High Court of Australia Gibbs C.J. Wilson, Brennan, Deane and Dawson JJ. Chalmers Leask Underwriting Agencies v Mayne Nickless Ltd [1983] HCA 20 ORDER Appeal dismissed with costs. Cur. adv. vult. The following written judgments were delivered:— June 17 Gibbs C.J. I have had the advantage of reading the reasons for judgment prepared by my brothers Brennan and Deane and am in agreement with them. I would, however, add a few observations. The sole question on the appeal was whether the claim for loss or damage suffered by the respondent (the insured contractor) under a policy of contractors' risks insurance was excluded by cl. (iii) of the exclusions in the conditions of the policy. If it was not, the respondent was entitled to recover under the policy. By cl. (iii), the insurance did not cover "loss or damage directly caused by defective workmanship, material or design or wear and tear, or mechanical breakdown or normal upkeep or normal making good but so that this exclusion shall be limited to the part immediately affected and shall not apply to any other part or parts lost or damaged in consequence thereof". The argument for the appellant was that a new trial should have been ordered by the Court of Appeal once that Court had reached the conclusion that the learned primary judge had fallen into error in importing the concept of negligence into the phrase "defective workmanship, material or design". It was submitted that the appeal was governed by the principle which was expressed as follows in Suttor v. Gundowda Pty. Ltd. [1] : "Where a point is not taken in the court below and evidence could have been given there which by any possibility could have prevented the point from succeeding, it cannot be taken afterwards." However, this is not a case in which a new point was taken for the first time in the Court of Appeal. The question whether the loss or damage was "directly caused by defective workmanship, material or design" was squarely raised by the pleadings. It was one of the main issues at the trial, although there the parties advanced different arguments as to the meaning of those words in the policy. According to the learned primary judge, the "principal submission" of the appellant was that if the coffer dam failed to keep the water out of the works being constructed by the respondent it was defective, and that it was not necessary to establish negligence to bring the case within the exclusion. That submission was rejected by the learned primary judge but it cannot be said that when the Court of Appeal accepted it, its judgment depended upon a point not raised at the trial. The issue on which the Court of Appeal decided the matter was litigated at the trial and the appellant should have adduced at the trial (and no doubt did adduce) whatever evidence it considered material, having regard to the construction which its counsel submitted and which was ultimately accepted. If, contrary to the view taken by the majority of the Court of Appeal, the primary judge had not made the necessary findings of fact in relation to that issue, it was in those circumstances open to the Court of Appeal to make its own findings, paying of course due regard to the views expressed by the primary judge as to the credibility and acceptability of the witnesses. 1. (1950) 81 C.L.R. 418, at p. 438. However, it is unnecessary to consider whether the loss or damage for which the respondent claimed to recover was "directly caused by defective workmanship, material or design". The exclusion which cl. (iii) brings about is "limited to the part immediately affected". In the present case the "part immediately affected" by the alleged defective workmanship, material or design was (at most) the coffer dam, but no claim was made under the policy in respect of any loss or damage to the coffer dam. It is true, as counsel for the appellant pointed out, that there was a claim for "desilting", and that some at least of the silt which had to be removed from the works being constructed by the respondent resulted from the disintegration of the coffer dam. However, the loss or damage caused by the silt for which a claim was made by the respondent was caused to the works which the respondent was constructing and not to the coffer dam itself. In other words, the loss or damage resulting from the necessity to remove the silt was in respect of "any other part or parts lost or damaged in consequence thereof" (i.e., in consequence of the alleged defective workmanship, material or design of the coffer dam) and the exclusion was inapplicable to such damage. The concluding words of cl. (iii) (which commence "but so that this exclusion") apply to all of the preceding words of the clause and not simply to the words "mechanical breakdown or normal upkeep or normal making good". I could not usefully add to the reasons given by my brothers Brennan and Deane for reaching that conclusion. I conclude therefore that if one assumes that the loss or damage to the work was directly caused by any defective workmanship, material or design of the coffer dam, cl. (iii) nevertheless did not exclude a claim in respect of the loss or damage in question, since it was not loss or damage to "the part immediately affected" within the meaning of that clause. No question was raised as to the effect of the concluding words of cl. (iii) either at the trial or in the Court of Appeal, but, "When a question of law is raised for the first time in a court of last resort, upon the construction of a document, or upon facts either admitted or proved beyond controversy, it is not only competent but expedient in the interests of justice, to entertain the plea": Connecticut Fire Insurance Co. v. Kavanagh [2] ; cited in Suttor v. Gundowda Pty. Ltd. [3] . 1. [1892] A.C. 473, at p. 480. 2. (1950) 81 C.L.R., at p. 438. I would dismiss the appeal. Wilson J. I have had the advantage of reading the reasons for judgment prepared by Brennan and Deane JJ. and the observations of the Chief Justice. I agree with those reasons and observations and would dismiss the appeal. Brennan and Deane JJ. The general issue in this appeal is whether certain loss and damage, which the respondent sustained as a consequence of a number of severe floodings of open channel flood mitigation work which it was carrying out in the vicinity of the Bunburry Curran Creek between Glenfield and Campbelltown in New South Wales, came within the terms of an exclusion clause contained in a policy of insurance issued by the appellant. The insurance under the policy was, "in respect of occurrences happening during" the period of insurance, "against physical loss of or damage to property of every kind and description (including the whole of the Contract Works ) owned by the Insured or for which the Insured may be responsible". It is common ground that each flooding constituted an "occurrence" within the meaning of the policy and that the loss and damage in question, if not within the exclusion clause, came within the insurance cover. The exclusion clause upon which the appellant relies is the third of a group of eight numbered exclusion clauses contained in the policy under the heading " Exclusions ". It provides: This insurance does not cover: (iii) loss or damage directly caused by defective workmanship, material or design or wear and tear, or mechanical breakdown or normal upkeep or normal making good but so that this exclusion shall be limited to the part immediately affected and shall not apply to any other part or parts lost or damaged in consequence thereof; The appellant claims that the relevant loss and damage was, within the meaning of cl. (iii), "directly caused by defective workmanship or design" in a bank of impacted earth which the respondent had constructed across the watercourse of the creek and which formed, with the banks of the watercourse, what has been described as a coffer dam. The earth bank ("the coffer bank" or "the bank") was intended to serve the dual function of protecting the construction works in and along the watercourse below from flooding and of providing an on-site haulage road from one side of the creek to the other. Heavy equipment using the bank as a haulage road caused the soil of the bank to impact with the result that a depression of a depth of approximately two feet was formed across part of the top of the bank. The appellant points to this depression as the manifestation of the alleged defective workmanship or design. In the various floodings, the water flowed over the bank through the depression, causing rapid erosion of and damage to the bank. The disputed loss and damage were not in respect of the recurrent damage to the bank itself. They were loss and damage caused by the flooding waters, after they had passed over and through the bank, by scouring of the construction works and by deposit of the soil of the bank and other soil and debris which those waters carried. The respondent disputes the existence of any relevant defective workmanship or design in relation to the coffer bank and maintains that, if such defective workmanship or design did exist, it did not cause any relevant loss or damage for the reason that the flood waters would, in any event, have flowed over the top of the bank resulting in its erosion and collapse with at least as great loss and damage as had in fact been sustained. In the Supreme Court of New South Wales, the learned trial judge (Hunt J.) upheld the respondent's contention that there had been no relevant defective workmanship or design. His Honour also expressed some conclusions which are claimed by the respondent to constitute a finding that the relevant loss and damage would have occurred in any event. In the Court of Appeal, Hutley, Glass and Mahoney JJ.A. disagreed with Hunt J.'s construction of cl. (iii) which had provided the basis of his finding that there had been no relevant defective workmanship or design. The majority (Hutley and Mahoney JJ.A.) concluded, however, that Hunt J. had found that the loss and damage would have occurred in any event and that the appeal should accordingly be dismissed. Glass J.A. was not persuaded that Hunt J. had so found and concluded that there should be a new trial. As the disagreement in the courts below indicates, the questions there considered are not without difficulty. However, we do not find it necessary to consider whether there was any relevant defective workmanship or design and whether, if there was, the disputed loss and damage flowed from it. We have reached a firm conclusion that, regardless of whether there was defective workmanship or design in the coffer bank which directly caused the disputed loss and damage, that loss and damage did not come within exclusion cl. (iii) by reason of the express provision, at the end of the clause, "that this exclusion shall be limited to the part immediately affected and shall not apply to any other part or parts lost or damaged in consequence thereof". The respondent relied upon this limiting provision for the first time in this Court with the consequence that its relevance was not considered in the judgments in the courts below. The issue raised by the respondent's reliance upon the provision is, however, one of construction and it is not suggested either that the conduct of the trial would have been different or that further evidence would have been adduced if it had been expressly raised at first instance. In the circumstances, the respondent should be permitted to rely on the provision to maintain the judgment in its favour. The question of construction is whether the limiting provision at the end of cl. (iii) applies generally to the "loss or damage" specified in the clause or whether, as the appellant contends, it applies only in respect of the exclusion of such of that loss or damage as is directly caused by mechanical breakdown, normal upkeep or normal making good. The answer to that question of construction turns upon the denotation of the phrase "this exclusion" in the limiting provision. Prima facie, that phrase refers to the single exclusion contained in the clause in which it occurs, that is to say, the exclusion of loss or damage directly caused by any of the matters mentioned in cl. (iii). There is nothing inherently illogical in that prima facie construction of the limiting provision. To the contrary, the various causes by reference to which the excluded loss or damage is described share a common element in that they all relate to the presence, the development, the prevention or the repair of defect or deterioration in equipment or property and it is no more anomalous that the overall exclusion should be limited to loss or damage "to the part immediately affected" than that it should be limited to loss or damage "directly" caused by one or other of the designated causes. As we followed it, the argument for the appellant was that the exclusion of the loss or damage described in cl. (iii) should be viewed as being, in truth, three independent exclusions of different types of loss or damage distinguished by reference to cause, namely, (i) loss or damage directly caused by defective workmanship, material or design, (ii) loss or damage directly caused by wear and tear, and (iii) loss or damage cause by mechanical breakdown, normal upkeep or normal making good. If the clause be so viewed, the presence of the comma after the word "tear" and the absence of a comma after the word "making good" are said to support a construction of the limiting provision which confines it to loss or damage caused by the third of those groupings of causes. In our view, that argument is quite unpersuasive. The suggested grouping of causes is not warranted as a matter of logic or as a matter of construction and, in any event, the mere absence of a comma is of dubious worth as an aid to the construction of a clause, such as cl. (iii), in which punctuation has plainly been a haphazard matter: thus, for example, there is, as a matter of construction, no valid reason for grouping "mechanical breakdown" with any of the other indicated causes and there is inconsistency between the presence of a comma after the word "tear" and the absence of a comma after the word "design". The true answer to the argument however is that, even if one can properly divide the causes of loss or damage into the suggested groupings, the fact remains that cl. (iii) contains but one exclusion, namely, loss or damage directly caused by any one, or by a combination of any one or more, of a number of designated causes relating to the condition of property or equipment. The phrase "this exclusion" in cl. (iii) cannot properly be construed as referring to one or other of the possible causes of an exclusion. It refers to the exclusion itself, that is to say, it refers to the single overall exclusion of loss or damage of the type described in the clause. The result is that the exclusion of loss or damage caused by defective workmanship, material or design is "limited to the part immediately affected and shall not apply to any other part or parts lost or damaged in consequence thereof". On the appellant's argument, the direct cause of the disputed loss and damage was the depression on the top of the coffer bank which is alleged to have been the result of defective workmanship and design. Even if that be accepted and if it be also accepted that the damage caused by the flooding waters after they had passed over or through the bank was "directly caused" by the defective workmanship or design, the effect of the limitation provision in cl. (iii) is to limit the exclusion to the part immediately affected which, at most, comprised the whole of the coffer bank itself. No part of the relevant loss and damage is in respect of the damage to, or the costs of reinstatement of, the coffer bank. That being so, the exclusion clause was not applicable. The appeal should be dismissed with costs. Dawson J. I agree with the reasons for judgment of my brothers Brennan and Deane that the appeal should be dismissed, and with the observations of the Chief Justice. I have nothing to add.