In this case, an appeal from the Victorian Civil and
Administrative Tribunal ('VCAT'), Osborne
J of the Supreme Court of Victoria was required to consider the
meaning of phrase 'wear and tear' in an exclusion clause
and a condition requiring the insured to take reasonable
precautions to prevent loss in an industrial special risks policy
issued by QBE.
JSM Management Pty Ltd ('JSM') leased a
trucking depot / warehouse distribution centre to a company
('the Tenant') for a term of five years
commencing in October 2007. Before going into possession, the
Tenant was advised by a representative of JSM that the hardstand at
the premises had a load bearing rating of 40 tonnes and that the
Tenant would not be able to use its container forklift (with a
potential weight of 100 tonnes) on the hardstand because it would
cause it to fail. The Tenant went into occupation prior to the
commencement of the lease and brought the container forklift onto
the site . The Tenant was again warned by JSM's agent that the
forklift should not be used on the hardstand.
The forklift was however utilized for unloading containers over
subsequent months and the hardstand was damaged by its weight and
JSM did not terminate the lease but attempted to negotiate with
the Tenant to reinforce the hardstand. JSM made a claim for the
damage to the hardstand upon its industrial special risks policy.
JSM's insurer, QBE, rejected the claim on the basis of an
exclusion in respect of 'wear and tear'.
JSM unsuccessfully pursued a declaration that the policy
responded in the VCAT. It then appealed to the Supreme Court of
JSM appealed on the ground that the VCAT member had erred in law
by interpreting the phrase 'wear and tear' in the policy as
including damage caused by other than ordinary or normal use.
On appeal, QBE sought to rely on the additional ground for
refusing cover that JSM had breached a condition of the insurance
policy that it 'take all reasonable precautions'
to prevent loss, destruction, or damage to the insured
After considering a number of authorities dealing with the
meaning of the words 'wear and tear' in the context of
leases and insurance policies, Osborne J allowed JSM's appeal.
His Honour found that 'wear and tear is regarded as a
consequence of ordinary usage and ordinary weather' and
that it was not necessary that the words be qualified by words such
as 'normal' or 'fair'. He said
further that he did not accept that the present use, namely the
continued operation of a massively overweight container forklift on
the hardstand over a period of approximately eight months, could be
described objectively as 'ordinary use'.
With regard to the 'reasonable precautions' condition,
QBE argued that JSM had breached the condition by failing to
terminate the lease and instead entering into negotiations intended
to persuade the tenant to undertake works to increase the load
bearing capacity of the hardstand. QBE also argued that negligence
on the part of JSM was sufficient to trigger the clause.
Osborne J held that the correct test was whether the insured had
been reckless in failing to take precautions in accordance with the
following passage from the judgment of Diplock LJ in Fraser v
BN Furman (Productions) Ltd  1 WLR 898:
'... It is not enough that
the [insured's] omission to take any particular precautions to
avoid accidents should be negligent: it must be at least reckless,
that is to say, made with actual recognition by the insured himself
that a danger exists, and not caring whether or not it is
His Honour remitted the matter back to VCAT for reconsideration
of this issue in accordance with the law.
The decision provides a helpful restatement of the law in
relation to the interpretation of 'wear and tear'
exclusions and 'reasonable precautions' conditions.
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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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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