A recent NSW Court of Appeal case1 highlights the subtleties of indemnity clauses.
An indemnity clause in a construction contract provided that the subcontractor was to indemnify and keep indemnified,
the joint venture (which was the main contractor):
“…against all claims…arising as a result of any act, neglect or default of the subcontractor, its employees
or agents elating to its execution of the Works.”
An employee of the subcontractor fell over some pipes lying on the floor. The joint venture submitted that the act of
s act” any
the subcontractor’employee in tripping and falling was an “ falling within the meaning of “ act, neglect or
default” the indemnity.
The majority of the Court of Appeal held that the words “ and default”
neglect” “ involved a breach of legal duty. There
was no rationale or practical reason for the contract to treat the word “ as providing an obligation to indemnify
irrespective of whether the breach was tortious, contractual or statutory.
The majority accordingly held that the mere “ of tripping was not sufficient to create a liability under the indemnity.
The dissenting judge held that the word “ was neutral and did not connote a breach of duty.
If you want to draft an indemnity which creates a liability for any act irrespective of whether it is tortious or negligent,
you need to make that clear in the clause.
We also draw your attention to Andar Transport P/L v Brambles Limited2 in which the High Court held that where an
indemnity is ambiguous, the principles of construction require the provisions to be construed in favour of the surety,
i.e., the person giving the indemnity.
Article by Harold Werksman
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1 F&D Normoyle Pty Ltd v Transfield Pty Ltd 2005 NSWLR 502
2 2004 217 CLR 424 at 437