A “slavish application” of the 2008 NSW Supreme Court decision in Erect Safe Scaffolding (Australia) Pty Ltd v Sutton, rather than implementing principles the majority followed, is “apt to mislead”, a Brisbane barrister says.

In an AILA Queensland breakfast presentation, barrister Kevin Holyoak examined whether Queensland courts were likely to follow the Erect Safe decision or, alternatively, the New South Wales body of law that “went against it” in February’s GIO General Ltd v Centennial Newstan Pty Ltd decision.

Mr Holyoak said considering how general principles were used in Erect Safe and similar cases “produces a guide [that] explains the outcome in Erect Safe and assists in similar tasks”.

Contractor Ian Sutton was injured when he hit his head on a protruding cross bar on October 21, 2002, while working on a Sydney multi-storey residential and commercial building construction site. The cross bar was erected by Erect Safe.

In 2006, NSW District Court Judge Peter Garling found Erect Safe and site contractor Australand independently liable for Sutton’s injury. Erect Safe was required to indemnify Australand and held to be in breach of its obligation to maintain public liability insurance.

The Appeal Court issue was whether the indemnity clause in Erect Safe and Australand’s contract confined Erect Safe’s liability to indemnify Australand for liabilities from Erect Safe’s performance of subcontract works or whether it extended to Australand’s liability that arose in relation to the works.

Justice Peter McClellan, with whom Justices Roger Giles and John Basten agreed, found the indemnity was confined.

As Mr Sutton’s injury was partly caused by Australand’s negligence, the indemnity did not require Erect Safe to indemnify Australand for its liability which was caused by its own acts or omissions.

Justice McClellan said the “true construction” of the clause in Australand and Erect Safe’s contract was that the word “its” should have been included before the words “performance of the subcontract works”, and liability was required to arise out of Erect Safe performing the subcontract works.

He said the clause was confined by the word “arising”, which required the relevant obligation to arise either out of the performance of the subcontract works or Erect Safe’s other obligations under the subcontract.

Australand’s liability did not “arise” out of Erect Safe’s performance of any of its contractual obligations but from its own independent acts of negligence.

Mr Holyoak said Erect Safe was often referred to for two issues: whether an indemnity could be construed to require indemnifiers to indemnify beneficiaries for their own negligence; and whether a party obliged to effect insurance for another was obliged to do so for the other party’s negligent acts or omissions.

“Recourse to the authorities shows the outcome will sometimes depend on which of those two issues is the primary issue for determination as a matter of construction,” he said.

In GIO General v Centennial, the NSW Appeal Court rejected GIO General Ltd’s appeal against a District Court judgement requiring it to indemnify Newcastle mining company Centennial Newstan Pty Ltd (June 2014 Resolve, Insurer loses indemnity appeal).

Labour hire employee Andrew William McDonald was injured while working as a fitter and turner at Centennial’s coal mine. He was employed by Labourforce but his labour was supplied to Centennial by a related company, Advantage, under a contract for labour services.

Centennial sought an indemnity from GIO under a policy issued to Advantage on the basis it was included in the defined term “You/Your Insured” in the GIO policy’s public and products liability section because it was a person to whom Advantage was “obligated by virtue of any contract or agreement to provide insurance such as is afforded by this policy … but only to the extent required by such contract or agreement”.

GIO argued the cover required did not include Centennial’s liability for its own negligence and Centennial was not, to that extent, insured under the policy.

Mr Holyoak said the contract’s arrangement was “starkly different” from Erect Safe.

There was a “proportionate provision in the indemnity and that could be understood to be picked up by the provisions which immediately followed related to that indemnity”, he said.

But there were “additional and supplementary special insurance requirements” with an indemnity to support the obligation to buy insurance.

That contrasted with the provision in Erect Safe for “respective rights and interest” that was “construed to conform with the indemnity”. The special requirements in GIO “expressly required cover beyond the scope of the indemnity afforded”.

Mr Holyoak said if the language was open to two constructions, courts would avoid the “capricious, unreasonable, inconvenient or unjust”, even if the construction was not the “most obvious or grammatically accurate”.

But a court “has no mandate and is not justified in disregarding unambiguous language simply because the contract would have a more commercial and business-like operation or have more balance, if an interpretation different to that dictated by the language were adopted”, he said.

Mr Holyoak’s paper is on AILA’s website. Go to “speaker papers” and look for the heading Contractual indemnity cage fight.

• Back to top