No break in the chain of causation - Court of Appeal finds public liability insurance policy responded to loss

27 May 2024

The Appellant successfully challenged a decision of the District Court of New South Wales, which found that it had broken the chain of causation (in a case involving personal injury suffered by a commuter who slipped on wet tiles) by reopening a stairway with tiles that it knew, or may have known, were slippery when wet.

The Appellant argued that the cause of the injury derived from a breach of an implied contractual term by the contractor as the tiles were ultimately not reasonably fit for purpose. The Court of Appeal found in favour of the Appellant, with the consequence that the contractor’s public liability insurance policy responded to the commuter’s injury.

In issue

  • Whether there was an implied contractual term that tiles provided by a contractor would be reasonably fit for purpose.
  • Whether the implied term was breached by the contractors as the tiles were moderately slippery when wet and therefore not reasonably fit for purpose.
  • Whether the slipperiness of the tiles contributed to a commuter’s injury.
  • Whether the ‘chain of causation’ had been broken by the Appellant’s reopening of the tiled area to the public despite its knowledge or potential knowledge that the tiles were moderately slippery when wet.
  • Whether the public liability insurance policy would respond.

The background

In 2016, the Appellant (Sydney Trains) engaged a contractor to provide and install tiles of two different sizes on a stairway connecting a platform and the concourse at Penshurst Railway Station. A commuter slipped on the (wet) tiles and sustained injuries. Prior testing had found that, when the tiles were wet, there was a moderate risk of slipping. In 2018, the Appellant was held liable for the injury caused to the commuter in relation to the slipperiness of the tiles.

The Appellant separately initiated proceedings under s 601AG of the Corporations Act 2001 (Cth) against the public liability insurer of the contractor, being the Respondent (Argo Syndicate AMA 1200), alleging that the contractor was in breach of implied terms in its contract with the Appellant, and that the insurance policy provided cover in those circumstances. At trial, the primary judge found:

  1. that the contractor had breached an implied term of the contract by laying tiles which were moderately slippery when wet and therefore not reasonably fit for their purpose;
  2. that the ‘chain of causation’ was broken as the Appellant had opted to reopen the stairway despite its knowledge or potential knowledge regarding risks of slipping with the tiles; and
  3. the policy responded to liability for contractual damages arising from the contractor’s breach of the implied term.

The Appellant appealed the decision on a narrow basis, submitting that the primary judge had erred in his conclusion that the Appellant had broken the chain of causation for its loss.

The decision on appeal

The Court of Appeal upheld the primary judge’s finding that there was a breach of an implied term that the tiles provided by the contractor would be fit for purpose, in circumstances where the Appellant was entitled to rely on the expertise of the contractor in the provision and installation of the tiles. The Court rejected the Respondent’s submission that it had not been demonstrated that the tile on which the commuter had slipped was wet, and upheld the primary judge’s finding that the slipperiness of the tile had contributed to the commuter’s injury.

Further, the Court found that the Appellant had not broken the chain of causation by its reopening of the stairway. The Respondent argued that once the Appellant had the test reports on slip resistance, the onus shifted to the Appellant to explain why it had reopened the stairway, such that this decision should be regarded as the sole cause of the injury. The Court did not accept this argument, citing some possibilities as to why the significance of the slip resistance testing may not have been appreciated by the Appellant (including scenarios where the contractor may have failed to properly inform the Appellant). As such, the evidential onus remained with the Respondent, which failed to establish what in fact happened after the contractor received the slip resistance test results. Accordingly, Leeming JA found that the Respondent failed to discharge its onus.

The Court of Appeal also upheld the trial judge’s findings that the insurance policy did respond to liability under a breach of contract claim, and that no exclusion clauses were applicable. The relevant policy clause provided that ‘The Insured is indemnified in accordance with the Insuring Clause against liability for injury, damage or advertising liability sustained as a result of an Occurrence during the Period of Insurance’. Although the Respondent argued that ‘liability for injury’ only refers to the compensation of an injury, Leeming JA instead held that this clause should not be interpreted narrowly, but rather, in accordance with the commercial circumstances which the policy was intended to address.

Implications for you

For insurers, this case reinforces that while there may be more than one act or event which may be a sufficient cause of an injury, the chain of causation is not necessarily broken by the act or event which constitutes a more immediate cause of the loss. This judgment also demonstrates the Courts’ approach to the interpretation of insurance policies, being one which considers the broader context of commercial interests of parties and the objectives which a policy was intended to secure.

Sydney Trains v Argo Syndicate AMA 1200 [2024] NSWCA 101

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