Professional Liability Guide

CHAPTER 2 – CONTRACTUAL INDEMNITIES AND LIMITATIONS

Interpreting indemnity clauses When construing a contractual indemnity, it is useful to keep in mind that:

‘It is … a fundamental consideration in the construction of contracts of this kind that it is inherently improbable that one party to the contract should intend to absolve the other party from the consequences of the latter’s own negligence.’ 155 Given that indemnities can have a significant financial benefit to the indemnified party, their inclusion in a relevant contract is usually the result of specific negotiations and may even be the result of valuable consideration passing from the indemnified to the indemnifier. It is also important to be mindful that each case will turn on its facts and the specific wording of the clause being considered in the context of the commercial relationship between the parties. For that reason, while having recourse to previous decisions interpreting indemnities may provide some assistance when interpreting the clause at hand, those decisions may ultimately not be indicative of how a court will construe the indemnity due to the nuances of either the wording or the relationship between the parties. Also relevant is that the Court will construe a contractual indemnity contra proferentum where there is ambiguity. That is, where an indemnity clause is ambiguous in its effect (see Applegarth J’s remarks in Ellington below), it will be construed against the party whose interest the clause favours. 156

The case of Samways v WorkCover Queensland & Ors 157 not only guides the interpretation of indemnity clauses but also provides a good example of the benefit they can convey.

The plaintiff, a concreter, was dispatched by his employer to work at a site under the control of the defendant building contractor. The building contractor had entered into a ‘wet hire’ agreement with the defendant hire agency for the hire of a bobcat and operator. One afternoon, after some mechanical trouble, the bobcat was left on the site in its usual parking space but with the bucket in an elevated position. The following morning, the plaintiff walked into the raised bucket and injured his shoulder.

The plaintiff sued his employer, the building contractor and the hiring agency. At trial, all three defendants were liable for the plaintiff’s injuries insofar as:

ƒ the hiring agency was liable for the negligence of the operator in failing to move the bobcat or lower its bucket; ƒ the site supervisor, employed by the building contractor, was negligent for failing to move the bobcat or arrange to have it moved; and ƒ the employer was liable for failing to direct employees not to carry out tasks near the bobcat or to erect a barricade around it.

Liability was apportioned 60% to the hiring agency, 30% to the building contractor, and 10% to the employer.

155 Gillespie Bros & Co Ltd v Roy Bowles Transport Ltd [1973] QB 400, 419 cited in Ellington v Heinrich Constructions Pty Ltd [2004] QCA 475. 156 Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549. 157 [2010] QSC 127.

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