Supreme Court New South Wales Medium Neutral Citation: Carillion Construction Ltd v AIG Australia Ltd [2016] NSWSC 495 Hearing dates: 17 and 18 March 2016 Decision date: 22 April 2016 Jurisdiction: Equity - Commercial List Before: Stevenson J Decision: Separate questions answered; plaintiff's action barred by deed of release and out of time Catchwords: INSURANCE – indemnity insurance – when cause of action arose – whether cause of action arose at time of occurrence of peril or when insurer failed to do what was required of it under the policy - whether claim out of time; LIMITATIONS – whether claim out of time - with what jurisdiction does transaction have closest connection – whether Northern Territory three year limitation or Victorian or New South Wales six year limitation period applies – whether defendant estopped from asserting three year limitation period applies – whether time should be extended under Limitation Act 1981 (NT); CONTRACT – whether claim barred by deed of release – proper construction of release; ESTOPPEL - whether claim barred by an Anshun estoppel – whether defendant estopped from asserting a three year limitation period Legislation Cited: Insurance Contracts Act 1983 (Cth) Limitation Act 1981 (NT) Cases Cited: Akai Pty Ltd v People's Insurance Co Ltd (1996) 188 CLR 418 Associated Forest Holdings Pty Ltd v Gordian Runoff Limited [2015] TASFC 6 Bonython v Commonwealth (1950) 81 CLR 486; [1951] AC 201 Bradley v Eagle Star Insurance Co Ltd [1989] AC 957; 1 Lloyd's Rep 465 Callaghan v Dominion Insurance Co Ltd [1997] 2 Lloyd's Rep 541 CGU Insurance Ltd v Watson [2007] NSWCA 301 CIC Insurance Limited v Bankstown Football Club Limited (1997) 187 CLR 384 Cigna Insurance Asia Pacific Ltd v Packer [2000] WASCA 415 Commonwealth v Vero Insurance Ltd [2012] FCA 826 Commonwealth v Vero Insurance Ltd [2013] FCAFC 152 Doggett v Commonwealth Bank of Australia [2015] VSCA 351 Firma C-Trade SA v Newcastle Protection and Indemnity Association (The Fanti) [1991] 2 AC; [1987] 2 Lloyd's Rep 299 Grant v John Grant & Sons Pty Ltd [1954] HCA 23; 91 CLR 112 In re September 11th Liability Insce Coverage Cases 2004 US Dist LEXIS 3181 John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36; 203 CLR 503 O'Neill v Yield House Inc 964 F Supp 806, 810 (SDNY 1997) Penrith City Council v Government Insurance Office of New South Wales (1991) 24 NSWLR 564 Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; 149 CLR 537 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 The Owners Corporation of Strata Plan 61390 v Multiplex Corporate Agency Pty Ltd (No 2) [2012] NSWSC 322 Tillotson v ANZ Life Assurance Co Ltd (1997) 9 ANZ Ins Cas 77,131 Transam Insce Co v Thomas M Durkin & Sons 1991 WL 206765 (ED Pa 1 Oct 1991) Tropicus Orchids Flowers and Foliage Pty Ltd v Territory Insurance Office (1998) 10 ANZ Ins Cas 61-412 Virk v Gan Life Holding plc [2000] Lloyd's Rep IR 159 Texts Cited: D K Derrington and R S Ashton, The Law of Liability Insurance, (3rd ed 2013, Lexis Nexis) E R Hardy Ivamy, General Principles of Insurance Law, (6th ed 1993, Butterworths Law) J Birds, B Lynch and S Milnes, MacGillivray on Insurance Law, (13th ed 2015, Sweet & Maxwell) M Davies, A S Bell and P L G Brereton, Nygh's Conflict of Laws in Australia, (9th ed 2014, Lexis Nexis) M Levine and R Haar, Construction Insurance and UK Construction Contracts, (2nd ed 2008, Informa Law) R M Merkin, Colinvaux's Law of Insurance, (10th ed 2015, Sweet & Maxwell) W I B Enright and R M Merkin, Sutton on Insurance Law, (4th ed 2015, Lawbook Co) Category: Principal judgment Parties: Carillion Construction Limited (Plaintiff) AIG Australia Limited (Defendant) Representation: Counsel: J C Sheahan QC with D F C Thomas and E Bathurst (Plaintiff) G McArthur QC with P D Herzfeld (Defendant) Solicitors: Herbert Smith Freehills (Plaintiff) Wotton + Kearney (Defendant) File Number(s): SC 2015/179066 Judgment 1. Between 7 June 1996 and 11 December 1999, Barclay Mowlem Constructions Limited and others constructed a wharf on behalf of the Northern Territory Government at the Darwin East Arm Port. 2. At that time, Barclay Mowlem was indemnified under a Contracts Works Policy ("the Policy") with American Home Assurance Company against physical loss and damage to the works at the wharf. 3. During the course of its construction, the wharf suffered physical damage. Barclay Mowlem made a claim under the Policy in respect of that damage. American Home denied liability. 4. On 7 October 1999, Barclay Mowlem commenced proceedings in this Court against American Home seeking a declaration of its entitlement to indemnity under the Policy and payment of a sum in the order of $14.35 million. 5. The 1999 proceedings were settled on the terms set out in a Deed of Release dated 12 April 2001. Those terms included a payment by American Home to Barclay Mowlem of $3.5 million. 6. At some time prior to 11 December 1999, tie rods, the function of which was to keep in place the sheet pile retaining wall of the wharf, became structurally impaired. This was because they deflected and sustained "double bends" at the point where they exited the capping beam on top of the retaining wall. I will call this the "Tie Rods Damage". The amount claimed by Barclay Mowlem in the 1999 proceedings did not include the amount necessary to remedy the Tie Rods Damage (although, as I explain below, Barclay Mowlem claimed a relatively small amount - some $187,000 – as the cost to reinstate the cathodic protection of the tie rods, and American Home referred to the Tie Rods Damage in its defence of the claim). 7. Barclay Mowlem did not rectify the Tie Rods Damage until June 2005. This was a major exercise. It cost something in the order of $13.75 million. 8. Later, Barclay Mowlem assigned its right under the Policy to the plaintiff, Carillion Construction Limited; and the defendant, AIG Australia Limited, assumed American Home's obligations under the Policy. For convenience, I will refer simply to AIG (even in respect of events where the insurer was American Home). It will be necessary on occasion to refer separately to Barclay Mowlem and Carillion. 9. On 26 March 2010 Carillion made a claim under the Policy for indemnity in relation to the $13.75 million expended by it in June 2005 to rectify the Tie Rods Damage. I will call this the "Tie Rods Claim". 10. AIG denied liability to indemnify Carillion in respect of the Tie Rods Claim. There is a dispute about when that denial of liability occurred. AIG claims (and for the reasons I set out below, I accept) that it occurred on 3 August 2011. 11. On 17 June 2015 Carillion commenced these proceedings against AIG seeking a declaration of its entitlement to indemnity under the Policy in respect of the Tie Rods Claim and consequential orders. 12. AIG contends that Carillion's claim is barred by: 1. the 2001 Deed of Release; 2. an Anshun estoppel, on the basis that Barclay Mowlem ought reasonably have brought the Tie Rods Claim in the 1999 proceedings; and 3. operation of the Limitation Act 1981 (NT) (which provides for a three year limitation period), or alternatively the corresponding provisions in Victoria or New South Wales (which provide for a six year limitation period). 1. On the other hand, Carillion claims that AIG represented that "it would not assert that anything less than a six year limitation period applied" to Carillion's claim and that AIG is now estopped from contending that a three year limitation period applies. 2. As the matters raised by AIG go to the question of whether Carillion can maintain these proceedings, Bergin CJ in Eq ordered that they (as well as the estoppel question) be separately determined. Her Honour, with the assistance of the parties, formulated a series of particular questions directed to these matters. 3. The precise questions, and my answers, are set out in the schedule annexed to this judgment (Annexure (8.34 KB, pdf)). 4. In substance, my conclusion is that Carillion's claim is barred both by the Deed of Release and the Limitation Act 1981 (NT). 5. Mr Sheahan QC appeared with Mr Thomas and Ms Bathurst for Carillion. Mr McArthur QC appeared with Mr Herzfeld for AIG. The proceedings were conducted with admirable economy and skill. I have been greatly assisted by the comprehensive written and oral submissions presented by both parties. Much of what appears in this judgment (especially as to uncontroversial and background matters) is drawn from those submissions. The Policy 1. The Policy recited that the insurer would indemnify the insured (now, relevantly, Carillion) "in respect of loss, destruction, damage or liability in the manner and to the extent provided" in the Policy and that the insured's obligation of indemnity was "subject to the terms, exceptions, memoranda conditions and other provisions contained herein". 2. The insuring clause reads, relevantly: "SECTION A – CONSTRUCTION PERIOD The insurer(s) will indemnify the insured against physical loss, destruction or damage to the insured property from any cause not otherwise excepted happening during the construction period:- (a) Whilst at the situation from the time of completion of unloading thereat and thereafter until all of the works are complete and have been accepted by the principal." 1. The "construction period" was from 7 June 1996 to 11 December 1999. 2. Three further clauses are relevant. 3. First, cl 3 of the General Conditions provides: "NOTIFICATION OF LOSS On the happening of any occurrence giving rise or likely to give rise to a claim under this policy or upon receipt by the insured of notice of any claim or subsequent proceeding the insured or his legal representatives shall as soon as practicable after the occurrence. (a) give notice thereof in writing to the insurer(s) (b) preserve any damaged or defective insured property or things which might prove necessary or useful by way of evidence in connection with any claim and so for as may be reasonably practicable no alteration or repairs shall without the consent of the insurer(s) be made after the event until the insurer(s) shall have had an opportunity of inspection. (c) take all practical steps including in the case of insured property stolen or lost or wilfully damaged the giving of notice as soon as practicable to the police to recover any insured property and to discover and punish any guilty person. (d) when called upon to do so furnish to the insurer(s) in writing all detail of the event together with such evidence vouchers proofs and explanations as the insurer(s) may reasonabl[y] require." 1. Next, memoranda cl 4 provides: "CLAIMS PROCEDURE: For all losses immediate advice is to be given to any office of the Heath Fielding Australia Group and the Insured is to defer proceeding with repairs until Insurers or the Assessors have made a preliminary survey. For losses where the insurers or their assessors have undertaken a preliminary survey and the estimate of the loss is expected to exceed A$500,000 the insurers agree to make available to the Insured a progress payment equal to at least 50 percent of the estimated value of the claim within one month of the damage having been inspected provided however that sufficient information is made available to the assessors to enable the Insurers to admit liability under the terms of this Insurance. The amounts stated in this condition refer to estimates of amounts payable after application of the Excess." 1. Finally, exception 8 provides: "The insurer(s) shall not be liable in respect of:- … Loss or damage due to any fault, defect, error or omission in design plan or specification but his exclusion shall be limited to that part of the property insured immediately affected and shall not apply to any other part of [sic: or] parts lost or damaged as a consequence thereof." 1. The separate questions do not require me to make any finding about whether Carillion's claim is excluded by exception 8, nor as to its proper construction. The exception draws a distinction between property "immediately affected" by a design fault (which is caught by the exclusion) and "parts lost or damaged as a consequence thereof" (which is not). The exclusion, and that distinction, are relevant to issues arising in respect of the Deed of Release. The Deed of Release 1. Relevantly, the 2001 Deed of Release is in the following terms: "2. RECITALS 2.4 On or about 28 June 1996 the Insurer issued to various parties including [Barclay Mowlem]…a Contract Works Insurance Policy… 2.6 [Barclay Mowlem] allege[s] that during the course of construction of the Wharf…the Wharf suffered physical loss and/or damage ('the Damage'). 2.7 [Barclay Mowlem] made a claim against the Insurer for indemnity under the Policy with respect to the cost of rectifying the Damage including on site overheads, off site overheads, margin and interest ('the Claim') and the Insurer declined indemnity under the Policy to [Barclay Mowlem] with respect to the Claim. 2.8 [Barclay Mowlem] commenced proceedings against the Insurer in the Commercial List Equity Division of the New South Wales Supreme Court no. 50125 of 1999 seeking indemnity under the Policy with respect to the Claim together with legal costs ('the Proceedings'). 2.9 The Insurer, [and Barclay Mowlem] have agreed to a full and final settlement of the Claim and of the Proceedings for $3,500,000 inclusive of interest and all other costs and expenses of any nature whatsoever including legal and expert engineering fees. 3. AGREEMENT 3.1 In consideration of the Insurer having paid to [Barclay Mowlem] the sum of THREE MILLION AND FIVE HUNDRED THOUSAND DOLLARS ($3,500,000), the receipt of which is hereby acknowledged, [Barclay Mowlem] release[s] and discharge[s] the Insurer from all actions, suits, claims, demands and causes of action both at law and in equity and the costs thereof which [Barclay Mowlem] may now have or which but for this Deed could, would or might at any time hereafter have or have had on or against the Insurer in respect of or arising out of the matters the subject of the Claim and Proceedings...". [Emphasis in original] The proper construction of the Deed of Release 1. It is common ground that the principles by which I should construe the Deed of Release flow from the decision of the High Court in Grant v John Grant & Sons Pty Ltd [1954] HCA 23; 91 CLR 112 at 123 ff. 2. In their submissions, Mr Sheahan and Mr Thomas summarised those principles as follows: "(a) [F]irst, the common law requires general words in a release to be construed by reference to the subject-matter of the particular dispute(s) which the recitals said the parties had resolved on the terms of the deed. In this way, 'the general words of a release should be restrained by the particular occasion'. Regard will be had to the background facts known to the parties, to the nature of the claims made (and proceedings commenced) prior to the release being executed, and the particular objective intent of the parties by whom the release is executed. The intention of the parties ascertained from this process will control the operation of general words in a release. The general words should not be permitted to subvert what the parties should be taken to have intended when the release is properly construed in its context; (b) secondly, Equity operates to achieve an analogous result. An alleged releasor enjoys an equity 'to have the general words of a release confined to the true purpose of the transaction ascertained from the scope of the instrument and the external circumstances.' The 'state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor' will be relevant matters in this context. Equity therefore 'permits an investigation of the circumstances, including consideration of the actual intentions of the parties, in order to determine whether enforcement of the general words of a release would be against conscience'." [Citations omitted] 1. Mr McArthur and Mr Herzfeld accepted that this was an accurate summary of the relevant principles but also drew attention to the observations of Pembroke J in The Owners Corporation of Strata Plan 61390 v Multiplex Corporate Agency Pty Ltd (No 2) [2012] NSWSC 322 at [22] and [30] as follows: "The principle for which Grant v John Grant & Sons (above) stands is sometimes described more widely than is justified. It is not, and never has been, authority for the proposition that the general words of a release can only ever apply to matters then known to the parties. … …the joint judgment in Grant v John Grant & Sons (above) also recognised that there will always be cases where, properly characterised, the parties should be taken to have intended that the general words of a release should operate to encompass all conceivable further disputes, whether disclosed or not and whether within the knowledge of a party or both parties, or outside of it… In such a case there is no room for the application of equitable principle. The equitable principle only has a role to play when it appears from the terms or the context or other admissible evidence, that the enforcement of the legal right would, by a literal application of the general words of a release, be against conscience. It would not be against conscience if the court is satisfied that the parties intended 'upon a particular and solemn composition for peace' to release uncertain demands and presently unknown claims...". [Citations omitted] 1. Pembroke J's observations were recently endorsed by the Victoria Court of Appeal in Doggett v Commonwealth Bank of Australia [2015] VSCA 351 at [63] per Whelan JA. What was released? 1. The words of the release are wide indeed. 2. What is released is any claim Barclay Mowlem might have against AIG "in respect of or arising out of the matters the subject of the Claim and Proceedings". 3. The "Claim" is the claim for indemnity then made by Barclay Mowlem for physical loss and/or damage to the wharf (recital 2.7). The "Proceedings" are the 1999 proceedings, in which Barclay Mowlem sought indemnity from AIG under the Policy in respect of the "Claim" (recital 2.8). 4. A question arises as to whether the parties intended, by using the words "the Claim and Proceedings", that the release applies only to matters "the subject of" both "the Claim" and "the Proceedings" or whether they intended the release to operate in relation to matters the subject of either "the Claim" or "the Proceedings". 5. It is true, as Carillion submitted, that the use of the word "and" in the expression "the Claim and Proceedings" (rather than "or" as is used in the preceding expression "in respect of or arising out of) suggests that the parties intended the expression to operate cumulatively, rather than disjunctively. 6. However, as I explain below, Barclay Mowlem quantified "the Claim" as being for an amount in the order of $8 million. The claim made in the 1999 proceedings was for over $14 million. Plainly, Barclay Mowlem included more in its claim in the 1999 proceedings than it had included in "the Claim" itself. 7. Further, recital 2.9 states that the parties agreed to a "full and final settlement" of "the Claim" and "the Proceedings"; that is both of those subjects; not merely those matters that were common to both. That suggests to me that the intention of the parties was that the release operates in respect of or arising out of matters the subject of either "the Claim" or "the Proceedings" or both. Was the Tie Rods Damage "the subject of the Claim"? 1. On 17 October 1997, Barclay Mowlem submitted a claim to AIG's loss assessors, GAB Robins for "tie rod damage" in the order of $69,500 as well as a claim for "rectification of longitudinal cracking". 2. The work needed to rectify the "tie rod damage" claim was described as: "Remove fill, lift tie rods (prior and during re-installation) strengthen tie rod support system necessary to pre-camber line of tie rods to minimise deflection during installation, replace fill materials etc." 1. On 23 December 1997, GAB Robins informed Barclay Mowlem that AIG would pay the longitudinal cracking claim but not the "tie rod damage" claim. 2. There is no evidence that Barclay Mowlem further pursued that "tie rod damage" claim. 3. Several months later, on 30 March 1998, Barclay Mowlem wrote to GAB Robins attaching its "estimated costs associated with the remedial works currently being undertaken on site" in the sum of some $2.8 million. No claim was made in respect of the tie rods. 4. On 23 September 1998, Barclay Mowlem's solicitors wrote to GAB Robins saying that the costs of remediating the wharf had increased to $8 million and could be as much as $20 million. 5. On 23 October 1998, Barclay Mowlem sent GAB Robins a breakdown of the $8 million claim that included a sum of $79,000 for "Cathodic Protection of Repair Works" (which may have been a reference to the need to restore the cathodic protection of the tie rods). 6. In March 1999, AIG received reports from engineers, Maunsell McIntyre, to the effect that the tie rods were not capable of sustaining the compressive loads to which they were subjected. 7. Maunsell McIntyre opined: "It is considered that damage to the lower tie rods has been caused by a defect in the specification of the fill material in relation to the tidal conditions and the method of placing it, and by defects in the detailing of the tie rods. Sagging of the lower tie rods and the associated cracking of the fill behind the anchors were the subject of remedial action undertaken in 1997. …Maunsell considers there is likely to be significant further damage to the lower tie rods due to overstressing in bending, tension and shear." 1. However, Maunsell McIntyre noted that Barclay Mowlem had made no claim under the Policy for indemnity for such matters. 2. On 25 March 1999, AIG wrote to Barclay Mowlem's broker stating that it denied liability to indemnify Barclay Mowlem on the basis that Barclay Mowlem's claim was excluded by exception 8 to the Policy (set out at [24] above). AIG stated: "Having considered the engineering advice from Maunsell McIntyre and the legal advice from Phillips Fox, we are of the view that all damage is excluded as the integrity of the whole wharf structure was affected by a series of faults, defects, errors or omissions in design, plan or specification which caused all of the damage claimed. Therefore, the part immediately affected was the entire wharf structure." 1. On 15 April 1999, AIG's solicitors wrote to Barclay Mowlem's solicitors summarising Maunsell McIntyre's concern as follows: "Maunsell has recently expressed to our client a concern as to the structural adequacy of the wharf… Maunsell's concern relates primarily to the current stress levels in the lower tie rods. It believes it would be prudent for a design reviewer to give particular attention to the current stresses in the lower tie rods in consideration, inter alia, of the deformation to which they are currently subjected… Maunsell considers that…it is probable that various future working loads (and combinations thereof) will increase stress in the overall tie rod and anchor system and in the sheet piles…". 1. As I understand it, it is common ground that the problem that Maunsell McIntyre had identified was the Tie Rods Damage. 2. Dr Moss-Morris, the consulting engineer who designed the wharf, did not agree with Maunsell McIntyre's concerns about the capacity of the tie rods to withstand loads. 3. Accordingly, on 28 April 1999, Dr Moss-Morris wrote to Barclay Mowlem stating: "I refer to the issues raised by Maunsell McIntyre in…their report concerning stresses in the tie rods. Having considered all of the matters which they suggest may effect [sic] the loads in the tie rods, I am satisfied that the tie rods are adequate for their intended purpose. Particularly I can find no basis to suggest that the wharf is facing failure either now or in the future as a result of these matters." 1. The next day, 29 April 1999, Barclay Mowlem's solicitors wrote to AIG's solicitors stating: "Dr Arthur Moss-Morris has unequivocally stated that, in his professional judgment, the tie rods have the capacity to withstand the loads to which they can reasonably be expected to be subjected and that, by reason thereof, there is no basis for concern of a major structural failure of the wharf now or at any time in the future." 1. Following AIG's 25 March 1999 denial of liability, on 7 October 1999 Barclay Mowlem commenced the 1999 Proceedings. 2. In its Summons, Barclay Mowlem alleged that the loss and damage was due to, amongst other things, the tie rods. 3. However the Reply that Barclay Mowlem filed in the 1999 Proceedings makes clear that the only damages sought in respect of the tie rods were for the "cathodic protection" of the tie rods, and not the Tie Rods Damage. 4. That was also made clear by a report prepared by Mr Robert Steedman from Gibb Maritime, dated June 2000, that Barclay Mowlem served and which included the following statement concerning the tie rods: "Tie rods were supported by structural bracing frames to prevent tie sag during placement… The tiles were lifted during the final stages of fill placement to rectify any sag. Despite the significant sagging and rotation of the tie rods that took place their performance has been adequate… Although unsightly, once bent [a tie rod's] ability to transmit the required tensile force is not greatly affected… The only remaining issue regarding the performance of the [tie rods] would be whether the corrosion protection wrapping system had been compromised. However it is understood that the tie rods are also cathodically protected and following the remedial works, continuity between all ties has been established. Hence this issue is not significant". 1. Ultimately, the amount claimed by Barclay Mowlem in respect of the cathodic protection of the tie rods (described as the cost to "re-establish tie rod protection") was in the order of $187,000. 2. Evidently, Maunsell McIntyre had correctly identified the Tie Rods Damage. However, based on Dr Moss-Morris's opinion, Barclay Mowlem did not in 1999 take steps to rectify the Tie Rods Damage (and, as I have explained above, did not do so until 2005) and made no claim under the Policy in respect of that damage. Its only claim concerning the tie rods related to the question of cathodic protection. 3. Thus, "the Claim" referred to in the Deed of Release, did not include any claim for the Tie Rods Damage. The Tie Rods Damage was thus not "the subject of the Claim" for the purpose of the Deed of Release. Is the Tie Rods Claim nonetheless a matter "in respect of" or "arising out of" the matters that were the "subject of the Claim" or the "subject of the Proceedings"? 1. Although Barclay Mowlem made no claim for the Tie Rods Damage in the 1999 proceedings, AIG raised the issue of the Tie Rods Damage in its Defence. 2. In the first iteration of the Defence, AIG alleged that the loss claimed by Barclay Mowlem was in respect of property "immediately affected" by "faults, errors and omissions in the design" of the wharf and thus caught by exception 8 of the Policy (see [24] above). 3. The particulars to the Defence alleged: "The design underestimated the loads on the tie rods… The design should have provided for the tie rods to be positioned in vertical and not horizontal pairs… The short length of the tie rods in relation to the sequence of placement of the fill led to some forward movement and shear distortion of the entire wedge of backfill material contained between the sheet pile wall and the previously constructed bund, adding to the forward movement of the capping beam relative to the toe of the piles and contributing to the settlement of the backfill material, exacerbating the vertical loads on the piles… The application of the surcharge caused vertical settlement of the sheet piles at the western end of the wharf, resulting in increased lateral pressures on the wall which increased the load on the tie rods and anchors, causing forward movement of the anchors and consequent forward movement of the wall." 1. The final iteration of the Defence particularised these matters by reference to named expert reports, rather than as is set out in the preceding paragraph. Mr McArthur informed me, and Mr Sheahan did not dispute, that the contents of those expert reports were to the same effect. 2. These particulars refer to the Tie Rods Damage that Maunsell McIntyre identified, that Dr Moss-Morris said did not need to be addressed, and that Barclay Mowlem did not then rectify. The Tie Rods Damage is thus identified by AIG as being (allegedly) part of the insured property "immediately affected" by the alleged design defect and thus caught by exception 8. 3. Thus, the question of the Tie Rods Damage is something that arose in the 1999 proceedings, albeit as a part of AIG's Defence. 4. It follows, in my opinion, that the claim now being made by Carillion in respect of the Tie Rods Damage (the Tie Rods Claim) is a matter that is either (or both) "in respect of" or "arising out of" the matters "the subject of the Claim". 5. The Tie Rods Claim is also, for the same reasons, a matter is that either (or both) "in respect of" or "arising out of" the 1999 "Proceedings". 6. Either way, the Tie Rods Claim is the subject of, and caught by, the Deed of Release. 7. For that reason, Carillion's claim in these proceedings is barred by the Deed of Release. The Anshun estoppel question 1. In view of my conclusion concerning the Deed of Release, this question does not arise. 2. However, I will deal with it briefly. 3. AIG's case is that the Tie Rods Claim is so closely related to the claim Barclay Mowlem actually brought in the 1999 proceedings that it was unreasonable of Barclay Mowlem not to have brought that claim in those proceedings such that Carillion should now be estopped from bringing that claim in these proceedings (for example, Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589). 4. It is common ground that Barclay Mowlem did not rectify the Tie Rods Damage at the time it commenced the 1999 proceedings. It only did so in June 2005. 5. In those circumstances, it could only be said that it was unreasonable of Barclay Mowlem not to bring the claim for the Tie Rods Damage in the 1999 proceedings if it could also be said that it was unreasonable of Barclay Mowlem not to have rectified the Tie Rods Damage at that time. 6. I would infer that the reason Barclay Mowlem did not rectify the Tie Rods Damage prior to bringing the 1999 proceedings was because of Dr Moss-Morris's 28 April 1999 advice that "the tie rods are adequate for their intended purpose" (see [52] above). 7. In those circumstances, I am not persuaded that it was unreasonable of Barclay Mowlem to accept that advice. It must follow that it was not unreasonable for Barclay Mowlem not to include a claim for the Tie Rods Damage in the 1999 proceedings. 8. In those circumstances, no Anshun estoppel arises. The time limit for the Tie Rods Claim - the proper law of the Policy 1. An issue dividing the parties is whether the limitation period relevant to the Tie Rods Claim is three years (the position in the Northern Territory) or six years (the position in Victoria and New South Wales). 2. Under Australian law, limitation provisions form part of the substantive law and are thereby governed by the lex causae and not the law of the forum (John Pfeiffer Pty Ltd v Rogerson [2000] HCA36; 203 CLR 503). 3. It is thus necessary to determine the proper law of the Policy. 4. The question is: "…whether, upon the proper construction of the contract (which may include an expression of choice in direct language), the court may properly conclude that the parties exercised liberty given by the common law to choose a governing law for their contract. If the answer to this is in the negative, then the law will itself select a proper law". [Akai Pty Ltd v People's Insurance Co Ltd (1996) 188 CLR 418 at 442 per Toohey, Gaudron and Gummow JJ] 1. It is common ground that, in this case, it is not possible to deduce the presumed intention of the parties by examining of the Policy. 2. Thus, the law must "itself select a proper law". It does so by determining with which system of law "the transaction has its closest and most real connection": Bonython v The Commonwealth (1950) 81 CLR 486 at 498; [1951] AC 201 at 219 per Lord Simonds; and Akai at 437 and 440. 3. In its written submissions, Carillion drew attention to a statement in E R Hardy Ivamy, General Principles of Insurance Law, (6th ed 1993, Butterworths Law): "The locality of the subject-matter of insurance, even in the case of immovable property, does not appear to have any bearing on the question of what law is to be regarded as the proper law of the contract…the subject-matter of the contract is to be distinguished from the subject-matter of the insurance." [At 620] 1. As Mr McArthur submitted, in light of the decision in Akai (in which the majority, Toohey, Gaudron and Gummow JJ, noted at 437 that "the risk was very substantially situated in New South Wales", a factor obviously considered to be of great weight on the facts in that case) that cannot be a correct statement of the law in Australia. 2. A more accurate statement is to be found in D K Derrington and R S Ashton, The Law of Liability Insurance, (3rd ed 2013, Lexis Nexis) at 13-81: "The location of the insured risk is sometimes of the highest relevance [Transam Insce Co v Thomas M Durkin & Sons 1991 WL 206765 (ED Pa 1 Oct 1991)] but the place of the occurrence is not dispositive [In re September 11th Liability Insce Coverage Cases 2004 US Dist LEXIS 3181] and it may be disregarded or discounted if the risk is located in two or more jurisdictions [O'Neill v Yield House Inc 964 F Supp 806, 810 (SDNY 1997)]." 1. In this case, the connection between the Policy and the Northern Territory is striking. 2. The Policy is described as a "Contract Works Policy". 3. Its function was to afford Barclay Mowlem, now Carillion, with indemnity in relation to loss to those "contract works". The risk insured against was thus in the Northern Territory. In my opinion, that is a powerful factor pointing to the conclusion that the system of law with which the Policy has the "closest and most real connection" is that of the Northern Territory. 4. It is true that the Policy insures property extending beyond the wharf in Darwin and covers insured property anywhere in Australia. However, the wharf is the substantial insured asset. 5. The Policy does have some connections to other jurisdictions; Victoria and, to a lesser extent New South Wales and Queensland. 6. Thus (and I exclude from consideration matters not known to the parties at the date on which they entered the Policy: see M Davies, A S Bell and P L G Brereton, Nygh's Conflict of Laws in Australia, (9th ed 2014, Lexis Nexis) at [19.30]): 1. AIG negotiated the Policy with Barclay Mowlem's broker, Heath Fielding Australia Group, whose registered office and principal place of business was in New South Wales; 2. Barclay Mowlem's office in Brisbane provided instructions to Heath Fielding's office in Brisbane to negotiate the Policy, which then negotiated with AIG's office in Sydney; 3. AIG had its registered office and principal place of business in Victoria; and 4. The Policy contains a dispute resolution clause permitting the parties to arbitrate any dispute under the Australian Commercial Disputes Centre in Sydney. 1. However, these connections are, as AIG submits, "varied and fortuitous". 2. The risk insured against is and was very substantially located in the Northern Territory. It is with the jurisdiction of the Northern Territory that the Policy, and thus the transaction, has its closest and most real connection. It is the law of the Northern Territory, including the three-year limitation period in the Limitation Act 1981 (NT), that applies to the Policy. Is AIG estopped from contending for a three year limitation period? 1. Carillion contends that if, as I have concluded, the Northern Territory limitation statute governs its claim for the Tie Rods Damage, AIG is estopped from relying on the Northern Territory statute. 2. The estoppel is said to arise from a letter sent by Wotton + Kearney (on behalf of AIG) to Herbert Smith Freehills (on behalf of Carillion) on 26 November 2012. 3. In that letter Wotton + Kearney contended, evidently for the first time, that Carillion's claim in respect of the Tie Rods Damages was time barred and concluded: "If, contrary to [AIG's] contention, the release issue is determined in favour of Carillion: (a) the limitation period in relation to the physical damage to the tie rods which commenced during the construction period in or about 1997 commenced to run in November 1999 and expired in November 2005; and (b) the Carillion Claim is statute barred." 1. Before me, Mr Richard Benson, a commercial director of a subsidiary of Carillion gave this evidence in his affidavit: "12. If [AIG] or its legal representatives had said in the 26 November 2012 letter, or in other correspondence or discussions, that a three-year limitation period applied to the Current Claim, I would have considered there to be a risk that the claim might be time barred if proceedings were not commenced within three years of a denial of indemnity in respect of the Current Claim. 13. Having identified that risk, I can confirm that I would have adopted a cautious approach and proceeded on the basis that the earliest date on which a limitation defence could apply to the claim would be three years after indemnity had been denied. I would also add that the earliest a denial of the Current Claim could have occurred was the date it was notified. Given that the Current Claim was notified on 26 March 2010, the earliest possible date a limitation defence was available to [AIG] was 26 March 2013. 14. On this basis, and in order to avoid the risk that the Current Claim might be time-barred, I would have instructed Herbert Smith Freehills to commence proceedings prior to 26 March 2013." 1. At all relevant times Carillion was advised by experienced solicitors; Herbert Smith Freehills. 2. Those solicitors had given Carillion advice about the limitation question. 3. On 5 July 2012, Carillion sought advice from Herbert Smith Freehills as to whether there were "any time bar issues…which we need to be aware of". 4. On 13 July 2012, Herbert Smith Freehills advised: "In terms of time bar/limitation periods, the position under Australian law is that the limitation period does not commence until the insurer has refused to honour its obligations under the insurance policy. At the earliest, this period would likely start around May 2010 when Wotton & Kearney initially raised a number of coverage issues in their letter (26 May 2012). The limitation period here would be 6 years." 1. On 2 November 2012 (a little more than three weeks before Wotton + Kearney's letter of 26 November 2012) Herbert Smith Freehills wrote to Carillion: "One of the matters raised at our recent meeting was the risk that Carillion may be time barred from making a claim against [AIG] in relation to the damage to the tie bars. You requested that we set out in an email to you our views on that issue. As discussed during the meeting with you, our current view is as follows: the better view is that Carillion's claim against [AIG] as the insurer does not start running until [AIG] refuses to indemnify Carillion in respect of the claim, rather than when the damage the subject of the claim occurred or was discoverable (we note that this is different to the position under UK law); on one view, [AIG] has not yet communicated its refusal to indemnify Carillion in relation to the damage [to] the tie bars, however even if that view is incorrect the earliest time at which a refusal was made was in Wotton & Kearney's letter of 26 May 2010; and Carillion therefore has 6 years from 26 May 2010 to commence proceedings against [AIG] in court to preserve its claim i.e. until 25 May 2016." 1. Thus, Herbert Smith Freehills' clear advice to Carillion was that the relevant time limit was six years. Mr Benson agreed in cross-examination that Carillion relied on this advice (particularly that of 2 November 2012) "in deciding when to issue this proceeding". 2. Carillion alleges that, by Wotton + Kearney's letter of 26 November 2012, AIG not only asserted that a six year limitation period applied but that "it would not assert that anything less than a six year limitation period applied" to Carillion's claim. 3. I agree that it is implicit in Wotton + Kearney's letter that the relevant limitation period was six years. However, I do not agree that the letter implicitly represents that AIG would not contend for a shorter limitation period. 4. Although Mr McArthur did not, in cross-examination, challenge the evidence of Mr Benson that I have set out above, Mr Benson agreed that he relied on Herbert Smith Freehills' advice on the question of time limitations. 5. He also gave this evidence: Q. Did you accept that that position put forward by Wotton & Kearney was correct? A. No we didn't. Q. Instead did you on that matter act on your own judgment on the legal advice you received from your solicitors? A. I did. Q. I suggest to you the same is the position in relation to limitations, that in relation to the limitation period and when it ran, what you acted upon was the advice you got from your solicitors, not from anything Wotton & Kearney said? A. That's correct." 1. Thus, Mr Benson agreed that, in relation to the limitations question, he acted on the advice of Carillion's solicitors, and not on anything said by AIG's solicitors. 2. AIG did not seek to rely upon the three year limitation period under the Northern Territory statute until filing its reply in the proceedings. 3. But it had no duty to Carillion to reveal that position earlier. Thus what Mr Benson would have done, had AIG indicated reliance on a three year limitation period earlier, seems to me to be beside the point. 4. And, if, contrary to what I have said, it is implicit in Wotton + Kearney's letter of 26 November 2012 that AIG would not assert a three year limitation period, such reliance as Carillion may have placed on such representation was unreasonable, bearing in mind that it was seeking and obtaining advice from its own solicitors on the very same question. 5. Accordingly, whether the matter is looked at from the point of view of promissory estoppel, or estoppel by representation, my opinion is that Carillion's case on estoppel is not made out. Should time be extended under s 44 of the Limitation Act 1981 (NT)? 1. That conclusion is also sufficient to dispose of Carillion's claim under s 44 of the Limitation Act 1981 (NT). 2. Section 44(1) of that Act authorises the Court to extend the time limit for instituting an action "to such an extent, and upon such terms, if any, as it thinks fit." 3. That sub-paragraph is to be read with s 44(3)(b) of the Act which, relevantly, imposes two additional limitations: 1. the Court must be satisfied that "the plaintiff's failure to institute the action within the limitation period resulted from representations or conduct of the defendant, or a person whom the plaintiff reasonably believed to be acting on behalf of the defendant, and was reasonable in view of those representations or that conduct and other relevant circumstances"; and 2. the Court must be satisfied that, "in all the circumstances of the case, it is just to grant the extension of time." 1. For the reasons I have set out in my consideration of Carillion's estoppel claim, I am not satisfied that Carillion's failure to commence these proceedings prior to June 2015 was a result of representations or conduct by AIG or, if that be wrong, was reasonable in view of those representations. When did Carillion's cause of action in respect of the Tie Rods Damage arise? 1. The Policy is a contract for indemnity for property damage. 2. Consideration of the limitation point as a separate question involves the implicit assumption that, but for the limitation point, Carillion has a cause of action for indemnity under the Policy; that is that AIG was not otherwise entitled to deny liability to indemnify and is in breach of its contractual obligations in doing so. 3. The limitation period commenced when Carillion's cause of action under the Policy, so assumed to exist, arose. 4. AIG contends that Carillion's cause of action in respect of the Tie Rods Damage arose at the time that damage occurred (no later than December 1999). 5. If that is so, Carillion's claim is well out of time, no matter what the length of the limitation period. 6. Carillion contends that its cause of action only arose once AIG had a reasonable time to consider its claim, and then declined or failed to grant indemnity and, in so doing, breached its obligations under the Policy. Carillion's case is that this time did not occur before mid June 2013. 7. If that is so, Carillion's claim is in time, no matter what the length of the limitation period. 8. I do not accept either submission. In my opinion, Carillion's cause of action arose when AIG refused indemnity under the Policy. For the reasons I set out below, I find that date to be 3 August 2011. 9. There is much English authority for the proposition that under an indemnity policy (such as that in this case, and as opposed to a third party liability policy), the insured's cause of action accrues, and time begins to run, on the occurrence of the peril the subject of the indemnity. 10. That authority is summarised in R M Merkin, Colinvaux's Law of Insurance, (10th ed 2014, Sweet & Maxwell) at [9-073] as follows: "There is a consistent line of authority for the proposition that the date on which the assured's action accrues is the date on which the insured peril occurs and not on the later dates when the loss is manifested, the assured incurs expenditure or the insurers deny liability, the principle being that the insurer has agreed to hold the assured harmless against the occurrence of an insured event so that when the event takes place the insurers are in immediate and automatic breach of contract and are liable for unliquidated damages. Although it has sometimes been indicated that the occurrence of the peril is a breach of contract, the notion that insurers may be in breach of contract several hundred times every day is unattractive and a preferable way of stating the principle is that a contract of insurance is: '[A]n agreement by the insurer to confer upon the insured a contractual right which, prima facie, comes into existence immediately when loss is suffered by the happening of an event insured against, to be put by the insurer into the same position in which the insured would have been had the event not occurred, but in no better position.' The limitation period is not postponed by reason of the fact that the assured was at the time unaware of the occurrence of the insured peril. Thus, in the case of a fidelity policy which protects the assured against fraud by an employee, the limitation period runs not from the date of the discovery of the fraud but from the date of the fraud itself." [Citations omitted] 1. Identical words appear in the current edition of W I B Enright and R M Merkin, Sutton on Insurance Law, (4th ed 2015, Lawbook Co) at [15.650] (perhaps because Professor Merkin is one of the authors). However, the authors go on to note that "[t]he position in Australia is open to some doubt". 2. The quoted passage in Colinvaux comes from the judgment of Sir Peter Webster in Callaghan v Dominion Insurance Co Ltd [1997] 2 Lloyd's Rep 541 at 544. That case concerned a fire policy. Sir Peter Webster also said: "Unless, therefore, there are clear words in the policy which have a contrary effect, liability under this policy, being a policy of indemnity insurance, arises immediately [when] loss is suffered as a result of the happening of the relevant event [the fire]". [At 544] 1. In M Levine and R Haar, Construction Insurance and UK Construction Contracts, (2nd ed 2008, Informa Law) the differing position between indemnity policies and liability policies is explained thus: "This general rule in respect of the limitation of actions for breach of contract has an unusual application in respect of contracts of insurance, an application which is liable to catch parties unexpectedly. It might be thought that if an insurer is sued in respect of a refusal to indemnify an insured against a loss, the cause of action would accrue at the date of refusal. That is not the law. The position in English law is that the insurer is in breach of the contract of insurance as soon as the insured has suffered loss as a result of an insured event. If the insurance is a contract of indemnity insurance, it is an agreement by an insurer to confer on an insured a contractual right to indemnity which on the face of it comes into existence immediately when loss is suffered by the happening of an event insured against: see per Lord Goff in Firma C-Trade SA v Newcastle Protection and Indemnity Association (The Fanti) [[1991] 2 AC 1 at pp 35 to 36; [1987] 2 Lloyd's Rep 299 at p 202]. For the purposes of determining the date at which an insured's cause of action accrued, there is in general a distinction to be drawn between policies of liability insurance on the one hand and all other types of insurance on the other. The cause of action does not accrue under a liability policy until the liability of the insured is established by judgment, arbitration or binding settlement: see Bradley v Eagle Star Insurance Co Ltd [[1989] AC 957; [1989] 1 Lloyd's Rep 465]. In respect of other types of insurance policy, including property, life, marine and other forms of insurance, the law has long been that, because an insurance policy is to be construed as insurance against the occurrence of an insured event, the occurrence of that event is treated as equivalent to a breach of contract by the insurer. Accordingly, in the absence of policy terms affecting the matter, the limitation period begins to run as soon as the insured event occurs, even though no claim has been made: per Potter LJ in Virk v Gan Life Holding plc [[2000] Lloyd's Rep IR 159 at p 162]. In property insurance, the cause of action accrues on the occurrence of the peril: see Callaghan v Dominion Insurance Co Ltd [[1997] 2 Lloyd's Rep 541]." 1. A similar commentary appears in J Birds, B Lynch and S Milnes, MacGillivray on Insurance Law, (13th ed 2015, Sweet & Maxwell) at [21-055]: "In the absence of express provision that the insurers are not to be under a liability to the insured until notice is given or a demand is made, the accrual of a cause of action to the insured does not depend upon either of these things. In Callaghan v Dominion Insurance Co Ltd [[1997] 2 Lloyd's Rep 541]… The Court followed earlier authorities holding that a cause of action for unliquidated damages on an indemnity insurance arose when the loss occurred, because at that moment the insurers were in breach of a promise to hold their insured harmless against loss. The conditions relied on by the insured were construed either to relate to the quantification of the indemnity as opposed to the accrual of the right to be indemnified, or to provide a defence to payment of a claim made pursuant to it." [Some citations omitted] 1. In Derrington and Ashton, the authors' position is less clear. Both propositions, that is, that breach occurs at the time of the insured's peril or at the time indemnity is denied by the insured, are put forward as correct statements of the law in separate parts of the text (see [13-6] and cf [13-184]). 2. There is Australian authority consistent with the English authority. 3. Thus in Cigna Insurance Asia Pacific v Packer Ltd [2000] WASCA 415, the Full Court of the Supreme Court of Western Australia held that the insured's cause of action under a "Permanent Total Disablement" policy accrued, and time began to run, on the happening of the relevant event (disablement lasting 12 months): per Pidgeon J at [96] with whom Malcolm CJ and Kennedy J agreed (at [32] and [56]). 4. In Commonwealth v Vero Insurance Ltd [2012] FCA 826, Yates J seemingly accepted, albeit in obiter, the insurer's submission (advanced, as it happens, by Mr McArthur) that the position stated in Callaghan is correct (at [82] to [90]). Contrary to Mr McArthur's submissions before me, I do not read the judgment of the Full Court of the Federal Court in that case as endorsing that point of view: cf Commonwealth v Vero Insurance Ltd [2013] FCAFC 152 at [19] per Dowsett J at [19], Logan J at [53] and Jagot J at [115] to [116]. 5. In Associated Forest Holdings Pty Ltd v Gordian Runoff Limited [2015] TASFC 6, the Full Court of the Supreme Court of Tasmania endorsed the conclusions in Cigna and reached a corresponding conclusion concerning a policy in which the insurer provided cover for losses exceeding a stated sum in relation to work place accidents (per Blow CJ at [94] to [97], Porter and Wood JJ agreeing at [101] and [102]). 6. This state of the law appears to be born of a judicial apprehension that, were the accrual of an insured's cause of action against an insurer to occur only when the insured had made a claim and the insurer failed to pay (or refused) that claim, "an insured could postpone the beginning of the relevant limitation period by delaying giving notice" (Sir Peter Webster in Callaghan at 546). 7. I am not sure how well placed such apprehension is. Most indemnity policies impose on an insured an express obligation to make claims in a timely manner. If an insured delayed unduly in making a claim, the insurer may well be able to resist the claim on that basis (subject, of course, to showing prejudice for the purposes of s 54 of the Insurance Contracts Act 1983 (Cth)). 8. On the other hand, the conclusion that a cause of action under an indemnity policy occurs at the time of the peril may lead to the conclusion that, where an insured does not become aware of the occurrence of the insured peril until after the expiry of the applicable limitation period, the cause of action would arise and become barred before either the insured or the insurer became aware of it. Thus, to take the example of a fidelity policy referred to in the extract from Colinvaux referred to above, a fraudster might cover his or her tracks so effectively that the insured peril (the fraud) did not come to light until after the passage of the limitation period; measured from the date of the fraud. No doubt, the object of many fraudsters is to conceal the fraud they have committed. 9. A different opinion was expressed by Giles J (as his Honour then was) in Penrith City Council v Government Insurance Office of New South Wales (1991) 24 NSWLR 564. 10. In that case, his Honour was dealing with a professional negligence policy, that is, a liability policy. 11. However, his Honour's observations appear to me to have been intended to be of general application, and have since been endorsed by the New South Wales Court of Appeal (constituted by himself, as Giles JA, together with Spigelman CJ and Basten JA, both of whom agreed with his Honour) in a case that did concern an indemnity policy: CGU Insurance Ltd v Watson [2007] NSWCA 301. 12. In Penrith, the council had settled a claim from a third party, and sought indemnity under the relevant policy. Relevantly, the question was whether the council's cause of action against the insurer accrued when it settled with the third party or when the insurer later denied liability to indemnify. 13. Gilles J said (at 568F-G and 571F): "It is not in question that the [council] was entitled to indemnity when the [claim by the third party] was made against it, or when it gave notice of the claim to the [insurer], in the sense that it was then entitled to the benefit of the [insurer's] promise to indemnify it against the claim. But the [council's] cause of action was for unliquidated damages for breach of contract: [his Honour set out a number of authorities]. It had to establish a contract (the policy) by which the [insurer] promised to do something (indemnify it against [the third party's] claim), and breach of that contract (failure to indemnify it against [that] claim). It could then recover the loss suffered as a consequence of that breach. The plaintiff's cause of action accrued upon breach. Thus it must be asked what the [insurer] was required to do in performance of its promise, and when it failed to do what was required of it. Only when the [insurer] failed to do what was required of it could a cause of action for damages for breach of contract accrue to the [council]. There was no cause of action simply because [the third party] made its claim or the claim was notified to the [insurer] – the [insurer] could have thereafter fully performed its promise… Unliquidated or not, the damages [that an insured can claim] are damages for breach of contract, and there will be no breach until the insurer has been required to pay or do some other act in performance of its promise and has failed or refused to do so." 1. Thus, his Honour's conclusion was that an insured's cause of action for damages for breach of contract only accrues when the insurer "failed to do what was required of it". 2. On the facts, his Honour concluded that the insured council's cause of action accrued, and time began to run, either when the council's liability to the third party was established (by a settlement) or, alternatively, by reason of there being a "continuing refusal to provide indemnity so that the [insurer] was in breach when liability was established", or, alternatively, when the insurer confirmed its refusal of indemnify after the settlement (at 571B-C). The fact that his Honour contemplated that the insured council's cause of action accrued at any one of these times makes clear that his Honour's conclusions did not depend on the policy under consideration being a liability policy, rather than an indemnity policy. 3. His Honour was thus drawing a distinction between the chose in action of the insured council, namely the right of indemnity provided by the policy (to indemnify the council against the third party's claim) and any cause of action open to the council to "then and there claim damages from the insurer for breach of contract in failing to provide indemnity" (see 570E). 4. Giles J's statements were referred to in each of Cigna, Vero and Associated Forest. 5. In Cigna, Pidgeon J held that if Giles J's statements were intended to be a "principle of general application" they were inconsistent with an earlier Western Australian decision in Tillotson v ANZ Life Assurance Co Ltd (1997) 9 ANZ Ins Cas 77,131 and should not be followed (at [70] and [90]). 6. In Vero, Yates J discounted the weight of Giles J's remarks (without actually rejecting them) because they were obiter and not "quoted in CGU" (see [88]). I do not read Giles J's conclusions as obiter. It was also not correct for Yates J to say that Giles J's statements were not "quoted in CGU" (see [61] of CGU). 7. In Associated Forest, Blow CJ held that Penrith was distinguishable on the facts (at [94]). 8. As I have said, the Court of Appeal has now endorsed Giles J's statements. 9. I have held that the proper law of the Policy is that of the Northern Territory. My attention has not been drawn to any authority relevant to this question from the Northern Territory. Neither counsel suggested, and I see no reason to conclude, that the law of the Northern Territory is or should be different from the law of another state or territory on this question. 10. In those circumstances, faced with what I see to be conflicting intermediate appellate authority on the question, and for the reasons I have set out at [138] to [140] above, I prefer to follow the decision of Giles J in Penrith, as endorsed in the New South Wales Court of Appeal in CGU. 11. As Giles J pointed out, a distinction is to be drawn between the time when an insured's entitlement to indemnity arises and the time when its entitlement to sue for damages for breach of contract arises (see [148] above). It may well be that an insured under an indemnity policy would be entitled, immediately on the occurrence of the peril, to seek a declaration of its entitlement to indemnity. But its entitlement to sue for damages for breach of the promise of indemnity only arises only when the insurer has not done "what was required of it" under the policy. 12. I will return later in these reasons to the question of "what was required of" AIG under the Policy. Do the words of the Policy compel a different conclusion? 1. Having reached this conclusion, it is not necessary for me to consider Mr Sheahan's submission that, even if the general rule is that an insured's cause of action under an indemnity policy arises on the occurrence of the insured peril, there are in the Policy "clear words which have a contrary effect" (Sir Peter Webster's words at [130] above). 2. Nonetheless I will do so, albeit briefly. My conclusion is that I should not accept Mr Sheahan's submissions on this point. 3. Mr Sheahan first relied on memoranda cl 4, set out at [23] above. 4. That clause provides that the insured must defer proceeding with repairs until a preliminary survey had been conducted and that, if that survey showed the loss was likely to exceed $500,000, the insurer would make a 50 per cent progress payment provided it has sufficient information "to admit liability" under the policy. 5. Mr Sheahan submitted that there would be no reason for the parties to agree that a progress payment be conditional on provision of sufficient information to enable the insurer to "admit liability", if the insured's cause of action had accrued. 6. I was initially attracted to this submission but, on reflection, do not accept it. 7. This is for a number of reasons. First, the clause does not state, in terms, that compliance with it is a condition precedent to the insured having a right of indemnity. 8. Second, as Mr McArthur submitted, a liability can be admitted after it has arisen. An admission of liability need not be, and is often not a precondition to its existence. 9. Third, an admission of liability under the Policy might well amount to more than an admission of the accrual of the insured's cause of action under the Policy. It might also amount to an admission that no exception or exclusion to the Policy is enlivened or a statement by the insurer that it does not propose to rely on any such exclusion or exception. 10. In effect, the clause provides that the price the insured must pay to get the 50 per cent progress claim is the provision of sufficient information to the insurer to enable it to "admit liability". Even if the insurer's liability arose immediately on the happening of the peril, there would be sense in the parties agreeing that, in order that the insured received that progress payment, it provide the insurer with sufficient information to enable it to admit the existence of that liability. 11. Mr Sheahan also relied on cl 3 of the General Conditions of the Policy, set out at [22] above. That clause obliges the insured to give timely notice ("as soon as practicable") of the happening of an occurrence likely to give rise to a claim. In particular, Mr Sheahan relied on that part of cl 3 which requires the insured to preserve damaged property pending inspection. 12. I do not see what light this clause casts on when the parties intended that the insured's cause of action for indemnity would arise. Even if it arose on the happening of the peril, it would be reasonable for the parties to agree that the insured give timely notice of any claim and preserve property for inspection; for example so as to provide the insurer with an opportunity to consider the quantum of any such claim. I see nothing in this clause that itself bespeaks the parties' intention that the insured's cause of action be postponed. When did Carillion's cause of action under the Policy arise? "What was required" of AIG under the Policy in relation to Carillion's claim for indemnity? 1. Carillion made a claim under the Policy for the Tie Rods Damage on 26 March 2010. 2. There is no clause in the Policy that obliged AIG to deal with that claim in any particular time. 3. However, the law in Australia is that, absent a stipulation in a policy of the time by which an insurer must perform its obligations, the insurer must do so within a reasonable time: for example, CIC Insurance Limited v Bankstown Football Club Limited (1997) 187 CLR 384 at 401-2 per Brennan CJ and Dawson, Toohey and Gummow JJ and Tropicus Orchids Flowers and Foliage Pty Ltd v Territory Insurance Office (1998) 10 ANZ Ins Cas 61-412 at 74,631-2 per Mildren J. 4. The authors of Sutton state that in Australia "there is a now accepted line of authority that an insurer is under a duty to pay a claim within a reasonable time of the occurrence of the insured peril, failing which there is breach of contract" (at [15.650]). 5. That statement assumes, of course, that the insurer is liable to pay the claim in question. A more precise statement of the position must be that an insurer is obliged to decide and notify the insured within a reasonable time whether or not it will pay the claim. It will be in breach of that duty if, after a reasonable time has passed, the insurer makes no decision at all about the claim. However, if an insurer makes a decision within a reasonable time, but the decision is wrongly to deny liability to indemnify the insured, the insurer will be in breach of its contract of indemnity. 6. Mr Sheahan submitted, without reference to authority, that the date on which Carillion's cause of action arose was the date "on which AIG, after having a reasonable period of time in which to consider Carillion's claim in respect of [the Tie Rods Damage], declined or failed to grant indemnity and, in so doing, breached its obligations under the Policy." Mr Sheahan submitted that if, before such reasonable time had passed, AIG wrongly refused indemnity, that would be no more than an anticipatory breach by it of its obligations under the Policy which, if not accepted, would have no effect. 7. I do not accept that submission. 8. It may be that the duty of an insurer to decide within a reasonable time whether or not to indemnify an insured carries with it a right to take reasonable time to make the decision. That duty and right may be two sides of the one coin. But any such right is one for the benefit of the insurer and, accordingly may be waived by the insurer: for example see Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; 149 CLR 537 at 543, 552, 560 and 565. That is, the insurer can, within the reasonable time available to it and before that time has passed, decide what to do. In that event, as well as not being in breach of its obligation to act in a timely manner, it has waived its right to take longer. If its decision is to refuse indemnity, and that decision is not justified, it is there and then in breach of its obligations. It is not merely a question of anticipatory breach. When did AIG decline the claim? 1. Following Carillion's claim of 26 March 2010, the parties, through their solicitors, exchanged correspondence. It is not necessary to set out the detail of that correspondence. Documents were requested and provided. Contentions were exchanged. Carillion provided AIG will a large number of technical reports. 2. A meeting between the parties took place on 3 August 2011. 3. There is not in evidence any letter that AIG sent Carillion arising from that meeting. 4. Some six months later, on 19 January 2012, Carillion wrote a letter to AIG that referred to the meeting of 3 August 2011. Carillion provided information as to the progress of the remedial works at the wharf and concluded: "With reference to the submission of our claim under the [Policy] and as stated, we continue to focus on completing the works efficiently, but I can also confirm that we are considering the arguments you put forward to us on 3rd August 2011 and reviewing the correspondence and documentation subsequently provided. However, at this time we continue to maintain we have grounds to claim under the [Policy] and continue to maintain records of the costs." 1. Several months later, on 2 March 2012, Carillion's solicitors, then known as Freehills, wrote to Wotton + Kearney referring to the meeting of 3 August 2011 and stating: "At that meeting, you outlined your client's position in relation to coverage under the [Policy], in relation to the claim advanced by [Carillion]. The primary position your client advances is that any and all claims under the Policy concerning tie rods/tie bars were settled by the 2001 Deed of Release…". 1. Freehills then advanced arguments as to why Carillion's claim was not so released. 2. Several months later, on 5 August 2012, Carillion wrote directly to AIG, again referring to the meeting of 3 August 2011, which it described again as a meeting "to discuss the way forward". As it had done in its communication of 19 January 2012, Carillion provided AIG with information concerning the progress of its work at the wharf and concluded that it was then "in the final process of compiling the documentation to support our claim" and looking forward to a meeting "to talk you through" such documentation and "hopefully agree common ground to allow the claim to progress." 3. On 9 September 2012, Carillion provided to AIG what appears to be a more focused account of what happened on 3 August 2011: "During the meeting held on 3 August 2011 [AIG] stated that based on a number of issues they had identified concerning [the claim made in the 1999 proceedings] there was no case for the insurer to answer, and considered the matter for any future insurance claims for reimbursement of costs for subsequent remedial works as closed… In summary the comments during the meeting were that the insurance policy was no longer attached and the subsequent "Deed of Release" discharged [AIG] from all actions and claims etc". 1. That letter contains what appears to me to be a clear acknowledgment that, on 3 August 2011, AIG did not merely "discuss the way forward" but stated that it had "no case to answer", the matter was "closed", that the Policy "no longer attached" and that AIG's liability was "discharged" by the Deed of Release. That sounds to me to be very much like a denial of liability. I find that it was. 2. Carillion's letter went on to propose a meeting "to identify common ground and discuss the way forward". It appears such a meeting took place on 4 December 2012. In the meantime, Wotton + Kearney and Herbert Smith Freehills (as they had by then become) continued to exchange correspondence, in the course of which Wotton + Kearney repeatedly contended that Carillion's claim was barred by the Deed of Release. On 26 November 2012, Wotton + Kearney asserted that, even if the Deed of Release did not bar Carillion's claim, the claim was "statute barred". 3. The 4 December 2012 meeting did not yield a resolution of the issues. 4. Wotton + Kearney and Herbert Smith Freehills continued to exchange correspondence throughout 2013. There is a reference in Herbert Smith Freehills' letter of 19 April 2013 to Wotton + Kearney appointing an "independent engineering expert to assist in its consideration of the underlying factual issues that are the subject of the current claim". On 24 May 2013, Wotton + Kearney sent Herbert Smith Freehills further documents. The last letter in evidence is one from Herbert Smith Freehills to Wotton + Kearney on 3 September 2013 in which Wotton + Kearney's contentions concerning the Deed of Release and the limitation period are further disputed. 5. The evidence is silent as to what occurred between 4 September 2013 and 17 June 2015, when these proceedings were commenced. 6. My conclusion from this evidence is that AIG denied liability to indemnify Carillion under the Policy at the meeting on 3 August 2011. Although, thereafter, the parties continued to have discussions, and although AIG continued to consider material forwarded by Carillion and, indeed, engaged its own expert opinion, it did not recant from that denial of liability. 7. Carillion does not suggest that it was unreasonable for AIG to fail to come to a decision about liability prior to 3 August 2011. On the contrary, Carillion's contention in these proceedings is that it would have been reasonable for AIG to wait until mid June 2013 to make a decision. 8. Thus, the fact that AIG did make a decision (to deny liability) on 3 August 2011 shows that it was not in breach of its duty to act in a timely manner. 9. However, if, as Carillion contends, it is entitled to indemnity under the Policy, AIG was in breach of its duty to indemnify Carillion from 3 August 2011. Time began to run from that date. Overall conclusion concerning limitation 1. Carillion's cause of action in respect of the Tie Rods Claim arose on 3 August 2011. The proper law of the Policy is that of the Northern Territory. The applicable limitation period is therefore three years. AIG is not estopped from so contending. Carillion is not entitled to an extension of time under s 44 of the Limitation Act 1981 (NT). Its claim is out of time and statute barred. Conclusion 1. For those reasons, my answers to the separate questions are as set out in the schedule annexed to these reasons (Annexure (8.34 KB, pdf)). 2. I invite the parties to confer and agree as to what should now happen in the proceedings. ********** Amendments 22 April 2016 - Typographical error in par 82 corrected 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. Decision last updated: 22 April 2016