Davis v Commissioner for Main Roads [1968] HCA 10; (1967) 117 CLR 529 (11 March 1968)

HIGH COURT OF AUSTRALIA

DAVIS v. COMMISSIONER FOR MAIN ROADS [1968] HCA 10; (1967) 117 CLR 529

Contract - Indemnity

High Court of Australia
Barwick C.J.(1), McTiernan(2), Kitto(3), Menzies(4) and Windeyer(5) JJ.

CATCHWORDS

Contract - Construction - Indemnity provision - Scope.

Indemnity - Indemnity clause in contract - Scope.

HEARING

Sydney, 1967, November 3; 1968, March 11. 11:3:1968
APPEAL from the Supreme Court of New South Wales.

DECISION

1968, March 11.
The following written judgments were delivered:-
BARWICK C.J. In this matter I have had the advantage of reading the reasons of cl. 7 of the agreement between the parties and with his reasons for reaching his conclusions, there is no need for me to do more than concur in his opinion that this appeal should be dismissed. (at p531)

McTIERNAN J. I am of opinion that the conclusion of the Court of Appeal of the Supreme Court of New South Wales is right. I concur in the reasons for judgment of my brother Menzies and I cannot usefully add anything. (at p531)

KITTO J. The appellant, being sued by the Commissioner for Railways for having negligently caused damage to one of the Commissioner's locomotives by a collision between the locomotive and a motor vehicle at a public crossing of a railway line, claimed in third-party proceedings contribution from the respondent in respect of any sum which the Commissioner might recover in the action. The statutory basis of the claim to contribution was the provision made by s. 5 (1) (c) of the Law Reform (Miscellaneous Provisions) Act, 1946 (N.S.W.) that any tortfeasor liable in respect of damage suffered by a person as a result of the tort may recover contribution from any other tortfeasor who is, or would if sued have been, liable in respect of the same damage, whether as a joint tortfeasor or otherwise; and the appellant's case as pleaded was that a cause of the collision was negligence on the part of the respondent for which he would have been liable if the Commissioner for Railways had sued him. The statutory provision, however, is qualified, and the respondent pleaded that the qualification applied to the case. It is in these words : ". . . so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought." By demurrer proceedings in the Supreme Court the question was raised whether the terms of a certain contract between the appellant and the respondent did entitle the respondent to be indemnified by the appellant in respect of "the liability in respect of which the contribution is sought", namely the liability of the respondent to the Commissioner for Railways. (at p531)

2. According to the pleadings, the contract was one by which the respondent engaged the appellant with his motor truck to take part, together with other contractors, in carrying out certain roadwork in close proximity to the public crossing, being work which involved the driving of motor vehicles, including the appellant's, over the crossing at frequent intervals and at times when locomotives and trains were likely to be approaching at high speed. It contained a clause which the respondent contends entitles him to the indemnification that he claims in the third-party proceedings. It is in these terms, the appellant being referred to as the Contractor and the respondent as the Commissioner :

"7. The Contractor shall undertake the whole risk of
carrying out the contract, and without limiting the generality
thereof, shall -
(a) hold the Commissioner indemnified against all claims
arising out of -
(i) damage to the property of the Contractor or any
third party ;
(ii) death of or bodily injury to the Contractor or his
employees, or employees of the Commissioner, or any
third party including persons transported in vehicles
engaged by the Contractor ;
whether such damage, death or bodily injury is caused
by the use of a motor vehicle or by goods falling or
projecting
therefrom or otherwise howsoever,
(b) reimburse the Commissioner for damage sustained by the
loss of or damage to the whole or any part of the materials,
plant or equipment entrusted by the Commissioner to the
Contractor pursuant to this contract.
The Contractor shall insure any motor vehicle used on the
contract in the joint names of himself and the Commissioner
under a policy unlimited in amount covering liability for
damage to the property of third parties, and evidence of such
insurance and of the registration of the vehicle shall be furnished
to the Officer-in-Charge, if required." (at p532)

3. In the Supreme Court Herron C.J. and Jacobs J. held that this clause has the meaning and application for which the respondent contends, but Sugerman J. dissented. In effect, the ground of the dissent was that the clause upon its true construction extends only to claims asserting a vicarious responsibility on the part of the respondent for acts or omissions on the part of the appellant (or his servants) in the performance of the contract, whereas the claim which the appellant alleges that the Commissioner for Railways might have maintained against the respondent was one asserting a responsibility of the respondent for his own acts or omissions or those of his own servants. (at p532)

4. It is not, I think, correct to say that if the Commissioner for Railways had sued the respondent instead of the appellant, he would have been asserting a claim for damage as having been caused by the use of the appellant's truck in performing the contract between the appellant and the respondent. His claim would have been for damage as having been caused by acts and omissions for which the respondent himself was responsible. In such an action he could not have relied upon any negligence in the management of the appellant's vehicle. The negligent acts and omissions attributed to the respondent in the third-party declaration may be summarized as (1) establishing near the crossing a road-making camp which restricted the vision of approaching motor vehicles ; (2) failing to take due precautions to prevent the appellant's vehicle from being driven over the crossing at times when any locomotive was approaching ; (3) failing to take steps to allay or restrict the intensity of clouds of dust caused in the vicinity of the crossing by the frequent driving of contractors' motor vehicles to and from the roadwork over the crossing ; and (4) failing to warn the driver of the appellant's vehicle of the approach or times of approach of locomotives. It was because those acts and omissions were a cause of the damage to the locomotive that the Commissioner for Railways, according to the appellant's third-party case, could have successfully recovered from the respondent. I therefore agree with Sugerman J. in regarding as the real question in the case the question whether the indemnity clause in the contract in impliedly confined, so far as claims against the respondent for negligence are concerned, to claims in respect of the causing of damage by negligent acts or omissions of the appellant or his servants in the carrying out of the contract between him and the respondent. (at p533)

5. I agree also with his Honour in the answer that he gave to the question. It is not a question, as I see it, upon which such cases as Furness Shipbuilding Co. Ltd. v. London & North Eastern Railway Co. (1934) 50 TLR 257 , Canada Steamship Lines Ltd. v. The King (1952) AC 192 and Davis v. Pearce Parking Station Pty. Ltd. [1954] HCA 44; (1954) 91 CLR 642 , have any bearing. The dominant purpose of the indemnity clause is announced by its opening words : "The Contractor shall undertake the whole risk of carrying out the contract" - that is to say, plainly enough, the whole risk of his (the appellant's) carrying out the contract. That risk extends to the causing of damage to the property or person of a third person, or to property of the respondent as well as to the receipt of damage by the appellant himself, and pars. (a) and (b) of the clause specifically include various categories of such damage. I do not doubt that damage caused by negligence is included ; but the question is : whose negligence ? It seems to me impossible to suppose that the parties were intending that the appellant should indemnify the respondent against claims based upon the respondent's negligence. They certainly cannot have been thinking of damage to the causing of which the appellant and his servants were strangers ; and if the clause be read so as to exclude that case, there is nothing in it to require the appellant, in the case where the respondent's negligence was a cause of damage to a third person but the appellant's negligence was also a cause of the same damage, to indemnify the respondent against the liability which his own negligence brought upon him. (at p534)

6. I should reach this conclusion even if the language of the contract had been freely negotiated between the parties, but if there be any doubt about it a construction contra proferentem is surely called for. The pleadings show that the indemnity clause is part of "General Conditions" of contracts made by the respondent after calling tenders for the hire of motor trucks with drivers. The choice of language is therefore the respondent's, and the appellant has assented to the form placed before him without having had any part in the drafting of it. In my opinion far more explicit words than those of the indemnity clause would have been needed if the contractor were to be given so much as a hint that he was giving an indemnity against liabilities not based upon any act or omission in the course of the carrying out of the contract on his part. (at p534)

7. In my opinion the indemnity clause has been construed incorrectly in the majority opinion in the Supreme Court, and the appeal should be allowed. (at p534)

MENZIES J. The Commissioner for Main Roads (hereinafter called "the Commissioner") entered into a contract with one Davis (hereinafter called "the contractor") for the cartage of spoil across a railway level-crossing. Clause 7 of the contract was as follows :

"7. The Contractor shall undertake the whole risk of
carrying out the contract, and without limiting the generality
thereof, shall -
(a) hold the Commissioner indemnified against all claims
arising out of -
(i) damage to the property of the Contractor or any
third party ;
(ii) death of or bodily injury to the Contractor or his
employees or employees of the Commissioner or
any third party including persons transported in
vehicles engaged by the Contractor,
whether such damage, death or bodily injury is caused by
the use of a motor vehicle or by goods falling or projecting
therefrom or otherwise howsoever,
(b) reimburse the Commissioner for damage sustained by the
loss of or damage to the whole or any part of the materials,
plant or equipment entrusted by the Commissioner to the
Contractor pursuant to this contract.
The Contractor shall insure any motor vehicle used on the
contract in the joint names of himself and the Commissioner
under a policy unlimited in amount covering liability for
damage to the property of third parties and evidence of such
insurance and of the registration of the vehicle shall be furnished
to the Officer-in-Charge, if required." (at p535)

2. While the truck belonging to the contractor was being driven across the level-crossing it came into collision with a locomotive engine belonging to the Commissioner for Railways and damaged it. The Commissioner for Railways thereupon sued the contractor for damages for negligence, and the contractor in turn instituted third-party proceedings against the Commissioner, alleging that in the event of his liability to the Commissioner for Railways, he was entitled to contribution or indemnity from the Commissioner by virtue of s. 5 (1) (c) of the Law Reform (Miscellaneous Provisions) Act, 1946 (N.S.W.). The basis of this claim was that the damage done by the truck to the locomotive was caused wholly or in part by the Commissioner's negligence in establishing, in the vicinity of the crossing, a road-makers' camp which obscured the view of those using the crossing, and in taking no precautions in relation to bad visibility caused at the crossing by dust raised by the contractor himself and other contractors working in a like fashion to himself. To this third-party claim the Commissioner, by a fourth plea, pleaded cl. 7 of the contract and alleged that :

"the defendant is not entitled to recover contribution from
the third party in this action because the third party is by
virtue of the said agreement entitled to be indemnified by the
defendant in respect of the liability in respect of which
contribution
is sought within the meaning of s. 5 (1) (c) of the
Law Reform (Miscellaneous Provisions) Act, 1946."

By replication the contractor pleaded the contract in full, whereupon the Commissioner demurred, asserting that the replication establishes "that the third party is entitled to the indemnity claimed by the third party in its fourth plea". There followed a joinder in demurrer. The demurrer coming on for hearing before the Court of Appeal was upheld (Herron C.J. and Jacobs J.A., Sugerman J.A. dissenting). (at p536)

3. The short question is, therefore, whether the contract between the contractor and the Commissioner does entitle the Commissioner to be indemnified by the contractor in respect of the liability in relation to which contribution is sought, viz. liability to the Commissioner for Railways for the damage done to his locomotive by reason of collision with the contractor's truck. (at p536)

4. The simplest way to test the matter is to disregard any negligence on the part of the contractor, and to assume that the Commissioner for Railways sued the Commissioner alleging that the damage caused to the locomotive in collision with the truck was caused by the negligence of the Commissioner and, then, to ask whether cl. 7 of the contract would, in the circumstances afford the Commissioner an indemnity against the contractor for any damages awarded to the Commissioner for Railways against the Commissioner. (at p536)

5. The claim of the Commissioner for Railways in the circumstances which I have just envisaged would, as between the contractor and the Commissioner, be a claim for damage to the property of the Commissioner for Railways caused by the use of the contractor's truck in the carrying out of the contract with the Commissioner. That this is so is apparent from the terms of the contractor's amended declaration of third-party claim which alleges that the respondent engaged the appellant to take part in the doing of certain roadwork near a railway line which involved the driving of the appellant's motor vehicle over a public crossing, and that the respondent was negligent in certain respects whereby a locomotive collided with the appellant's motor vehicle on the public crossing and the locomotive was damaged. As such, the claim would fall fairly and squarely within cl. 7, for the collision would have been one of the risks of carrying out the contract and the claim would arise out of damage to the property of a third party caused by the use of the truck. (at p536)

6. It was argued for the appellant, however, that cl. 7 of the contract should not be understood as conferring an indemnity upon the Commissioner against liability for the negligence of itself, its servants and agents, and reference was made by way of analogy to the decision of the Privy Council in Canada Steamship Lines Ltd. v. The King (1952) AC 192 . I cannot accept this limitation upon cl. 7 and regard the case relied upon as readily distinguishable. There it was decided, in accordance with well-established principles, that an exemption clause which did not limit liability for negligence in clear terms should be construed as relating to a liability not based on negligence. Here it appears to me plain from its language that cl. 7 does cover the Commissioner against liability for negligence of itself, its servants and agents. Default of this sort for which the Commissioner is liable seems to me the very subject matter of cl. 7. Thus, to take an instance, indemnity is given against claims against the Commissioner arising out of the death or bodily injury of the contractor himself. Such a claim against the Commissioner could not be maintained in the absence of fault on the part of the Commissioner, its servants and agents. Accordingly the only purpose, or at least the principal purpose, for taking such an indemnity, would be to protect the Commissioner against liability for its own fault. Furthermore, once it appears that the indemnity does extend to the Commissioner's fault, including negligence, there is no sound ground for limiting the indemnity to particular breaches of the duty of care. The indemnity should be allowed to operate in accordance with its terms which throw upon the contractor the whole risk of carrying out the contract. (at p537)

7. This, in my opinion, is not a case where authority is particularly useful. My decision depends upon the language of cl. 7 which I find unambiguous even if it produces what may be thought to be hardship despite a provision in the contract requiring the contractor to insure any motor vehicle used on the contract in the joint names of himself and the Commissioner under a policy unlimited in amount for damage to the property of third parties. It does seem to me, however, that the indemnity which cl. 7 creates is not less extensive than that which the House of Lords in Furness Shipbuilding Co. Ltd. v. London & North Eastern Railway Co. (1934) 50 TLR 257 held covered injury to third persons caused by the negligence of a railway company claiming indemnity against its innocent contractor under a contract for works in which there was a provision requiring insurance. (at p537)

8. I agree therefore with the Court of Appeal and would dismiss this appeal. (at p537)

WINDEYER J. I consider that this appeal should be allowed. I agree in the judgment of my brother Kitto. I do not construe cl. 7 of the contract as protecting the respondent in the events alleged. The question is whether the respondent was, within the words of the statute, a "person entitled to be indemnified". That question seems to me to depend on the scope of the clause properly construed and applied. It may depend too upon whether the appellant's undertaking was not subject to an implied condition that the respondent would, on his part, exercise due care in the conduct of the operations and undertaking in which the appellant was to perform his contract. (at p538)

ORDER

Appeal dismissed with costs.