Queensland Judgments
Authorised Reports & Unreported Judgments
Exit Distraction Free Reading Mode

Delta Pty Ltd v Team Rock Anchors Pty Ltd & Anor

Unreported Citation:

[2017] QSC 115

EDITOR'S NOTE

This recent decision of Dalton J considers a claim against an insurer by a plaintiff who had settled a claim against the insured, and had taken assignment of the insured’s rights under the policy as part of the settlement with the insured. The decision considers the policy terms and whether the plaintiff could make its claims directly against the insurer. Her Honour also considered the plaintiff’s claim as assignee including whether the purported assignment was one that could be assigned at law and whether the settlement deed entered into between the plaintiff and the insured gave rise to a liability under the policy. 

Dalton J

25 July 2017

In 2006, Queensland Investment Corporation (“QIC”) entered into a contract with the plaintiff, Delta Pty Ltd, to perform excavation works at a building site in Brisbane. [1]. The work involved excavating a deep basement in preparation for a high-rise building being built on the site. [1]. QIC contracted with a company “Watpac” as the builder, and the contract between QIC and Watpac was novated so that Delta was in a contractual relationship with Watpac. [1].

Delta engaged the first defendant, Team Rock Anchors Pty Ltd (“TRA”), to “install anchors and walers and to secure the retaining walls for the basement excavation”. [1]. TRA’s performance under the subcontract was “woeful”. [6]. As a result, Delta was required to “essentially start excavating again, testing and replacing defective anchors as the re-excavation proceeded”. [7].

Delta and Watpac both incurred costs and delay as a result of TRA’s breaches of the subcontract. [35]. Watpac began preparing a claim against Delta, but this was ultimately settled. [35]. Delta sued TRA in the current proceeding, commenced in 2012, and then settled. [37]. The settlement involved taking an assignment of TRA’s rights against TRA’s insurer, Mecon. [37]. A trial was subsequently conducted before Dalton J, with Delta claiming against Mecon for an indemnity pursuant to the contract of insurance between TRA and Mecon. [37]. Delta asserted, as against Mecon, the same loss which it had asserted against TRA. [67].

Dalton J first dealt with the issue of whether Delta could make its claims directly against Mecon, as the insured under the policy. [72]. The definition of insured in the Schedule of Cover referred to “[TRA] principals and subcontractors who are not otherwise insured”. [73]. Although her Honour accepted that Delta was TRA’s principal in respect of the job, in the circumstances, her Honour was not satisfied that Delta had proved that it was not otherwise insured. [78]. The evidence showed that Delta had at least two insurance policies relevant to the loss it sustained. [77]. Moreover, her Honour rejected a submission that Mecon, as the insurer, bore the onus of proving that Delta was otherwise insured. [77]. The onus was on Delta to prove it had no other insurance. [77]. Her Honour was, however, satisfied that Delta fell within an extended definition of insured under the liability section of the Mecon policy. [80]–[81]. It was therefore necessary to consider whether there was any liability to indemnify. [81]. In the result, her Honour concluded that there was no liability for the claims made against Mecon by Delta as an insured under the policy. [82]–[120].

Her Honour then turned to consider the claims made against Mecon by Delta as assignee. Mecon argued that the “subject matter which TRA purported to assign to Delta was not assignable at law”. [121]. It relied on authorities for the proposition that “a contract of indemnity insurance is a contract of a personal indemnity and cannot, therefore, be assigned”. [121]. Dalton J noted that “while the primary obligations under a policy cannot be assigned, secondary rights can be”. [122]. Her Honour rejected the proposition that TRA purported to assign the contract of insurance, and construed the words of the assignment as an assignment of TRA’s secondary rights against Mecon as the insurer under the contract. [122]–[125]. The right to an indemnity, being a chose in action, was assignable at law. [125].

Delta, as assignee from TRA, claimed against Mecon pursuant to cl 5 of the insurance policy. By that clause, Mecon provided an indemnity for all amounts which TRA would “become legally liable to pay in compensation for Personal Injury or Property Loss”. [135]. Delta relied upon TRA’s liability under the settlement deed as the source of liability in TRA to pay compensation for Property Loss. [136]. Mecon argued that it could not rely upon the deed to show that it had become legally liable to pay within the meaning of cl 5. [136].

In considering this issue, her Honour referred to MacGillivray on Insurance Law for the proposition that:

“In order to recover under a conventional liability policy, the assured must show that it was under a legal liability to the third-party claimant; that the liability is covered by the insurance, and (in the case of a settlement) that any amount paid by way of settlement was reasonable.” [137].

Her Honour explained that to establish a liability, the settlement “must not only be reasonable but also bona fide”, and that “[m]onies paid for an ulterior purpose, that is a purpose ‘extraneous to the risks insured against’, will mean that there is not such a bona fide settlement of a liability”. [142]. Her Honour also noted that the requirement “that there is a settlement, and that the settlement is reasonable, may be two aspects of the rule, but in truth there is only one rule”. [143].

Ultimately, her Honour found that Delta had failed to establish liability within the meaning cl 5.00 of the policy for two reasons. [145]. The first reason was that TRA had no liability to pay Mecon. Clause 2.1(a) of the settlement deed provided that TRA would become liable to pay only on demand by Delta, and Delta had made no demand. [146]. Moreover, by cl 2.2 of the deed, the only liability TRA had was for any amount “actually recovered by Delta under the Mecon policy as assignee of TRA”. [146]. But if Delta recovered in the proceeding, the judgment sum would have been payable to Delta, not TRA. TRA would therefore never have any funds in its hands, and could never become liable to pay those funds to Delta. [146]. The settlement deed did not “in reality” establish any liability in TRA. [150].

The second reason was that her Honour was not convinced on all the evidence that the settlement was reasonable in the sense that it reflected a reasonable evaluation of TRA’s prospects in the proceeding. [161]. Her Honour was therefore “not convinced that it established a liability to pay within the meaning of cl 5.00 of the policy”. [161].

Her Honour also rejected Delta’s claims under cl 1 ([127]–[134]) and cl 5.01 ([166]–[169]) of the policy. In the result, her Honour gave judgment for Mecon against Delta. [170].

J English

Require Technical Assistance?

Message sent!

Thanks for reaching out! Someone from our team will get back to you soon.

Message not sent!

Something went wrong. Please try again.