TRIDENT GENERAL INSURANCE CO V MCNIECE BROS PTY LTD

TRIDENT GENERAL INSURANCE CO V MCNIECE BROS PTY LTD

NAME OF STUDENT

I Background Information

First instance

Appeal

Further appeal

Full citation

Trident General Insurance Co Ltd v McNiece Bros Pty Ltd

Trident General Insurance Co Ltd v McNiece Bros Pty Ltd

Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107

Parties

McNiece

Trident

Trident

Trident

McNiece

McNiece

Date

1988

1988

September 9, 1988

Court

Supreme Court

Court of Appeal

High Court

Coram

Yeldham J

Dawson JJ, Mason CJ, Wilson, Deane, Toohey, Brennan, and Gaudron JJ

II Proceedings’ History

Blue Circle Cement got into a binding insurance contract with an insurer known as Trident. Trident gave Blue Circle Cement an insurance policy that covered all liability related to accidents happening during the execution of a given construction project. In the policy, the parties that were defined as being assured included all the subcontractors, as well as contractors, engaged by Blue Circle Cement. McNiece was one of the subcontractors. After some time, McNiece was recognised by Blue Circle Cement as its principal or chief contractor in relation to the work that was being done at the plant owned by Blue Circle Cement. One of the McNiece’s workers at the plant sustained grave injuries. The worker sought, as well as recovered, an adverse judgment against his employer, McNiece. McNiece sought to be indemnified from the liability related to the injuries in accordance to the Trident insurance policy. Trident refuted the liability, arguing that only Blue Circle Cement and Trident were parties to the insurance policy. Trident asserted that there were no other parties to the policy, including McNiece.

McNiece moved against Trident at the Supreme Court. The Supreme Court ruled against Trident. Trident appealed the decision delivered by the Supreme Court at the appeal court. Subsequently, the appeal court held that contract privity was absent in the relationship between the two parties before it. The court held that McNiece failed to afford Trident consideration. Even then, the appeal court ruled in favour of McNiece, holding that insurance policies provide that a beneficiary is capable of suing on an insurance policy regardless of whether there is contract privity or there is no contract privity. As well, the appeal court ruled in favour of McNiece, holding that insurance policies provide that a beneficiary is capable of suing on an insurance policy regardless of whether there is consideration or there is no consideration. Trident appealed the decision delivered by the appeal court at the high court.

III Brief Material Facts Statement

Blue Circle Cement was the owner, as well as operator, of a Marulan-based plant for crushing limestone. On June 13, 1977, Blue Circle Cement got into a binding insurance contract with an insurer known as Trident. Trident gave Blue Circle Cement an insurance policy that covered all liability related to accidents happening during the execution of a given construction project. In the policy, the parties that were defined as being assured included all the subcontractors, as well as contractors, engaged by Blue Circle Cement. McNiece was one of the subcontractors. The policy covered all the subsidiaries of Blue Circle Cement apart from its subcontractors, as well as contractors. The policy covered all the suppliers of Blue Circle Cement apart from its subcontractors, as well as contractors, too.

The policy offered cover to the contractors, suppliers, subcontractors, and subsidiaries against liability regarding different events. The events specified in the policy included individual injuries sustained during the plant’s extension and during the plant’s alternation. Blue Circle Cement paid the related premiums to Trident. Following the issuance of the policy by Trident to premium-payer, Blue Circle Cement, McNiece became the Blue Circle Cement’s chief contract for the construction-related work that was happening at the Blue Circle Cement’s plant. On the morning of July 4, 1979, a site engineer employed by McNiece was supervising work at the plant. Particularly, the site engineer was directing a crane driver in his work at the site. The driver was not an employee of McNiece. The driver sustained grave injuries at that time.

The driver moved against McNiece, presenting an action of personal injuries against the company. McNiece was ordered to pay damages to the driver. Subsequently, McNiece wrote to Trident seeking indemnity in accordance with the terms of the insurance policy. Trident turned down McNiece’s indemnity claim, arguing that only Blue Circle Cement and Trident were parties to the insurance contract. McNiece filed a legal case in the Supreme Court against the insurer, Trident. The court was persuaded by the claim that McNiece made, determining that indeed McNiece was deemed one of the parties to the insurance contract owing to the actuality that it the contract had been ratified by McNiece following the Blue Circle Cement’s agency. Trident appealed against the determination that the court made in favour of McNiece. The appeal court agreed with the Supreme Court’s determination, deciding that McNiece remained properly and justifiably entitled to being indemnified by Trident based on the policy. The appeal court was persuaded by the argument that based on common law, an exception existed in the contract privity doctrine particularly in the case of beneficiaries under given insurance policies.

IV Issues to be Decided / Grounds of Appeal

Trident prayed that the high court find that it was not justifiable that McNiece be allowed to sue Trident to be indemnified based on the insurance contract between Trident on one hand and Blue Circle Cement on the other hand since the McNiece did not feature in the contract as one of its original parties. The high court was faced with the question of whether, regarding insurance contracts, and nearly definitely regarding indemnity contract by and large, where it can be proved that the contracts’ third parties contemplated the principals, then the parties could administer the contracts. From the foregoing, it is clear that the appellant sought to be declared as being not liable and presented only one major appeal ground.

VII Decision (Rule and Application)

On September 9, 1988, the high court’s majority, Mason, Wilson, Toohey, and Gaudron, determined that it was justifiable that McNiece be indemnified by Trident based in the Trident-issued insurance policy regardless of the actuality that it was not one of the parties to the original insurance contract between Trident on one hand and Blue Circle Cement on the other hand. The court was persuaded, as well as held, that regarding insurance contracts, and nearly definitely regarding indemnity contract by and large, where it can be proved that the contracts’ third parties contemplated the principals, then the parties could administer the contracts.

VIII Ratio Decidendi

Each of the high court judges determining the appeal agreed that the contract privity doctrine was able to create and prop justice. Even then, they gave varied perspectives on the question of if the doctrine needed to be wholly reconsidered regarding particular situations. They gave varied perspectives on the question of if the doctrine needed to be wholly reconsidered regarding particular situations such as regarding liability insurance contracts. Mason agreed with Wilson in their shared judgement that the whole contract privity doctrine ought to be reviewed but there was no need that they make that very determination in the appeal that they were determining at that time. They were persuaded that there was no need that the contract privity doctrine and the determination that consideration ought to move away from promisees apply to insurance policies.

In the 585th paragraph of the majority determination Mason agreed with Wilson that ultimately, the constrained question that the court was faced with was if old, or dated, rules were applicable to insurance policies. They determined that the unfairness that would spring from such a determination would stem from the failure to make the espoused intention of the insured take effect would order own affairs consequently. They determined that the unfairness that would spring from such a determination would stem from the failure to make the espoused shared intention of the related parties take effect would order own affairs consequently. They determined that the unfairness that would spring from such a determination would stem from the failure to make the espoused shared intention of those aware of given insurance policies take effect would order own affairs consequently. They affirmed that the possibility of dependence by third parties to the expected benefits under given insurance policies was rather tangible that the common law ought to be modelled with a consideration of the possibility.

Mason agreed with Wilson in their shared judgement that the argument was lend even more significant force where it was applicable to insurance policies targeting liabilities that are presenting as covering insured parties and their charges, including subcontractors. They reasoned that numerous subcontractors are likely to suppose that such policies are indemnities that are effective in own favour. In addition, they reasoned that numerous subcontractors are not only likely to suppose that such policies are indemnities that are effective in own favour but also likely to keep away from taking out own insurance arrangements for the same grounds covered by the policies. They were persuaded that the situation was likely to have played out in the case of McNiece. In the case of McNiece, they determined that regardless of the carefulness that the court would have ordinarily adopted in reviewing the previous authorities and long-running principles, they could only determine that the principle-based shaping of the law needed that McNiece be recognised as being entitled to a favourable ruling regarding the action.

Mason and Wilson pointed out in the 115th paragraph of the majority ruling that third parties had no capacity to sue in accordance with insurance contracts. As well, Mason and Wilson pointed out in the 115th paragraph of the majority ruling that strangers to the corresponding considerations have no capacity to maintain law-related actions upon it. They accepted that the elementary contract privity rules and the need that promisees move away from consideration have been besieged. They noted that in America, in most states third parties are capable if suing straightforwardly on insurance parties that they are meant to benefit other parties. Even then, regardless of then reform calls, the classic values had continued to hold in the United Kingdom and in Australia. They recognised that they had been a number of law reforms, including the 1984’s Insurance Contracts Act that allowed insurance policy third parties for whom given insurance policies were aimed at conferring given benefits to them to sue straightforwardly on the insurance policies in given cases. Characteristically, even then, the classic rules were applicable.

Gaudron determined the Trident’s appeal devoid of referring to contract privity as a doctrine. She determined that given that the insurer had acknowledged a settled promise consideration relating to a third party’s benefits, it was obligated to the third party to suffice the promise. She determined that the third party had attained a right, capacity, to move actions for the purposes of securing the promise’s benefits. Toohey was persuaded that in cases where public liability indemnity insurance policies are awarded in situations where there is proof that the related third parties expect to be indemnified, the parties who order own affairs in sensible dependence that they are idemnifiable under such policies are perfectly entitled to suing on such policies. Dawson and Brennan dissented the majority ruling.

IX Obiter Dictum

The majority judgement recognised the chance for damages’ action at the promisees’ suit for promise breach to confer benefits to third parties was not an adequate sanction, or justification for securing the promise’s performance. Particular performances may serve as suitable remedies in given cases although not all and the third parties rely on promisees to execute given promises to their own benefit. As well, particular performances may serve as available remedies in given cases although not all and the third parties rely on promisees to execute given promises to their own benefit. The court’s minority threw away the implied prayer that the contract privity doctrine be abolished by and large and specifically regarding liability insurance contracts.

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