Recent Court of Appeal decision concerning claims against insurers where causation was an issue

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Recent decision discusses causation principles when the actions of two or more parties are alleged to have contributed to the loss.
Australia Litigation, Mediation & Arbitration
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Background to the case

Nicole Michael sustained personal injuries when she slipped and fell on tiles laid by Infrastruction Pty Ltd on a stairway at the Penshurst Train Station on 24 August 2016.

Ms Michael only sued Sydney Trains, and obtained judgment on 5 July 2018. Infrastruction was deregistered on 16 June 2020.

Sydney Trains brought separate proceedings against Infrastruction's insurer, Argo on 4 November 2020. The claim was made in negligence under the Civil Liability Act (Third Party Claims Against Insurers) Act, and also a claim for breach of contract pursuant to Section 601AG of the Corporations Act, which provides that:

A person may recover from the insurer of a company that is deregistered an amount that was payable to the company under the insurance contract if:

(a) the company had a liability to the person; and

(b) the insurance contract covered that liability immediately before deregistration.

District Court decision

The District Court refused leave for Sydney Trains to pursue the negligence contribution claim as it was outside the limitation period, but the claim under s 601AG proceeded.

The judge found that Infrastruction had not breached the implied term of the contract to take reasonable care when completing the works. The judge did find that Infrastruction had breached the implied term for failing to provide tiles that were fit for purpose because they lacked an adequate level of slip resistance.

However, Sydney Trains failed in its contractual claim on the basis of causation. The judge found that Sydney Trains was aware that the tiles did not meet the relevant safety specifications, but left the stairway open, which was a sufficient basis to find a break in the chain of causation between Infrastruction's breach of contract and Sydney Trains' loss.

Sydney Trains' submissions on appeal

Sydney Trains argued that the finding that it reopened the the stairway despite knowing of the slip resistance test, breaking the chain of causation, was in error.

Court of Appeal decision

In upholding Sydney Train's appeal in relation to causation, the Court of Appeal confirmed that more than one act may be a sufficient cause of an injury, in which case both acts will be regarded as a cause of the entirety of the loss or damage. It was noted that it had become a well-accepted that the chain of causation is not necessarily broken by the act of the Plaintiff which constitutes more immediate cause of the loss or damage than the Defendant's negligence.

The Court of Appeal stressed that the use of metaphors such as "break the chain of causation" is no substitute for legal analysis. It was found that it had not been established that Sydney Trains made a deliberate decision to reopen a stairway known to be more slippery than the specifications it had proposed, or that it even appreciated the nature of the defect.

The Court of Appeal also rejected Argo's submission that the liability was for damages for breach of contract for which the policy did not respond, and not liability "for" personal injury. The Court of Appeal found that until and unless someone suffered personal injury, there was no liability for "injury" so defined. Whether an indemnity "for" injury responds only to direct claims by someone who actually sustains personal injury is a question of construction depending on the text and context of the words in the Policy. While, generally speaking, "for" connotes a closer relationship than "in respect of", the phrase when used in the context of this Policy was apt to encompass secondary liability for personal injury.

Judgment was therefore entered in favour of Sydney Trains. There was also no possibility for any reduction for contributory negligence as the breach of the implied term did not involve negligence (Astley v Austrust Ltd (1999) 197 CLR 1).


The decision provides a helpful discussion of causation principles when the actions of two or more parties are alleged to have contributed to the loss. It is not sufficient to simply rely on the legal maxim "break the chain of causation".

It is also notable that the Court of Appeal rejected the submission that the policy should not respond as it is a claim in contract and not a claim "for" personal injury. This is something that insurers should consider when seeking to rely on contractual exclusion clauses.

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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