Reported Decision : (2000) 11 ANZ Insurance Cases 61-477 New South Wales Court of Appeal CITATION : HIH CASUALTY & GENERAL INSURANCE LTD v PLUIM CONSTRUCTIONS PTY LTD & ANOR [2000] NSWCA 281 FILE NUMBER(S) : CA 40893/98 HEARING DATE(S) : 14 August 2000 JUDGMENT DATE : 17 October 2000 PARTIES : HIH CASUALTY & GENERAL INSURANCE LTD v PLUIM CONSTRUCTIONS PTY LTD and COMMERCIAL UNION ASSURANCE CO OF AUST LTD JUDGMENT OF : Mason P at 1; Handley JA at 73; Foster AJA at 73 LOWER COURT JURISDICTION : District Court LOWER COURT DC 4863/97 FILE NUMBER(S) : LOWER COURT Kuner ADCJ JUDICIAL OFFICER : Appellant: J E Maconachie QC; S G Campbell COUNSEL : lst Respondent: D B McGovern; A J O'Brien 2nd Respondent: ADM Hewitt SC; H Marshall Appellant: Hunt & Hunt SOLICITORS : 1st Respondent: Tesoriero Henderson Cotter 2nd Respondent: Henry Davis York CATCHWORDS : Insurance contracts - accident at building site - competing insurance claims - double insurance giving rise to contribution rights between insurers - principal-arranged insurance - duty on the owner of vehicle to take out third-party insurance - clauses to protect insurer from claims which should be covered by compulsory motor vehicle insurance - meaning and application of s45(2) Insurance Contracts Act 1984 - "other insurance" clauses limiting an insurer's liability - using a Law Reform Commission Report to identify the mischief to which legislation is directed - "the operation or use of a motor vehicle" - (ND). DECISION : See par [89] of judgment THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40893/98 MASON P HANDLEY JA FOSTER AJA Tuesday 17 October 2000 HIH CASUALTY AND GENERAL INSURANCE LTD v PLUIM CONSTRUCTIONS PTY LTD & Anor The first respondent, Pluim Constructions P/L ("Constructions") was doing building work at the Mingara Recreation Club. Related companies, Pluim Detail Joinery P/L ("Joinery") and Pluim Commercial Landscapes P/L ("Landscapes") were also involved in aspects of the job. Knight, an employee of Landscapes, was asked to assist Constructions by removing debris from the site using a truck and bobcat belonging to Landscapes. Knight was injured when tipping contents from the bobcat into the truck. Glass shards fell through the mesh cage of the bucket and became lodged in his knee. There was not meant to be glass in the pile of rubbish Knight was removing. Knight sued Constructions and Joinery in the District Court. Constructions was found to have breached a duty of care owed to the plaintiff to see that glass was separated from the accumulated debris and rubbish pile. Four third party notices were filed by the defendants propounding claims for indemnity under the Law Reform (Miscellaneous Provisions) Act 1946 and (against the Club) damages for breach of cl 8.4 of the building contract. The appeal was concerned with the insurance claims. Constructions were insured with the appellant ("HIH") against public liability risk, and when Constructions' claim for indemnity under the policy was refused, it joined HIH as a third party in the proceedings. The proprietor of the Mingara Club also had effected policies of public liability insurance for Constructions in respect of personal injury or death arising by accident where the accident arose out of or was caused by the execution of the building works. These policies were taken out with the Commercial Union Assurance Company of Australia Ltd ("CU"). Only one of these policies was relevant ("the CU Policy"). Constructions claimed indemnity under the CU policies pursuant to a third party notice. CU denied liability, relying upon various exclusions including 6(b) of the CU Policy. The trial judge found for CU holding that Constructions' claim fell within exclusion 6(b). HIH argued that condition 7 of the HIH policy dealing with principal-arranged insurance allowed it to escape liability under its own policy if CU was liable under the CU policy. His Honour found Condition 7 rendered void by s45(1) of the Insurance Contracts Act 1984 (Cth), in particular because the CU Policy was not "specified" in the HIH policy. His Honour also rejected HIH's attempt to rely directly on exclusion 4(a) in the HIH policy. HIH appealed and the respondents were Constructions and CU. HELD - (per curiam): 1. HIH was not exempted because of Condition 7 of the HIH Policy allowing for other insurers to provide indemnity. Discussion of the operation of s45(2) of the Insurance Contracts Act. Condition 7 of the HIH policy does not specify a contract of insurance such as the CU Policy, and insufficiently specifies the CU Policy within s45(2). Ausstress-PSC Pty Ltd and Carlingford Australia General Insurance Ltd v Zurich Australian Insurance Ltd, District Court of Queensland, Robyn J, 1 May 1992 (discussed). 2. The trial judge was correct in concluding that HIH could not invoke exclusion 4(a). Discussion of common insurance term "operation…of any vehicle". This exclusion clause was not engaged because there was no "operation" of the truck "by or on behalf of" Constructions, the relevant insured. NRMA Insurance Ltd v NSW Grain Corporation (1995) 22 MVR 317 (cited). 3. The cross-appeal as to costs brought by Constructions should be dismissed with costs. Gould v Vaggelas (1995) 157 CLR 215 (cited). (Per Handley JA and Foster AJA allowing the appeal): 4. Exclusion clause 6(b) of the CU policy does not apply to CU's claim for indemnity in respect of the damages awarded to Knight. Knight's injuries arose of out the use of the bobcat which was not required to be registered and covered by compulsory motor vehicle insurance. On this view of the facts exclusion clause 6(b) did not apply and the CU policy would have responded to the claim. 5. The judgments against the two insurers will be res judicata not only in favour of Constructions but also in favour of each other. The absence of formal claims for contribution between the two insurers did not prevent the Court from making appropriate orders which finally disposed of these disputes avoiding further litigation. (Per Mason P dissenting and dismissing the appeal): 6. Considering the operation of exclusion clause 6(b) of the CU policy, the trial judge was correct in concluding that the CU policy did not respond to Constructions' claim. ORDERS See par [89] of judgment. ********** THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40893/98 MASON P HANDLEY JA FOSTER AJA Tuesday 17 October 2000 HIH CASUALTY AND GENERAL INSURANCE LTD v PLUIM CONSTRUCTIONS PTY LTD & Anor JUDGMENT 1 MASON P: An off street accident at the premises of the Mingara Recreation Club, Tumbi Umbi on 1 September 1992 has given rise to complex insurance issues. Mr Knight's accident 2 The first respondent, Pluim Constructions Pty Ltd ("Constructions") was doing building work at the Club. Related companies, Pluim Detail Joinery Pty Ltd ("Joinery") and Pluim Commercial Landscapes Pty Ltd ("Landscapes") were also involved in aspects of the job. 3 Mr Knight, an employee of Landscapes, was asked to assist Constructions by removing debris from the site using a truck and bobcat belonging to Landscapes. The truck had third-party insurance but the bobcat did not. 4 The bobcat had a 40mm square metal mesh cage enclosing the operator other than at the front. It was also fitted with a four-way bucket with controls allowing the bucket to tilt back and forwards and to open and close at the base of the bucket to enclose materials being lifted in the bucket. The bucket was open on top. The arms on the bobcat elevate the bucket above and slightly in front of the operator's cage, permitting the bucket to be placed over a truck or other receptacle. 5 Mr Knight filled the truck twice and delivered the load to the rubbish tip. 6 He was injured while filling the third load. Using the bucket on the bobcat, he grabbed rubbish from a pile and drove the bobcat towards the truck, lifting the bucket up about 3 metres above his head and slightly in front of him. He intended to tip the contents of the bucket into the truck. The terrain was flat. He heard a crash on top of the mesh cage and could tell it was glass. He closed his eyes and when he opened them he saw glass shards in his knee. There was not meant to be glass in the pile of rubbish he was removing. Proceedings in the District Court 7 Mr Knight sued Constructions and Joinery in the District Court. Constructions was found to have breached a duty of care owed to the plaintiff to see that glass was separated from the accumulated debris and rubbish pile. Damages were assessed in the sum of $74,993.00. A verdict was entered in Joinery's favour. 8 Four third party notices were filed by the defendants propounding claims for indemnity and contribution under various insurance policies, contribution or indemnity under the Law Reform (Miscellaneous Provisions) Act 1946 and (against the Club) damages for breach of cl 8.4 of the building contract. This appeal is concerned with the insurance claims. 9 No claim for contribution was pleaded between the insurers. The insurance policies 10 As indicated, Landscapes had taken out compulsory third-party insurance with respect to its truck. 11 The Pluim group of companies were also insured with the appellant ("HIH") against public liability risk. The relevant policy was issued on 21 July 1992 for the ensuing 12 months. When Constructions' claim for indemnity under the policy was refused, it joined HIH as a third party in the proceedings (RB 11). HIH admitted its obligation under the policy to indemnify contractors such as Constructions, subject to its right to rely upon various provisions of its policy including condition 7 and exclusion 4(a). 12 In cl 8.4 of the building contract, the proprietor of the Mingara Club had agreed to effect public liability insurance for Constructions in respect of personal injury or death arising by accident where the accident arose out of or was caused by the execution of the building works. In compliance, the proprietor effected two policies with the second respondent, Commercial Union Assurance Company of Australia Ltd ("CU"), being a Liability Policy and a Construction Policy. By virtue of cl 8.11 of the building contract, Constructions agreed that it was satisfied with the terms, conditions, exclusions and excesses of these policies. 13 Only the CU Construction Policy remains relevant. It was effected on 27 August 1992 and covered the year commencing 24 July 1992. It was in favour of Mingara Recreation Club Ltd, Constructions and all subcontractors. 14 Constructions claimed indemnity under the CU policies pursuant to a third party notice (RB 34). CU denied liability, relying upon various exclusions, including 6(b) of the CU Construction Policy. 15 The issues in these two third party proceedings overlap because HIH's defence to the claim made upon it included reliance upon an "other insurance" exclusion in its policy (condition 7) coupled with the assertion that Constructions' liability to Mr Knight was covered by the CU Construction Policy. 16 Kuner ADCJ found that neither of the CU policies responded to the claims by Constructions. He also rejected HIH's attempt to rely directly on exclusion 4(a) in the HIH policy. 17 The respondents to this appeal (by leave, previously granted) are Constructions and CU. HIH's submission that the CU Construction Policy responds 18 HIH submitted that the CU Construction Policy responded to Constructions' claim for indemnity (as propounded in the fourth third party notice). HIH's interest in advancing this argument lay in (1) HIH's argument that condition 7 of the HIH policy dealing with principal-arranged insurance (the "other insurance" exclusion) allowed HIH to escape liability under its own policy if CU was impaled under the CU policy; and (2) HIH's alternative argument that there was double insurance giving rise to contribution rights between the insurers. 19 CU and Constructions accepted that Constructions' claim for indemnity was a risk falling within the CU Construction Policy. But they invoked exclusion 6(b) of that policy, albeit that Constructions did so contingently upon HIH failing in its remaining claims. 20 The trial judge held that the CU Construction Policy did not respond because Constructions' claim fell within exclusion 6(b). Although unnecessary to go further, he also held that HIH could not rely upon condition 7 of its own policy because it was rendered void by s45(1) of the Insurance Contracts Act 1984 (Cth), in particular because the CU Construction Policy was not "specified" in the HIH policy. 21 HIH must overcome both limbs of his Honour's reasoning to obtain complete exemption from Constructions' claim for indemnity under the HIH policy. If the first limb is overturned but not the second, HIH remains exposed to a full claim for indemnity by Constructions, but with an apparently strong right of contribution from CU. (Such a claim is not propounded on the pleadings, but issue was fully joined between the insurers.) CU Exclusion 6(b) 22 Exclusion 6 refers to: Claims in respect of Personal injury or Damage to Property arising directly or indirectly out of or caused by or in connection with the use of (a) any aircraft or aerial device in the physical or legal control of the insured or used in work undertaken by or on behalf of the insured. (b) any Vehicle or any attachment to any Vehicle in the physical or legal control of the Insured or used in work undertaken by or on behalf of the Insured in respect of which insurance is required by virtue of any legislation relating to motor vehicles. (c) any Watercraft whilst afloat in the physical or legal control of The Insured or used in work undertaken by or on behalf of the Insured. 23 The trial judge found that Constructions' claim under the CU Construction Policy arose out of the use of the truck in work undertaken by or on behalf of Constructions within exclusion 6(b). The appellant HIH does not dispute this, indeed the proposition is embraced in connection with an alternative argument advanced in the appeal (see below). However, HIH challenges the respondents' joint invocation of exclusion 6(b) on the basis that the exclusion only operated if third-party insurance for the truck was required by statute to be effected by the insured making the claim (ie Constructions). 24 It was submitted that the words emphasised were to be implied because Constructions would otherwise be left without cover with respect to Mr Knight's successful claim on it. Constructions was unable to claim under the third-party policy because it was neither the owner or driver of the truck (cf Motor Accidents Act 1988, s9), nor could it claim under its own workers compensation policy because Mr Knight was not its employee. 25 Apart from its circularity, the fallacy in this reasoning is that it seeks to construe the CU policy by reference to an imputed intent of the Club to secure all-embracing insurance cover for its builder. This is an impermissible method of construction of a free-standing policy. More importantly, it fails to recognise that, as a party to the building contract, Constructions expressly recognised that the "principal-arranged insurance" would contain conditions and exclusions which Constructions contracted that it would accept (see cl 8.11). Constructions is covered by the CU policy, but only to the extent that the policy provides. 26 In my view, there is no basis for reading unexpressed words into exclusion 6(b) that would expand the exclusion. I read the words "in respect of which insurance is required by virtue of any legislation relating to motor vehicles" as qualifying the words "any Vehicle or any attachment to any Vehicle" at the opening of subclause (b) (cf the unqualified form of subclauses (a) and (c)). In that context, it is perfectly understandable why the drafter of clause 6 paid no attention to the identification of the persons upon whom such requirement lay. 27 Indeed, the Motor Accidents Act 1988 was similarly insouciant, because it imposed no direct duty on the owner of a vehicle to take out third-party insurance. Rather, s8(1) penalised any person who used, or who caused or permitted another person to use, an uninsured vehicle on a public street (subject to irrelevant exceptions). This said, there is a loose sense in which it can be said that the statutory requirement to take out a third party policy lay upon Landscapes as the owner of the truck. This gives plenty of work for exclusion 6(b) without the need to strain it by expanding the exclusion through implying additional words into it. If an accident involving the truck attracts third party cover for the owner or driver, so be it. But if it does not, that is no reason to expand the scope of the CU policy to fill some suggested gap in coverage. 28 The trial judge was correct in concluding that the CU Construction Policy did not respond to Constructions' claim. 29 This conclusion renders it unnecessary to address HIH's submission that the cover of the HIH policy is withdrawn because of the operation of condition 7 of the HIH policy. Since, however it was fully argued I shall address some remarks to the topic. Condition 7 of the HIH policy 30 HIH submits that, if the CU policy responds, there would be not merely a case of double insurance, but HIH would be exempted entirely because of Condition 7 of the HIH policy which stated: PRINCIPAL-ARRANGED INSURANCE In the event of the named Insured entering into an agreement with any other party (who for the purpose of this clause is called 'the Principal') pursuant to which the Principal has agreed to provide a policy of insurance which is intended to indemnify the named Insured for any liability arising out of the performance of the Works then the Company(ies) will (subject to the terms and conditions of this Policy) only indemnify the names Insured for such liability not covered by the policy of insurance provided by the Principal. 31 Section 45 of the Insurance Contracts Act 1984 (Cth) provides: 45(1) Where a provision included in a contract of general insurance has the effect of limiting or excluding the liability of the insurer under the contract by reason that the insured has entered into some other contract of insurance, not being a contract required to be effected by or under a law, including a law of a State or Territory, the provision is void. 45(2) Sub-section (1) does not apply in relation to a contract that provides insurance cover in respect of some or all of so much of a loss as is not covered by a contract of insurance that is specified in the first-mentioned contract. 32 It is accepted by the parties that subs (1) will avoid condition 7 unless subs (2) applies. Assuming that the CU Construction Policy responded, the issue became one of determining whether the words "the policy of insurance provided by the Principal" in condition 7 were sufficient to specify the CU policies within s45(2). 33 The primary judge held that the language of condition 7 was too general and not of sufficient specificity to satisfy s45(2). In my view he was correct. 34 In its Report on Insurance Contracts (No 20, 1982), the Australian Law Reform Commission (ALRC) identified the mischiefs involved in "other insurance" clauses which limit an insurer's liability (see Chapter 11). Such clauses were said to fall into three main classes (par 281). The first class covers provisions which purport to exclude liability altogether in the event of other insurance. The insured's sole recourse is to the other insurer. The second comprises provisions which limit the insurer's liability to a rateable proportion of the loss. In that event the insured must bring two actions. Even then the insured may suffer an overall loss if the other insurance is insufficient or if the claim against the other insurer is defective. The third class covers provisions which limit the liability of the insurer to any amount by which the loss exceeds the amount recovered or recoverable from the other insurer. Such a provision converts a policy into an excess policy without appropriate reduction in the premium. 35 The ALRC concluded that there was no substantial justification for any of the various types of "other insurance" clause. Since they may cause the insured's reasonable expectations to be defeated, it was recommended that all forms of such provisions should be rendered ineffective. If more than one insurance policy is in effect in respect of the same risk, the insured should be entitled to recover the whole loss from any one of the insurers, which should then be entitled to obtain contribution from the others (par 289). 36 These recommendations were embodied in cl 46 of a draft Bill appended to the ALRC report. That clause became s45 of the Insurance Contracts Act 1984. 37 The ALRC explained the proposed cl 46(2) in par 54 of its Summary of Recommendations and par 290 of its Report. They state: 54. Exceptions . Two exceptions should be made to the recommendation for the negation of other insurance clauses: . It should be made clear that the issue of a true excess liability policy for an appropriate premium to cover the insured's liability over and above that covered by another insurance which is specifically identified in the excess policy, is not affected. … 290. Limits on Recommendation It should be emphasised that these recommendations would have not effect on layered policies in the field of co-insurance where each policy is for a discrete range of the total risk and where no overlap occurs. In addition, two exceptions should be made to the recommendation in the preceding paragraph. First, it should be made clear that the issue of a true excess liability policy to cover the insured's liability over and above that covered by another insurance which is specifically identified in the excess policy is not affected. … 38 The Explanatory Memorandum explaining cl 45 of the Bill identified the mischief addressed in cl 45 in terms broadly similar to the ALRC Report. The Memorandum referred to the intended effect of the clause in the following terms: 148 . Where two or more contracts of insurance provide cover in respect of the same loss insurers will be able to claim contribution from one another in respect of the loss (ALRC para 289). It is appropriate that an insurer should be able to exclude liability which is also covered by compulsory insurance eg workers' compensation or third party insurance. It is also appropriate that he can exclude liability where the policy is a genuine excess policy (ALRC para 290). 39 The academic literature reveals a spectrum of opinion as to the meaning and application of the word "specified" in s45(2). Sutton, Insurance Law in Australia 3rd ed (1999), suggests (at p982) that sub-s(2): …refers to the situation where contract A provides cover in relation to a loss that is not covered by contract B and contract B is specified in contract A. In that case, the section has no application to contract A. What constitutes specification is not defined but it must mean that contract B need not be precisely named but must be sufficiently described so as to be capable of identification, and the requirement of specification makes it clear that only true excess liability policies are intended to be exempted from the operation of s45(1). 40 Derrington and Ashton, The Law of Liability Insurance, (1990) take a slightly narrower view of s45(2), stating (at p378) that: The position under the Insurance Contracts Act 1984 is that a provision of this type which has the effect of limiting or excluding the liability of the insurer is void, except for an "excess" policy in respect of another policy which is specified in the policy containing the condition. Accordingly, even that form of condition which made the policy containing it an excess policy in the event of other insurance, and which was so effective in the past, is ineffective unless it specified the other insurance. Because of the purpose of s45, it is most probable that the specification of the policy to which it is to be an excess is so general that it would not meet the requirement of sub-s(2) which would except it from the general avoidance which sub-s(1) visits upon conditions relating to other insurance. (sic) Otherwise, the scope of the section is obviously intended to be far-reaching by its reference to the result, so that it may well be found to apply to all such conditions and provisos except those in an excess policy that is related to a specific and named policy. 41 Kelly and Ball, Insurance Legislation Manual 3rd ed (1995) suggest at p132 that "specified" means that the actual contract must be identified in the excess policy - otherwise the excess policy would not be a "true excess policy". 42 To my knowledge, the only judicial discussion of s45(2) is the unreported decision of Robyn QC DCJ of the Queensland District Court in Austress-PSC Pty Ltd and Carlingford Australia General Insurance Ltd v Zurich Australian Insurance Ltd (1 May 1992). 43 This decision, cited by Kuner ADCJ, is a very clear one on its facts because the relevant provision did no more than refer to "any other Policy of Indemnity or Insurance in favour of or effected by or on behalf of the Insured applicable to such Occurrence" as the defeasance provision. Nevertheless it is pertinent that Judge Robyn QC accepted the submission that s45(2) was: … to be construed as requiring reference to 'other insurance' to be specific, as opposed to a description in general words capable of extending to the other insurance, if the provision under examination is to survive being struck down by sub-s.(1). It seems to me the underlying notion is that the insured and the insurer have tailored their own bargain to take account of the impact of other contracts. 44 In my view it is unnecessary to seek the definitive meaning of the sub-section, although the policy of s45(1) suggests to me that the exception in sub-s(2) should be construed narrowly, as some of the writers suggest. Whatever the outer limits of the subsection, I cannot in any event read condition 7 of the HIH policy as specifying a (emphasis added) contract of insurance such as the CU Construction Policy. 45 Here there was no identification of any particular policy with any particular insurer. The type of insurance which the proprietor was obliged to take out was described in the building contract in terms of the broadest generality and with no reference to conditions or exclusions. The HIH policy is not in form or substance a type of layered insurance or excess insurance. The fact that "a policy of insurance" would be "principal-arranged" only emphasises its futurity, contingency and lack of relevant specificity. In the context of condition 7, "a policy of insurance" means any policy of insurance. This is the antithesis of "a…. specified contract" within s45(2). 46 Even on the approach suggested by Professor Sutton (par 40 above), the CU Construction Policy is not "specified". 47 It is therefore unnecessary to pursue the interesting question whether the Bill appended to the ALRC Report should be construed to give effect to the particular intent expressed in par 290 of that Report otherwise than through the traditional methods of resorting to a Law Reform Commission Report to identify the mischief to which legislation is directed (cf Bitumen and Oil Refineries (Australia) Ltd v Commissioner for Government Transport (1955) 92 CLR 200 at 211-12, Wacal Developments Pty Ltd v Realty Developments Pty Ltd (1978) 140 CLR 503, Acts Interpretation Act 1901 (Cth) s15AB(2)(b)). 48 It may be that a contract of insurance need not actually have been formed and/or commenced before it is capable of being specified within s45(2). And it is possible that a clearly defined class of insurance such as "X's standard Construction Policy with an excess of Y" would suffice. I prefer to reserve my position on these possibilities. They are far removed from the present situation. HIH exclusion 4(a) 49 Finally it was submitted that the claim by Constructions upon HIH was excluded by the direct operation of exclusion 4(a) of the HIH policy which stated: This Policy does not cover liability … 4. For personal injury and/or loss of or damage to property a caused by the ownership or operation by or on behalf of the Insured of any vehicle in respect of the use of which liability insurance is provided by virtue of any legislation relating to motor vehicles or which is otherwise insured in respect of the same liability, but this exclusion does not apply when any such vehicle is being used as a tool of trade at the site of the Works and such use is not insured under a specific Motor Vehicle, Compulsory Third Party or other insurance policy. (emphasis added) 50 Since Mr Knight's injury was not caused by the fault of the owner or driver of the truck Landscapes had no need to seek cover under its third-party insurance. 51 HIH nevertheless submitted that Constructions' liability for Mr Knight's injury was caused by the "operation on behalf of" Constructions of a vehicle (the truck) in respect of the use of which liability insurance was provided by virtue of legislation relating to motor vehicles (ie compulsory third-party insurance). 52 As previously indicated, the accident occurred as Mr Knight was attempting to dump the first bucket of debris of his third load into the truck. The truck was the intended receptacle of the load which contained the glass shards, but no part of the load or bobcat had come into contact with the truck at the time of the accident. The bobcat was fully elevated, standing close to the truck. 53 At trial, HIH relied upon the "loading cases" dealing with the expressions "caused by or arising out of the use of a motor vehicle" (Motor Vehicles (Third Party Insurance) Act 1942) or "caused by the fault of the owner or driver of the vehicle in the use or operation of the vehicle" (Motor Accidents Act 1988). HIH cited Government Insurance Office of New South Wales v R J Green and Lloyd Pty Ltd (1966) 114 CLR 437, Harvey Trinder (NSW) Pty Ltd v Government Insurance Office of New South Wales (1966) 114 CLR 449 and NRMA Insurance Ltd v NSW Grain Corporation (1995) 22 MVR 317. See also NSW Ministerial Corporation v Handford (1994) 35 NSWLR 187 and Central West County Council v NSW Ministerial Corporation (1998) 29 MVR 119. 54 In NSW Grain Corporation, Clarke JA pointed out that the phrase used in the Motor Accidents Act was narrower than that used in the Motor Vehicles (Third Party Insurance) Act because of the absence of "or arising out of". Making this allowance, the case law under the earlier Act was applied in respect of the liberal interpretation accorded to the phrase "the use of a motor vehicle". On this basis, the loading of a vehicle designed to be used for the carriage of goods was held to be part of the use of such vehicle. 55 Here the trial judge accepted that in certain circumstances the loading of a truck while stationary could involve the "use" of the truck. However, he held that the exclusion clause in the HIH policy was not engaged because there was no "operation" of the truck "by or on behalf of" Constructions, the relevant insured. 56 His Honour referred to Canadian case law as to the meaning of "operation" in certain contexts (see O'Reilly v Canadian Accident and Fire Association Co Ltd [1929] 2 DLR 70, Fraser v Co-Operators Insurance Association (1984) 8 DLR 4th 246). However, the crux of his reasoning was as follows: 211. The truck was at all times under the control of Mr Knight. He may well have been subject to direction from Mr Dolby [Constructions' employee] concerning the place at which the truck was parked or loaded whilst on the Mingara Recreation Club site yet Mr Dolby had no control of the driving of the truck. In those circumstances even if the truck was being 'operated' I would not regard Constructions through Mr Dolby as the 'driver' of the truck nor that Constructions through his agency became or was involved in the 'operation' of the truck. 212. Accordingly, the injury caused to Mr Knight was not by the operation of the truck by or on behalf of Constructions and therefore HIH Exclusion 4 does not prevent Constructions from being entitled to indemnity under the HIH policy. 57 I respectfully agree with this reasoning. 58 HIH submits that "operation" when appearing in the first line of exclusion 4(a) is used in contradistinction to "ownership" and in the sense of "use in work". The first proposition is clearly correct but it does not support the second. 59 I accept HIH's submission that caution is required in the use of the Canadian decisions, which turn in part upon the terms of specific policies or statutory provisions. To my mind they do no more than reinforce the impression that "operation" is narrower than "use" as regard a motor vehicle. 60 In my view, the trial judge was correct in concluding that CU could not invoke exclusion 4(a). There is no basis for construing "operation" in some figurative sense. Nor can it be accepted that there is an equivalence between "operation" and "use", especially since the two different words are found within the very exclusion. 61 Whatever the outer limits of the expression "operation", the truck was not being operated by or on behalf of the relevant insured under the CU policy, ie Constructions. Nor, a fortiori, was Mr Knight's injury caused by such operation, no matter whether one applies the insurance notion of "proximate cause" or the broader "common law" idea of causation. 62 The truck was stationary. No part of its loading mechanism was engaged. It was merely the intended receptacle for debris which, unfortunately for Mr Knight, fell on him first. The accident was in no way contributed to by the truck. The cause, and relevantly the sole cause, of the accident was the negligence of Constructions as regards its system for accumulating rubbish and its failure to inform Mr Knight that there was glass in the pile of rubbish he had been directed to clear. There was no "injury … caused by the ownership or operation … of any vehicle". 63 It is unnecessary to reinforce this conclusion by reference to principles requiring a strict construction of an exclusion clause (cf O'Reilly at 71-2). 64 The appeal should be dismissed with costs. Cross appeal as to costs 65 Constructions and Joinery had filed a third party notice against Landscapes seeking contribution under the Law Reform (Miscellaneous Provisions) Act 1946, based upon Landscapes' breach of duty to its employee Mr Knight. The claim failed because no such breach was established (RB 90) and Constructions was ordered to pay Landscapes' costs. 66 Constructions sought against HIH a Bullock or Sanderson order with respect to its costs liability to Landscapes. It was submitted that the joinder of Landscapes had been prompted by HIH's refusal of indemnity. 67 The primary judge refused the order, accepting the submission of HIH that Constructions' claims were not interdependent with or in any real sense alternative to the claim against HIH. Norwest Refrigeration Services Pty Ltd v Bain Daws (1984) 157 CLR 149 at 163 was cited. 68 By way of cross-appeal Constructions challenges the refusal of this special costs order. It is submitted that the trial judge should have found that HIH's refusal to honour its obligations under the policy of insurance was sufficient conduct to trigger the exercise of discretion in Constructions' favour. It is submitted that Constructions' duty to conduct the litigation with proper regard for its insurer's (HIH's) interest meant that it would have been dangerous for Constructions not to have joined Landscapes as a third party, all the more so since it was likely that HIH would have done so in any event. 69 It was submitted that the ultimate test is whether the costs incurred in joining a successful third party can be seen to have been reasonably and properly incurred as between the successful party and the unsuccessful defendant. In the present case Constructions was forced to sue Landscapes because HIH had denied liability. 70 In my view the cross-appeal fails. The primary judge's reasoning betrays no error of principle. Indeed the approach taken by his Honour is entirely consonant with the approach approved in Gould v Vaggelas (1985) 157 CLR 215. His Honour was entitled, on the facts, to conclude that Constructions' joinder of Landscapes was not prompted by conduct of HIH in or prior to the litigation sufficient to trigger the favourable exercise of the discretion. 71 The joinder of Landscapes was not justifiable by reference to Constructions' contractual duty to its insurer. For one thing, Constructions had the protection of s151Z of the Workers Compensation Act 1987, without the need to join Landscapes. 72 The cross-appeal should be dismissed with costs. 73 HANDLEY JA AND FOSTER AJA: We have had the advantage of reading in draft form the reasons for judgment of Mason P. We agree generally with his Honour except as to the meaning of the exclusion in cl 6(b) of the CU Construction Policy (the CU policy). In our opinion this clause does not apply to the first respondent's claim for indemnity in respect of the damages awarded to Mr Knight. 74 The trial Judge held that Mr Knight's personal injuries arose out of the use of Constructions' truck in work undertaken by it and that cl 6(b) applied because the truck was registered and subject to compulsory third party insurance. This finding, although not challenged, was rather artificial and involved an expansive, rather than a strict, construction of the clause. Mr Knight's injuries in reality arose out of the use of the bobcat which was not required to be registered and covered by compulsory motor vehicle insurance. On this view of the facts the clause did not apply and the CU policy would have responded to the claim. 75 It is convenient to set out the relevant provisions of cl 6(b). They are as follows: "Claims in respect of Personal Injury or Damage to Property arising … out of …the use of:- (a) any aircraft …, (b) any Vehicle … used in work undertaken by or on behalf of the Insured in respect of which insurance is required by virtue of any legislation relating to motor vehicles; (c) any Watercraft … ". 76 We are satisfied that the purpose of cl 6(b) was to protect the insurer from claims which should be covered by compulsory motor vehicle insurance. The CU policy was intended for use throughout Australia (see Definition of "Cover" in Section 2), and its construction cannot be governed by the motor vehicle legislation of any one State. 77 Unfortunately the underlying intention we have discerned has become obscured by the verbose wording of cl 6(b). The phrase "in respect of which" in para (b) could be read as referring back to "any Vehicle" but in our view refers back to "Claims". Accordingly what follows at the end of para (b) should be taken as referring to: "Claims … in respect of which insurance is required …". 78 A construction which treats the words "in respect of " and what follows as governing vehicles would withdraw cover in respect of "Damage to Property" arising out of the use of such a vehicle although the compulsory policy does not cover "Damage to Property". The Construction we favour avoids that result. If a compulsory policy is in force, the construction we favour will ensure that there is neither an overlap nor a gap between the two policies. 79 The trial Judge held that Mr Knight did not have a claim under the Motor Accidents Act which would be covered by the compulsory policy. He said: "The injury to Mr Knight was not caused by the fault of the owner, Landscapes or the driver … in the use or operation of the truck. On the evidence I find that Mr Dolby was not the driver of the truck nor did he, in the sense found in Ricketts v Laws (1988) 14 NSWLR 311, have control of the driving of the truck. In my view a claim was not available to Mr Knight against Constructions or Landscapes under that Act". 80 This finding has not been challenged and is clearly correct. Clause 6(b) does not apply because the relevant claim was not one in respect of which insurance was required by legislation. The result is that the CU policy responded to Constructions' claim in respect of its liability to Mr Knight and it had double insurance from the appellant and the second respondent. To that extent the appeal must be allowed. 81 Constructions issued separate Third Party notices claiming indemnity from the appellant and CU and both companies became parties to the action (DCR Pt 21 r 4) Neither insurer sought contribution from the other but the liability of each to Constructions was fully litigated as between the insurers and Constructions. No objection was, or could have been, taken to the appellant's standing to seek the reversal of the decision of the trial Judge as to the liability of CU to Constructions. Our conclusion that the CU policy responded to this claim requires the entry of judgment in favour of Constructions against CU for indemnity in respect of the judgment in favour of Mr Knight. The judgments against the two insurers will be res judicata not only in favour of Constructions but also in favour of each other. See Spencer Bower, Turner and Handley, "Res Judicata" 1996 page 112. 82 In these circumstances the absence of formal claims for contribution between the two insurers does not prevent this Court from making appropriate orders which will finally dispose of these disputes and avoid further litigation. See Croston v Vaughan [1938] 1 KB 540 CA. 83 There remain the associated questions of costs in the District Court and this Court. These matters were not argued at the hearing. Judgment should be entered for Constructions against CU for the amount of its claim and the costs payable by it to Mr Knight. We think that the appropriate order in respect of Constructions' own costs would be for both insurers to be ordered to pay the costs in the District Court of the issues raised by Constructions' third party notices against them with a right of contribution in favour of either insurer who pays more than one half of such costs. 84 The appellant sought to cast all liability onto CU and in this respect failed, whereas CU sought to cast all liability onto the appellant, and in this respect it too failed. In these circumstances we consider that each insurer should bear its own costs in the District Court. 85 The appellant has failed in its appeal as against Constructions but Constructions has failed in its cross-appeal, and we think the appellant should be ordered to pay 90% of Constructions' costs in this Court. The appellant could have litigated its claim for contribution against CU in this Court without seeking any relief against Constructions, which could have become a submitting respondent. In these circumstances we can see no reason why the appellant should recover from CU any contribution in respect of the costs in this Court it may be ordered to pay to Constructions. 86 The appellant has had a substantial, but only partial, measure of success against CU in this Court, and should be entitled to an order for some of its costs of the appeal to reflect that success. Our provisional view is that CU should be ordered to pay one half of the appellant's costs of the appeal other than any costs payable by the appellant to Constructions. 87 The Court was informed that after limited leave to appeal had been granted the appellant paid to Constructions, or at its direction to Mr Knight, the amount of the judgment entered in favour of the latter. Presumably interest on the judgment was also paid. The Court does not know whether the appellant has paid or indemnified Constructions against the costs payable by it to Mr Knight. Judgment should be entered in favour of the appellant against CU for half the amount paid by the appellant to Constructions or to Mr Knight in respect of his judgment, interest and costs, together with interest at Court rates from the date or dates of payment until the date of judgment in this Court. 88 There may also be questions as to the costs ordered to be paid by the appellant to other parties who were joined as opponents in its summons for leave to appeal who were not parties to the actual appeal. 89 The parties are entitled to be heard on all these questions, if they wish, and at their own risk as to costs. At this stage we will simply order the parties to bring in short minutes of orders to reflect our reasons and for that purpose the matter will be listed before Handley JA at 9.30 am on Tuesday 31 October 2000. If agreement is reached in the meantime, the agreed short minutes can be filed in the Registry and the mention will be cancelled. If agreement cannot be reached, and one or more parties wish it, the appeal can be re-listed for further argument before the Full Court. ********* DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.