Federal Court of Australia

MOS Beverages Pty Ltd v Insurance Australia Ltd trading as CGU Insurance [2020] FCA 1716

ORDERS

THE COURT ORDERS THAT:

1.    Within 14 days the parties file a draft minute of orders to give effect to the Court’s reasons, or competing draft minutes, together with any submissions on the proposed declarations or orders, including on costs and the future conduct of the proceedings.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

ALLSOP CJ:

1    The proceedings concern a claim for indemnity for loss of goods under an Industrial Special Risks Policy issued by the respondent (CGU) to Admiral International Pty Ltd. The applicant (MOS Beverages) seeks to claim under the Policy as a third party beneficiary.

2    By agreement with the parties issues of policy construction and indemnity were ordered to be heard first and separately. The issues that have been referred for the purposes of the hearing were agreed between the parties as follows:

1.    Whether, upon the proper construction of the clause titled “Interests of other parties”, the applicant is entitled to indemnity from the respondent on the basis that the insurable interest of the applicant was sufficiently specifically noted in the records of Admiral International Pty Ltd?

2.    Whether, upon the proper construction of endorsement SALESXB4, the applicant is entitled to an indemnity from the respondent under s 48(1) of the Insurance Contracts Act 1984 (Cth)?

3    I propose to amend these questions slightly on the basis that MOS Beverages’ written submissions in chief and in reply rely solely upon s 48(1) of the Insurance Contracts Act 1984 (Cth) (ICA). That is, s 48(1) is not only relevant to question 2 as set out above, but also to question 1. Thus, the separate question the subject of this judgment is as follows:

1.    Whether the applicant is entitled to indemnity from the respondent under s 48(1) of the Insurance Contracts Act 1984 (Cth) by reason of:

a.    the applicant being sufficiently noted in the records of Admiral International Pty Ltd in accordance with the clause titled “Interests of Other Parties”; and/or

b.    the proper construction of endorsement SALESXB4.

4    For the reasons that follow, the question should be answered in the affirmative. On the proper construction of the Policy, being the “Interests of Other Parties” clause, MOS Beverages is entitled to indemnity from CGU as a third party beneficiary under the Policy.

5    MOS Beverages conducts a business importing alcoholic and non-alcoholic beverages into Australia. Since December 2015, in the course of its business, MOS Beverages has stored its imported goods from time to time and in varying quantities at a bonded warehouse operated by Admiral. According to MOS Beverages’ further amended statement of claim, Admiral provided a number of services to MOS Beverages, including the collection and transport of containers of goods owned by MOS Beverages from Port Botany to the warehouse premises, the storage of goods under bond in the bonded section of the premises, the arrangement for payment of customs clearance fees into and out of bond, and the movement of bonded goods to the unbonded section of the premises upon payment of customs clearance fees by MOS Beverages.

6    In September 2017, CGU and Admiral entered into a policy of insurance numbered 01R2096618. The policy was in the form of an Industrial Special Risks Insurance Policy and was modified by endorsements contained in a Policy Schedule. The policy period was from 4:00pm on 30 September 2017 to 4:00pm on 30 September 2018.

7    The loss the subject of MOS Beverages’ claim occurred as a result of a fire at Admiral’s warehouse premises on 16 April 2018. In the statement of agreed facts filed for the purpose of determination of the separate question, the parties agreed that at the time of the fire MOS Beverages had goods stored at the warehouse premises and at least some of the goods that MOS Beverages had stored on the premises were destroyed in the fire. The exact quantity and value of the goods owned by MOS Beverages which were destroyed in the fire will be determined at a later stage in the proceedings, should the separate question be answered in MOS Beverages’ favour, and should the parties not be able to reach agreement on such issue.

8    The statement of agreed facts states that the goods MOS Beverages had stored at the warehouse premises at the time of the fire were not otherwise insured. GCU noted in its written submissions that, as at 28 July 2020 when the submissions were filed, it had not yet been able to complete its investigations as to whether MOS Beverages’ goods were “otherwise insured”. Given that the statement of agreed facts was filed a month after the filing of CGU’s written submissions and CGU has not sought leave to adduce evidence to contradict or qualify the agreed fact, I proceed on the basis that it is agreed between the parties that MOS Beverages’ goods were not “otherwise insured”: Evidence Act 1995 (Cth) s 191. The Court does not provide an advisory opinion divorced from facts. In answering the separate question, the Court is making a final and conclusive decision based on a concrete, agreed situation with the aim to quell the dispute between the parties in respect of the issues the subject of the separate question: Bass v Permanent Trustee Company Limited [1999] HCA 9; 198 CLR 334 at 354–359 [43]–[56]. That is how the separate questions have been presented.

9    As a result of the damage caused by the fire, Admiral sought indemnity from CGU under the Policy. That claim for indemnity is the subject of proceedings in the Supreme Court of New South Wales.

10    The “Insured” under the Policy is identified on page 1 of the Policy Schedule to be:

Admiral International Pty Ltd, Admiral Corporate Group Trust

and

(a)     subsidiary companies, organisations and other associated companies as defined under Section 50AAA of the Corporations Act 2001 (Commonwealth), and

(b)     social and sports clubs (including the committees and officers from time to time of unincorporated bodies) and the trustees of the Insured’s superannuation and pension funds and welfare organisations, and

(c)     all organisations and other entities to whom (whether mortgagees, lessors, joint ventures [sic: venturers] or other parties with a legal or equitable interest in the Property Insured) the named Insured has a responsibility to maintain insurance;

all for their respective interests, rights and liabilities and to the extent that they are not more specifically insured, but excluding none.

MOS Beverages did not submit that it falls within the definition of “Insured”.

11    Page 1 of the Policy Schedule defines Admiral’s business to be “principally: Customs and AQIS approved Depot FAK and FCL Packing, Unpacking Warehousing and Distribution Taxi Trucks and Hourly Hire AQIS approved wash bay, Licensed Bond Store, Project Shipping Management, Reefer Storage and any other activity incidental thereto”.

12    The indemnity under the material loss or damage section of the Policy (section 1) is in the following terms:

In the event of any physical loss, destruction or damage … not otherwise excluded happening during the period of insurance at the Situation to the Property Insured described in Section 1 the Insurer(s) will, subject to the provisions of this Policy including the limitation on the Insurer(s) liability, indemnify the Insured in accordance with the applicable Basis of Settlement.

13    The “Property Insured” under section 1 of the Policy is defined to mean:

All tangible property both real and personal of every kind and description (except as hereinafter excluded) belonging to the Insured or for which the Insured is responsible, or has assumed responsibility to insure prior to the occurrence of any damage, including all such property in which the Insured may acquire an insurable interest during the Period of Insurance.

14    Directly after section 1 of the Policy is a “Memoranda to Section 1”. The first clause of the memoranda provides as follows:

INTERESTS OF OTHER PARTIES

The insurable interests of only those lessors, financiers, trustees, mortgagees, owners and all other parties specifically noted in the records of the Insured shall be automatically included without notification or specification; the nature and extent of such interest to be disclosed in event of damage.

Where the insurance covers the interests of more than one party, any act or neglect of an individual party will not prejudice the rights of the remaining party/parties; provided the remaining party/parties shall, immediately on becoming aware of any act or neglect whereby the risk of damage has increased, give notice in writing to the Insurer(s) and on demand pay such reasonable additional premium as the Insurer(s) may require.

15    The Policy Schedule contains a number of endorsements. On page 13 of the Policy Schedule, under the heading “SECONEH4 SECTION 1 – MATERIAL LOSS OR DAMAGE” and sub-heading “PRPRTYH4 THE PROPERTY INSURED”, are the following two endorsements:

SALESXB4     CUSTOMERS’ GOODS

The policy extends to insure goods belonging to the Insured’s customers at the Premises, to the extent that such goods are not otherwise insured.

PROPBXS4     PROPERTY INSURED (B)

The first paragraph of the definition of The Property Insured is amended to read:

All tangible property both real and personal of every kind and description (except hereinafter excluded) belonging to the Insured or for which the Insured is responsible, or has assumed responsibility to insure prior to the occurrence of any Damage, including all such property in which the Insured may acquire an insurable interest or for Damage to which the Insured becomes responsible or assumes responsibility to insure, after the commencement of the Period of Insurance.

16    Page 13 of the Policy Schedule also contains an endorsement addressing liability for duty, under the sub-heading “INDEM1H4 THE INDEMNITY”:

LDUTYVB4    LIABILITY FOR DUTY

The policy extends to include the Insured's liability for customs, excise and other duties that the Insured becomes liable to pay in the event of Damage to Property Insured.

17    The sub-limit of liability for section 1 in respect of “Customers Goods” is stated in the Policy Schedule to be $4,000,000. This sub-limit is significantly higher than the other sub-limits for section 1 of the Policy, reflecting the fact that as the operator of a bonded warehouse, customers’ goods likely comprised a significant proportion of the property situated on Admiral’s premises.

18    The principles to apply in relation to the interpretation and construction of insurance policies as commercial contracts were not in dispute. Such principles can be found in authorities dealing with the construction of commercial contracts, such as Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 at 656–657 [35]; Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited [2015] HCA 37; 256 CLR 104 at 116–117 [48]–[52]; Simic v New South Wales Land and Housing Corporation [2016] HCA 47; 260 CLR 85 at 111 [78]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; 261 CLR 544 at 551 [16] and also in authorities dealing specifically with contracts of insurance: McCann v Switzerland Insurance Australia Limited [2000] HCA 65; 203 CLR 579 at 589 [22], 600–603 [73]–[74]; Wilkie v Gordian Runoff Limited [2005] HCA 17; 221 CLR 522 at 528–529 [15]–[16]; Johnson v American Home Assurance Company [1998] HCA 14; 192 CLR 266 at 272–276 [19] (Kirby J, albeit in dissent); and Australian Casualty Co Limited v Federico [1986] HCA 32; 160 CLR 513 at 520–521. See also Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390 at 405 and the cases referred to thereat, which emphasise the importance of commercial purpose in the interpretation and construction of a policy. The principles need not be restated fully here, but it is important to note that the Policy is to be given a businesslike interpretation, paying attention to the language used by the parties in its ordinary meaning, and to the commercial purpose and object of the contract, in the context of the surrounding circumstances, including the market or commercial context in which the parties are operating, by assessing how a reasonable person in the position of the parties would have understood the language: Todd v Alterra at Lloyds Ltd (on behalf of the underwriting members of Syndicate 1400) [2016] FCAFC 15; 239 FCR 12 at 22–23 [42]. As Lord Halsbury LC said in Glynn v Margetson & Co [1893] AC 351 at 359: “a business sense will be given to business documents”. Lord Bingham of Cornhill’s explication of that phrase of Lord Halsbury in Homburg Houtimport BV v Agrosin Private Ltd (The ‘Starsin’) [2004] 1 AC 715 at 737 [10] bears repetition: “The business sense is that which businessmen, in the course of their ordinary dealings, would give the document.” His Lordship reinforced the powerful sense of that expression of the matter by reference to the famous observation of Lord Mansfield in Hamilton v Mendes (1761) 2 Burr 1198 at 1214; 97 ER 787 at 795: “The daily negociations and property of merchants ought not to depend upon subtleties and niceties; but upon rules, easily learned and easily retained, because they are the dictates of common sense, drawn from the truth of the case.” Cardozo J expressed the matter similarly in the context of considering causal connections in the words of a contract of insurance in Bird v St Paul Fire and Marine Insurance Company 224 NY 47 at 51 (1918): “General definitions of a proximate cause give little aid. Our guide is the reasonable expectation and purpose of the ordinary business man when making an ordinary business contract.” Preference is to be given to a construction supplying a congruent operation to the various components of the whole: Wilkie 221 CLR at 529 [16].

19    MOS Beverages submitted that it is entitled to indemnity under the Policy because it is a third party beneficiary pursuant to s 48(1) of the ICA. Section 48(1) of the ICA provides:

A third party beneficiary under a contract of general insurance has a right to recover from the insurer, in accordance with the contract, the amount of any loss suffered by the third party beneficiary even though the third party beneficiary is not a party to the contract.

20    “Third party beneficiary” is defined in s 11 of the ICA to mean:

a person who is not a party to the contract but is specified or referred to in the contract, whether by name or otherwise, as a person to whom the benefit of the insurance cover provided by the contract extends.

21    MOS Beverages relied upon two clauses to establish itself as a third party beneficiary under the Policy: the “Interests of Other Parties” clause, set out above at [14], and, alternatively, the “SALESXB4” endorsement, set out above at [15].

22    MOS Beverages submitted that it is an “owner” who is “specifically noted in the records” of Admiral for the purposes of the “Interests of Other Parties” clause and thus its “insurable interests” are “automatically included [in the Policy] without notification or specification”.

23    The parties filed a bundle of documents that the parties agreed constitute business records of Admiral. The index to the bundle contains brief descriptions of the documents, which are also taken to be agreed between the parties. The first document in the bundle is an email from the Managing Director of Admiral, Mr Fateev, to a Mr Kozinets dated 1 December 2015, which was described in the index to the bundle as “Admiral email to MOS re import quote”. The contents of that email included a list of prices for various services, including “Bonded Storage” and “General Storage” which were both calculated at a price per pallet per week.

24    The second document is a letter from Mr Fateev under an “Admiral International” letterhead dated 8 December 2015. The recipient of the letter is not identified. The letter stated the following:

Admiral International will accept customable goods on which duty has not been paid, on behalf of ‘Mos Beverages Pty Ltd’ (ACN: 609622380). We are prepared to accept goods under bond. We accept responsibility on receipt of the goods at our bonded premises, details which are listed below. Our company’s standard procedures are suitable for recording under bond goods. We understand the provisions and requirements of section 61A of the [E]xcise Act 1901 and section 71E of the Customs Act 1901.

25    The third document is a “Commercial Sublease Agreement” signed on 29 January 2016 in which Admiral purported to sublease part of the warehouse premises to MOS Beverages for use as an office.

26    The bundle also includes (as described in the index to the bundle) eight invoices from Admiral to MOS Beverages with dates ranging from 17 June 2016 to 1 March 2018, five “Customs/ATO Import records” of goods imported by MOS Beverages and delivered to Admiral’s warehouse premises with dates ranging from 15 June 2016 to 9 October 2017, and two statements of account from Admiral to MOS Beverages dated 9 January 2018 and 27 March 2018. Each of the import records identify the importer of the goods as MOS Beverages and the warehouse establishment as either “GH16H Admiral Bond – S79” or “GH16H Admiral International”. The import records note the vessel, voyage and date of import, and include an itemised list of imported goods with a description of the goods, and their quantity and value. The import records appear to correspond (in date and in the description of goods) to the invoices issued by Admiral to MOS Beverages. The invoices also identify the vessel and voyage and several of the invoices contain charges for bond storage, with descriptions such as “Bond Storage (wine) 10 plts 1 week starts 13/03/17 – 19/03/17 ($10.00 p/plt)”.

27    CGU conceded in its written submissions that, between them, the bundle of documents establish that MOS Beverages was a customer of Admiral and from time to time and in variable amounts, goods or products owned by MOS Beverages were kept at Admiral’s warehouse premises. CGU submitted, however, that this was not enough to bring MOS Beverages under the “Interests of Other Parties” clause or s 48(1) of the ICA.

28    MOS Beverages submitted that the fact it is noted in the records of Admiral as a customer and an owner of warehoused goods is sufficient for the operation of the clause and s 48(1).

29    MOS Beverages relied in its written submissions on the decision of the Supreme Court of Victoria in Pacific Dunlop Limited v Maxitherm Boilers Proprietary Limited [1996] VicSC 387; (1997) 9 ANZ Insurance Cases ¶61-357. The plaintiff in Pacific Dunlop had purchased an autoclave from the defendant. The plaintiff held an industrial special risks policy which covered property damage and business interruption, but did not provide liability insurance. The policy contained an “Interests of Other Parties” clause in terms similar to the clause the subject of the present proceedings. The clause provided that the insurable interest of lessors, financiers, trustees, mortgagees, owners and “all other parties more specifically noted in the records of the insured” be automatically included in the policy. The autoclave was destroyed and the plaintiff commenced proceedings against the defendant. The defendant claimed indemnity under the policy as a “non-party insured” pursuant to s 48 of the ICA. At first instance Teague J held that, by operation of the Goods Act 1958 (Vic), the defendant did not have an insurable interest in the autoclave at the time it was destroyed. This precluded the defendant from claiming under the “Interests of Other Parties” clause.

30    Justice Teague addressed the parties’ submissions on construction of the “Interests of Other Parties” clause in obiter. Counsel for the plaintiff had submitted that the provision required the insurable interest, if any, of the defendant to be more specifically noted in the records of the plaintiff. He argued that requirement meant that the plaintiff would have to have, as it did not have in relation to the defendant, a record of the latter’s interest which was something more than the usual records relating to the purchase of goods. Dismissing the argument, Teague J stated at 76,956–76,957:

I concluded that the construction which he proposed was inappropriate, essentially because it was too narrow when the whole of the provision was read together. The provision is framed in terms that suggest that the insurer was prepared to take a flexible rather than a fixed approach to recording and communication. That flexible approach, confirming the acceptance of minimal rather than maximal formality is particularly obvious in the use of the adverb “automatically”, reinforced by the words “without notification or specification”.

The provision refers to the records of the insured, but does not spell out a requirement that any register of interests of other special records be maintained. It seems to me that the absence of any words clearly requiring special records to be maintained, and the presence of words obviating the need for communication on a transaction by transaction basis ought to be treated as material. I accept that the use of the word “more” before “specifically noted” could be seen as an indication of something more than usual being called for. However, if it was intended that there should be something more, one would have thought that the provision would have included at least a basic indication of what was called for. I think that if it was contemplated as between the insurer and the contracting insured that there should be a heightened degree of formality applying as to transactions involving situations where there were different insurable interests, that should have been spelt out with greater particularity.

31    On appeal, in Maxitherm Boilers Pty Ltd v Pacific Dunlop Ltd [1998] 4 VR 559; 10 ANZ Insurance Cases ¶61-393, Ormiston, Callaway and Buchanan JJA each agreed with the primary judge’s conclusion that the defendant did not have an insurable interest in the autoclave within the meaning of the policy. Buchanan JA (Ormiston JA agreeing) made the following comments at 74,180, again in obiter, on the construction of the “Interests of Other Parties” clause:

The parties accepted that the memorandum required “the insurable interest” rather than “the other parties” to be more specifically noted. More specific notation may require recording the interest in a form that relates it expressly to the insurance policy. It may not be sufficient that the interest of an owner is noted by the existence of documents of sale such as quotations, purchase orders and invoices, from which the proprietary rights of the seller can be inferred. I need not decide the point, for in my opinion Maxitherm had no insurable interest to be noted.

Justice Callaway left the issue open: at 74,174.

32    I respectfully agree with the comments made by Teague J at first instance. I also note that the word “more” does not appear in the provision here qualifying the phrase “specifically noted” as it did in Pacific Dunlop. The language used in the clause considered by the Court in Pacific Dunlop and the clause presently under consideration endorses a flexible approach to notification with minimal formality. I agree with Teague J that the absence of any explicit requirement to keep special records ought to be treated as material. Indeed, the wording to any reasonable businessperson would not be understood as calling for any formality or identity of interest by reference to this Policy.

33    Justice Teague made a number of observations at 76,953 which are relevant to the “Interests of Other Parties” clause presently under consideration. First, the mere presence of the provision in the Policy makes it clear that the contracting insured intended that certain third parties were to be treated as third party beneficiaries. Secondly, the measure of protection to third parties which the provision was intended to provide was limited given that the Policy is essentially a policy of property insurance, and not of liability insurance. Thirdly, the provision contains an automatic element. The inclusion of the word “automatically” is reinforced by the addition of the words: “without notification or specification”. The language “automatically included without notification” makes plain that the insurer was not concerned with the precise identities of the other interested parties or the precise nature and extent of the interest, provided that the other interested parties were specifically noted in the records of the insured prior to the loss being sustained. Finally, the second paragraph in the provision represents an attempt to address the potential problem as to how rights between the insurer, the contracting party and any potential claimant third party are to be adjusted, further supporting the intention of the parties to allow certain third parties to claim directly under the Policy.

34    As noted by Teague J at 76,952, it is important to keep in mind the character of the activity engaged in by the contracting insured, which governed the obtaining of the insurance cover. As acknowledged in the Policy Schedule, Admiral operated a Licensed Bond Store. From the perspective of Admiral, it made good commercial sense to have cover not only for property unquestionably owned by it, but also on property owned by others (especially customers) which was stored in its bonded warehouse at any given time. Further, the commercial sense of a broader and more flexible approach to the inclusion of interested third parties under the Policy can be readily appreciated in the context of a bonded warehouse where goods owned by various customers are coming and going on a regular basis. The difficulties with keeping a schedule or register of insurable interests in connection with the Policy in such circumstances are plain. It is also clear from the language used in the clause that CGU accepted the risk of other parties without formal notification or a register of interests. It has otherwise limited its risk by limiting the indemnity available in respect of customers’ goods to $4,000,000.

35    In my view, a reasonable businessperson would have understood the terms of the “Interests of Other Parties” clause to mean that owners of property insured under the Policy would have a direct avenue to claim against CGU, provided that their insurable interest was noted in the records of Admiral in some acceptable businesslike way, prior to the loss being sustained. The approach and observations of Teague J reflect a fair and reasonable approach embodying practical business common sense, eschewing niceties or subtleties or any demand for something more than that which reasonable business behaviour would produce.

36    The definition of “Property Insured”, as amended by the endorsement, meant that any property for which Admiral was responsible was insured under the Policy. This included property which Admiral took into its possession as bailee. The SALESXB4 endorsement extended the property insured under section 1 of the Policy to include all goods of Admiral’s customers (including MOS Beverages) which were stored on the premises, to the extent they were not otherwise insured. These clauses together have the effect of insuring customers’ goods for their full value, not just for the liability of Admiral to the customer as bailee and bailor: see Waters v Monarch Fire and Life Assurance Co (1856) 119 ER 705; 5 El & Bl 870; Maurice v Goldsbrough Mort & Co Ltd [1939] AC 452; 3 All ER 63; Hepburn v A Tomlinson (Hauliers) Ltd [1966] AC 451; 1 All ER 418; and Darlington Commodities Ltd v Gibbs (1982) 2 ANZ Insurance Cases ¶60-486. The “Interests of Other Parties” clause further extends the protection afforded to Admiral’s customers by ensuring that they have a direct claim to indemnity from CGU (provided that the requirements in the clause are satisfied and the goods are not otherwise insured).

37    CGU submitted that the mere mention of MOS Beverages by name in Admiral’s business records did not fit with the wording of the clause or its intended purpose. It submitted that the clause, which is commonly deployed in industrial special risks policies, usually covers certain specified parties with certain specified interests in the property insured. According to CGU, it must be shown that the third party has an interest in the property covered by the policy of insurance or that the insured has agreed to take on the burden of purchasing the insurance. In all instances, CGU submitted, it requires an identifiable and specific interest in the property insured; it is not triggered by the mere mention of a party in records held by the insured.

38    With respect, the requirement described by CGU is exactly the position in which MOS Beverages finds itself: a third party who has a specific interest (that is, ownership) in property insured under the Policy (that is, customers’ goods that are stored on the premises and are not otherwise insured). MOS Beverages had an “insurable interest” in goods that were insured under the Policy. MOS Beverages is not merely a third party whose name is mentioned in the records held by Admiral; it is specifically identified in Admiral’s records in the context of it being a customer whose goods are stored at the premises.

39    The records of Admiral, particularly the import notices and invoices, identify the nature of MOS Beverages’ insurable interest and the property in which MOS Beverages’ insurable interest vests. With respect to Justices Buchanan and Ormiston, I am not of the opinion that, in the circumstances of this contracting insured and the nature of its business, the insurable interest of the third parties needed to be recorded in a form that related it expressly to the Policy. Such a requirement would negate the flexible approach otherwise endorsed by the language of the clause, which flexible approach commends itself to reasonable and practical business common sense.

40    CGU submitted that MOS Beverages’ construction of the clause would produce absurd results, with coverage extending to anyone with whom Admiral conducted business and kept records of that business, or to any third party who had property on premises controlled by Admiral. These examples are far removed from the position of MOS Beverages: MOS Beverages was an owner of property that, by the SALESXB4 endorsement, was insured under the Policy and its ownership of such property, and thus its insurable interest, was noted in the records of Admiral.

41    CGU further submitted that it was open to MOS Beverages to take out its own insurance over its goods. That would, however, exclude the goods from cover under the SALESXB4 endorsement, which requires the goods to be “not otherwise insured”, preventing even Admiral from being able to make a claim in relation to the goods (unless the goods otherwise fell within the definition of “Property Insured”). The very fact that the SALESXB4 endorsement includes the words “not otherwise insured” supports a construction of the Policy that includes customers as third party beneficiaries.

42    It was accepted by CGU in its written submissions that the definition of “third party beneficiary” in s 11 of the ICA applies where an insurance policy nominates a class of persons or parties to whom the coverage will be extended. CGU referred to Trident General Insurance Co Limited v McNiece Bros Proprietary Limited [1988] HCA 44; 165 CLR 107 where the policy specified a building site and extended coverage to “all Contractors and Sub-contractors and/or Suppliers”. With respect, this is exactly what the “Interests of Other Parties” clause does: it nominates a class of persons, being “lessors, financiers, trustees, mortgagees, owners and all other parties specifically noted in the records of the Insured”, whose insurable interests are automatically included in the Policy and thus to whom coverage is extended. On this basis, MOS Beverages satisfies the definition of a third party beneficiary under s 11 of the ICA and is entitled to indemnity under the Policy in accordance with s 48(1).

43    MOS Beverages submitted that it was also a third party beneficiary under ss 11 and 48(1) of the ICA by reason of the SALESXB4 endorsement alone. There is some force in MOS Beverages’ submission that, given the inclusion of property for which Admiral is “responsible” in the definition of “Property Insured”, the SALESXB4 endorsement is futile unless it was intended to allow customers to claim as third party beneficiaries. However, the SALESXB4 endorsement merely states that the Policy extends to customers’ goods. That is, the subject of the endorsement is the property owned by customers. A mere reference to property in which a third party holds an interest may not be sufficient to satisfy the requirement that the third party be “specified or referred to in the contract” within the meaning of that phrase in s 11 of the ICA. The cases in which s 48(1) has been applied to date have concerned policies in which a specific person or class of persons was identified in the policy as having coverage extended to them: see VL Credits Pty Ltd v Switzerland General Insurance Co [1990] VR 938; 5 ANZ Insurance Cases ¶60-936; Barroora Pty Ltd v Provincial Insurance Ltd (1992) 26 NSWLR 170; 7 ANZ Insurance Cases ¶61-103; Commonwealth Bank of Australia v Baltica General Insurance Co Ltd (1992) 28 NSWLR 579; 7 ANZ Insurance Cases ¶61-133; Cooperative Bulk Handling Limited v Jennings Industries Limited [1995] WASC 476; 8 ANZ Insurance Cases ¶61-286; Dee-Tech Pty Ltd v Neddam Holdings Pty Ltd [2012] NSWSC 251 at [151]; and ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65; 224 FCR 1 at 316 [1628]. Given my conclusion as to the construction of the “Interests of Other Parties” clause, it is strictly unnecessary to decide whether MOS Beverages would otherwise be a third party beneficiary under the Policy by reason of the SALESXB4 endorsement. Looking at the Policy as a whole and the provisions congruently, however, the better view is that the SALESXB4 endorsement clarifies the property that is covered under the Policy. The endorsement should not be interpreted as excluding the requirement for notation of third party interests (including customers’ interests) in the records of Admiral, as required by the “Interests of Other Parties” clause.

44    Pursuant to the clause titled “Interests of Other Parties” and s 48(1) of the ICA, the applicant is entitled to indemnity under section 1 of the Industrial Special Risks Policy (ISR Mark IV) Insurance Policy Number 01R2096618 as a third party beneficiary. I will give the parties an opportunity to consider the most appropriate way of embodying this conclusion: whether by declaration or by answer to the stated separate question.

45    It should be noted that the matter was initially listed on 22 June 2020 for hearing on separate questions which dealt solely with the SALESXB4 endorsement. That hearing was vacated on short notice because MOS Beverages sought to rely in its written submissions on the “Interests of Other Parties” clause and sought to adduce affidavit material and business records in support of that argument. MOS Beverages had not raised that clause as a basis for indemnity in its originating application or statement of claim. MOS Beverages’ statement of claim was amended on 19 June 2020 to include reliance upon the “Interests of Other Parties” clause and the parties filed new proposed separate questions, agreed facts, an agreed tender bundle and written submissions accordingly. Given the centrality of the “Interests of Other Parties” clause to my ultimate conclusion on indemnity, it is appropriate to give the parties an opportunity to consider what costs orders should be made.

Associate:

Dated:    1 December 2020