Gatton Bus Service P/L v Australian Aviation Underwriting Pool P/L
[1992] QCA 86
•30/04/1992
[1992] QCA 086
GATTON BUS SERVICE P/L v AUSTRALIAN AVIATION
UNDERWRITING POOL P/L
COURT:
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
BRISBANE
Appeal No. 61 of 1991
[GATTON BUS SERVICE P/L v AUSTRALIAN AVIATION UNDERWRITING POOL P/L]
BETWEEN:
GATTON BUS SERVICE PTY. LTD.
(Plaintiff) Respondent
AND:
AUSTRALIAN AVIATION UNDERWRITING
POOL PROPRIETARY LIMITED
(Defendant) Appellant
_____________________________________________________________
Mr Justice Davies
Mr Justice McPherson
Mr Justice Williams
______________________________________________________________
Judgment delivered 30/04/1992
JUDGMENT OF THE COURT
Hearing Date(s):
#DATE: 30:04:1992
CWDS:
CATCHWORDS:
JUDGE1:
JUDGMENT OF THE COURT
Delivered the 30th day of April, 1992.
A Cessna 172 XP Hawk aircraft owned by the respondent crashed near the
airfield outside Gatton from which the Lockyer Valley Flying Club conducted
operations on 29 November, 1987. The plane had dual controls and the two
persons occupying the seats giving access to those controls were killed in
the crash. The appellant was the insurer of the aircraft pursuant to a
policy called "Plane Words" Aircraft Policy. Relying on s. 6 cl. 3 of the
policy the appellant refused to indemnify the respondent with respect to the
loss, and proceedings were commenced in the District Court to recover the sum
insured, namely $36,000. The trial took place before Pratt D.C.J. and a
jury.
The essential facts can be shortly stated. There was no dispute that the
aircraft in question was a "single engine aeroplane not exceeding 5,700
kilograms maximum take off weight". Its only unusual or significant feature
was that it was fitted with a variable pitch propeller. The Air Navigation
Regulations and the Air Navigation Orders Part 40 each contain requirements
relevant to the licensing of pilots and the endorsements which could be made
on a licence. M.E. Linning was the holder of an unrestricted licence
permitting him to pilot single engine aeroplanes of the size of the Cessna
172 and he was a very experienced pilot. However neither his qualifications
nor his competence were in issue at the trial. C.T. Ludwigsen was the holder
of a restricted licence permitting her to fly single engine aircraft not
exceeding 5,700 kilograms maximum take off weight, but she was not
experienced in flying such an aircraft fitted with a variable pitch
propeller. Nor was she qualified to do so.
Linning was at all material times a director of the respondent company. His
wife was also a director, but the evidence was unclear as to whether there
were any other directors. Particulars of the shareholding were not placed in
evidence, nor were the Articles of Association.
Both Linning and Ludwigsen were killed instantly in the crash. On the
flight, Ludwigsen was occupying the left hand seat which is ordinarily
occupied by the pilot in command (except where there was a pilot under
instruction). There was in consequence of their deaths no direct evidence as
to what occurred on the flight deck at material times. From conversation
which occurred prior to the flight it appears that one of the purposes of the
flight was to allow Ludwigsen to "fly" the aircraft. But that does not
support the inference that she was to fly the plane throughout the flight or
that she was the pilot controlling the aircraft at any particular point in
the flight. The critical time for purposes of the action was the attempted
landing.
The claim form dated 2 December, 1989 submitted by the respondent under the
hand of Mrs Linning as director stated that C.T. Ludwigsen was the pilot at
the material time, but that was clearly based only on the fact that she was
in the left hand seat. Given the known circumstances at the time that form
was completed and the evidence at the trial the admission, if any, contained
in that statement is of little weight.
The aircraft approached the landing strip from the west at a time when, on
the evidence, the wind was from the north‑east. The attempted landing was a
"heavy" one so that the aircraft bounced back 30 feet into the air. The
evidence from eye witnesses on the ground was all to the effect that whoever
was piloting the aircraft made a decision to "go around". Power was applied;
that was evident to those on the ground from the noise of the engine. The
aircraft gained little height (it was probably never more than a couple of
hundred feet off the ground) and turned left through 180 degrees without a
great deal of bank (it was estimated there was only about 10 degrees of bank
at that time). At about the point where it was facing west, that is about
parallel to the strip, the aircraft fell away to the left, its nose hit the
ground, and it cartwheeled to a halt.
On the evidence there were at least three possible causes or contributing
factors to the crash:
(i) Inexperience on the part of the person (on the appellants' case,
Ludwigsen) piloting the aircraft during the attempted landing. The evidence
suggested that a Cessna 172 fitted with a variable pitch propeller had a
higher "sink rate" than a normal 172, that is, it descended more quickly, and
that this was the probable explanation for the heavy abortive landing. The
aircraft may have received damage during the heavy landing so that the rudder
and possibly other control mechanisms were not functioning properly. This
was the view of some aviation experts who investigated the crash and examined
the wreckage;
(ii) Pilot (again Ludwigsen on the appellant's case) error [after the
aircraft had bounced into the air] in that either the flaps were retracted
before its speed was sufficiently high to permit the aircraft to continue
flying with safety, or there was a failure to adjust the trim of the aircraft
correctly after applying power causing the aircraft to become unstable.
Inexperience with the idiosyncrasies of a variable pitch propeller would have
made it more difficult for a pilot to regain full control of the aircraft
after it had bounced into the air, and of course an inexperienced pilot would
have greater difficulty regaining control after such a landing;
(iii) If the aircraft was being flown from the right hand seat, whether
throughout or only after the bounce, the pilot (Linning) may have become
disorientated and misread instruments, particularly the air speed indicator
which was positioned more to the front of the left hand seat, thus
occasioning an error of the type referred to in (ii). Flying the aircraft
from the right hand seat would involve the pilot overcoming factors such as
parallax error in order to read accurately controls situated to the left.
Misreading the air speed indicator after the heavy landing could have
resulted in trim or flaps being adjusted at a time at which it would have
created instability.
Clause 3 of s. 6 of the insurance policy is in the following terms:
"You shall comply with all provisions in force from time to time of the
Air Navigation Act, Air Navigation Regulations and Air Navigation and
Airworthiness Orders and Requirements issued by the Department of Transport
or other competent Authority and shall take all reasonable steps to ensure
that the Act, Regulations, Orders and Requirements are complied with by any
pilot of the aircraft, your agent(s) and employees and that the aircraft
shall be airworthy at the commencement of each flight."
The plaint alleged relevant matters with respect to the aircraft, and the
existence of the insurance policy. It then alleged the crash occasioning
loss of the aircraft and the refusal of the appellant to pay out in
accordance with the policy. The amended defence admitted all allegations in
the plaint save the value of the aircraft and the failure and refusal to pay
out pursuant to the policy. It then went on to assert that the appellant was
not under any obligation to pay out on the policy and referred to particular
clauses therein, including that quoted above. It alleged that there was an
implied term of the insurance contract to the effect that "the plaintiff by
its servants or agents would not permit or allow a pilot not licensed to fly
the said aircraft to conduct such activity". Paragraphs 6‑10 of the defence
are of importance and are set out in full:
"6. On the 29th November, 1987 being the date of the crash
particularised in paragraph 5 of the statement of claim:‑
(a) shortly prior to the said crash the said aircraft attempted a
landing at the airstrip at the Queensland Agricultural College;
(b) the pilot of the aircraft during the course of that attempted
landing was Clementine Ludwigsen;
(c) the said aircraft was so damaged during the course of that
attempted landing as to cause the same to crash in the grounds of the
Queensland Agricultural College at Lawes.
7. At all material times the said Clementine Ludwigsen was authorised
by the plaintiff by its agent Mr Murray Linning to fly such aircraft.
8. (a) Clementine Ludwigsen as aforesaid was not the holder of a
licence issued under the Air Navigation Regulations permitting her to act as
a pilot of the said aircraft.
(b) Mr Murray Linning knew the matters set out in paragraph 8(a)
hereof.
9. In breach of Regulation 50(1) of the said Regulations Clementine
Ludwigsen as aforesaid acted in a capacity as a member of the flight crew of
the aircraft namely as pilot when she did not hold a licence endorsed with
the rating appropriate for such aircraft under the provisions of Part V of
the Air Navigation Regulations.
10. The conduct of the plaintiff in permitting Clementine Ludwigsen as
aforesaid to operate the said aircraft as a pilot was in breach of each of
the terms of the said policy particularised above."
In its reply the plaintiff relied on s. 54(1) of the Insurance Contracts Act
1984 (Cth) in answer to the allegations made in paras. 6‑9 inclusive. In its
rejoinder the defendant alleged that if Ludwigsen was acting as pilot as it
had alleged, that could reasonably be regarded as capable of causing or
contributing to the loss and that in those circumstances by operation of s.
54(2) the appellant could lawfully refuse to pay the claim. In a
surrejoinder the plaintiff set up matters which would call sub‑ss. (3) and
(4) of s. 54 into play.
Regulation 50(1) of the Air Navigation Regulations was in the following
terms:
"A person shall not act in any capacity as a member of the flight crew
of an Australian aircraft (whether or not he alone constitutes the flight
crew of that aircraft) unless he holds a licence granted or rendered valid
under this Part, being a licence that ‑
(a) is appropriate under the provisions of this Part; and
(b) is endorsed with the rating (if any) that is appropriate under the
provisions of this Part,
for a person acting in that particular capacity."
The relevant provisions of s. 54 of the Insurance Contracts Act are:
"(1) Subject to this section, where the effect of a contract of
insurance would, but for this section, be that the insurer may refuse to pay
a claim, either in whole or in part, by reason of some act of the insured or
of some other person, being an act that occurred after the contract was
entered into but not being an act in respect of which sub‑section (2)
applies, the insurer may not refuse to pay the claim by reason only of that
act but his liability in respect of the claim is reduced by the amount that
fairly represents the extent to which the insurer's interests were prejudiced
as a result of that act.
(2) Subject to the succeeding provisions of this section, where the act
could reasonably be regarded as being capable of causing or contributing to a
loss in respect of which insurance cover is provided by the contract, the
insurer may refuse to pay the claim.
(3) Where the insured proves that no part of the loss that gave rise to
the claim was caused by the act, the insurer may not refuse to pay the claim
by reason only of the act.
(4) Where the insured proves that some part of the loss that gave rise
to the claim was not caused by the act, the insurer may not refuse to pay the
claim, so far as it concerns that part of the loss, by reason only of the
act."
It was against that background that the matter went to the jury. The
questions for the jury and the answers thereto were as follows:
"1. Immediately prior to the crash of the Cessna Aircraft VH‑UDU on 29
November, 1987 had the aircraft attempted a landing?
Yes
2. If "yes" to question 1, was the aircraft damaged as a consequence of
attempted landing such that such damage caused the ultimate crash of the said
aircraft?
No
3. Alternatively, did the said attempted landing otherwise cause the
ultimate crash of the said aircraft?
Yes
4. Was Clementine Ludwigsen the pilot of the aircraft during the course
of the said attempted landing?
No
5. On 29 November, 1987 was Murray Linning possessed of authority from
the Plaintiff to act as its agent in deciding who should fly the said
aircraft?
No
6. Had Clementine Ludwigsen been authorised by Murray Linning to fly
the aircraft at the time of the said attempted landing?
Yes
7. As at 29 November, 1987 was Clementine Ludwigsen unlicensed in that
she held no licence issued under the Air Navigation Regulations permitting
her to act as a pilot of a Cessna 172 XP Hawk?
Yes
8. If "yes" to question 7, did Murray Linning know of such fact?
Yes
9. Was Murray Linning aware that the Air Navigation Regulations
contained provisions as to the licensing of pilots?
Yes
10. If "no" to question 9, ought Murray Linning to have been aware that
the Air Navigation Regulations contained provisions as to the licensing of
pilots?
Not applicable
11. Could the act of allowing or authorising Clementine Ludwigsen to fly
the said aircraft reasonably be regarded as being capable of causing or
contributing to the loss of the Plaintiff's said aircraft?
Yes
12. Was no part of the loss of the aircraft caused by the act of Murray
Linning in authorising Clementine Ludwigsen to fly the said aircraft?
No
13. If "no" to question 12, was some part of the loss of the aircraft
not caused by the act of only Murray Linning in authorising Clementine
Ludwigsen to fly the said aircraft?
Yes
14. If "yes" to question 13, what proportion of the loss is attributable
to the act of Murray Linning in authorising Clementine Ludwigsen to fly the
said aircraft?
40%"
Grounds 1, 2 and 6 of the appeal challenged the jury's findings. Grounds 3,
4 and 5, which challenged actions of the trial Judge, were abandoned at the
commencement of argument before us.
Grounds 7 and 8 challenged his Honour's award of interest on the judgment at
18 per cent. However the respondent in its outline of argument in effect
conceded that 12 per cent was an appropriate rate and at the commencement of
argument the appellant abandoned its challenge to the award of any interest.
The result was that the parties agreed that if the appeal is dismissed in
substance the interest on the judgment should nevertheless be reduced by
$4,320.00.
By grounds 1 and 2 the appellant challenged the jury's findings with respect
to questions 4, 5, 13 and 14. Principally it was argued that the finding
that Ludwigsen was not the pilot (question 4) was inconsistent with the
findings contained in the answers to questions 13 and 14, was against the
evidence, and was unreasonable and perverse. Pursuant to ground 6 the
appellant argued that the finding that Linning was not possessed of authority
to act as the respondent's agent in deciding who should fly the aircraft
(question 5) was against the evidence, unreasonable and perverse.
It is convenient to deal with the argument with respect to the answer to
question 5 first. Mrs. Linning, a director of the respondent at the relevant
time, gave evidence which strongly suggested that Linning, also a director,
was the person in the company who was responsible on a day to day basis for
all management decisions with respect to the aircraft. Counsel for the
appellant in legal argument after the close of evidence directed the
attention of the learned trial Judge to this matter. As p. 226 of the
transcript indicates the learned trial Judge, with respect to the issue
raised by question 5, said to counsel for the appellant: "I don't think on
the state of the evidence there is the slightest possibility they will be
against you on that . . . I will be astonished if they do. Really I intend
to tell them they would be drawing a long bow if they found the deceased
gentleman in all of those circumstances didn't have the company's authority
to say who flew that aircraft."
The learned trial Judge did deal with the question in his summing up but did
not direct the jury as strongly as he intimated he would. He drew attention
to the fact that the defence (appellant) said "from this evidence you would
hardly come to any view other than that he was authorised by the plaintiff
even though there might not be a document available to which one could point
or there may not have been a directors' meeting held which came to that
resolution . . . Obviously, said the defence, he had the authority of this
company to say who flew and who did not fly that aircraft and actually,
ladies and gentlemen, you might think there is much strength in that
argument. However since it is a question of fact and it is one of the
questions you have to answer, it is a matter for you and only you."
Towards the end of his summing up he reminded the jury of the answers
contended for by counsel for the plaintiff (respondent). When dealing with
question 5 at that point he said: "The plaintiff says to you the expertise
being in Linning does not mean he had the authorisation, and you will
remember, says the plaintiff, that Mrs. Linning said that none had been given
to him." The last reference was to an answer given by Mrs. Linning in
evidence in chief which, to say the least, had to be heavily qualified when
consideration was given to her cross‑examination.
In all of the circumstances there is much force in the submission that the
finding by the jury reflected in the answer to question 5 is so against the
weight of evidence as to be perverse. But the jury found that Ludwigsen was
not the pilot of the aircraft during the course of the attempted landing and
the answer to question 5 therefore is irrelevant unless the answer to
question 4 is set aside.
In consequence the appeal proceeded on the basis that the answer to question
4 was critical and only if it was set aside could the appellant succeed on
the substantive issues.
There is much force in the submission of counsel for the respondent that the
jury's answers to questions 2 and 4 destroyed the appellant's case as
pleaded. All the evidence pointed to the fact, as found by the jury in
answer to question 1, that immediately prior to the crash the aircraft had
attempted a landing. When question 2 is analysed there are really two parts
to it. Firstly, was the aircraft damaged as a consequence of the attempted
landing, and secondly did such damage cause the ultimate crash of the
aircraft. Those two matters were rolled into one, and only if both were
found to have been established by the evidence would a "yes" answer be
justified. The "no" answer is perfectly consistent with the jury accepting
the evidence of the expert investigators that some damage was occasioned to
the aircraft in consequence of the attempted landing but that such damage was
not the cause of the ultimate crash. That would be the result either if the
jury were not satisfied on the evidence that such damage caused the ultimate
crash of the aircraft or they were positively satisfied that, for example,
subsequent pilot error was the cause of the crash.
There is nothing necessarily inconsistent between the "no" answer to
question 2 and the "yes" answer to question 3. There was a body of evidence
which supported the proposition that the ultimate crash was caused by the
failure of the pilot to regain full control of the aircraft after the
attempted landing. As it was the bounce back into the air after the
attempted landing which necessitated the pilot taking particular measures to
regain control over the aircraft it is obvious that an affirmative answer was
available to question 3.
In para. 6(b) of the defence the appellant asserted that Ludwigsen was the
pilot during the course of the attempted landing. Given the pleadings the
onus was on the appellant of establishing that fact. The "no" answer to
question 4 could merely indicate that the jury was not satisfied on the
balance of probabilities that Ludwigsen was the pilot at the time of the
attempted landing; it does not necessarily constitute a positive finding that
Linning was the pilot at that time. But it is clear in all the circumstances
that a "no" answer was open on the evidence.
Analysed in that light there is no inconsistency between the answers given
to questions 1 to 4 inclusive.
The answers to questions 6 to 10 inclusive were in no way challenged and are
clearly explicable on the evidence. It was not suggested that there was any
inconsistency between the answers to questions 4 and 6, and when it is
appreciated that question 6 was directed to authorisation that is obvious.
Questions 11 to 14 inclusive, which were concerned with the possible
application of s. 54 of the Insurance Contracts Act, were however the subject
of submissions, and in particular it was argued, as noted above, that the
answer to questions 13 and 14 were inconsistent with the answer to question
4.
Mr. Boughen for the respondent advanced an argument which reconciles all of
the answers, but the difficulty with accepting his suggested approach is that
it is by no means certain that that is what the jury had in mind (it is by no
means clear that the jury were invited to consider the questions in that
way). However, as the suggested approach explains the jury's findings, and
is available on the evidence, it is impossible to say that the findings
reached by the jury were perverse.
The argument was based on the third possible cause discussed above; that
Linning was flying the aircraft from the right hand seat.
There was a body of evidence, as noted above, that there was some greater
difficulty in flying this aircraft from the right hand seat, particularly in
an emergency situation. Because of that, allowing or authorising Ludwigsen
to occupy the left hand seat could reasonably be regarded as capable in an
indirect way of causing or contributing to the loss of the aircraft (on the
premise that the crash was due to pilot error influenced by flying the
aircraft from the right hand seat).
Question 12 is really a corollary to question 11. Again, on the assumption
that the jury considered that flying the aircraft from the right hand seat
was a contributing cause of the crash, the answer is fully explicable and not
inconsistent with any other finding.
The phraseology used in question 13 could only be the product of a lawyer's
tortured mind; though it was necessary to reflect the language of the statute
the question could readily have been formulated without using a double
negative. But again the answer is comprehensible given the evidence and not
inconsistent with other findings, particularly on the assumed finding that
some pilot error on the part of Linning contributed to the crash.
It must not be overlooked that in each of questions 11 to 14 inclusive the
act referred to was that of authorising Ludwigsen to fly the aircraft; for
the reasons already given there is no inconsistency between findings that
there had been such an authorisation resulting in or evidenced by Ludwigsen
occupying the left hand seat, and a finding that in fact she was not flying
(or that it had not been proven that she was flying) the aircraft at the time
specified in question 4.
Against that background the jury may well have considered it necessary to
address the apportionment as formulated in question 13. On the basis of
their previous findings it was for the jury to determine to what extent
Linning's occupancy of the right hand seat contributed to the crash; that is
to what extent was his pilot error due to or caused by the fact he was
sitting in the right hand seat. If they were entitled to consider the
evidence in that way it was not submitted that there was anything wrong with
the apportionment they arrived at.
When the jury's findings are carefully analysed in the light of the evidence
given at the trial it can be seen that each is supported by the evidence.
The allegation in para. 6(b) of the defence was central to the appellant's
refusal to pay out on the policy. The appellant failed to satisfy the jury
on the balance of probability that Ludwigsen was the pilot during the course
of the attempted landing, and in consequence the whole basis of the defence
collapsed. In the light of the jury's answer to question 4 counsel for the
respondent (plaintiff) moved for judgment and, as the record shows, counsel
for the appellant (defendant) found himself in a position where he could not
without difficulty oppose that. Judgment was therefore entered for the
respondent‑plaintiff. Before this Court the case was conducted along similar
lines. Unless this Court could set aside the finding made by the jury's
answer to question 4 it was virtually conceded by counsel for the appellant
that the judgment should stand.
For the reasons given the appellant has not demonstrated that the answer to
question 4 should be set aside and it follows that the judgment should stand,
subject to the adjustment for interest.
The appeal should therefore be allowed and the judgment of the District
Court varied so that the plaintiff should recover against the defendant the
sum of $36,000.00 together with interest at the rate of 12 per cent per annum
from the date of the plaint to the date of judgment, such interest amounting
to $8,640.00. The appellant should pay the respondent's costs of the action
including reserved costs to be taxed, and further the appellant should pay
the respondent's taxed costs of and incidental to the appeal.
ORDER:
Counsel:
Solicitors
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