Indemnity clauses are often the last provisions to be agreed in
contractual negotiations and are usually subject to robust
discussion as there is so much at stake. Indemnities may enable a
party to circumvent rules of remoteness and the obligation to
mitigate loss, or transfer liability to another party altogether.
The ability to transfer liability may even extend to risks that
seem unusual for an indemnifying party to bear, as the recent
decision in Samways v WorkCover Queensland &
Ors1 (Samways) illustrates.
In Samways, the Queensland Supreme Court considered whether an
indemnifying party can be indemnified for liability arising from
its own negligence. The court:
laid down the principles of the construction of indemnity
confirmed that a carefully worded indemnity clause can lead to
one party compensating another party for the negligence of that
The plaintiff, Scott Samways, sustained an injury to his
shoulder when he walked into the raised bucket of a bobcat on a
building site where he was working. He was successful in his claim
for damages in negligence against his employer, Tessman Concreting
(10%); the principal contractor, De Luca Properties (30%); and the
owner of the bobcat, Lynsha (60%).
The indemnity clause
Lynsha sought to recover from De Luca Properties the amount of
any damages that Lynsha was required to pay to Mr Samways. The
agreement for hire of the bobcat between Lynsha and De Luca
Properties included an indemnity clause which provided:
"The Hirer [De Luca
Properties] shall fully and completely indemnify the Contractor
[Lynsha] in respect of all claims by any person or party whatsoever
for injury to any person or persons and/or property caused by or in
connection with or arising out of the use of the plant and in
respect of all costs and charges in connection therewith whether
arising under statute or common law."
Lynsha claimed that the indemnity required De Luca Properties to
indemnify Lynsha against the consequences of Lynsha's own
The court set out the relevant principles which apply to the
construction of indemnity clauses. These included:
An indemnity clause is to be construed strictly and any doubt
as to the construction should be resolved in favour of the
indemnifier. Doubt may arise not only from the uncertain meaning of
a particular expression but from the width of its possible
Without statutory authority, a court has no mandate to rewrite
a provision to avoid what it retrospectively perceives as
commercial unfairness or lack of balance.
A clause should be construed in its contractual context which
allocates risks of different kinds between parties.
Effect should be given to the ordinary meaning of the language
used (absent use of technical expressions or terms of art) so as to
provide certainty as to where responsibility may lie, against which
insurance may be obtained.
The fact that a contract requires a party to take out insurance
against an indemnified liability may be taken into account in
concluding that an indemnity applies to that liability (whether or
not insurance is in fact taken out). The absence of a provision for
insurance against the liability may also be taken into
According to the court, the "commercial and contractual
context" did not make it improbable that Lynsha would seek to
be indemnified for damages caused by its own negligence. The court
found that the clause should be construed according to its ordinary
meaning and extend to claims for liability for personal injury for
which Lynsha was liable. De Luca Properties was therefore required
to indemnify Lynsha in respect of Mr Samways' claim.
What it means for commercial contracts
This case provides a useful summary of the principles governing
the construction of indemnity clauses. The most important point to
bear in mind when drafting an indemnity is that it will usually be
strictly construed. Any doubt as to construction will be resolved
in favour of the indemnifier.
It is unusual (and seems potentially unfair) for a party to be
found liable to indemnify another party for claims based on the
other party's negligence. However, if the ordinary meaning
of a clause is clear, and the "commercial and contractual
context" supports such a construction, then the court will
give effect to such a provision.
1  QSC 127, Applegarth J
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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We discuss whether certain clauses commonly found in ordinary commercial contracts could be considered to be penalties.
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