Reported Decision : (2002) 12 ANZ Insurance Cases 61-520 New South Wales Supreme Court CITATION : Pioneer v QBE [2002] NSWSC 137 CURRENT JURISDICTION: Common Law Division FILE NUMBER(S) : SC 20339/98 HEARING DATE(S) : 31/1/02 JUDGMENT DATE : 8 March 2002 Pioneer Road Services Pty Limited (Cross Claimant) PARTIES : QBE Insurance Limited (First Cross Defendant) QBE Insurance (Australia) Limited (Second Cross Defendant) JUDGMENT OF : Wood CJatCL at 1 B Toomey QC with A Black (Plaintiff) B Donovan QC with P A Regottieri (1st Def) COUNSEL : J E Maconachie QC with I R Pike (2nd Def) I G Harrison SC with P S Braham (3rd Def + Cross Claimant) P Hallen SC (Cross defendants 1 & 2) Walsh & Blair (P) I V Knight (Crown Sol) (D1) SOLICITORS : Phillips Fox (D2) Corrs Chambers Westgarth (D3) Colin Biggers & Paisly (XDef) CATCHWORDS : Insurance policy - plaintiff injured whilst driving after roadworks - cross claim - indemnity sought - nature and extent of policy coverage - whether material non disclosure in policy - policy not intended to cover the type of activities performed. LEGISLATION CITED : Insurance Contracts Act 1984 Alex Kay Pty Limited v General Motor Acceptance Corporation & Anor (1963) VR 458 Atlantic Maritime Co Inc v Gibbon [1954] 1 QB 88 Australian Casualty Co Ltd v Federico (1986) 160 CLR 513 Australian Paper Plantations Pty Limited v Venturoni (2000) VSCA 71 Baltzan v Fidelity Insurance Co of Canada [1932] 32 WWR 140 Canada Rice Millers Ltd v Union Marine & General Insurance Co Ltd (1941) AC 55 City Centre Cold Store Pty Limited v Preservative Skandia Insurance Limited (1985) 3 NSWLR 739 Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 Darlington Futures Ltd v Delco Australia Pty Limited (1986) 161 CLR 500 Dickinson v Motor Vehicle Insurance Trust (1987) 163 CLR 500 FAI General Insurance Co Ltd v Gold Coast City Council (1995) 2 Qd R 341 GIO General Limited v Newcastle City Council (1996) 38 NSWLR 558 Government Insurance Office of NSW v R J Green & Lloyd Pty Limited (1965) 114 CLR 437 Hazelwood v Travellers Indemnity Co of Canada (1979) 2 WWR 271 CE Heath Underwriting & Insurance (Aust) Pty Ltd v Edwards Dunlop & Co Ltd (1993) 67 ALJR 395 HIH Casualty & General Insurance Limited v Waterwell Shipping Inc and Another (1988) 43 NSWLR 601 CASES CITED : James Miller and Partners Limited v Whitworth Street Estates (Manchester) Limited (1970) AC 583 JJ Lloyd Instruments Limited v Northern Star Insurance Co Limited [1987] 1 Lloyd's Law Reports 32 Alex Kay Pty Limited v General Motors Acceptance Corporation (1963) VR 458 Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd (1918) AC 350 C H Magill & Anor v National Australia Bank Limited [2001] NSWCA 221 MGICA Ltd v United City Merchants (Australia) Limited (1986) 4 ANZ Ins Cas 74 Monarch Insurance Company Limited v Steel Mains Pty Limited (1986) 4 ANZ Insurance Cases 60 P Samuel and Co Ltd v Dumas [1924] AC 431 Sports Vision Australia Pty Limited v Tollglen Pty Limited (1998) 44 NSWLR 103 Spunwill Pty Limited v Bab Pty Limited (1994) 36 NSWLR 290 State Government Insurance Commission v Stevens Brothers Proprietary Limited (1984) 154 CLR 552 Walton v NEM General Insurance Association (1973) 2 NSWLR 73 Wayne Tank & Pump Co Limited v The Employer's Liability Assurance Corporation Limited (1973) 3 All ER 825 Vosten v The Commonwealth (1989) 1 Qd R 693 West Wake Price and Co v Ching (1956) 3 All ER 821 White v Australian and New Zealand Theatres Ltd (1943) 67 CLR 266 Zurich Australia Insurance Ltd v Fruehauf Finance Corporation Pty Limited (1993) 7 ANZ Ins Cas 78 DECISION : Cross Claim dismissed - 5 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION 20339/98 WOOD CJ at CL Friday 8 March 2002 Pioneer Road Services Pty Limited v QBE Insurance Limited and QBE Insurance (Australia) Limited Pioneer seeks indemnity in respect of its liability to the plaintiff, Miss Palmer arising out of negligence and breach of its contract with the Evans Shire Council for the upgrade of a public road. That indemnity is sought under Policies of Insurance issued by QBE Insurance Limited, and QBE Insurance (Australia) Limited. Issues arise as to whether the policies extend to provide cover for Pioneer's liability to the Plaintiff, as the policies were limited to cover where Pioneer provides consulting advice for a fee, or provides design services as part of a supply and lay contract. Held: The contract of insurance must be read as a whole, in its commercial setting, and in such a way as to fulfil its commercial purpose. Any ambiguity is to be resolved by reading the contract as a whole, and by reasonable construction as the presumed intention of the parties. In the event of ambiguity, it is to be read contra proferentem. The proposals were agreed by the parties to have been incorporated into the contracts, and it is appropriate to have regard to them. M GICA v. United City Merchants (Australia) Limited (1986) 4 ANZ Ins Cas 74, 340, Darlington Futures Ltd v. Delco Australia Pty Limited (1986) 161 CLR 500, Zurich Australia Insurance Ltd v. Fruehauf Finance Corporation Pty Limited (1993) 7 ANZ Ins Cas 78, 007, Alex Kay Pty Limited v. General Motors Acceptance Corporation (1963) VR 458 cited. Cover limited to design and consulting servces only: The design of the product and the construction of the product are distinct matters. Guidance as to whether an act or omission falls within the cover is to be obtained from the description of the work which Pioneer agreed to provide, pursuant to its contract with the council. Pioneer's contract with the council was to perform the roadwork in accordance with design and specifications already laid down by the RTA. Its work was execution of the design rather than provision of the design. Vosten v. The Commonwealth (1989) 1 Qd R 693 applied. Beavers v. Westhaven Boatyard Limited (1987) 4 ANZ Ins Cas 60-809 cited. Intention of the Parties to Insure Liability arising in connection with Pioneers Contract with the Council : There had been no intention to enter into a contract of insurance in respect of a simple supply and lay contract. This can be seen by reference in the proposals to the limited fee income involved for design and consulting services. It is not legitimate to use as an aid in the construction of a contract, anything which the parties said or did after it was made, however the later conduct of the parties is admissible to identify the things with which the contract deals. Magill & Anor v. National Australia Bank Limited [2001] NSWCCA 221 applied. Codelfa Construction Pty Limited v. State Rail Authority of New South Wales (1982) 149 CLR 337, Sports Vision Australia Pty Limited v. Tollgen Pty Limited (1998) 44 NSWLR 103 cited. Spunwill Pty Limited v. Bab Pty Limited (1994) 36 NSWLR 290 not followed. Liability Incurred in the Conduct of the "Professional Business Practice" of Pioneer : The term "professional" in the context of Professional Indemnity Insurance is very broad. The term "professional Business Practice" should also be construed broadly. The term was used to define the ambit of the business of Pioneer, and as such, did not confine the cover to a breach of professional duty strictly regarded. However, for the reasons previously mentioned, cover is excluded in this instance. GIO General Limited v. Newcastle City Council (1996) 38 NSWLR 558 applied. FAI General Insurance Co Ltd v. Gold Coast City Council (1995) 2 Qd R 341 distinguished. Proximate cause and Multiple Causes : Pioneer must show that an event insured against was a proximate cause of the loss. The Court should not strain to find a dominant cause if there are two causes, both of which were effective causes of the loss. If there are two causes and one is within the terms of the policy, but one falls within the terms of an exemption clause, then the insurer is entitled to rely on the exemption clause, the exception taking priority over the general. However, this principle only applies where there is an express exclusion. If there are two causes, one which falls within the policy and another outside the policy (but not specifically excluded) then the contract is to be interpreted contra proforentem, and the insured may take advantage of the contract. Accordingly, had the liability of Pioneer been attributed to design or advisory services, then Pioneer would have been able to take advantage of the policy. However, as noted above, Pioneers role was to execute design rather than to provide design services. JJ Lloyd Instruments Limited v. Northern Star Insurance Co Limited [1987] 1 Lloyd's law reports 32 applied. Wayne Tank & Pump Co Limited v. The Employer's Liability Assurance Corporation Limited (1973) 3 All ER 825 cited. Having regard to the matters already discussed, it is unnecessary to consider whether there was a failure on Pioneer's part to make proper disclosure of the nature and extent of pioneer's business in the area of design and consulting, and in relation to the States in which it operated. Orders: The cross-claim against QBE Insurance Limited, and QBE Insurance (Australia) Limited is dismissed. IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION 20339/98 WOOD CJ at CL Friday 8 March 2002 Pioneer Road Services Pty Limited v QBE Insurance Limited and QBE Insurance (Australia) Limited Judgment 1 His Honour: Pioneer Road Services Pty Limited ("Pioneer") seeks, by way of its cross claim filed in the proceedings between Lisa Denise Palmer and the Roads and Traffic Authority of New South Wales ("the RTA") and others, an indemnity in respect of its liability to Miss Palmer ("the plaintiff"), as found in those proceedings. A. BACKGROUND 2 That indemnity is sought under Policy of Insurance issued by QBE Insurance Limited ("QBE") and QBE Insurance (Australia) Limited ("QBEA"). I have already dealt, in a judgment delivered on 20 December 2001, with (a) the basis upon which Pioneer is liable to pay damages to the plaintiff; (b) its obligation, along with the Evans Shire Council ("the Council") to indemnify the RTA in respect of its liability to the plaintiff; and with (c) the equal apportionment of liability between the Council and Pioneer pursuant to their mutual cross claims. 3 Left outstanding for further submissions was the determination of the present cross claim which raises issues as to: (a) the proper construction of the insuring clauses under the respective Policies of Insurance which were issued by QBE and QBEA; (b) whether if the Policies, upon their proper construction, extend to provide cover for Pioneer's liability to the Plaintiff, or to the other cross claimants in the proceedings, that obligation attaches to QBE or to QBEA; and (c) whether, in relation to either policy there was a material non disclosure at the time that the proposal was submitted, entitling the relevant insurer to avoid liability. B. FACTS 4 Before dealing with the issues which arise it is necessary to record certain background facts: (a) Pioneer held, at the time of the Plaintiff's accident (on 27 February 1997), 2 policies of General Liability Insurance, which had been issued by HIH Casualty and General Insurance Limited ("HIH") on 16 December 1996, and which extended an indemnity (in a total of $50m) for any such liability to pay compensation for injury sustained by a person (such as the Plaintiff), as may arise in the course of the conduct of its business; (b) It was common ground that, by reason of the collapse of HIH, Pioneer was unlikely to recover any part of the moneys for which it had become liable, in these proceedings, by way of recourse to either General Liability Policy; (c) On 10 December 1996, QBE issued to Pioneer a Policy for Professional Indemnity Insurance, in response to a proposal dated 26 November 1996, which was effective for the year commencing 30 November 1996 (" Accident Year Policy "); (d) In this proposal, in answer to a question (Q10) about its prior negligence claims history, Pioneer disclosed that it had been subject to a number of negligence claims, advised that further questions on specific claims should be directed to its " 3rd party liability insurer – Heaths (HIH Winterthur) ", and added that such claims were " covered by (the) liability policy and would likely not have been caught under the Professional Indemnity Policy ." By way of a note, there appeared the following observation:- "( Pioneer) has acquired PI Policy for specific jobs where it may be called on to provide specific consulting advice (for a fee or where responsibility for pavement design is put with (Pioneer)). No negligence claims have yet evolved from performance of such activities ." (e) The nature of the business was described as follows (in answer to Q18): " Principally manufacture, design and construction of asphalt surfaces, application of bituminous seals, application and manufacture of bituminous products, application of micro asphalt surfaces, cement stabilisation, pavement recycling including all associated activities incidental to, or associated therewith, including ownership and/or occupation of premises ." Earlier, in answer to Q12, Pioneer noted that it required a "PI Policy to provide cover where:- (1) it provides consulting advice for a fee (the road maintenance treatment and design) (2) it provides design services as part of a supply and lay contract." (f) the limit of indemnity under such policy was $2M for any one claim, and $4M in the aggregate. The policy schedule identified the Professional Business Practice, for which the insurance was issued, as "Road Services Consultants and as more fully described in the proposal form". An endorsement to it noted that the Policy was "limited to cover design and consulting/advisory services only"; the retroactive date was unlimited. (g) By an endorsement, with effect from May 1997, the limit of indemnity was increased to $10m for any one claim, and $20m in the aggregate. (h) On 8 October 1997, Pioneer forwarded a proposal to QBE for renewal of the Policy for the 1997/98 year. It was followed by the issue of a renewal Policy on 3 January 1998 ("the claim year Policy"). It was similarly endorsed as limited to cover design and consulting/advisory services, as was each of the succeeding policies. (I) In the proposal for this year, John Lancaster and Ian Rickard were nominated as the Partners/Principals/Directors. The proposal noted additionally: "(Pioneer's) professional indemnity policy taken out to cover: (i) Jobs where we give consulting advice on a fee for service basis and (ii) Jobs where there is a design element The above 2 gentlemen are the most prevalent in providing such advice at (Pioneer) but there may be occasions through 97/98 where the abilities of others (all suitably qualified) are also called for. " Curriculum Vitae detailing their professional qualifications were provided by way of attachments, for each of these executives. Apart from them, the proposal disclosed that the "professional qualified staff comprised approximately 50 persons with engineering degrees". (J) In this proposal, more specific information was disclosed in relation to Pioneer's business activities as follows: " 12. (a) Please provide details of the precise nature of activities or business. 'Principally manufacture, design and construction of asphalt surfaces, application of bituminous seals, manufacture of bitumous products, application of micro asphalt surfaces, cement stabilization, pavement recycling including all associated activities incidental to, or associated there with, including ownership and/or occupation of premises. (Predominantly contracting revenue). Occasionally, advice associated with manufacture, design and construction of road surfaces is provided in return for a consulting fee.' ( b) Please categorise the activities or business outlined in Question 12(a) above and indicate the approximate percentage of your fee income derived from same. Type of Work 'Annual Australian 1996/7 PRS Turnover $210 Million Consisting of: Fees for Consulting Advice $21 K 1 Design and Construct Style Contracts 380 K Other 209599 K (Supply and lay of Asphalt and bitumen road surfaces and straight Ex-Bin supply of Asphalt) $210,000 K' (c) (i )Please provide details of advice given in relation to the activities or business outlined in Question 12(a) above. 'Consulting Advice – Fees Associated with tow assignments for VIC Roads contracts required Engineering analysis and reporting on test data (supplied by VIC Roads), with ultimately PRS recommending alternative pavement rehabilitation options. Design and construct contracts- see attached description.' (2) Revenue applicable to actual design element 10% (i.e. $38K) (1) Work for which PI cover is being sought.'" (k) by way of an annexure, additional details were provided in relation to a particular design and construction contract for Stabilpave. (l) The amount of gross income for design/construct advice for the preceding financial year was said to have been $100,000, and the estimate for the current year was said to be $75,000. (Q20) (m) In relation to the questions calling for disclosure of Pioneer's claims history, as well as disclosure of any circumstances that might give rise to a claim (clauses 23 & 24), the answers given were in the negative, subject to the note: "(Pioneer) has been a defendant in a number of liability policy claims over the years but it is not likely that any would have triggered a claim for a breach of professional duty… " (n) There were a number of further annexures to the proposal including documents relating to some design projects, as well as company brochures relating to its business activities, to asphalt and road maintenance treatments products and services, and to surface dressings. (o) A claim was made by the Plaintiff against Pioneer in September 1998, that is within the period of cover of the 1997/1998 QBE policy. (p) A further proposal was forwarded to QBE (undated) in respect of the 1998/99 year, which led to the issue, on 1 February 1999, of a renewal policy ("1998/99 renewal"). (q) In this proposal the following information was supplied in relation to Pioneer's business activities: " 12.(a) Please provide details of the precise nature of activities or business. 'Principally manufacture, design and construction of asphalt surfaces, application of bituminous seals, manufacture of bituminous products, application of micro asphalt surfaces, cement stabilisation, pavement recycling including all associated, activities incidental to, or associated therewith, including ownership and/or occupation of premises Occasionally advice associated with manufacture, design and construction of road services is provided in return for a consulting fee.' (b) Please categorise the activities or business outlined in Question 12(a) above and indicate the approximate percentage of your fee income derived from same . Type of Work 'Annual Aust 1997/98 PRS Turnover $224 million 100% Consisting of :fees for consulting advice .002% Design and construct C/T's 1.0% Other (supply and lay of asphalt and bitumen road surfaces and provision of product direct to customers) 98.998%" ( C)(i) Please provide details of advice given in relation to the activities or business outlined in Question 12(a) above. ' Consulting Advice : fees associated with an assignment for Vic Roads to provide separate detailed design reports for rehabilitation of a no. of roads – VIC Roads supplied all test data. The C/T required engineering, analysis and reporting on the test data with recommendations on alternative pavement rehabilitation options based on a range of different design lives. Design and Construct Contracts: Refer attached.'" (r) Similar attachments in the form of curricula vitae, design and construct contracts, together with several business brochures were provided to QBE, along with the proposal, presumably being those referred to in the last mentioned answer. (s) On 29 November 1999, a further proposal was supplied, on this occasion, to QBEA, in respect of the 1999/2000 year, which led to the issue, on 14 December 1999, of the 1999/2000 renewal policy. (t) In this proposal a claim against Pioneer for a "failed asphalt surface" was disclosed as a matter that had been notified to QBE (Q23). The Plaintiff's claim was not mentioned as a matter which had either been notified or as a circumstance which might give rise to a claim. (u) Again, curricula vitae were attached (for Ian Rickard and John Lancaster), as were summaries for certain design and construct contracts undertaken by Pioneer during the preceding 5 years. Various brochures, concerning the services and products provided by Pioneer, similar to those attached to the previous proposals were also attached. The details given of relevant staff described Messers Rickard and Lancaster as "Specialist Consulting Staff". There were said to be 61 professional staff with engineering degrees. (v) In this proposal the following information was provided in relation to Pioneer's business activities: " 12.(a) Please provide details of the precise nature of activities or business. 'Principally manufacture, design and construction of asphalt surfaces, application of bituminous seals, manufacture of bituminous products, application of micro asphalt surfaces, cement stabilisation, pavement recycling including all associated activities, incidental to, or associated therewith. Occasionally advice associated with the manufacture, design and construction of road surfaces is provided in return for a consulting fee.' (b) Please categorise the activities or business outlined in Question 12(a) above and indicate the approximate percentage of your fee income derived from same . 'Annual Australian 1998/99 Turnover approximately $2.8 million 100% consisting of fees for consulting advice .001% design and construct contracts 1.00% Other (supply and lay of asphalt - bitumen road surfaces and provision of product direct to customers) 98.99%' (b) Please provide details of advice given in relation to the activities or business outlined in Question 12(a) above . 'Consulting advice – fees associated with an assignment for VIC Roads to provide separate detailed design reports for the rehabilitation of a number of roads. VIC Roads supplied test data. The contract required engineering analysis and reporting of the test data with recommendations on alternative pavement rehabilitation options based on a range of different design lives. Design and construct contracts refer attached.'" (w) Following the submission of a further proposal (undated) QBEA issued a renewal policy for the year 2000/2001, on 20 December 2000 ("2000/2001 renewal"). This proposal follows, generally, those for preceding years, in relation to the description of Pioneer's business activities, as it did in relation to the disclosure of claims and circumstances. The attachments in relation to staff and prior significant contracts were also similar. (x) The answer given to question 12 was as follows: " 12.(a) Please provide details of the precise nature of activities or business. 'Principally manufacture, design and construction of asphalt surfaces, application of bitumen surfaces, manufacture of bituminous products and application of micro asphalt surfaces Occasionally advice associated with the manufacture, design and construction of road surfaces is provided in return for a consulting fee.' (b) Please categorise the activities or business outlined in Question 12(a) above and indicate the approximate percentage of your fee income derived from same. TYPE OF WORK 'Annual Australian 1990/2000 turnover approx $225 million 100% Consisting of fees for consulting advice 0.001% Design and construct contracts 1% Other (Supply and lay of asphalt - bitumen road surfaces and provision of product direct to customers) 98.99%' (c) (I ) Please provide details of advice given in relation to the activities or business outlined in Question 12(a) above. (Unanswered) " (y) In each of the proposals, commencing with the 1997/98 proposal, where details were sought of the amount of gross income/fees for design and consulting advice for the financial year last ended, this was said to have been wholly derived in Victoria. In the proposal for 1999/2000 Pioneer noted " We are currently tendering for contracts in Western Australia which include design and construct works with an annual value of between $5 million and $10 million. We are yet to be successful". There was no mention in any of the proposals of work undertaken in NSW, or of contracts to be performed in that State. (z) As appears from the reasons for judgement in the plaintiff's action, Pioneer has been held liable to pay damages to her by reason of negligence , on its part, in relation to its failures to: (i) prepare and submit a traffic control plan to the Council before commencing the relevant roadworks; (ii) ensure that steps were taken to cover the 75 km/h advisory speed sign, and for it to be replaced with an appropriate temporary sign; (iii) provide slippery road signs over the length of the roadworks; (iv) take steps to have a 60 Km/hr limit established for the length of the site of the roadworks; and to (v) remove the gravel from the road surface in the area of the top bend, in circumstances where the signs in place were inappropriate and inadequate. (aa) Additionally, its liability, has been held to arise by reason of parallel breaches of its contract with the Council. C. THE POLICIES OF INSURANCE 5 The Policy wording for the QBE and QBEA policies was identical, in all material respects. The provisions of relevance, for present purposes (QBE Policy) are as follows: " SECTION 1: INSURING CLAUSES 1.1 QBE agrees to indemnify the Insured against legal liability for any Claim for compensation first made against the Insured during the Period of Cover and which is notified to QBE during the Period of Cover in respect of any civil liability whatsoever and howsoever incurred in the conduct of the Professional Business Practice. … 1.3 QBE agrees that the Insured may notify a Claim (in accordance with Condition 5.1 Reporting and Notice) either during the Period of Cover or within twenty-eight (28) days after its expiry, PROVIDED ALWAYS THAT such Claim was made against the Insured during the Period of Cover. … 1.4 (a) 'Unlimited Retroactive Cover' – unless a Retroactive Date is specified in the Schedule, this Policy shall provide cover in respect of acts, errors or omissions committed (or alleged to have been committed) irrespective of when such acts, errors or omissions were committed (or were alleged to have been committed). … For the avoidance of doubt, the following coverage is provided in accordance with, and subject to, the terms of this Policy. 1.5 QBE agrees to provide coverage in respect of any Claim made against the Insured for breach or alleged breach of a contract for the provision of professional services. … SECTION 2: AUTOMATIC EXTENSIONS 2.1 QBE agrees that, notwithstanding Exclusion 4.1 (Prior or Pending), should a Claim which should have been notified, or a fact or circumstance which could have been notified, to QBE under an earlier Professional Indemnity Insurance Policy issued by QBE, then QBE will accept the notification of such Claim, fact or circumstance under this Policy, PROVIDED ALWAYS THAT: (a) QBE has continuously been the insurer under a Professional Indemnity Insurance Policy between the date when such notification should have been given and the date when such notification was, in fact, given: and (b) the terms and conditions applicable to this Extension and to that notification shall not be those of this Policy but shall be the terms and conditions (including the limit of indemnity and deductible) applicable to the QBE Professional Indemnity Insurance Policy under which the notification should have been given. … SECTION 4: EXCLUSIONS QBE shall not be liable under this Policy to provide indemnity in respect of any Claim against the Insured: 4.1 (a) made, threatened or intimidated against the Insured prior to the Period of Cover: (b) directly or indirectly based upon, attributable to, or in consequence of any fact or circumstance: (i) of which written notice has been given, or ought reasonably to have been given under any previous policy; or (ii) of which the Insured first became aware prior to the Period of Cover, and which the Insured knew or ought reasonably to have known had the potential to give rise to a Claim under this Policy. … 4.3 directly or indirectly based upon, attributable to, or in consequence of any duty or obligation assumed by the Insured which is not assumed in the normal conduct of the Insured's Professional Business Practice. … SECTION 5: CLAIMS CONDITIONS 5.1 (a) The Insured shall give to QBE written notice as soon as practicable of any Claim made against the Insured PROVIDED ALWAYS THAT such written notice is given to QBE during the same Period of Cover or within twenty-eight (28) days after its expiry. … 5.2 If during the Period of Cover the Insured becomes aware of any fact or circumstance that might give rise to a Claim under this Policy and elects to give notice in writing to QBE of such fact or circumstance, then any Claim which may subsequently arise out of such fact or circumstance shall be deemed to be a Claim made during the Period of Cover, PROVIDED ALWAYS THAT such written notice is given to QBE during the same Period of Cover or within twenty-eight (28) days after its expiry. … SECTION 7: DEFINITIONS 7.1 'Claim' shall mean: (a) the receipt by the Insured of any written or verbal notice of demand for compensation made by a third party against the Insured. (b) any writ, statement of claim, summons, application or other originating legal or arbitral process, cross-claim, counterclaim or third or similar party notice served upon the Insured. … 7.9 'Professional Business Practice' shall mean the business conducted by the Insured, as specified in the Schedule, whereby the Insured pursues his profession and which is conducted under the name specified as the Insured in the Schedule. If the practice should change its name and there is no other change which materially alters the risk, the business will continue to be deemed to be the 'Professional Business Practice'. 7.10 'Policy' shall mean: (a) the Schedule, Insuring Clauses, Extensions, Conditions, Definitions, exclusions and other terms contained herein; and (b) any endorsement attaching to and forming part of this Policy either at inception or during the Period of Cover; and (c) the Proposal. … 7.12 'Proposal' shall mean the written proposal made by the Insured to QBE containing particulars and statements which, together with other information provided by the Insured, are the basis of this Policy and are considered as incorporated herein ." 6 As previously observed, each policy was subject to an endorsement that it was "limited to cover design and consulting/advisory services only". D. CONSTRUCTION OF THE INSURING CLAUSE IN THE POLICY/POLICIES 7 Several questions arise in relation to the proper construction of the policy. It is convenient to deal with them together, since they are inter-related, and depend upon basic principles of construction. Those principles may first be noted. 8 It is trite law that a contract of insurance must be read as a whole, and in its commercial setting in such as way as to fulfil, and not restrain, its commercial purpose: MGICA Ltd v United City Merchants (Australia) Limited (1986) 4 ANZ Ins Cas 74, 340 at 74, 349/350 ("MGICA"); and Darlington Futures Ltd v Delco Australia Pty Limited (1986) 161 CLR 500 at 510. 9 Any ambiguity is to be resolved by reading it as a whole: Zurich Australia Insurance Ltd v Fruehauf Finance Corporation Pty Limited (1993) 7 ANZ Ins Cas 78, 007 at 78, 011 to 78012; and in a way that would prefer a reasonable construction as the presumed intention of the parties: Alex Kay Pty Limited v General Motors Acceptance Corporation (1963) VR 458 at 463. 10 In the event of an ambiguity arising, which cannot otherwise be resolved by reference to these principles, then it is appropriate for it to be read contra proferentem - in this case against QBE or QBEA as the insurer which offered the policy, in response to Pioneer's requests for insurance as contained in the relevant proposals: MGICA at 74, 350 per Kirby P, and at 74, 356 per Samuels JA. See also CE Heath Underwriting & Insurance (Aust) Pty Ltd v Edwards Dunlop & Co Ltd (1993) 67 ALJR 395 at 397, where Deane J pointed out (at 397) that ambiguities in insurance policies ought generally to be resolved in favour of the insured, "other things being equal". 11 The proposals were here agreed by the parties to form the basis of each of the contracts of insurance, and to be incorporated into those contracts. Accordingly, it is, in my view, appropriate to have regard to them when considering any question of construction concerning the matters which the parties agreed to insure: see MGICA at p 74, 347 per Kirby P. 12 In the light of the forgoing, I turn to three questions of construction which may be isolated from the submissions. (a) "Cover Limited to Design and Consulting/Advisory Services Only" 13 Pioneer accepted that the policy was limited by the endorsement to coverage for "design and consulting/advisory services". However, it submitted that such cover was attracted in this case so far as its liability arose out of its failure to prepare and submit to the Council a traffic control plan, out of its decision to defer sweeping of the road until 28 February 1997, and out of its failure to advise and ensure that sufficient signage was erected at the site once the gravel was spread on the new surface. These matters, it was submitted, fell within the concept of "design and/or advisory services", since they involved matters of planning or decision making as to what was required for the safe execution of the work to be performed under its contract with the Council. 14 QBE, however, submitted that the subject of the insurance was confined to activities of formulation, recording and communication before implementation of any supply contracts, and did not extend to matters arising or occurring in the course of their execution. 15 In order to determine the context to be given to the expression "design", in the context of an insurance policy of the kind here involved, both Pioneer and QBE made reference to standard dictionary definitions, as well as to the decision in Vosten v The Commonwealth (1989) 1 Qd R 693. 16 The dictionary definitions drawn to attention, relevantly defined "design" in the following inclusive ways: "(a) The shorter Oxford English dictionary: - a plan or scheme conceived in the mind; a project; - a plan or purpose of attack upon a person or thing; - a preliminary sketch, a plan or pattern from which a picture, building, machine, etc., may be made; - the action or art of planning and creating in accordance with appropriate functional or aesthetic criteria. (b) The Macquarie Dictionary: - to prepare the preliminary sketch or the plans for a work to be executed; - to plan or fashion artistically or skilfully; - to intend for a definite purpose; - to form or conceive in the mind; contrive; plan; - an outline, sketch or plan, as of a work of art, an edifice or a machine to be executed or constructed; - the combination of details or features of a picture, building, etc; - a plan; a project; a scheme ." 17 In Vosten, the question arose in the context of an injury suffered by a workman, when a crane jib fell on him, as a result for the failure of its anchorage system. The insurer relied upon an exemption clause which excluded liability for bodily injury caused by, or arising out of, any defective design of structural steel products. The contract under which the insured had assembled the crane, on the building site, was one which called for the design, supply and commissioning of the crane. 18 Ryan J, in delivering judgment in the Full Court, observed (at 708): " The evidence given at the trial and accepted by his Honour was that the luffing rope of the crane was not anchored in accordance with standard. The method of anchorage was a site decision after the unit had been rigged. The plans which were sent by the second defendant to the Queensland Department of Machinery did not show any details about the anchorage. Mr Hyde said (and his evidence on this point was not controverted) that this was a standard practice in the crane industry. However, regulation 22(2)(a) of the Inspection of Machinery Regulations provides that a person shall not construct or erect a crane without first obtaining the approval in writing of the design of the crane from the chief inspector. In such written approval the chief inspector is required to specify the safe working load of the crane. That might appear to indicate that the design should contain all the details necessary to enable the chief inspector to specify the safe working load of the crane. However, I do not consider that the design in the sense of the clause in the policy should be confined to matters set out on the plans submitted to the government department. The design of the product and the construction of the product itself are distinct matters. The design is an idea or conception; it is, as his Honour stated, quoting from the Oxford English Dictionary 'a plan or a scheme conceived in the mind of something to be done, the preliminary conception of an idea that is to be carried into effect by action.' When a decision was made on the site to fit a particular method of anchorage that involved two things: a decision on the design of the method of anchorage and the execution of that decision by fitting that anchorage. If the design decision was not defective but its execution was it could not be said that the injury arose out of the defective design of the product. On the other hand if the design itself was defective and the injury arose from that defect the insurer could rely upon the clause to exempt itself from liability. The finding by his Honour as to the cause of the accident does in my view indicate that it was attributable not to some defect in execution of a design but to a defect in the design itself. Failure to follow the code in relation to the strength of the rope anchorage resulted in a defect in design; as already stated his Honour held that it was the use of an anchorage system which did not comply with the code that caused the accident. " 19 By way of analogy it was submitted that here, any deficiency which occurred was attributable to a matter of execution of the contract rather than to a defect in any design itself. 20 Moving forward to the expression "consulting/advisory services", reference was made to the following dictionary definitions: " The term 'consult' is defined by the Macquarie Dictionary as follows: - to seek counsel from; ask advice of; - to refer to for information; - to have regard for [a person's interest, convenience, etc.] in making plans; - to consider or deliberate; take counsel; confer. … The variants of 'consult' are defined as follows: Consultant : - one who consults; - one who gives professional or expert advice; - a medical or surgical specialist. Consultation: - the act of consulting; conference; - a meeting for deliberation; - an application for advice to one engaged in a profession, esp. to a medical practitioner, etc. - a lottery, esp. if held in another State. Consultative: of consultation; advisory. Consulting: employed in giving professional advice, either to the public or to those practicing the profession: a consulting physician." 21 The term 'advisory' is defined by the Macquarie Dictionary as: "- of, or giving, advice; having power to advise ". 22 The verb 'advise' is defined by the same Dictionary, relevantly, as: "- to give counsel to; offer an opinion to, as worthy or expedient to be followed… - to recommend as wise, prudent etc… - to give [a person etc.] information or notice… - to offer counsel; give advice …" 23 Within the context of these dictionary definitions and judicial observations, Pioneer submitted that its obligation in relation to the provision of a Traffic Control Plan was an "advisory service"; and additionally, that each of the breaches of duty or of contract, which had been established, involved a "design" element. 24 The decision to defer the back brooming or sweeping, it was submitted, formed part of the plan, or design, of the work-involving a decision on the timing of that element of the contract, followed by its execution (or non execution until Friday). The failures to prepare a traffic control plan, or to secure or advise Council of the need for effective signage and speed restrictions, it was submitted, were similarly indicative of failures in the design of the work, rather than in workmanship simpliciter. 25 QBE submitted that guidance as to whether any relevant act or omission fell within the cover, was to be obtained from the description of the work which Pioneer agreed to provide, pursuant to its contract with the Council, in the schedule of pay items. This, it submitted, showed that the contract was one primarily for the supply and laying of the roadway. 26 Despite some references to "design of bitumous surfacing" in Parts 1.1.3(b) and 5.1.3(b) of the contract, QBE submitted there was no element of design expected of Pioneer, since the work, which it was called to perform had to conform to the design criteria which had been previously identified in the RTA Spray Sealing Guide and in the RTA Specification Part R 45. Additionally, it drew attention to the fact that there was no evidence, or suggestion, of Pioneer having been paid any fee for design, advice or consulting in relation to the subject works. 27 This contract, QBE submitted, was accordingly, not of the type specifically referred to in the proposal forms, pursuant to which it was called upon "to provide specific consulting advice for a fee, or where responsibility for pavement design [was] put with" it. Nor was it a contract of the kind also described in the proposals pursuant to which it was rewarded for "designing road stabilisation procedure as well as an actual laying/construction"; or one pursuant to which any professional person provided "advice". Rather, it was one which, in substance, called for performance or implementation of a contract for the supply and laying of bituminous road surfacing, in accordance with the detailed technical requirements laid down by the RTA. 28 The closest the case came to falling within the cover provided by the policy, it appears to have conceded, related to the Traffic Control Plan requirement. However, even in relation to that, it submitted that the signage aspect was not concerned with the design features of the signs, but rather with the implementation of the requirements specified in the contract, and in its several annexures, as to what was needed in relation to signs for the specific site. 29 In summary, it submitted that none of the respects which gave rise to liability on the part of Pioneer, involved a design or consulting/advisory service element. Rather, they were matters relating to monitoring, management and control of the site, after application of the seal, and before sweeping of the road surface. Upon that basis it submitted that the cross claims based upon the insurance policies must fail. 30 In my view, the submission of QBE is correct for the various reasons which it has offered. In particular it appears to me that Pioneer's contract was to perform the road work in accordance with the design and specifications already laid down by the RTA. Its work was more properly to be regarded as the execution of that design rather than the provision of design, or advisory/consulting services. 31 In particular, it had little room to move in relation to the provision of a traffic control plan, in the sense of exercising any independent judgment outside the parameters laid down for it. 32 Pioneer's negligence and breach of contract arose not from the design of an inappropriate traffic control plan, but from the absence of any plan at all. Otherwise, it does not seem to me that decisions concerning whether or not to sweep the roadway, or concerning the timing of that activity, properly answered the description of design or consulting/advisory services. 33 In addition to the authorities previously mentioned, it seems to me that the need to keep separate the concepts of design and implementation is also supported by the decision in Beavers v Westhaven Boatyard Limited (1987) 4 ANZ Ins Cas 60-809 concerning the proper construction of an exception clause. 34 Irrespective of these constitutions, it also appears to me, having regard to the matters next considered, that the kinds of activity or inactivity which Pioneer seeks to bring under the policy, were never intended to be caught by it. (b) Intention of the Parties to Insure Liability Arising in Connection with or Under Pioneer's Contract with the Council 35 Additionally, it was submitted by QBE that there had been no intention to enter into a contract of insurance in respect of the design element of a supply and lay contract, such as that pursuant to which the present roadworks were carried out. 36 This, it was submitted, followed from the terms of the answers furnished to question 12 of the relevant proposals, which have been set out in some detail earlier in this judgment, and from the fact that the description of Pioneer's business, in those proposals, made no reference to matters such as design or advice in relation to signage, or to sweeping of aggregate. If anything, the various handwritten responses in the proposals tended both expressly, and by reference to the limited fee income involved, to exclude any request for cover in relation to work involving the application of bitumous seals. 37 In this respect, QBE also relied upon the circumstances that the QBE policy was not included within the Certificates of Currency, or within the details of insurance with Pioneer had forwarded to Council – suggesting, so it was submitted, that Pioneer had not considered, or intended, that work under this contract would be the subject of the QBE policy. 38 Further, it relied upon the circumstance that in the various proposals, the contract between the Council and Pioneer was not mentioned as one to which the Policy would apply. Additionally, it pointed to the fact that NSW was identified, in the proposals following the execution of the contract between Pioneer and the Council, as a State in which no relevant activities had been based in the relevant years; all of its fee income for design and construct work having been derived in Victoria. 39 Finally in this respect, it pointed to the fact that the present claim was not notified to QBE or QBEA, as a matter involving a prior claim, or a circumstance that might fall within the relevant policies. 40 The extent to which regard can be had to conduct preceding the entry into a contract of insurance, or following its execution, as an aid to its construction, has been the subject of a number of decisions. The settled rule is that stated by Mason J in Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352, per Mason J: " Evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible to more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning… when the issue is which of two or more is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of contract, except in so far as they are expressed in the contract, but to the objective framework facts within which the contract came into existence, and to the parties' presumed intention in this setting ." 41 In Sports Vision Australia Pty Limited v Tollglen Pty Limited (1998) 44 NSWLR 103 at 114, Bryson J held (at 116) that it was not legitimate to use as an aid in the construction of a contract, anything which the parties said or did after it was made. His Honour considered the reasoning of Lord Reid in James Miller and Partners Limited v Whitworth Street Estates (Manchester) Limited (1970) AC 583 at 603 to be unanswerable, in this respect. As his Lordship there said: "..otherwise one might have the result that a contract meant one thing the day it was signed, but by reason of subsequent events meant something different a month or a year later ." 42 However, his Honour held (at p115 and 117) that the later conduct and statements of the parties was admissible to identify the things with which the contract deals – applying Williams J (at 281) in White v Australian and New Zealand Theatres Ltd (1943) 67 CLR 266. 43 A different view was taken by Santow J (as he then was) in Spunwill Pty Limited v Bab Pty Limited (1994) 36 NSWLR 290 (at 312) where post contract conduct was held to be potentially admissible in aid of the construction of words used in the contract where "it evidences a clear and mutual subjective intention as to what the contract originally meant." 44 This difference of opinion was resolved by the Court of Appeal in C H Magill & Anor v National Australia Bank Limited [2001] NSWCA 221, per Ipp JA (with whom Meagher and Heydon JJA agreed), where his Honour (at paras 50 – 51) held that the approach taken by Bryson J in Sports Vision was to be preferred. 45 Pioneer submitted that the intention of the parties was to be derived from the whole of the contractual documents which included the proposals. In this regard it pointed to the circumstances that: (a) in the 1996/97 proposal (para 4(e) above) Pioneer noted that it required cover where: "(i) it provides consulting advice for a fee (re road maintenance treatment and design); (ii) it provides design services as part of a lay and supply contract ." (Emphasis added). (b) in the claim year proposal (para 4(i)) it noted that it required cover for: "(i) jobs where we give consulting advice on a fee for service basis; and (ii) jobs where there is a design element ." (Emphasis added). 46 That the intention was to acquire cover where work undertaken by Pioneer included a design element, it was submitted, was reinforced by the provision of various brochures and promotional material (in response for example to question 18 of the 1997/98 proposal). One of these documents was that entitled "Surface Dressings" which noted, relevantly, so it was submitted: (a) In its introduction, that: " The sealing or resealing of a road is the application of a thin surface layer of bitumen binder onto which aggregate is spread… Close control of the three phases of sprayed work; preparation, execution and evaluation is essential as small errors can lead to failure. The need for proper engineering analysis, design and supervision in the successful execution of sprayed bituminous work cannot be over-emphasised." (Emphasis added). (b) In the section of the document entitled " Control of Traffic" , it was noted: " Control of traffic does not, however, start with the completion of the rolling operation. The whole of the work may have to be planned to avoid unnecessary inconvenience or delay to traffic or to the public. " (Emphasis added). 47 The provision of this information, followed by acceptance of the proposal, it was submitted, shows that QBE had intended to insure the design element involved in the laying of bituminous surfaces. 48 To the extent to which the proposals may have incorrectly conveyed that the design element of Pioneer's work was small in comparison with the total value of the work which it undertook, this was said to be of no moment, in the absence of any claim by QBE for one or other of the remedies provided in s 28 of the Insurance Contracts Act. 49 QBE submitted that the brochures did not assist Pioneer since it could not be the case that every matter or activity, mentioned in general documents of this kind, was converted into a matter for which insurance was requested and given. Otherwise, it submitted that the thrust of the proposals was to be understood as a request for insurance for those contracts, or areas of activity, where there was a specific or true design element, and not for those contracts which truly were simple supply and lay bitumen contracts, performed in accordance with the detailed RTA specifications and requirements. 50 Again, in my view, the QBE submission is made good. While I would not place any weight on whether or not Pioneer disclosed the QBE policy to the Council, or whether it made reference to the accident in later proposals, the policies did need to be understood in the context of the work Pioneer was undertaking, and in the light of the proposals. Each shows that its principal relevant source of revenue was "contracting revenue" (see clause 12 of the claim year proposal – para 4(j) above); and that design or consulting/advisory services occupied a small proportion of its work, arising where it was "occasionally" called on to provide specific advice, or accepted specific responsibility for pavement design (see the note to the accident year proposal – para 4(d) above; and clause 12 of the claim year proposal – para 4(j) above). The brochures and answers to question 12 of the claim year proposal, which sought details in relation to design and consulting work, in my view confirm this to be the case. 51 So far as the subsequent proposals may be relevant they seem not to disclose any difference in approach, or in the intention of the parties that it was only in relation to specific advice or design contracts, as distinct from routine supply and lay contracts, that insurance was sought and provided. (c) Liability "Incurred in the Conduct of the Professional Business Practice" of Pioneer 52 QBE next submitted that in order to attract cover, the civil liability of the insured had to be one that involved a professional activity, or a breach of a professional duty. In this regard it submitted that none of the circumstances which led to Pioneer becoming liable to pay damages constituted a professional activity or a breach of a professional duty. 53 While it accepted that the term "professional", in the context of professional indemnity insurance is very broad, QBE submitted that the relevant activity must properly be characterised as "the provision of a service of a skilful character according to a discipline… performed by professionally qualified persons" (per Kirby P in GIO General Limited v Newcastle City Council (1996) 38 NSWLR 558 at 568); or as "one pertaining or appropriate to a profession.. engaged in one of the learned professions" (per the Court in FAI General Insurance Co Ltd v Gold Coast City Council (1995) 2 Qd R 341 at 344). 54 None of the work relevantly involved in the present case, it submitted answered either of these descriptions or involved a person practicing a learned profession or holding a professional qualification. 55 Since the activities or services fell outside the ambit of Pioneer's "Professional Business Practice", it followed, so the submission continued, that cover was not available: Hazelwood v Travellers Indemnity Co of Canada (1979) 2 WWR 271. 56 Pioneer however submitted that the civil liability insuring clause (section 1.1) was not one indemnifying it for professional liability, or for breach of professional duty as such. Rather, it was one which extended to indemnify Pioneer "in respect of any civil liability whatsoever and howsoever incurred in the conduct of [its] Professional Business Practice" as defined in the policy (clause 7.9) and the schedule thereto. The policy, it may be recalled, in clause 7.9 defined the expression "Professional Business Practice" as "the business conducted by the insured, as specified in the schedule", whereby the insured "pursues his profession and which is conducted under the name specified as the insured in the schedule…" (Emphasis added). 57 The schedule to the various policies which were issued by QBE and QBEA "specified" the Professional Business Practice as that of "Road Service Consultants and as more fully described in the proposal form". As also noted earlier, compendious answers had been given in the proposal forms in answer to questions concerning Pioneer's "business activities", which included activities not normally regarded as being of a professional nature, including for example, activities of manufacture and construction, applications of bitumous seals, and associated activities which included ownership and occupation of premises. 58 In the light of these provisions it was submitted by Pioneer that the present was not a case where the phrase "Professional Business Practice" should be construed narrowly so as to restrict cover to liability arising out of any breach of professional duty strictly so regarded. Rather, it submitted that the case was one where cover applied so long as the relevant event giving rise to liability involved design or advice occurring within the business practice, as widely defined in the documents mentioned. 59 In relation to this aspect of Pioneer's submission, QBE contended, however, that the list of business activities in the proposal was a pro forma, or short cut, description of Pioneer's business activities as a whole, and not of its Professional Business Activities, the latter being the matter to which the question had in fact been directed. 60 This it argued, was made clear by the succeeding questions, 12(b) and (c), which were directed to ascertaining what proportion of Pioneer's business activities were truly professional. It was reinforced, it additionally submitted, by the handwritten note or notes which suggested that advice in relation to the manufacture, design and construction of road surfaces was provided, in return for a consulting fee, only occasionally. 61 In the event of its primary submission in relation to this aspect of the argument being rejected, Pioneer submitted that, when the full passage from the judgment of Kirby P in GIO v Newcastle was examined, it supported a wider meaning of the term "professional" than QBE's submission assumed. Relevantly it drew attention to the observation of Kirby P (at 568): " The term 'professional' in the context of professional indemnity insurance today is very broad. This is evidenced by the very large range of policies which are written for such insurance… The term involves, in the context of a policy written for a local government authority, no more than advice and services of a skilful character according to an established discipline…. The examination and analysis of building proposals with a view to granting consent is properly characterised as the provision of a service of a skilful character according to a discipline. In fact the evidence suggested (although this is not crucial or determinative) that some or all of the functions were performed by professionally qualified persons ." 62 Otherwise, it submitted that this decision was distinguishable, so far as the Court was there concerned with a policy which required the GIO to indemnify the insured for "all sums for which it became legally liable to pay by way of compensation… in respect of… Professional Liability." 63 Similarly, it submitted that FAI v Gold Coast was distinguishable, in that there, the relevant part of the insuring clause provided that the insured was indemnified: " against any claim or claims for compensation.. for breach of professional duty in the conduct of the practice as defined and referred to in the schedule ." 64 At p 344, the Court contrasted the position, in relation to the policy wording which it was considering: "..with Baltzan v Fidelity Insurance Co of Canada [1932] 32 WWR 140. There the indemnity was in terms of 'in the practice of his profession'. An injury to a patient because an x-ray table was improperly locked by the doctor was, not surprisingly, held to be within the terms of the indemnity." 65 In that case (Baltzan), the insured Doctor had asked the patient to lie on the table for the purpose of taking an x-ray. The insurer denied indemnity on the basis that Dr Baltzan's liability (if any) did not arise through "malpractice, error or mistake on his part in the practice of his profession". The Court found that from the time the patient entered the consulting room to the moment she left it, there was the relationship of patient and doctor and therefore, Dr Baltzan was practicing his profession. The failure of Dr Baltzan to properly secure the table was an error and a mistake in the practise of his profession. 66 In summary, Pioneer submitted that, in the present case, it was not necessary for it to demonstrate a breach of professional duty, if its failures did not amount to such, since the policy was one by which QBE agreed to indemnify it for a breach of duty occurring in the conduct of its professional business of applying bituminous seals. 67 Alternatively, it submitted that, if a breach of professional duty had to be established, then it did not need to be a breach by a person engaged in a profession; rather, it was sufficient that it be a breach of a duty involving "services of a skilful character according to an established discipline". The present case, it contended, answered that description. 68 I accept that the present case is one where the expression "professional business practice" was used to define the ambit of the business of Pioneer, and that, as such, it did not confine the cover, at least so far as tort liability was concerned, to a breach of professional duty strictly so regarded. Any restriction of the potential width of the cover depended upon other considerations (for example clause 1.5 in relation to claims for breach of contract), or the endorsement limiting cover to "design and consulting/advisory services". Accordingly, it appears to me that this part of Pioneer's argument is made good, although for the reasons previously mentioned, I remain of the view that the endorsement last mentioned excludes cover, in this instance. 69 A separate submission was pursued by QBE in relation to so much of Pioneer's liability as arose out of its breach of contract. It was submitted that clause 1.5 of the policy (see para 5 above), narrowed the ambit of cover, for such a basis of liability, by conditioning it upon breach of a "contract for the provision of professional services". 70 Again it submitted that the contract between Pioneer and the Council was not one for the provision of professional services; or alternatively, if it did answer that description, then it submitted that the way or ways in which it was breached did not involve services of a skilful character according to an established discipline. In my view these submissions have been made good, so that properly construed, cover for a breach of contract was only available where the contract was one which did call for the provision of design or consulting or advice services which were of a skilful character according to an established discipline. Clearly there were cases where Pioneer did contract for design and consulting/advisory services, and where the relevant work was carried out by professional engineers. These kinds of contracts or services were recognised, on the face of the documents, to be the exception rather than the rule. They stand on the other side of the line to contracts such as that with which this litigation is concerned for the supply and application of bituminous services. E. PROXIMATE CAUSE 71 If any of the circumstances of the present case properly fell within the concept of design liability, then QBE submitted that it did not answer the description of a "proximate cause" of Pioneer's loss, and hence was not covered by the policy. Alternatively, if there were multiple causes for the finding of liability, attention was directed to the principle established in Wayne Tank & Pump Co Limited v The Employer's Liability Assurance Corporation Limited (1973) 3 All ER 825 ("Wayne Tank"). 72 It is convenient to refer first to this decision since the issues raised are closely related. The Court in Wayne Tank was concerned with a public liability policy which gave cover for sums that the plaintiffs might become legally liable to pay as damages, consequent upon damage to property as a result of certain types of accident. An exception clause in the policy provided that the defendant would not indemnify the plaintiff in respect of liability consequent upon damage caused by the nature or condition of any goods supplied by it. The plaintiff installed certain equipment in a factory, which was unsuitable for its purpose and which posed a potential fire hazard. After the equipment had been installed a fire broke out causing extensive damage to the factory. In the trial, it was found that there were two causes of the fire. The first was the dangerous nature of the equipment. The second was the conduct of an employee of the plaintiff in switching the equipment on and leaving it unattended. 73 At page 831, Cairns LJ observed: ".. for my part, I do not consider that the Court should strain to find a dominant cause if, as here, there are two causes both of which can properly be described as effective cause of the loss. … I should prefer to say that unless one cause is clearly more decisive than the other, it should be accepted that there are two causes of the loss and no attempt should be made to give one of them the quality of dominance. On this approach if one cause is within the words of the policy and the other comes within an exception in the policy, it must be taken that the loss cannot be recovered under the policy. The effect of an exception is to save the insurer from liability for a loss which but for the exception would be covered. The effect of the cover is not to impose on the insurer liability for something which is within the exception." 74 At page 830, Lord Denning said: " I will assume, for the sake of argument, … that there was not one dominant cause, but two causes which were equal or nearly equal in their efficiency in bringing about the damage. One of them is within the general words (of the policy) and would render the insurers liable. The other is within the exception and would exempt them from liability. In such a case it would seem that the insurers can rely on the exemption clause. … The result is that, although this accident comes within the general words at the opening of the policy, nevertheless seeing that there is a particular exception , the exception takes priority over the general words. General words always have to give way to particular provisions. In the present case one of the causes which was efficient to produce the damage was the nature of the goods supplied by the insured. The insurers are exempt from liability for it. Their exemption is not taken away by the fact that there was another cause equally efficient also operating to cause the loss ." (Emphasis added). 75 This principle has been generally accepted as correct by the standard texts on insurance law. For example in Kelly and Ball, Principles of Insurance Law, Butterworths Looseleaf Service 2001, it is said (at 8.0020.30): " In some cases, there are two or more events that can be properly be described as proximate causes or causes of the insured's loss. The fact that the contract only provides cover against one of those events is no bar to recovery. It is sufficient for the contract to cover one of them. However, the position is different if the contract contains a clause under which liability for loss caused by one of those events is specifically excluded . The effect of the specific exclusion is to prevent the insured from recovering for a loss that is caused by the excluded event, even if the loss is also caused by another event that is covered by the contract ." (Emphasis added). 76 Similar statements appear in Sutton, Insurance Law in Australia 3rd Edition 1999 at 10.112, and MacGillivray On Insurance Law 9th Edition 1997 at 19.5. At paragraph 19.7, MacGillivray notes: " Once the assured has proved that the loss was caused by the general peril insured against, it is for the insurer to bring himself within any exception in the policy on which he relies ." See also Halsbury's Laws of England , 4th Edition, Vol 25 at para 181. 77 The question was expressly considered in JJ Lloyd Instruments Limited v Northern Star Insurance Co Limited [1987] 1 Lloyd's Law Reports 32 ("Miss Jay Jay") which was concerned with a yacht which suffered damage whilst at sea. Under the policy, the owner was insured in respect of damage caused by external accidental means. The policy provided that "no claim shall be allowed in respect of any loss or expenditure incurred solely in remedying a fault in design or in the event of damage resulting from faulty design." At issue was whether the damage suffered by the yacht was the result of faulty design or the action of the sea. The Court found that both the action of the sea and defective design were causes of the damage. It held that since the policy did not exclude design defects which contributed to a loss without being the sole cause, the claim fell within the policy. 78 At page 40, Slade LJ stated: "… I think it no less clear that the faulty design and construction of the boat must also be regarded as at least a cause, whether or not the proximate cause of the damage. On a common sense view of the facts both of these two causes were, in my opinion, equal, or at least nearly equal, in their efficiency in bringing about the damage. In these circumstances, if the policy had contained a relevant express exception which related to loss caused by the unseaworthiness of the vessel, the (insured's) claim might well have been unsustainable. " (Emphasis added). 79 Having considered Wayne Tank, Slade LJ went on to say: " However, since the instant policy contains no relevant exception relating to loss caused by unseaworthiness of the vessel, different principles apply. The legal position in such a case is stated thus in Halsbury's Laws of England (supra).. 'It seems that there may be more than one proximate (in the sense of effective or direct) cause of a loss. If one of these causes is insured against under the policy and none of the others is expressly excluded from the policy, the assured will be entitled to recover.'" 80 The authorities tend to show that the question of proximate cause is to be determined according to a common sense view of the events: (see Canada Rice Millers Ltd v Union Marine & General Insurance Co Ltd (1941) AC 55. Moreover, it is not necessarily the case that the latest in point of time is the proximate cause (the "Miss Jay Jay" at 39). As Lord Shaw of Dumferline said in Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd (1918) AC 350 at 369: "… The cause which is truly proximate is that which is proximate in efficiency". 81 So understood it is easy to envisage circumstances where there can be more than one effective proximate cause. 82 It is clear from these decisions that the principle in Wayne Tank has been applied only where there has been an express exclusion of one of the competing causes of the casualty. It is also clear that the dominant cause approach has been viewed with a degree of disfavour so far as it invites a search for, and isolation of, a single cause. 83 In City Centre Cold Store Pty Limited v Preservative Skandia Insurance Limited (1985) 3 NSWLR 739, Clarke J (as he then was) said (at 744 to 745): " Lord Sumner, in Board of Trade v Hain Steamship Co Ltd (at 541) concluded that the finding of the arbitrator, which was in question, established that there were two causes for the disaster and if one was "warranted free" then an underwriter would not be liable. Lord Sumner had previously expressed the same view in his dissenting speech in P Samuel and Co Ltd v Dumas [1924] AC 431, at 467, where he said: "… Where a loss is caused by two perils operating simultaneously at the time of loss and one is wholly excluded because the policy is warranted free of it, the question is whether it can be denied that the loss was so caused, for if not the warranty operates." This passage was expressly approved by Morris LJ in Atlantic Maritime Co Inc v Gibbon [1954] 1 QB 88 at 138, and Cairns and Roskill LJJ (at 69, 74) in Wayne Tank. The latter case is usually cited by text writers as the primary support for the proposition appearing in the quoted passage in the speech of Lord Sumner and, whilst only Cairns LJ decided the case upon the basis that there were two operative causes, it seems to me that the proposition should be regarded as established law. Once this is accepted then it must be recognised that it is not always possible, or essential, to isolate one cause as the dominant one. Likewise, if there are two causes and one only is covered there appears no good reason why, provided the other is not excepted, cover should be refused. Accordingly, I accept that the law is as stated in MacGillivray and that there may be two or more efficient causes. The next question relates to the approach which should be taken by the court when there are a number of causes. Roskill LJ opines that the court should endeavour to select one efficient cause. He said (Wayne Tank (at 72)): "… I think … that the court must, if it can, determine the proximate cause of the loss …. If there were two competing causes the court must select the dominant cause of the two as the proximate cause, it being well understood that the problem is not solved by mere point of order in time." A somewhat different viewpoint was articulated by Cairns LJ in the same case when he said (at 68-69): "… I do not consider that the court should strain to find a dominant cause if, as here, there are two causes both of which can properly be described as effective causes of the loss … I should prefer to say that unless one cause is clearly more decisive than the other, it should be accepted that there are two causes of the loss and no attempt should be made to give one of them the quality of dominance." For my part I propose to determine in the first instance whether there is one effective cause. But, recognising that in the present case there are a number of contributing causes, I do not propose straining to isolate one if it seems to me that two or more causes operated with approximately equal effect ." 84 Again, in HIH Casualty & General Insurance Limited v Waterwell Shipping Inc and Another (1988) 43 NSWLR 601 ("Waterwell"), the Court, while accepting the Wayne Tank principle, indicated that the common sense approach should be taken in preference to the artificial approach of searching for a dominant cause, where realistically there were two or more efficient causes of a loss. That was a case where the insured's vessel sank because its sea valves were negligently left open by the crew, and also because the wall of a strainer box failed due to corrosion, allowing sea water to enter and flood the vessel. The insured claimed indemnity under a policy which insured it in respect of loss or damage caused by the negligence of crew members. The insurer sought to deny indemnity in reliance upon a provision in the policy that "unless the policy otherwise provides, the insurer is not liable for ordinary wear and tear". 85 Sheller JA, with whom Beazley and Stein JJA agreed, said (at 612): " If I may respectfully say so, such an approach, in a situation where each of two or more causes may realistically be described as an efficient and, in that sense, proximate cause, prefers commonsense to the artificial exercise of attempting to decide which of two or several is the winner of what in fact may be a dead heat. In my opinion, this Court should follow and apply the decision of the English Court of Appeal in the [Miss Jay Jay]. Therefore, where there are competing proximate causes and loss from one is insured against and none of the others is expressly excluded, the insured is entitled to recover ." 86 As his Honour later said (at 613): " in the present case, if the loss of the vessel was proximately caused by both the negligence of the master, officers or crew and by wear and tear, the appellant was liable under the policy even though the policy did not cover wear and tear or loss the result of wear and tear. No exclusion for wear and tear was called for or to be found. It was simply outside the cover provided ." 87 As I have observed, QBE submitted that Pioneer had to show that an event insured against was a proximate cause of its loss, relying upon decisions such as Australian Casualty Co Ltd v Federico (1986) 160 CLR 513 at 534-535; and West Wake Price and Co v Ching (1956) 3 All ER 821 at 825 per Devlin J. This, it submitted, Pioneer had failed to do since it was the presence of loose aggregate on the roadway which was the proximate cause, and that such circumstance did not involve a design matter or an advisory service. 88 Pioneer however submitted that the present case was not of the genus where coverage depended upon identification of a "cause" or "proximate cause" for its liability. In this regard it returned to the submission that the insuring clause related to "legal liability… incurred in the conduct of the Professional or Business Practice" of Pioneer (Emphasis added). 89 Further, it submitted that even if it could be argued that there were several causes, one or more of which did not qualify as an advisory service or design matter, then the endorsement, which limited cover to such matters, did not amount to an express exclusion, of the kind identified by Sheller JA in Waterwell as attracting an application of the Wayne Tank principle. 90 In my view, the present case was not one which would attract an application of the Wayne Tank principle. Had an exclusion been intended where there were concurrent causes, one of which was a non design or advisory matter, then it might properly have been expected that there would have been an express exclusion to that effect in Section 4 of the policy, which specifically identified ten excluded circumstances. 91 So far as there was any ambiguity in relation to whether the endorsement amounted to an exclusion of the kind to which the Wayne Tank principle applied, then, in my view, this should be resolved contra proforentem in favour of Pioneer: Alex Kay Pty Limited v General Motor Acceptance Corporation & Anor (1963) VR 458. The present case is akin to Waterwell where causes other than design or advisory services were "outside the cover provided rather than excluded". 92 Accordingly, had the liability of Pioneer been properly attributed to design or advisory services, then I do not consider that Wayne Tank could have been called in aid by QBE. 93 In passing, I also note that there is a distinction between policies in respect of which it is necessary to identify a "cause" or "proximate" cause, and policies in which the insuring clause is concerned with claims "arising out of" rather than with a loss "caused by" a specified event. That distinction was made by the High Court in Government Insurance Office of NSW v R J Green & Lloyd Pty Limited (1965) 114 CLR 437 per Windeyer J at 447; in State Government Insurance Commission v Stevens Brothers Proprietary Limited (1984) 154 CLR 552 at 555, 559; and in Dickinson v Motor Vehicle Insurance Trust (1987) 163 CLR 500 in which the full Court said (at 505): " The test posited by the words 'arising out of' is wider than that posited by the words 'caused by' and the former, although it involves some causal or consequential relationship between the use of the vehicle and the injuries, does not require the direct or proximate relationship which would be necessary to conclude that the injuries were caused by the use of the vehicle ." 94 Reference may also be made to Australian Paper Plantations Pty Limited v Venturoni (2000) VSCA 71 where some consideration was given to the nexus required between the liability or claim, and the performance of the work in question. F. EXLUSION CLAUSE – DUTY OR OBLIGATION NOT ASSUMED IN THE NORMAL CONDUCT OF PIONEER'S PROFESSIONAL BUSINESS PRACTICE. 95 QBE submitted that exclusion clause 4.3 (noted above at para 5) operated, consistently with the principles noted in Monarch Insurance Company Limited v Steel Mains Pty Limited (1986) 4 ANZ Insurance Cases 60-686 and Walton v NEM General Insurance Association (1973) 2 NSWLR 73 at 84, to carve out from those claims which are covered by the operative insuring clause, those activities involving duties or obligations which might be within the ambit of the cover, but which are not normally assumed in the conduct of Pioneer's Professional Business Practice. 96 It then submitted that none of the relevant activities leading to liability on Pioneer's part constituted a normal part of that business practice. 97 This point arose by way of a late application to amend the defence to the cross claim, and argument in relation to it was reserved in order to determine whether it should be the subject of further evidence. Having regard to the matters considered it is unnecessary to give further consideration to this point. G. ADDITIONAL ISSUES 98 As previously noted, some additional matters were also reserved, concerning the relevant policy (if any) which might extend cover, and whether there was a non-disclosure, in relation to whether Pioneer had carried out work activities relevant to the policy in New South Wales. 99 As to the first, it was submitted that the claim having been made during the period of cover extended under the 1997/1998 QBE policy, any claim brought under the QBEA policy must fail. The second issue turns upon whether or not there had been a failure to make proper disclosure of the nature and extent of Pioneer's business, particularly in the area of design and consulting/advice, but also in relation to the States in which it operated, This would be a matter of potential relevance for an assessment of the risk insured, and would also give rise to questions as to what should be the consequences of any such non disclosure, if made good. 100 Having regard to the matters already considered, it is also unnecessary for me to deal with those questions. ORDERS 101 It follows from the foregoing, that the cross claim against QBE and QBEA should be dismissed. ********** Last Modified: 03/15/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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