In our October 2009 edition we noted that Speno Rail
Maintenance Australia Pty Ltd v Hammersley Iron Pty Ltd (2009)
had been appealed to the High Court. That appeal has now been heard
and this article sets out the High Court's findings.
The High Court has interpreted section 45 of the Insurance
Contract Act (1984) (Act) strictly in finding
that section 45 only applies to "other insurance"
provisions in circumstances where the insured "has entered
into" the relevant contracts of insurance giving rise to the
potential for double insurance.
Speno Rail Maintenance Australia Pty Ltd
(Speno) and Hamersley Iron Pty Ltd
(Hamersley) entered into a contract for works
which required Speno to ensure that Hammersly was noted on its
general insurance policy with Zurich Australian Insurance Ltd
(Zurich) (Speno Policy).
Hamersley also held its own insurance policy with Metals &
Minerals Insurance Pty Ltd (MMI)
(Hamersley Policy) which contained an "other
Both the Speno Policy and Hamersley Policy responded to the
personal injury claim of a Speno employee who was injured during
the course of his employment with Hamersley. Therefore, the issue
of contribution arose as between Zurich and MMI.
MMI relied on the "other insurance" clause in the
Hamersley Policy and resisted contribution. Zurich contended that
the "other insurance" clause was void pursuant to section
45(1) of the Act.
Zurich's argument was accepted in the Supreme Court of
Western Australia but rejected in the WA Court of Appeal. Zurich
was granted special leave to appeal to the High Court in July 2009.
The High Court ultimately confirmed the appellate court's
decision, dismissing Zurich's appeal.
The High Court looked at the mischief sought to be prevented by
section 45, namely that an insured could find himself in a
situation of having no insurance cover where two policies, intended
to cover its liability; both contained "other insurance"
clauses, leaving no insurance cover at all.
Bypassing how, from a purposive approach, the situation of a
named insured was different to that of a noted insured as it
pertained to section 45, the High Court instead dealt with the
question as a matter of construction, focusing on the words
"entered into" appearing in section 45. Giving these
words their ordinary meaning and construing this phrase narrowly,
the High Court held that the inclusion of a person who was not a
party to the insurance contract would be inconsistent with the
meaning of section 45. As Hamersley had not "entered
into" the Speno Policy, but was merely a noted insured,
section 45 did not apply.
Although section 45 was found not to apply, the High Court
nonetheless provided guidance as to how part of the clause affected
by section 45 would be treated in circumstances where other
provisions in the clause were unrelated to section 45. In this
regard, the High Court indicated that it would only be the
provision affected by section 45 that would be rendered void and
not the entire clause. Therefore, the clause would be severed to
the extent that section 45 applied to it.
Zurich Australian Insurance Ltd v Metals & Minerals
Insurance Pte Ltd  261 ALR 468
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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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