Commercial and General Insurance Co Ltd v Government Insurance Office (NSW)

[1973] HCA 51

HIGH COURT OF AUSTRALIA

. Menzies, Walsh and Mason JJ.

COMMERCIAL AND GENERAL INSURANCE CO. LTD. v. GOVERNMENT INSURANCE OFFICE (N.S.W.).

(1973) 129 CLR 374

9 November 1973

Motor Vehicles—Insurance

Motor Vehicles—Third party insurance—Bodily injury caused by or arising out of use of motor vehicle—Workman injured by mobile crane in fixed position at construction site—Whether use of motor vehicle—Motor Vehicles (Third Party Insurance) Act, 1942 (N.S.W.), s. 5 (1) "motor vehicle". Insurance—Double insurance—Contribution between insurers—Extent of liability to contribute—Whether one insurer entitled to indemnity rather than contribution—Motor Vehicles Act, 1942 (N.S.W.), s. 10 (8) (b).

Decision

November 9
THE COURT delivered the following written judgment:-
This is an appeal from a decision of the Supreme Court of New South Wales (Hope J.) dismissing a claim for contribution between two insurance companies. The appellant, an insurer under the Workers' Compensation Act, 1926, as amended (N.S.W.), indemnified an employer against a judgment obtained by a rigger who suffered injuries, whilst in the course of his employment, in an accident involving a mobile crane upon a construction site. The accident, it was found by Hope J., was caused by the negligence of a fellow employee who was the driver of the crane. The respondent was the insurer of the employer under the Motor Vehicles (Third Party Insurance) Act, 1942, as amended (N.S.W.)
- the Act - in respect of the mobile crane. This latter policy covered the liability of the negligent employee as well as the employer whose liability was, in the circumstances, entirely vicarious. His Honour held that the claim failed because the circumstances of the use of the crane at the time of the accident did not give rise to any liability on the part of the respondent to indemnify the employer. (at p377)

2. The mobile crane was described by his Honour as -

"...one in which the controls for driving the unit along the ground were situated in a separate cabin from the controls which operated the crane, these being mounted in a structure affixed to the body of the unit above the rear wheels of the unit, and the motor which operated the crane was a different motor from the one used to move the unit on its wheels. The crane had attached to it metal beams called outriggers which, when not in use, did not protrude from the sides of the unit, but which could be drawn out when it was desired to use them. The unit could be used as an ordinary mobile crane or, to use the term used in a notice affixed to the unit, could be used 'free', and when so used could be driven from place to place, along a public road or elsewhere, and with or without a load attached to the crane, and could also be operated when the unit was stationary. The outriggers were used when it was desired to use the crane in a static or 'blocked' position. In this position, the outriggers were drawn from the sides of the unit and jacks which were attached to the end of each outrigger were screwed down so that they came into contact with a support, which generally comprised a stack of timber. When the crane was on level ground, the jacks were screwed down so that pressure was taken off the tyres of the wheels of the unit, but so that the wheels were still touching the ground. The result of this operation was that the weight of the mobile crane was on the jacks and the timber beneath them, so that the weight of any object being lifted by the crane did not change the position of the body of the crane in relation to the ground by reason of extra pressure on any of the tyres. Where the ground on which the crane was being used in a static position was not level, it might be necessary to depress the jacks to an extent sufficient to raise one or more of the wheels completely off the ground, so that the body of the unit retained its horizontal position. As is apparent, the weight which could be raised safely by the crane, and the radius of the movement of the jib which could be permitted with safety, varied according to whether, inter alia, the crane was being used 'blocked' or 'free', and a table was affixed to the inside of the cabin from which the crane was driven setting out the maximum weights which could be raised by the crane when the jib was extended to specified radii, and according as whether the crane was 'blocked' or 'free'."

At the time of the accident the crane was being used on the construction site in a "blocked" position. It had been driven to the site some days before the accident and had been used in a "blocked" position which was changed from time to time. His Honour regarded the crane as a "hybrid" unit which could be used for two purposes: as a mobile crane, in the "free" position and moving along streets, or as a fixed crane when "blocked". Because he found that the crane was not being used as a mobile crane, he held that this use was not use as a motor vehicle within the meaning of the Motor Vehicles (Third Party Insurance) Act. (at p378)

3. We are of the opinion that so to hold was at variance with the decisions of this Court in Fawcett v. B.H.P. By-products Pty. Ltd. (1960) 104 CLR 80 and Government Insurance Office of N.S.W. v. R.J. Green &Lloyd Pty. Ltd. (1966) 114 CLR 437 . In Fawcett's Case (1960) 104 CLR 80 the use of a mechanical loader, when stationary, was held to be the use of the insured motor vehicle within the meaning of the Act. In the latter case, Barwick C.J. said (1966) 114 CLR, at pp 441-442 :

"...the Act is not limited to the use of a vehicle in or upon public thoroughfares or to its use in movements: and that in choosing the expression 'the use of the motor vehicle' as the basis for the requirement of a policy of insurance and for the delimitation of the area of the indemnity to be obtained, the Act indicates an intention to cover a very wide field, a field more extensive than what might be called the traffic use of the motor vehicle."

The Chief Justice gave the example of a tarboiler as a vehicle whose use is covered by the Act even when stationary. It was not disputed in the present case that a mobile crane was a motor vehicle within the meaning of the Act. Clause 5 of the third party policy limits the indemnity to cases where the motor vehicle is being used for the purposes of a mobile crane. In our opinion, the crane was in use as a mobile crane at the time of the accident. A mobile crane does not cease to be a mobile crane just because it is being used in a stationary or "blocked" position; it is a mobile crane being used in one of the ways in which it was built to be used. (at p378)

4. Counsel for the respondent argued that a principle whereby a use for the purposes of the Act is constituted by the use of the insured motor vehicle in accordance with its description is to state the matter too widely. Such a principle would, it was said, result in a large number of situations, such as an injury to a worker injured by a lathe in a mobile workshop or a tea-lady injured by an urn in a mobile canteen, falling within the Act. It is true that the application of what has been decided may sometimes result in a person obtaining an indemnity against a liability which seems remote from the purposes of an insurance that is requisite only for vehicles which go upon public roads, but this derives in part from the consideration that the cover obtained is not limited to what happens upon public roads. It extends to the use of the motor vehicle in New South Wales. Furthermore, as has been decided in cases such as Harvey Trinder (N.S.W.) Pty. Ltd. v. Government Insurance Office of N.S.W. (1966) 114 CLR 449 , it is not every use of an insured motor vehicle that will constitute a use for the purposes of the Act and a policy in accordance therewith. Indeed, some of the extreme cases quite naturally used to illustrate the far reaching consequences of what has already been decided may, when a decision becomes necessary, be found to be outside the limits of a third party insurance indemnity. Unfortunately no solution of borderline cases can be provided without legislative intervention. It seems to us that, as the authorities stand, it is not possible to import some limitation of a general character depending upon the circumstance that, when a person is injured arising out of the use of an insured vehicle, the use at the time is unconnected with locomotion. (at p379)

5. Having reached the conclusion that the respondent was liable to indemnify the employer in respect of the injuries caused in this accident, it follows that the principles stated by this Court in Albion Insurance Co. Ltd. v. Government Insurance Office (N.S.W.) (1969) 121 CLR 342 , are applicable and that the respondent is liable to contribute. (at p379)

6. The next question is the extent of the respondent's liability to contribute. The appellant claims an indemnity, or alternatively a contribution of half, of what the appellant has spent in contesting and settling the rigger's claim against his employer. (at p379)

7. Where a person is entitled under two policies of insurance to an indemnity against loss arising from the happening of an event, the risk of which is covered by each policy, then, for the purposes of adjusting the rights of the insurers, the two policies are treated as one insurance and the insurer which satisfies the indemnity is entitled to contribution from the other insurer: Albion Insurance Co. Ltd. v. Government Insurance Office (N.S.W.) (1969) 121 CLR 342 . (at p380)

8. Here, on the view which we have taken of the construction and application of the third party policy, there was such a double insurance. We consider, therefore, that the appellant was entitled to contribution from the respondent. As we have said, however, the appellant has, by the amendment to its original claim, sought that the contribution, so called, should be an indemnity. This claim is that, although there was but one insurance, the loss should be borne by one of the insurers to the exclusion of the other. In considering this, one suggestion may be disposed of shortly. The Law Reform (Miscellaneous Provisions) Act, 1946, s. 5, cannot itself be a source of any right of one insurer to recover from another. The operation of that provision is confined to tortfeasors. Furthermore, there is no contractual relationship between the two insurers. Accordingly, any claim that the appellant has against the respondent must depend upon the right to contribution arising from the double insurance of the one risk, i.e. the risk of the employer's liability in damages for the negligence of his servant for which he must bear the responsibility. Such a claim is, by its very nature, one to rateable relief and it is not immediately obvious how, when there is a double insurance, one of the insurers should be able, in proceedings for rateable relief, to throw the whole burden of the indemnity upon the other. Indeed, the purpose of the doctrine is to avoid this very thing. The doctrine is not concerned with working out the rights of insurers and third parties. It is concerned with distributing the indemnity to which the insured is entitled under policies of insurance with two insurers. If the rights of insurers and third parties are involved, a further element is introduced, namely, what is, or could be, the result of the exercise by an insurer of his right of subrogation to the position of the person who has been indemnified. (at p380)

9. It may be that the appellant, having fully indemnified the employer, could, by subrogation, sue the employee for damages, contribution or indemnity, relying upon the common law or, in certain circumstances, s. 5 of the Law Reform (Miscellaneous Provisions) Act: Lister v. Romford Ice &Cold Storage Co. Ltd. (1957) AC 555 . It would, however, be a question whether that decision would apply in a case where the employer is under a statutory obligation to obtain a policy which would cover the liability of the employee as well as the employer. Furthermore, it may be that the extent of the contribution to be made by the employee in the event of successful proceedings would depend upon the actual circumstances of the employment as well as the necessity for third party insurance. We do not, however, propose to examine these problems because, even assuming that a claim here by the employer against the employee would succeed, we consider that the different claim made here, namely by one insurer against the other for full indemnity, must fail on the simple ground that the right to contribution between co-insurers, recognized and confirmed by the decision in Albion Insurance Co. Ltd. v. Government Insurance Office (N.S.W.) (1969) 121 CLR 342 , can never amount to a complete indemnity but must always be confined to rateable contribution. That is the essence of the right. The only so-called "equity" upon which the appellant can rely against the respondent is for rateable contribution, and its claim for indemnity is misconceived. In meeting the employer's claim for indemnity, as it did, the appellant, of course, acknowledged that it was discharging its own liability to the employer under its policy. Its present claim is that the liability which it discharged was ultimately not its at all but was that of the respondent entirely because the respondent's policy covered the employee as well as the employer. (at p381)

10. Let it be supposed that, by an application of Lister's Case (1957) AC 555 , the appellant, by subrogation, obtained judgment against the employee. Would it follow that the employee could then recover from the respondent? It seems to us that for the determination of this question the course which the appellant ought to have taken, in its endeavour to throw the whole of the burden of the employer's indemnity upon the respondent, was not to have sued the respondent for contribution as a co-insurer but to have sued the employee and in that or subsequent proceedings to have sought to have the issue of liability between the employee and the respondent, for any sum for which judgment might be obtained, determined as between the proper parties. The initiative to claim against the respondent would rest with the employee, not with the appellant. (at p381)

11. The appellant, however, relies upon authority to support its claim. We are disposed to think that the authority which lends most guidance in the matter is Sickness and Accident Assurance Association Ltd. v. General Accident Assurance Corporation Ltd. (1892) 19 R 977 (Court of Sess.) . This case was referred to in Albion Insurance Co. Ltd. v. Government Insurance Office (N.S.W.) (1969) 121 CLR 342 , and part of the judgment of Lord Low was cited with approval with regard to the doctrine of contribution in cases of double insurance. The judgment, however, provides further assistance here for the Lord Ordinary goes on to distinguish between claims made by virtue of the doctrine of double insurance and claims made by virtue of the right of subrogation. In referring to the decision of the House of Lords in Simpson &Co. v. Thomson (1877) 5 R (HL) 40 , Lord Low said (1892) 19 R, at p 980 :

"That case, however, appears to me to belong to a totally different branch of law from the present case. It exemplified an application of the doctrine that where the insured has a primary right against third parties who have been the authors of the loss, the insurers on making good the loss are entitled to be put in his place, and to enforce the remedies which he would have had against these third parties. That, however, is not the doctrine which lies at the root of the rule of marine insurance to which I have referred, but it is a doctrine which would be destructive of that rule. The right of an underwriter who has indemnified the insured to claim contribution from the other underwriters cannot be founded upon the doctrine of subrogation, because an assignee can have no higher right than his cedent, and a shipowner who has received full indemnity from one underwriter can never make any claim against another underwriter." (at p382)

12. It is, however, necessary to consider the case of Dawson v. Bankers and Traders Insurance Co. Ltd. (1957) VR 491 , which was followed in Northern Assurance Co. Ltd. v. Coal Mines Insurance Pty. Ltd. (1970) 91 WN (NSW) 293 . (at p382)

13. In Dawson's Case (1957) VR, at p 492 , Sholl J. was dealing with a claim by one insurer for contribution from another insurer and held that "there is no equity in one insurer to throw on another insurer any part of a loss which, on a full working out of all parties' rights, would be wholly borne by the former". In reaching this conclusion he relied upon North British &Mercantile Insurance Co. v. London, Liverpool &Globe Insurance Co. (1877) 5 Ch D 569 . In the first place it may be observed that the case relied upon was not a case of double insurance but concerned an unsuccessful attempt by the insurer of one party to obtain contribution from the insurer of another party in respect of a loss covered by each policy in favour of the different parties, namely a wharfinger and an owner of grain stored by the wharfinger. What was decided was the grantors of the policy to the owner were not liable to contribute to the loss for which the wharfinger was primarily liable, but against which he was insured under the wharfinger's policy, so that the grantors of that policy were ultimately liable. It was accepted that, had the owners elected to sue under their policy, their insurer would have had a right by subrogation to sue the wharfinger in order to recover what they paid and that, in those circumstances, there being no double insurance, there was no right of contribution by the insurers of the wharfinger against the insurers of the owner. This authority does not bear upon the problems which arise when there is double insurance. Sholl J., however, did hold that, where a person injured because of the negligence of an employee recovers damages from the driver's employer, a claim by the employer against the driver for an indemnity would be a claim to enforce "liability ... incurred by" the driver "in respect of bodily injury caused by or arising out of the use" of a motor vehicle. Upon this question there were conflicting views in Victoria in Australian National Airways Pty. Ltd. v. Vines (1950) VLR 510 and Knowles v. Sheen (1953) VLR 109 . Sholl J. said (1957) VR, at p 505 :

"I am of opinion that a claim by an employer against his employee for an indemnity in the contemplated circumstances would be a claim to enforce a 'liability ... incurred by' the driver 'in respect of ... bodily injury to any person caused by or arising out of the use of such motor car in Victoria', within the meaning of those words as used in the plaintiff's policy; cf. Australian National Airways Pty. Ltd. v. Vines (1950) VLR 510 . I do not, if I may respectfully say so, share the doubt as to the correctness of the decision expressed by learned counsel for the present plaintiff, as an Acting-judge of this Court, in Knowles v. Sheen (1953) VLR 109 ." (at p383)

14. A third party insurance policy, to conform with s. 10 of the Motor Vehicles (Third Party Insurance) Act, must insure the owner and the driver of a motor vehicle "jointly and each of them severally against all liability incurred by that owner and that person jointly or by either of them severally in respect of the death of or bodily injury to any person caused by or arising out of the use of the motor vehicle in New South Wales ..." (at p383)

15. Furthermore s. 10 (8) (b) (iii) of the Act, so far as relevant, is as follows:

"Every third-party policy shall to the extent of the
insurance effected by that policy -
...
(b) extend ... to indemnify the insured person ... against -
...
(iii) liability arising where the insured person ... claims
contribution from some other person as a joint tort-feasor
or has a claim made against him...as a joint
tort-feasor." (at p383)

16. In deference to the argument addressed to us, we have thought it proper to deal with counsel's reliance upon Dawson v. Bankers and Traders Insurance Co. Ltd. (1957) VR 491 , and upon s. 10 (8) (b) (iii) of the Motor Vehicles (Third Party) Insurance Act 1946, but we must emphasize that, in our opinion, it is only in proceedings between the parties concerned, viz. the employer, the employee, and the third party insurer, that the questions which have arisen can properly be determined. In the working out of rights and obligations of insurers among themselves, it ought not to be assumed that there will be independent proceedings by some person not subject to the control of the insurer interested in the taking of such proceedings. (at p384)

17. There is a further matter. The claim for contribution extended to one half of $30,283.41 (i.e. judgment of $28,000 with $925.20 costs, plus the employer's costs of defending the action $1358.21). For the respondent it was argued that no part of $1358.21, the costs of defending the action, was proper subject matter for contribution. With that we agree. The costs were incurred by the appellant in the exercise of its right to defend the action brought against the employer which it had insured. The indemnity granted to the employer, however, was against claims for which the employer should be liable for any injury to an employee. Accordingly, the policy of the appellant did not cover the costs which the appellant incurred in defending the action. Nor did the third party policy. The indemnity thereby granted was against liability "incurred by the owner and/or the driver in respect of the death of or bodily injury to any person caused by or arising out of the use of the motor vehicle". Neither policy, therefore, covered the costs incurred by the employer or the appellant in defending the rigger's action. Accordingly, in our opinion, the liability of the respondent is limited to one half of $28,925.20, i.e. $14,462.60. (at p384)

18. We would, therefore, allow the appeal and order that the appellant should have judgment for that amount. (at p384)

Orders

Appeal allowed with costs.

Order of the Supreme Court of New South Wales be
set aside and in lieu thereof order that judgment
be entered for the plaintiff in the sum of
$14,462.60 with costs.