Westina Corporation Pty Ltd (Westina) was a haulage contractor
trading under the name "Jamieson Transport". In 2005 it
hired a road train comprising a prime mover and three trailers to
BGC Contracting (BGC) pursuant to the terms of a written "wet
hire" agreement. The wet hire agreement obliged Westina to
provide the services of a qualified operator for the road
The hire agreement contained the following terms:
a warranty by Westina that the hired equipment was "in
sound mechanical condition" and an agreement to "defend,
indemnify and hold BGC harmless against any injury, death, claim or
other such loss arising out of the use of the plant by BGC except
to the extent caused by BGC's willful (sic)
a risk allocation and indemnity clause in these terms:
The Supplier (Westina) shall bear the
risk of loss in the hiring of the Plant and must defend, indemnify
and hold BGC harmless against any injury, death, claim or other
loss arising from the hiring of the Plant.
a clause requiring Westina to effect public liability insurance
and workers compensation insurance.
The hired road train was involved in a collision with an
oncoming road train on 11 June 2005. At the time the Westina prime
mover was being driven by a Mr Ingold, an employee of Westina. The
road train with which he collided was (co-incidentally) owned by
BGC and driven by one of its employees, Mr Keys. Mr Ingold was
killed in the collision.
The trial judge concluded that the accident occurred as a result
of the negligence of Mr Keys, and that BGC was vicariously liable
for that negligence.
BGC then sought to rely on the indemnities in the wet hire
agreement and to argue that the indemnities operated in respect of
any loss arising from the hiring of the plant, even in
circumstances where the cause of the loss was the negligence of the
BGC's own employee. The trial judge upheld this contention and
found that the risk allocation and indemnity clause, on its clear
terms, was wide enough to cover any losses or damages arising out
of the hiring. In the Judge's view it was "not appropriate
to try and establish ambiguity where none exists".
The Western Australian Court of Appeal upheld an appeal by
Westina. The court unanimously found that the indemnity should be
construed in the context of "the surrounding circumstances
known to the parties, and the apparent purpose and object of the
transaction". In the court's view, the phrase "risk
of loss" in the indemnity clause was ambiguous – it
was not clear whether the clause was intended to extend to an event
in connection with the hired vehicles even if the event was caused
by the negligent act or omission of BGC's employee.
In addition, the Court of Appeal held that whilst the words
"arising from the hiring of the Plant" had a broad
connotation, there was uncertainty as to whether the indemnity
should be characterised as a "reflexive indemnity" (i.e.
an indemnity intended by the parties to apply to a liability that
arises from BGC's own default under the agreement). Here, the
Court of Appeal determined that the language of the indemnity left
doubt as to whether the parties intended the indemnity to apply to
liabilities arising from the default or breach of duty of the
The fact that Westina was required to effect insurance was not
relevant in the absence of evidence that any policy taken out in
compliance with the hire agreement would have indemnified Westina
in circumstances where the loss of the equipment was caused by the
negligence of BGC.
The Court of Appeal also went to some lengths to emphasise that
a contractual indemnity was the obverse of an exclusion clause and
that as such any doubt as to the proper construction of the
indemnity must be resolved in favour of the indemnifier (here,
Lessons to be learned
Indemnities require careful drafting - a reflexive indemnity
must "undoubtedly convey the intention of the parties that the
indemnity applies to liabilities arising from the default or breach
of the indemnified party".
Evidence of a clause requiring one party to effect insurance is
not conclusive evidence that the insuring party is to bear all the
risks associated with the use and operation of the particular
Cooper Grace Ward was named Joint Best Australian Law Firm in
the BRW Client Choice Awards 2009 - Revenue < $50m.
The firm has also been named as the fastest growing law firm in
Australia for 2009 by The Australian.
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This was an interlocutory decision about the appointment of a tutor for the child appellant, to carry on his proceedings.
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