Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (formerly GIO Insurance Limited) & Ors [2006] NSWSC 223

Reported Decision : (2006) 14 ANZ Insurance Cases 61-701

New South Wales Supreme Court

CITATION : Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (formerly GIO Insurance Limited) & Ors [2006] NSWSC 223

HEARING DATE(S) : 11/10/05, 12/10/05, 17/10/05-21/10/05, 24/10/05-27/10/05, 31/10/05-3/11/05, 7/11/05-10/11/05, 14/11/05-16/11/05, 21/11/05-24/11/05, 28/11/05, 1/12/05, 5/12/05-7/12/05, 12/12/05-15/12/05, 30/1/06, 20/2/06-24/02/06, 27/02/06-3/3/06

JUDGMENT DATE : 12 April 2006

JURISDICTION : Equity Division Commercial List

JUDGMENT OF : Einstein J

DECISION : Policies do not respond. Short minutes of order to be brought in.

CATCHWORDS : Professional Indemnity insurance - Construction of contracts of insurance - Conditions - Exclusionary provisions - Deeming provisions - Multi-layered scheme of insurance put in place by Baulderstone Hornibrook ["BHE"] as Head Contractor for the design and construction of third runway extending into Botany Bay at Kingsford Smith Airport - Reinforced Earth construction - Sand loss from reinforced earth walls resulting in voids and settlement - Costs of carrying out design and construction work to rectify subject walls likely to exceed $60 million - Initial proceedings brought by Sydney Airports Corporation ["SACL"] against BHE - Initial proceedings settled in the absence of acceptance [by upper lay insurers] that policies responded - Reasonableness of settlement of initial proceedings - Identification of the substance of claim made by SACL - Present proceedings commenced by BHE against insurers [including upper layer insurers] seeking declarations of entitlement to indemnity and associated relief - Exclusion providing that policy would not indemnify in respect of claims made against insured arising out of construction work performed involving the means, methods, techniques, sequences, procedures and use of equipment - Primary questions of fact as to whether excessive sand loss caused by reason of design defects or construction work - Principles of construction - Sundry questions of proper construction and nature of policy provisions - Construction issues including meaning of phrase "arising out of" - Identification of which are "insuring clauses" - Rectification of contracts of insurance - Claims to rectify policies including to change retroactive date - Issues concerning pre-conditions - Notification issues - Consideration of what circumstances notified - Consideration of sundry exclusion clauses - Proper construction of word "claim" when used in an insurance policy - Whether one claim or two claims - Whether any breach of professional duty by BHE giving rise to SACL's claim committed in the course of BHE itself conducting one of defined professional activities - Consideration of deeming provisions - Implied terms - Exclusion in respect of claims for any legal liability imposed upon insured pursuant to law of contract but only when such legal liability would not have been imposed upon pursuant to law of tort - Exclusion providing that policy would not indemnify in respect of claims made which relate to any contractual or other duty or obligation assumed by insured not assumed in the normal conduct of the insurer's profession as defined - Whether insurers breached obligations of utmost good faith inter alia by failing to investigate promptly - Consideration of source and content of duty of good faith in context of exercise of discretion under an insurance policy - Consideration of delay generally - Consideration of delay by insurer in the context of a proposed settlement - Whether BHE breached its obligations of good faith owed to insurers - Rectification works - Quantum - Waiver of legal professional privilege