De Vito v Commercial Union Assurance Co. Ltd No. Scgrg-00-535

DE VITO v COMMERCIAL UNION ASSURANCE COMPANY LIMITED
[2001] SASC 16

Full Court: Doyle CJ, Olsson and Bleby JJ

1................ DOYLE CJ....... Mr De Vito conducts a transport business. He made a claim on his insurer, Commercial Union Assurance Company Limited (“CUA”). The claim was for the cost of repairs carried out on one of his trucks. The repairs were required after the truck was damaged when it overturned. CUA denied liability. Mr De Vito brought proceedings in the District Court to enforce his claim under the policy. The Judge found in favour of CUA. Mr De Vito has appealed.

The issue before the Judge, and on appeal, was whether the claim made by Mr De Vito is one that CUA is permitted to decline to pay in reliance upon either one of two “General Exclusions” found in the policy. The Judge found that one of the relevant exclusions was applicable.
The exclusion upon which the Judge relied is one which permits CUA to refuse to pay a claim for damage if the vehicle is driven by a person “who is under 25 years of age or has held the relevant class of drivers licence for less than 2 years”. The driver at the time fitted that description. The issue before the Judge was whether this clause should be given its literal meaning, or whether it should be interpreted in accordance with what Mr Hayes QC, counsel for Mr De Vito, submitted was the presumed or reasonable expectation of the parties as to the operation of the policy. The submission for Mr De Vito was that this clause should be interpreted as applying only if the driver in question was driving with the authorisation, express or implied, of Mr De Vito.

The policy

Mr De Vito was insured under a “Heavy Transport Insurance” policy issued by CUA. The terms and conditions of this policy are contained in a printed document of fourteen pages.
The first two pages contain an extract from the Insurance Contracts Act 1984 (Cth) and a number of “Important Notices”. Then comes a section headed “Our Agreement”, followed by the detailed policy terms. They are grouped under a number of subheadings, namely: “General”; “Section 1: Loss of or damage to Insured Vehicle”; “Section 2: Third Party Liability,” and “Endorsements”.
The section headed ‘General’ has a number of sub-headings. Under the various sub-headings are definitions of the terms used in the policy, details of the excess payable in respect of a claim, and details of “Additional Benefits” payable under the policy. Then there are two sub-headings “General Conditions” and “General Exclusions”. The Section headed “General Conditions” sets out a number of conditions which do not require consideration. The section heading “General Exclusions” contains 11 separate exclusion clauses including those relevant to this case.
Both Section 1 providing for “Loss of or Damage to Insured Vehicle” and Section 2 relating to “Third Party Liability” have further sub-headings which specify “Additional Benefits” and “Exclusions”.
The claim in this matter was made under Section 1. That section provides that:
“Following physical loss or destruction of, or damage to, the Insured Vehicle caused by any accident or misfortune:
1.     the Company will, at its option, either:
(a).... repair, reinstate or replace the Insured Vehicle; or
(b)    make a cash payment to the Insured, owner or other party who has an interest in the Insured Vehicle to the extent of that interest, and such payment by the Company will be in full and final discharge of that interest;
.........
3.The Company will pay either:
(a).... the reasonable cost of protection and removal [of the vehicle] to the nearest repairer ... or place of safety ...; or
(b)    the reasonable cost expended by the Insured in the recovery or return of the Insured Vehicle following theft, .........”
Following the provisions for “Additional Benefits” there are a number of “Exclusions”. These include an exclusion stating that:
“The Company will not pay any claim for:
1...... loss, destruction or damage caused by:
(a).... lawful seizure;
(b) operation of law arising from any breach of contract, agreement or obligation.”
The policy draws a distinction between the Insured and the Driver, through the “Definitions” in the “General” section. This distinction is relevant to the extent of the coverage of the policy, particularly the scope of the General Conditions and General Exclusions. ‘Insured’ is defined to mean:
“the person(s), company(ies) or firm(s) named as the Insured in the Schedule of this Policy and subsidiary companies, only if also named in the Schedule.”.

“Driver” is defined to mean:

“the Insured or any person with the Insured’s permission driving, using or in charge of the Insured Vehicle or Substitute Vehicle.”

The policy uses the terms “Driver” (with the “d” in upper case) on numerous occasions. However, whenever the verb “to drive” is used (usually as “driven”) the “d” is in lower case. And, on occasions, “driver” appears in lower case. An example of this appears in one of the “Important Notices”, which provides as follows:
“6. Acceptance of Driver Questionnaires
You must notify the Company of all drivers prior to them driving any Insured Vehicle. This notification must be given on the Company’s standard Driver Questionnaire form. Cover will not be effective until each driver has been accepted by the Company and you have been notified of the Company’s acceptance.
Failure to submit a Driver Questionnaire will result in any claim being denied if the Driver does not satisfy our underwriting guidelines.
If a Driver Questionnaire is submitted after an event giving rise to a claim, and the Company accepts the driver, a penalty excess of $3,000 will apply in addition to any other excess.”
[Emphasis added]
“General Conditions” 1 is as follows:
“1. Duty of the Insured
The liability of the Company is conditional upon:
(a).... payment of the premium by the Insured;
(b) the notification as soon as possible by the Insured to the Company of any change materially varying any of the facts or circumstances which existed at the commencement of each Period of Insurance, including notification of any new or additional driver on the Companys’ standard Driver Questionnaire form; and
(c)... compliance with the terms of the Policy by the Insured and by any other person claiming indemnity under this Policy.”
Condition 2 provides for the cancellation of the Policy in certain circumstances by the insurer. Condition 3 prohibits the transfer of the interest under the policy without the insurer’s written consent. Condition 4 deals with “Claims Procedure”. Condition 5 permits CUA to control any claim against the insured, and to exercise rights of subrogation. Condition 6 states that the policy operates only while the Insured Vehicle is used within Australia for either social, domestic or pleasure purposes or in connection with the Insured’s business or occupation. Condition 7 headed “Co-Insurance” limits CUA’s liability by reference to the market value of an insured vehicle.
Following the “General Conditions” are the “General Exclusions.” These specify matters in respect of which “the Company will not pay claims”. It should be noted that some of the exclusions refer to theft as a possible ground for a claim, namely, exclusions 1-4, 9 and 11 while the remainder do not. (I will return to the significance of this). Exclusion 1 provides that CUA will not pay claims for:
“1..... any destruction, loss, damage, theft, fire or liability caused, sustained or incurred when the Driver was not authorised to drive the Insured Vehicle or Substitute Vehicle under the law in force in the State or Territory in which the Insured Vehicle or Substitute Vehicle was being driven, and the insured knew or should reasonably have known at the time that the Driver was not duly authorised;”

It is to be noted that the defined term “Driver” is used here.

Exclusion 2 permits CUA to reject a claim resulting from “destruction, loss, damage, theft, fire or liability caused, sustained or incurred when” the Driver (again with the defined meaning) was under the influence of drugs or alcohol; had a blood alcohol level equal to or more than the level prescribed by law; and when the Driver had refused to undergo a breath analysis test measuring the concentration of alcohol or any drug. The exclusion does not operate with respect “to anyone otherwise entitled to indemnity under this Policy if he or she proves that he or she was not aware and could not reasonably have been aware that the Driver of the Insured Vehicle or Substitute Vehicle was at the time so affected ... .”
Exclusion 3 permits the denial of a claim for “any destruction, loss, damage, theft, fire or liability caused, sustained or incurred” when the Insured Vehicle or a trailer or attachment is used to carry excess loads, for conveying passengers, or is in an unsafe condition. This exclusion is not limited to use by a “Driver”.
Exclusion 4 deals with:
“4. any destruction, loss, damage, theft, fire or liability intentionally caused, sustained or incurred by the Driver, the Insured or with the consent of the Insured except as a result of the Driver taking evasive action in the ordinary course of driving.”

Again, the defined term “Driver” is used.

Exclusion 5 and 6 respectively permit denial of liability for “any destruction, loss, damage, fire or liability caused by or arising from” radioactivity or nuclear material and any consequence of war or invasion. There is no reference to a “Driver” or to driving. Exclusion 7 denies a right to recover, in the case of concrete mixers, for “destruction, loss, damage, fire or liability caused, sustained or incurred” as a result of solidification of concrete.
Exclusion 8 is the critical provision. It permits CUA to refuse to pay a claim for:
“8. any destruction, loss, damage, fire or liability caused, sustained or incurred where the Insured Vehicle is driven by or in control of any person who is under 25 years of age or has held the relevant class of drivers licence for less than 2 years;”

There is no reference to “theft”. Here, the defined term “Driver” is not used. As will appear, this is central to the issue that arises on appeal.

Exclusion 9 permits denial of a claim for “any destruction, loss, damage, theft, fire or liability caused, sustained or incurred where” arising from the Insured vehicle being left unattended for longer than a day otherwise than where it is normally kept “by the Insured or the Driver”. Exclusion 10 is another critical provision. It deals with:
“10. any destruction, loss, damage, fire or liability caused, sustained or incurred by a Driver who is not acceptable by the Company; ”

It is immediately followed by the note:

Note

If we do not have a completed Driver Questionnaire at the time an event giving rise to a claim occurs, the claim will be denied if the Driver does not satisfy our underwriting guidelines.”

The operation of Exclusion 10 is clarified by item 6 under the heading “Important Notices” on page 2 of the policy. For convenience, I set it out again:
“6. Acceptance of Driver Questionnaires
You must notify the Company of all drivers prior to them driving any Insured Vehicle. This notification must be given on the Company’s standard Driver Questionnaire form. Cover will not be effective until each driver has been accepted by the Company and you have been notified of the Company’s acceptance.
Failure to submit a Driver Questionnaire will result in any claim being denied if the Driver does not satisfy our underwriting guidelines.
If a Driver Questionnaire is submitted after an event giving rise to a claim, and the Company accepts the driver, a penalty excess of $3,000 will apply in addition to any other excess.”
Finally, exclusion 11 permits denial of a claim for “any destruction, loss, damage, theft or liability caused, sustained or incurred whilst” the Insured Vehicle is subject to an agreement of lease or hire. There is no reference to use of the vehicle by the Insured or by a “Driver”.

The facts

Mr De Vito had insured under the “Heavy Transport Insurance” policy a prime mover and trailer. In October, 1997 the truck and trailer overturned while being driven in the course of Mr De Vito’s business. Mr De Vito had entrusted the truck to a Mr Eaton. It was agreed at trial that Mr Eaton was a driver accepted by CUA under the policy. Accordingly, he was a “Driver” as defined. He, however, had permitted his partner Ms Good to drive it. Ms Good was driving the truck when it overturned. She was not a driver accepted by CUA under the policy. No Driver Questionnaire was submitted with respect to Ms Good until after the accident. CUA then refused to approve her on the grounds that, contrary to its approved driver policy, Ms Good had held her heavy transport licence for less than two years and was ineligible for approval. Consistent with this she was described by the Judge as a driver of little experience.
Mr De Vito claimed from CUA the sum of $90 000 for repairs to the prime mover. Initially the claim stated that Mr Eaton had been the driver, but later it was amended to reflect the fact that the driver had been Ms Good. CUA denied liability.
The issue of whether Mr De Vito knew of Ms Good being a driver arose at trial. This is important if one accepts Mr De Vito’s contention that “General Exclusion” 8 and 10 should be interpreted so as not to apply if Mr De Vito did not know of Ms Good being the driver at the time of the event giving rise to the claim.
There was evidence at trial to the effect that Ms Good had driven the truck previously. She had driven the truck within Mr De Vito’s transport depot at Waikerie and had also driven it to a fuel depot. Vehicle log books maintained for Road Transport Inspections listed Ms Good on a number of occasions as a ‘two-up’ driver. Minor damage to spotlights on the truck was said to have occurred while Ms Good was driving in Western Australia when the truck hit some kangaroos.
At trial, CUA argued that Mr De Vito knew of Ms Good having driven the truck before the accident. Mr De Vito denied this allegation. Mr De Vito stated that the accident with the kangaroos had not come to his attention, nor did he see or learn of Ms Good driving the truck within the depot. Mr De Vito also stated he had no reason or obligation to look in the log books. The trial Judge held that the case that Mr De Vito knew, or acquiesced in, Ms Good driving the truck was “very weak” but, found it unnecessary to make any specific finding.
The trial Judge did, however, suggest that Mr De Vito, despite his denials, knew that Ms Good had been driving soon after the accident occurred. This was based on the evidence of an employee who stated that Mr De Vito had referred to Ms Good as having been the driver in the accident. The trial Judge stated in conclusion, though making no finding, that he “would probably find that [Mr De Vito had] found out that ... [Ms Good had been the driver] on the day of, but after the accident.”

The issue

It was common ground that the claim made by Mr De Vito fell within Section 1 of the policy. Accordingly, Mr De Vito was entitled to payment under the policy unless one of the “General Exclusions” applied.
It was also common ground that CUA had not been informed, before the accident, that Ms Good would or might drive the truck in question; that before the truck overturned a Driver Questionnaire had not been submitted in respect of Ms Good, and that after the truck was damaged, when a Driver Questionnaire was submitted, CUA had decided that she was “not acceptable by the Company”.
As “Driver” is defined to mean a person driving a vehicle with the insured’s permission, General Exclusion 10 would permit CUA to reject the claim only if Mr De Vito gave his permission for Ms Good to drive the truck.
This issue was litigated before the Judge, but as I have already said he did not make a finding on the matter. He indicated that he probably would have found that Mr De Vito was not aware that Ms Good was driving or was likely to be driving the truck.
However, the Judge found that General Exclusion 8 applied, and enabled CUA to reject the claim. He rejected a submission that it should be interpreted as if the words “any person” were equivalent to the defined term “Driver”. In other words, he rejected a submission that General Exclusion 8 operated only when the person in question was someone whom the insured knew would be driving or someone whom the insured permitted to drive.

The submission for Mr De Vito

Mr Hayes QC, counsel for Mr De Vito, began his submissions on appeal by invoking certain well established general principles of construction applicable to insurance policies. He relied upon a passage from the dissenting judgment of Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99. Although Gibbs J dissented in the result, the principles that he states are, in my respectful opinion, supported by authority. He said (at 109);
“It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, “even though the construction adopted is not the most obvious, or the most grammatically accurate”, to use the words from earlier authority cited in Locke v Dunlop (1888) 39 Ch. D. 387, at p. 393, which, although spoken in relation to a will, are applicable to the construction of written instruments generally ; see also Bottomley’s Case (1880) 16 Ch.D. 681, at p. 686. Further, it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument. Finally, the statement of Lord Wright in Hillas & Co. Ltd. v. Arcos Ltd. (1932) 147 L.T. 503, at p. 514, that the court should construe commercial contracts “fairly and broadly, without being too astute or subtle in finding defects”, should not in my opinion, be understood as limited to documents drawn by businessmen for themselves and without legal assistance (cf. Upper Hunter County District Council v. Australian Chilling and Freezing Co. Ltd. (1968) 118 C.L.R. 429, at p. 437).”
Mr Hayes also put particular reliance on the following passage from the reasons of Kirby P in Transport Industries Insurance Co. Ltd. v NSW Medical Defence Union Limited (1986) 4 ANZ Insurance Cases [60-736] at 74, 410;
“But where the words of a commercial document are ambiguous, it is appropriate to assign to them the meaning, which the Court is permitted to infer, that those words hold as derived from the presumed expectation of the parties that the contract would operate in a commercial and realistic way. This approach is particularly suitable when applied to a policy of insurance where, in accordance with orthodox rules of construction, doubts should, as a last resort, be construed in favour of the insured and contrary to the insurer proffering the contract.”

I will return to these principles as appropriate during the course of my reasons.

Mr Hayes submitted, correctly in my opinion, that the policy covers the event that had occurred, namely, damage caused by accident or misfortune. He then submitted that the evident purpose of the policy was to permit CUA to refuse to pay a claim based on an insured event, when the refusal to pay was based on the fact that the insured event was caused or brought about by the driver of a vehicle or the person in control of the vehicle, only if the insured knew that the relevant person was or would be the driver, and had permitted this occur, either expressly or tacitly. When I questioned the precise scope of this submission, Mr Hayes adopted the following comment from the reasons of the Judge below:
“Surely what the parties must have intended was exclusion of loss or damage occurring when events giving rise to exclusions were authorised or at least connived at by the insured.”

Putting the submission a little differently, CUA could refuse to pay a claim, relying on one of the General Exclusions, when the relevant clause related to something done by the driver, or to the qualities or experience of the driver, only if the insured knew that that person was or would be the driver at the time in question, and had acquiesced in that.

Mr Hayes agreed that the effect of his submission was to read Exclusion 8 as if the words “a Driver” were substituted for the words “any person”.
He further argued that one could find in the policy a purpose to provide cover for the insured except in the circumstances just referred to by me. Adopting the words of Kirby P set out above, he said that his submission was consistent with the “presumed expectation of the parties”, and that the approach taken by the trial Judge and by CUA was not commercially realistic.
He also submitted that the policy document does not always use “Driver” and “driver” consistently. He referred to note 6 under the heading “Important Notices” to illustrate his point. For convenience, I record that I am not satisfied that he is correct about that, but I do not find it necessary to engage in a close analysis of this part of the policy.

Conclusions

I do not accept the submissions put by Mr Hayes. I consider that the Judge was correct.
There is no real doubt about the relevant principles to be applied. They are conveniently summarised in Halsbury’s Laws of Australia, Vol 15, Insurance, para [235-370]:
“(1)Words and phrases used in the contract are to be given their ordinary meaning, except where the ordinary meaning is in conflict with the meaning expressly given to them in the contract, or where the words or phrases have a special technical or legal meaning.
(2)Words and phrases must be interpreted in the context in which they appear.
(3)... In construing a contract, it is necessary to take account of its main object or commercial purpose, even if that requires words to be given a strained meaning.
(4)Any ambiguity in the contract is to be interpreted against the party who drew it up, which is normally the insurer. This principle only applies where there is a true ambiguity and it cannot be used to create an ambiguity. If the contract is put forward by the insured or the insured’s broker, the principle does not apply in favour of the insured, although it may apply in favour of the insurer. The principle also applies in favour of the insured where the relevant term is implied as a consequence of legislation.”
......... (Footnotes omitted).

In my opinion there is no inconsistency between this summary of the relevant principles and the propositions stated by Gibbs CJ and set out earlier in these reasons.

It is common ground that read literally Exclusion 8 operates to permit CUA to refuse the claim made by Mr De Vito. What basis is there for reading it in any other way? In large part the submissions for Mr De Vito relied on a presumed expectation as to the operation of the policy, being that advanced by Mr Hayes and summarised above. In my opinion there is an element of question begging in this approach. Mr Hayes’ approach tended to be to state the presumed expectation, and then to interpret the policy, and Exclusion 8 in particular, in the light of that presumed expectation. But, to the extent that the presumed expectation as to the operation of the policy is in the form of a relatively specific statement about how the policy will operate, the only permissible approach is to begin with the provisions of the policy itself and to see whether they support the presumed expectation. One cannot force the terms of a policy into the strait jacket of a presumed expectation, if that presumed expectation is derived from something outside the terms of the policy, and particularly if it may be, in reality, nothing more than the insured’s contention as to how the policy should be construed.
In my opinion, the underlying purpose or presumed expectation that Mr Hayes invoked cannot be found in the terms of the policy. To begin with, some of the General Exceptions operate by reference to a fact or event, without reference to any element of knowledge or acquiescence by the insured: for example, Exclusions 5 and 6. Exclusion 3 deals with a number of events, and while one would think that in most cases the person driving the vehicle would know of the circumstance that attracts the operation of Exclusion 3, knowledge of the circumstance on the part of the person driving or of the insured is not a condition of the availability of Exclusion 3. It is true that a number of the exclusions operate by reference to things done or permitted by the insured or by the Driver (meaning a person driving with the insured’s permission). Examples are to be found in Exclusions 1, 2, 4 and 10. But in a policy dealing with the insurance of trucks that will be driven by employees or subcontractors, it is not surprising to find frequent reference to a person driving with the permission of the insured. It is quite another thing to infer from this that, when the conduct of a driver (whether a permitted driver or not) produces an event that is identified in one of the general exceptions, the insurer will be concerned about that event only if the driver was a “Driver”.
In particular, I do not find it at all surprising that Exclusion 4, dealing with loss caused intentionally, should operate only when the loss is caused by a “Driver”. It is not surprising that the policy does not provide cover against loss intentionally caused by a person whom the insured permits to drive, but does apply to loss intentionally [caused] by some other person. Nor do I find the suggested literal interpretation of Exclusion 8 surprising. Exclusion 10 deals with loss (using that term quite generally) caused by a “Driver”. If the insured has permitted the person in question to drive, that person must be a person “acceptable by the company”. Through Exclusion 10 CUA gets the ability to control who may drive the trucks in question. Exclusion 8 provides a further level of protection that is not surprising in the context of a policy insuring a motor vehicle. It provides that if the person driving is below a certain age, or has less than a certain amount of experience, then CUA may refuse to pay the claim. Such provisions are not uncommon, particularly when they relate to the excess to be paid by the insured. I do not find it at all surprising, having regard to the overall nature of the policy, that CUA should stipulate for this further level of protection.
The most that can be said is that when a General Exclusion refers to something done or permitted by a person driving a truck, it refers to a “Driver”. But one can understand the reason for doing so in each case, without inferring that CUA is concerned only with the conduct or qualities of a “Driver”, in the defined sense.
For those reasons I am unable to discern, from the terms of the policy, a presumed expectation of the parties about the operation of the policy that accords with that identified by Mr Hayes. My view is that when the provisions of the policy are examined, one cannot arrive at the starting point for which Mr Hayes contends. One cannot generalise from the use of “Driver” in the General Exclusions as he would have the Court do.
Nor, in my opinion, does the literal approach to Exclusion 8 for which CUA contends produce any lack of harmony in the sense referred to by Gibbs J. In saying that I do not suggest that the policy provisions are incapable of producing results, in some instances, that might surprise the casual reader. But in my opinion when the General Exclusions in particular refer expressly to the insured or to a “Driver”, it is understandable that they should do so, and when they do not it is again understandable that they should not do so. In saying that I am not assuming the answer to the question under consideration. I mean that I do not find any internal tension or overall lack of harmony by reading the policy in the manner suggested by CUA. For example, in a policy like the present one it is to be expected that there will be a provision like Exclusion 10, permitting CUA to refuse to pay a claim if the person whom the insured permits to drive the truck is not “acceptable by the company”. The use of the defined term “Driver” in Exclusion 10 makes sense. Nor do I find it surprising that by Exclusion 8 CUA should give itself the right to refuse to pay a claim if the driver (whether a person permitted by the insured or not) is a person of less than a certain age or with less than a certain amount of experience. That is a common provision in motor vehicle policies. The concept of reading a document as a harmonious whole has about it a certain lack of precision, but I can find no tension or lack of harmony that would lead me to reject the literal meaning of Exclusion 8.
It must not be forgotten, as Gibbs J said, that if the words of the clause are clear, the court must give effect to them, even if the results may be unreasonable, and even if the court suspects the parties may have intended something else. I do not suggest that the result in the present case is unreasonable, or that I am satisfied that both parties would have intended something different. I merely emphasise the caution to be exercised before departing from a clear meaning.
At one stage in his reasons the Judge described the policy as “most obscure”. I am not as critical of the policy as was the Judge. Some aspects of the policy do cause some problems of interpretation, but there are probably few policies of insurance, intended to cover a fairly wide range of events, that do not give rise to some problems of interpretation.
The comment that the Judge made is related to uncertainty about the operation of the policy in the event of loss suffered as a result of theft by a driver. This could be loss in the form of deliberate or careless damage to the vehicle by a driver engaged in the theft, or it could be loss as a result of the truck simply disappearing after a theft. The point was made by the Judge, and by Mr Hayes in submissions, that there is no good reason why CUA should be permitted to refuse to pay such a claim if the truck is driven away by a thief who falls within Exclusion 8, but not by a thief who is more than 25 years of age and who has held the relevant class of license for more than two years. Doubts were raised by the Judge and by Mr Hayes about the application of Exclusions 1 and 4 in the case of theft. In my opinion too much weight should not be accorded to an argument based on such a situation. If a truck disappears or is damaged, and the reasonable inference is that this was a result of theft, the insured will be entitled to make a claim under the policy. If it can be proved that the thief was the “Driver”, CUA can refuse to pay the claim, relying on Exclusion 4. It may be that if it can be proved that a thief drove the truck away and was a person who falls within Exclusion 8, CUA will be entitled to refuse to pay the claim, but not if the thief was over 25 years of age and has had the relevant licence for at least 2 years. These outcomes depend on another issue, the operation of the policy in a case of theft.
In any event, they are not the results that I would reject as irrational or unreasonable. On the face of Exclusion 8, CUA has stipulated for the right to refuse to pay a claim when a truck is driven by or in control of a person falling within Exclusion 8, and while that may seem to have little to do with a claim for theft or deliberate damage, it is simply a consequence of the protection for which CUA has stipulated. The same comment can be made about a claim for damage intentionally caused.
None of the considerations advanced by Mr Hayes lead me to the conclusion that clause 8 is ambiguous. Ambiguity is not to be equated with an effect that may, in some situations, appear surprising and not to have a great deal to do with the sort of risk under consideration. I should add that in my opinion by and large the policy does appropriately distinguish between “Driver” and “driver”. That is not to say that some lapses may not be found, but I do not accept the submission that the defined term “driver” is used indiscriminately.
In conclusion, my opinion is that when the words of the policy are given their ordinary meaning, the present case falls within Exclusion 8, and CUA is entitled to refuse to pay the claim. I have not found any ambiguity in the meaning of clause 8, nor any irrationality in its operation. Nor can I identify any presumed expectation of the parties as to the operation of the policy, or a main object or commercial purpose, that would require the words of Exclusion 8 to be given a meaning other than their literal meaning.
For those reasons I would uphold the decision of the Judge.

Alternative contention

Mr McNamara, counsel for CUA, submitted that the Judge erred in failing to make a finding that Mr De Vito knew that Ms Good had driven and was likely to drive the truck, and accordingly that she was a person driving with his permission, and accordingly a “Driver”. The significance of this is that if that finding were made, then in any event CUA would be entitled to refuse to pay the claim relying on Exclusion 10.
As I observed earlier, the Judge did not make a finding on this point, although he indicated that if he had to make a finding, it is likely that he would have made a finding in Mr De Vito’s favour. The point is one on which a conclusion will be influenced significantly by one’s impression of Mr De Vito, and by one’s conclusion as to his credibility. As the Judge has not decided the point, it is inappropriate for this Court to decide the point for the first time. Had the submissions for Mr De Vito as to the operation of Exclusion 8 been successful, in my opinion it would have been necessary to remit the matter to the District Court for further consideration by the trial Judge.
In view of the conclusion that I have reached as to the meaning of Exclusion 8, it is neither necessary nor appropriate to take this matter any further.

Conclusions

For those reasons I would dismiss the appeal.

OLSSON J. I have had the benefit of reading in draft, the reasons for decision published by the Chief Justice in this matter.
I am compelled to the conclusion that, with respect, as a matter of logic and proper application of legal principle, his ultimate conclusion and the reasoning leading to it must be correct.
For a time I had some difficulty with the consequence that such a construction could lead to the apparently anomalous result that, if one of the appellant’s vehicles was stolen and damaged by a thief, then cover might be dependent on the age and/or driving experience of the thief.
However, the short answers to such a suggestion of anomaly are that:-
whether or not that would be the end result may well depend upon the proper interpretation and application of provisions of the relevant policy not here directly in issue; and
it must be borne in mind that the parties expressly bargained for a situation in which the premium paid reflected cover only for situations in which the actions of drivers of certain profiles were to be the subject of the policy. Payment of a higher premium could, no doubt, have led to a more extensive cover.
Even if it be thought that (2) above was not a complete riposte to the suggestion of anomaly I cannot regard that situation as being so acute as to require the policy not to be interpreted according to its normal and literal terms.
I, too, would dismiss the appeal.

BLEBY J. I agree that the appeal should be dismissed. I agree with the reasons of the Chief Justice. I merely add a few supplementary remarks of my own.
For the sake of convenience, I repeat the provisions of General Exclusion No 8:
“The Company will not pay claims for:
8...... any destruction, loss, damage, fire or liability caused, sustained or incurred where the Insured Vehicle is driven by or in control of any person who is under 25 years of age or has held the relevant class of drivers licence for less than 2 years.”
This was a claim for loss and damage sustained whilst an insured vehicle was being driven by a person who had held the relevant class of driver’s licence for less than two years. I can see no reason to depart from a literal reading of the exclusion clause.
There is no presumption in or implication to be drawn from the policy that the particular exclusion is to apply only when the relevant events were authorised or connived at by the insured. Indeed, the indications are to the contrary.
All exclusions contained in the “General Exclusions” part of the policy, where it is necessary to refer to the actions or qualifications of a person driving the vehicle, use the word “Driver”. By definition that means the insured or any person with the insured’s permission driving, using or in charge of the insured vehicle. Significantly, General Exclusion No 8 does not use that expression. It is the only exclusion which refers to the situation of a vehicle being driven by “any person”. Had the policy intended that the exclusion would only apply if the insured knew or ought to have known of the lack of qualification, it could have used the word “Driver” rather than “person”.
In addition, a number of the general exclusions apply where the driver fails to meet certain qualifications or fails to comply with certain negative stipulations. They are exclusions 1 (not authorised by law to drive), 2 (alcohol), 4 (intentional loss or damage), 8 and 10 (driver not approved by the insurer). There are also other exclusions which can apply as a result of certain acts or omissions of the driver or person in control, where that is not the insured. They are exclusions 3 (vehicle being driven while unsafe or unroadworthy etc), 7 (where used as a concrete carrier) and 9 (vehicle left unattended for more than 24 hours).
In only two of those exclusions is knowledge or connivance of the insured at the lack of qualification on which the exclusion depends or lack of knowledge of the insured of the disqualifying factor expressed to be a relevant consideration. That is in exclusions 1 and 2. That is a clear indication that the drafter of the policy conditions considered the insured’s state of knowledge or connivance to be relevant to some exclusions and not to others. In those circumstances it is significant that there is no reference to knowledge or connivance in exclusion No 8.
The literal interpretation of exclusion No 8 may appear to give rise to two perceived anomalies. The first is that if the vehicle is stolen and driven away but not damaged by a person who is under 25, the costs of recovery or, if the vehicle is not recovered, the value of the vehicle, may be claimed under the policy. However, if it is stolen and only damaged as a result of such a person driving the vehicle, the claim will be excluded. The second perceived anomaly might be that if the vehicle is stolen and damaged whilst being driven by a stranger who has all the necessary driving qualifications, the claim will be met, but it will be excluded if the thief happens to be under 25.
In my opinion such anomalies are perceived rather than real. They would appear to be a result of the fact that some general exclusions (Nos 1‑4 and 9) relate to claims for destruction, loss, damage, theft, fire or liability caused, sustained or incurred, whilst other exclusions (Nos 5, 7, 8 and 10) do not relate to theft. There is no doubt good reason why some exclusions relate to theft and some do not.
However, the perceived anomaly disappears when it is realised that there are many components of an insured risk, the presence or absence of which will affect the premium to be paid. This policy identifies a number of risk components which relate to the conduct and qualifications of persons driving the insured vehicles. It is easy to infer from the insurance provisions and the exclusions that drivers who are under 25 and who have held the relevant class of licence for less than 2 years provide a greater risk to an insurer than drivers who are over 25 and who have held the appropriate licence for more than 2 years.

If an exclusion which relies on those qualifications not being met is qualified so that the risk increases, no doubt the premium will be correspondingly affected. The insurer may well have taken the view that the risk of loss by theft of or from the vehicle is not materially affected by the age and driving qualifications of the driver, but that the risk of destruction, loss and damage through the driving of the vehicle by a person who does not meet those qualifications is increased, whether or not such a person drives with the knowledge or consent of the insured. That view is given effect to by the provisions of exclusion No 8.
In my opinion the appeal should be dismissed.

[2001] SASC 16

14 February 2001