NSW Supreme Court Interprets Scope of an Indemnity
May 11, 2021
A recent decision of the NSW Supreme Court in Woolworths Group Ltd v Twentieth Super Pace Nominees Pty Ltd atf the Byrns Smith Unit Trust t/as SCT Logistics  NSWSC 344 considered whether an indemnity against loss could apply in respect of loss caused by a force majeure event in the circumstances of the contract.
Woolworths engaged SCT to transport goods by rail to Western Australia. The train carrying the goods derailed, causing damage to the goods and Woolworths to suffer loss. Woolworths sought to recover from SCT pursuant to an indemnity clause in the agreement. SCT denied liability on the basis that:
- the derailment was caused by extreme weather, which was a force majeure event; and
- the agreement operated to relieve SCT of its obligation to indemnify Woolworths for loss and damage to goods in transit caused by a force majeure event.
The agreement provided that:
- SCT indemnifies Woolworths against losses arising from or in connection with any loss, theft, destruction or damage to the goods; but also
- neither party is liable to the other for any delay or failure to fulfil its obligations that is owing to a force majeure event.
Woolworths and SCT applied to the NSWSC for a separate determination on the question of whether Woolworths could rely on the indemnity.
The NSWSC held that Woolworths was entitled to be indemnified for the loss and damage incurred, irrespective of the force majeure event.
In reaching his finding, Henry J considered the following:
- both the indemnity clause and the force majeure clause are to be construed by reference to their text, with regard to the nature and general terms of the contract as a whole;
- other clauses of the contract were consistent with the commercial intention that SCT bear the risk of any damage to the goods; and
- contrary to SCT’s submissions, a liability to indemnify is not in and of itself a liability that was excused by the force majeure clause, as it is not liability for a delay or breach caused by the force majeure event – amongst other things, the liability to indemnify was triggered by Woolworths’ loss and did not require SCT to be in breach.
The full decision can be found here.