Icon Co (NSW) Pty Ltd (2021) 154 ACSR 126. In that way, the major commercial purpose of the Policy is achieved, and the secondary commercial purpose of preventing disputation which might impact on the construction works is a significantly lesser consideration. Ultimately, the real question is as to the extent to which the insurer extends cover to third parties to achieve that secondary benefit, and, in this case, that is directly answered by the limits of the extended cover which are expressly stated in the Definition. It is sufficiently apparent from the wording of the Definition that third parties whose conduct has the potential to cause substantial damage — being suppliers, manufacturers, architects, engineers and other professional consultants — are granted limited indemnity. No good reason was shown as to why those limits should not be respected. This does not undermine the Policy's purpose to any significant degree. 91 As the damage caused by WSP in this case arose from its off-site work, no indemnity is extended to it. Conclusion on appeal 92 For the foregoing reasons, the Policy does not provide indemnity cover to WSP in respect of its liabilities arising from its consultancy engineering work. For that reason, neither Chubb Insurance Australia Limited or Tokio Marine & Nichido Fire Insurance Co Ltd have any liability to indemnify WSP. 93 In the result, I would order that: (1) The appeal be allowed. (2) Declarations 2 and 3 and Orders 6 to 13 of the Orders made on 9 November 2023 be set aside and, in lieu thereof, it be ordered that: (a) the proceedings against the appellants be dismissed; and (b) the first respondent pay the appellants' costs of the proceedings at first instance. (3) The first respondent on appeal pay the appellants' costs of the appeal. The cross-appeal 94 By way of cross-appeal, Liberty sought orders that it too should be relieved from any obligation to indemnify WSP under its policy as the primary layer insurer in circumstances where the terms of its policy were mirrored by those of the Chubb and Tokio policies. The resolution of that would require the return of the matter to the primary judge for determination of a pleading point. For the purposes of facilitating the exercise of the primary judge's discretion, it would be necessary to set aside the declarations made against Liberty. Such orders are appropriate in the circumstances where the issue of indemnity remains to be resolved. 95 The orders which I would make on the cross-appeal are as follows: (1) The second respondent's cross-appeal be allowed. (2) Declarations 1 and 2 and Orders 4, 5, 6, 13 and 16 to 25 of the Orders made on 9 November 2023 be set aside. (3) The matter be remitted to the trial judge for determination in accordance with the Court's reasons for judgment. (4) The first respondent on appeal pay the second respondent's costs of the appeal. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington. Associate: Dated: 20 September 2024 SCHEDULE OF PARTIES NSD 1419 of 2023 Cross-Respondents Second Cross-Respondent TOKIO MARINE & NICHIDO FIRE INSURANCE CO LTD ABN 80 000 438 291 (AFSL 246548) Third Cross-Respondent WSP STRUCTURES PTY LTD