By Nica Manosca, Lawyer, and David Slatyer, Partner

Construction Risks – General Liability policy – the “Named Insured” / “Insured” – the principal contractor’s liability policy did not extend (by virtue of the policy definition of “Named Insured” / “Insured”) to cover a labour company which supplied workers to a subcontractor; see Mie Force Pty Ltd v Allianz Australia Insurance Ltd [2024] NSWCA 23

Facts

Rohrig subcontracted demolition works to Rhino Commercial Stripouts (Rhino Stripouts) as part of a project at the General Gordon Hotel, Sydenham, for which Rohrig was the principal contractor.

Rhino Stripouts is part of the informal “Rhino” group of companies, of which the appellant (Mie Force) is also part. Mie Force employed and provided workers to other companies in the Rhino group, including Rhino Stripouts. Rhino Stripouts had no employees.

Three employees of Mie Force were undertaking the works when there was a fire at the Hotel, causing property damage to the Hotel and neighbouring properties. Proceedings in negligence were commenced by both the Hotel and the owners of the neighbouring properties, and Mie Force was joined as a defendant. In those proceedings it is alleged that the fire at the Hotel was caused by hot works in the vicinity of combustible polystyrene waffle pods.

Allianz, the respondent, had issued a Construction Risks – General Liability policy of insurance, to Rohrig.

Under the Policy “Insured” was defined, relevantly, to include (subject to certain conditions):

any contractor or sub-contractor of any tier, other than those categories more specifically defined elsewhere in this Policy;

And “Named Insured”, in turn, was relevantly defined in the schedule to the Policy to include:

…and/or sub-contractors … including employees and agents of such entities 

Allianz agreed to indemnify Rohrig and Rhino Stripouts but denied indemnity to Mie Force.

The proceedings

Mie Force brought proceedings seeking declarations for indemnity under the Policy. The issue before the primary judge was whether Mie Force fell within the definition of those insured by the Policy. Mie Force contended that it did, on the basis that it was an “agent” of Rhino Stripouts or, alternatively, because it was a “sub-contractor” of Rohrig. The primary judge rejected both contentions.

As to the ‘agent’ issue, the primary judge addressed the meaning of “agent” as used in the Policy but found that it was not necessary to decide the proper construction of that term because even adopting the broader construction (that “agent” was used in the more colloquial sense of “any form of intermediary, or of persons who simply perform functions for others”), Mie Force was not, factually, the agent of Rhino Stripouts.

As to the ‘sub-contractor’ issue, the primary judge found that the term “sub-contractor” in the definition of “Named Insured” in the Policy did not include a “sub-sub-contractor”.

Thus, the primary judge declined to grant the declaratory relief sought.

Mie Force filed a notice of appeal alleging error in the primary judge’s determination of both the “agent” issue and “sub-contractor” issue. Allianz filed a notice of contention, contending that the primary judge erred in failing to find that “agent” bore the strict legal meaning of that term.

As to the ‘agent’ issue, in the appeal, White and Kirk JJA said the word “agent” in the Policy should be understood in its established sense as a legal term of art, describing persons with authority to create binding legal relations between a principal and third parties. The primary judge therefore erred, and Allianz’s notice of contention was upheld. There was no suggestion that Mie Force was an agent in the relevant legal sense.

(Ward P, in the minority, disagreed but ultimately held that there was no error in the primary judge’s characterisation of Mie Force as the supplier of a labour force rather than as an agent of Rhino Stripouts.)

As to the ‘subcontractor’ issue, in the appeal Mie Force argued that the term “sub-contractors” would be understood as persons performing contract work regardless of whether they were retained under a direct contract with the principal or whether they were retained by a sub-contractor to the principal.

Allianz argued that the contention by Mie Force that it carried out parts of the contract which Rohrig had with Rhino Stripouts, should be rejected – Rhino Stripouts did not contract with Mie Force to perform the demolition works in whole or in part; rather, it contracted with Mie Force for the provision of labour, and Rhino Stripouts continued to manage and oversee the demolition works.  Allianz said there was only a labour supply agreement between Rhino Stripouts and Mie Force and Mie Force are not “sub-contractors” for the purposes of the Policy (or at all).  This was unanimously accepted.

It was also held in the appeal proceeding that the primary judge had been correct to distinguish the case of Petrofina (UK) Ltd v Magnaload Ltd [1984] QB 127, a decision on which Mei Force had placed reliance, that held that a sub-sub-contractor was within the ordinary meaning of the term “sub-contractor” in an all-risks policy of insurance, which covered property damage at one site only. The Policy in this case is a “liability” policy which is far broader, covering all insured operations for the whole of the Rohrig group, extending beyond property damage, to personal injury and reputational damage.

The Appeal was therefore dismissed with costs.