The devil is in the detail when it comes to the construction of exclusion clauses – Zhang v ROC Services (NSW) Pty Ltd; National Transport Insurance by its manager NTI Ltd v Zhang [2016] NSWCA 370

On 16 September 2007, a truck driver (the plaintiff), was injured whilst assisting another driver, Vlado Popovic (Mr Popovic), with a trailer operated by a hydraulic system. A clevis mount which supported a hydraulic ram that supported a ramp on the back of the trailer snapped, causing the ramp to fall onto the plaintiff. This caused catastrophic injuries to the plaintiff, including incomplete paraplegia.
The plaintiff brought proceedings against the following parties:

• Mr Popovic
  
  
• The owner of the trailer, Calabro Real Estate Pty Limited (Calabro)
  
  
• Interfreight (Aust) Pty Ltd (Interfreight), Mr Popovic's employer
  
  
• Popovic Haulage Pty Ltd (PH), a company associated with Mr Popovic
  
  
• National Transport Insurance (NTI), the insurer of the first four defendants
  
  
• ROC Services (NSW) Pty Ltd (ROC), a third party contractor who performed works on the trailer 13 months prior to the accident.

Interfreight and PH were deregistered before the trial. Consequently, both the plaintiff and ROC applied for and were granted leave to proceed against NTI pursuant to s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW).

For the full background of this case, please refer to our previous Case Note on the Supreme Court of Appeal's decision in Zhang v Popovic [2016] NSWSC 407.

In the Supreme Court, Adamson J rejected the plaintiff's primary case against ROC, namely that it had installed the clevis mount. The substantial issue for determination was the identity of the person or corporation who installed the clevis mount. Her Honour found two witnesses, a former director of Interfreight and a director and secretary of Interfreight, to be unreliable and untruthful as her Honour believed they had concocted a deliberately false story to implicate ROC in the proceedings after becoming aware of NTI’s declinature of indemnity. Her Honour concluded that the clevis mount had been installed prior to the delivery of the trailer to ROC’s premises.

Her Honour accepted that Mr Popovic knew that the ramp could not be secured into position as it normally would have and as such required extra force. Consequently, Mr Popovic was found to have breached his duty of care to the plaintiff by enlisting the plaintiff's help and permitting him to stand under the ramp, thereby exposing the plaintiff to the foreseeable risk that the ramp may fall and injure him. Her Honour was satisfied that Calabro was negligent in the maintenance and repair of its trailer and that its negligence was a relevant cause of the failure of the weld. Interfreight was held vicariously liable for the negligence of its employee. Interfreight was also held liable on its own account due to its failure to instruct Mr Popovic as to how he should conduct himself so as to protect his own safety and the safety of others who might be in the vicinity of the trailer.

Her Honour also rejected the plaintiff’s fall back case, being that ROC should have been aware that the clevis mount was unsuitable to support the hydraulic ram. Accordingly, judgment was entered in ROC’s favour on the plaintiff’s claim and on all cross-claims to which it was a defendant.

NTI sought to establish that it was not liable to cover Mr Popovic, Interfreight, PH or Calabro by reason of three exclusion clauses contained within the Fleet Motor Policy it issued. Her Honour considered the relevant policy and exclusions and their respective meanings and considered it appropriate to apply the contra proferentem maxim to construe the meaning against NTI.

The exclusion relied on by NTI, which was subject to the appeal, provided:

Her Honour regarded a construction of this clause, which applied the words 'whilst it is being driven' to all vehicles, not just those in Queensland, would advance the assumed commercial purpose of the parties to provide cover complementary to the cover provided by statutory third party insurance. Her Honour preferred the construction where these words are to be read as if a comma preceded them, to indicate that the phrase limits the operation of the exclusion. On this construction, her Honour held the exclusion did not apply as the trailer was not being driven at the relevant time. Accordingly, none of the exclusions were found to apply and judgment was entered for the plaintiff, Mr Popovic and Calabro against NTI (noting that PH and Interfreight were deregistered), effectively leaving NTI to carry the entire liability load.

The plaintiff appealed against the dismissal of his claim against ROC on five grounds. NTI sought leave to appeal against the judgment against it, principally on the basis that Adamson J had wrongfully rejected its submission that the policy did not respond. NTI also claimed that it could, with leave, appeal against those aspects of Adamson J's judgment by which Mr Popovic was held liable and sought leave to appeal from aspects of the judgment relating to costs.

Leeming JA delivered the lengthy and complex majority judgment, supported by Sackville AJA. Macfarlan JA dissented as to the proper construction of the NTI exclusion clause, agreeing with the other majority findings.

The plaintiff advanced five grounds of appeal against ROC, with all being confined to a challenge to the rejection of the plaintiff’s secondary case. None was directed squarely at the adverse finding of causation. Grounds one to three and five were directed to breach. The plaintiff argued that Adamson J:

• Erred in holding that, absent of any visual deficiency in the weld, ROC was entitled to assume that the clevis mounts were sufficient to support hydraulic rams (ground one)
  
  
• Should have found that the size of the clevis mounts was such that they needed strengthening or bracing (ground two)
  
  
• Should have held that ROC had a duty to take reasonable care to strengthen or brace the clevis mounts, or alternatively to advise that it be done (ground three)
  
  
• Should have held that ROC was negligent in using the existing clevis mounts because they were unsuitable and needed to be strengthened or changed to a stronger and more robust type (ground five).
  
  

Leeming JA noted that the onus lay with the plaintiff to establish any fact relevant to the issue of causation. His Honour held that showing the failure by ROC to either redesign the mount, or warn that the mount was incapable of supporting the hydraulic system, was a necessary condition of the occurrence of the harm, ie the injury sustained by the plaintiff some 13 months later. His Honour was not satisfied the plaintiff had discharged its burden of proof with regards to causation, highlighting numerous deficiencies, including failures to respond to appeal submissions made by ROC. Therefore, the findings of Adamson J were upheld.

Ground four of the plaintiff's appeal was that there was “no sufficient evidence upon which her Honour found that there may have been damage to the left hand side clevis mount because of impact damage to the rear of the [trailer] in August 2007”. ³ Leeming JA found the plaintiff had misconstrued Adamson J's reasoning as she did not make a positive finding but rather was not persuaded the plaintiff had made out this aspect of his case. Consequently, the plaintiff's appeal against ROC was dismissed and the plaintiff was ordered to pay ROC's costs of the appeal.

With regards to the NTI exclusion clause, Leeming JA acknowledged it was complex and imperfectly drafted. The punctuation was, in his Honour’s view, plainly erroneous and incapable of being relied upon to resolve grammatical ambiguity. Relevantly, it was noted that the purpose of the policy was to provide cover for third party liability whilst loading and unloading, something not ordinarily covered by a compulsory third party policy. Leeming JA noted that one could not merely, based upon grammar alone, construe that a clause could necessarily qualify another clause in insolation and not other related clauses. It therefore followed that Adamson J was correct in that the considerations of the context and purpose outweighed the most natural textual meaning of the poorly drafted clause. Leeming JA noted that even assuming this interpretation was incorrect, application of the contra proferentem maxim would result in the same conclusion.

Regarding Mr Popovic's liability, Leeming JA did not accept, what was referred to as a hindsight approach adopted by NTI in its written submissions, that someone in Mr Popovic’s position would not have foreseen the risk of harm, specifically that the weld holding the clevis mount in place would fail and moreover that there was no breach of duty by Mr Popovic in allowing the plaintiff to remain under the ramp.
NTI were ordered to pay the costs of the plaintiff and the former director of Interfreight in respect of NTI's application for leave to appeal. The Court of Appeal made no orders with regards to Mr Popovic's and Calabro's costs of the application for leave to appeal, with the intention that they bear their own costs.

This case confirms that the devil is in the detail with respect to policy wording, particularly exclusion clauses. Draftspersons should pay careful consideration to all aspects of a policy, including the seemingly minute grammatical and punctuation details, to ensure that the meaning is specific, clear and certain.

The burden of establishing causation will always lie with the plaintiff.