Shamrock Civil Engineering Pty Ltd v Cleanaway Solid Waste Pty Ltd [2025] QCA 178

Michael Creedon | Megan Sharkey | Oliver Conroy

Key takeout

Indemnity clauses which require damage to occur ‘in the course of execution of works’ demand a causal relationship between the damage and the performance of works, rather than a mere coincidence of time and place.

Courts are reluctant to adopt a wide construction of indemnity clauses that expose contractors to uncertain liability for events outside their control (such as weather events) and unrelated to the scope of works, as such an interpretation would not reflect the parties’ presumed intentions.

Facts

This case is an appeal against the Queensland Supreme Court’s decision in Shamrock Civil Engineering Pty Ltd v Honan Insurance Group Pty Ltd [2024] QSC 313 (Primary Decision). We covered the Primary Decision here: Contractual interpretation of indemnity leaves party out of luck – Construction Law Made Easy.

To recap the key facts of the case, Cleanaway Solid Waste Pty Ltd and Cleanaway Pty Ltd (together, Cleanaway) entered into a master agreement with Shamrock Civil Engineering Pty Ltd (Shamrock) for Shamrock to complete earthworks at a waste disposal site owned by Cleanaway. A key component of the agreement was for Shamrock to construct a cell, which is a designated area for disposing of waste. The construction of the cell was to be completed in three stages.

By late February 2022, Cleanaway had completed two of the three stages of the cell. Prior to completion of the cell, referred to as Cell 3B North East, the site experienced significant rainfall which caused extensive flooding. Cleanaway alleges it incurred almost $31m in costs to drain Cell 3B North East, address noxious odours and treat contaminated water which became polluted with leachate because of the flooding.

Cleanaway sought to recover its remediation costs under clause 10 of the master agreement, which indemnified Cleanaway for:

‘any liability, loss, claim or proceeding whatsoever in respect of loss, destruction or damage to any property, real or personal, arising out of or in the course of or by reason of the execution of the Works.’

Shamrock, in turn, applied for summary judgment arguing that Cleanaway’s indemnity claim is unlikely to succeed and as such, the claim be dismissed.

In the Primary Decision, Judge Freeburn dismissed Shamrock’s application for a summary judgment, finding it arguable that Cleanaway had real prospects of success in a claim for indemnity. Shamrock appealed the Primary Decision to the Court of Appeal.

Decision

The Court of Appeal also dismissed the application for summary judgment.

Despite allowing Cleanaway’s claim to progress, the Court of Appeal rejected Cleanaway’s proposed interpretations of clause 10 and requested Cleanaway submit an amended counterclaim which raised new arguments in their pleadings. The Court of Appeal made this order on the grounds that:

1. Cleanaway had an arguable claim for damages for breach of contract;
2. a summary judgement would not preclude Cleanaway mounting a claim in damages;  
3. a trial should be conducted to explore evidence of the steps Shamrock should have taken to prevent the damages; and
4. the factual foundation of the claim could arguably enliven a right of indemnity under a separate limb of clause 10.

Rejection of ‘wide construction’ interpretation

Although the Court of Appeal also dismissed the application for summary judgment, the Court rejected the finding in the Primary Decision that clause 10 of the master agreement should be interpreted with a ‘wide construction’. Whereas the Primary Decision determined that damage occurring ‘in the course of the execution of the works’ simply requires proximity to the work in time and place, the Court of Appeal ruled that the ‘execution of works’ requires the damage to arise out of the performance of works.

The Court of Appeal supported this decision with several key reasons:

1. Each of the three components of clause 10 required there be some relationship between the damage and the ‘execution’ of works. Interpretation of ‘in the course of execution of the works’ required more than mere coincidence of the damage arising at the place or during the time when the contractor has control of the site.
2. A wide construction of the clause would expose Shamrock to uncertain liability for events over which it has no control over and operated outside the scope of works.
3. The words ‘arising in’ suggested connection more than the mere coincidence of time and place.
4. Clause 10 excluded damage which is the unavoidable result of the construction of works. It was illogical that Shamrock should be liable for damage which arose from unavoidable risks untethered to the construction of works (such as weather events).

Rejection of other interpretations

Cleanaway also argued that clause 10 created an ongoing obligation on Shamrock to manage stormwater and protect the works. The Court of Appeal rejected this argument, affirming that the only nexus between the damage and execution of works was an associate in time and place, and the nature of unperformed activates added nothing if causation is not required.