The terms of the policy relevant to the issue raised by ground 1 of the appeal are essentially the condition entitled ‘what you must do when you have a policy’, read in light of the ambit of the cover provided by the insuring clause and the specific exclusions from that cover.

Starting with the condition itself, the unqualified obligation to ‘comply with legislation and Australian Standards’ is contained in a clause in which two other obligations are expressly qualified by the requirement to ‘take reasonable care’. As the primary guide to the intention to be attributed to the parties to a contract is the words which they have used, a clause constructed in this way provides strong support for the insurer’s proposition that the relevant obligation should not be read as qualified by words which the parties have omitted in relation to that obligation, but included in relation to others. Similar considerations prevailed in each of Casino Show Society v Norris and Kim v Cole. Although the relevant clause in Buckley had a not dissimilar structure, as I have already noted, the clause in that case bore the heading ‘reasonable care’ which provides a sound basis for a qualified construction of the obligations contained within the clause – as is illustrated by the reasoning in Barrie Toepfer.

It follows that the critical question, and the question upon which this aspect of the appeal turns, is whether a construction of the clause which is strongly suggested by its terms would negate the evident commercial purpose of the policy. That purpose is to be inferred from the ambit of cover provided. The policy provides indemnity for legal liability to pay compensation for personal injury or damage to property. However, the cost of doing, redoing, completing, correcting or improving any work is expressly excluded from the ambit of cover provided. 54

As I have noted, 55 the trial judge noted a submission by counsel for the current respondents drawing attention to the evidence to the effect that the Australian Standards reflected what one would regard as the common law duty to perform a task with good workmanship and due skill and care. The respondents rely upon that evidence to support the proposition that the obligation to comply with the Australian Standards is coincident with the ambit of cover provided for negligence

54 55

See [33] of my reasons above. At [53] above.

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and would, if construed literally, defeat the purpose of the policy. That proposition should be rejected. The only Australian Standards to which reference has been made in this case are concerned with the quality and standard of work performed – in this case, plumbing work. The evident purpose of these standards is to ensure that plumbing work performed complied with the detailed prescriptions contained within their terms. So, exclusion of liability for the consequences of work which falls below those standards is consistent with the express exclusion of cover for the cost of rectifying defective work.

115

116

There would be considerable force in this aspect of the respondents’ argument if non-compliance with the Australian Standards was the only or the predominant source of potential liability indemnified under the policy. However, the trial judge made no finding to that effect, nor is any such finding open on the very limited evidence on the topic. I describe the evidence as ‘limited’ because the clause requires compliance with all ‘legislation and Australian Standards’ and must be construed in the context of its general application, rather than its specific application to the circumstances of this case. However, the only materials which the court has available to it in order to assess whether the cover excluded by the operation of the condition would generally be coincident with the ambit of cover provided is limited to the specific regulations and standards which were said to have been infringed by the work performed in this case. Those materials fall short of sustaining the conclusion that the words of the policy should be construed in the manner for which the respondents contend. Nor can any inference be drawn from a general notion of the potential ambit of the operation of Australian Standards. To the contrary, the only inference open on the material available to the court is that, like the plumbing standards, they are directed to matters relating to the quality of workmanship and work product.

This is not to say that it would be impossible to establish that the obligation to comply with all ‘legislation and Australian Standards’ is either wholly or largely coincident with the obligations which might give rise to liabilities covered by the policy. However, no finding to that effect was made by the trial judge, nor do the limited materials available to this court provide the basis for such a finding. If such a finding were made, the proper construction of the relevant clause might well be as the respondents contend. However, I reiterate that the limited materials before the court do not establish the proposition which underpins the respondents’ contentions.

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117

118

119

It is easy to imagine a myriad of circumstances in which cover would be provided under the policy for liability arising other than as a consequence of failure to comply with standards specifying the quality of workmanship or work product, or regulatory requirements to the same effect. The insurer points to liability for negligently leaving equipment lying around where people might trip over it, or stacking equipment which unbalances and strikes someone to cause injury. 56 One can imagine many other such circumstances. In the course of argument I provided an example involving liability arising from the negligent use of oxy welding or oxy cutting equipment in the course of performing work – a matter likely to be covered by the general duty of care rather than a specific standard relating to the quality of workmanship or work product. These examples are not intended to be exhaustive, and many more of a similar character could be provided.

This proposition can perhaps be illustrated another way. Counsel for the respondents drew a parallel between the obligations imposed by the Australian Standards and the common law obligation to perform work with due care and skill. 57 However, the common law duty to take care to avoid injury to one’s neighbour, famously enunciated by Lord Atkin in Donoghue v Stevenson, 58 creates a potential for liability to be incurred by a business proprietor in a much broader range of circumstances than a failure to perform work with due care and skill. The policy in this case provides indemnity for all liability incurred within the entire range of circumstances giving rise to a duty of care, whereas the condition only excludes indemnity where there is a breach of the duty to perform work with care and skill, and only then if the breach corresponds to a breach of relevant legislation or Australian Standards, being a breach which was causative of loss.

For these reasons, a construction of the policy which obliges the insured to ‘comply with legislation and Australian Standards’ does not, on the information available to the court, deprive the policy of any meaningful ambit of cover. To the contrary, the policy still provides a significant ambit of cover notwithstanding such a construction.