Insurance Commission of Western Australia v Leigh
[2001] WASCA 232
•1 AUGUST 2001
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE FULL COURT (WA)
CITATION: INSURANCE COMMISSION OF WESTERN AUSTRALIA -v- LEIGH & ANOR [2001] WASCA 232
CORAM: WALLWORK J
OWEN J
McKECHNIE J
HEARD: 21-22 MAY 2001
DELIVERED : 1 AUGUST 2001
FILE NO/S: FUL 27 of 2000
BETWEEN: INSURANCE COMMISSION OF WESTERN AUSTRALIA
Appellant (Third Party)
AND
GAVIN DEAN LEIGH
First Respondent (Plaintiff)QUITO PTY LTD
Second Respondent (Defendant)
Catchwords:
Road traffic - Policy of insurance - Words and phrases "all liability for negligence" and "unlicensed to drive"
Legislation:
Motor Vehicle (Third Party Insurance) Act 1943 (WA)
Road Traffic Act 1974 (WA)
Result:
Appeal dismissed
Category: A
Representation:
Counsel:
Appellant (Third Party) : Mr J G Staude
First Respondent (Plaintiff) : Mr A S Stavrianou
Second Respondent (Defendant) : Mr C L Zelestis QC & Mr M L Greenland
Solicitors:
Appellant (Third Party) : John G Staude
First Respondent (Plaintiff) : Stoddart & Co
Second Respondent (Defendant) : Greenland Brooksby
Case(s) referred to in judgment(s):
Allied Mutual Insurance Limited (Trading as AMI Insurance) v Crafts (1992) 7 ANZ Insurance Cases 61-138
Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1
The Federal Commissioner of Taxation v United Aircraft Corporation (1943) 68 CLR 525
Case(s) also cited:
Albion Insurance Company Ltd v Body Corporate Strata Plan No 4303 (1983) 2 VR 339
Central Trust Co v Rafuse (1986) 31 DLR (4th) 481
Commissioner for Railways (Qld) v Ruprecht (1979) 142 CLR 563
English and Scottish Mercantile Investment Co Ltd v Brunton [1892] 2 QB 700
Fire and All Risks Insurances Co Ltd v Nominal Defendant (Queensland) [1988] 1 Qd R 113
Guardian Royal Exchange Assurance v Kitson (1985) 3 ANZ Insurance Cases 60-676
John Ellis Ltd v Hinds (1947) 1 All ER 337
Langman v Valentine [1952] 2 All ER 803
March v E & M H Stramare (1991) 171 CLR 506
Motor Vehicle Insurance Trust v Scarborough Bus Services Pty Ltd (In Liq) [1968] WAR 10
Mulcahy v Motor Vehicle Insurance Trust, unreported; SCt of WA; Library No 4271; 2 October 1981
Podrebersek v Australian Iron and Steel Ltd (1985) 59 ALR 529
Plasteel Windows Australia Pty Ltd v Sun Alliance Insurance Ltd (1989) 5 ANZ Insurance Cases 60-918
Poland v Tilby & Motor Vehicle Insurance Trust, unreported; DCt of WA; Library No 397; 26 June 1981
Re Montagu's Settlement Trusts [1987] Ch 264
Rendlesham v Dunne (1964) 1 Lloyd's Rep 192
Ricketts v Laws (1988) 14 NSWLR 311; 5 ANZ Insurance Cases 60-878
Scott v Davis [2000] HCA 52; (2000) 175 ALR 217
Soblusky v Egan (1960) 103 CLR 215
State Government Insurance Commission v Sinfein Pty Ltd (1996) 15 WAR 434
State Insurance General Manager v Meekings-Stewart (1992) 7 ANZ Insurance Cases 61-127
Sungravure Pty Ltd v Meani (1963-64) 110 CLR 24
United Australia Ltd v Barclay's Bank [1941] AC 1; [1940] 4 All ER 20
Walton v National Employees Mutual General Insurance Association Ltd (1973) 2 NSWLR 73
Wylie v ANI Corporation Ltd [2000] QCA 314
WALLWORK J: I agree with the reasons for judgment of McKechnie J and with the order proposed.
OWEN J: I have read the reasons for judgment of the Hon Justice McKechnie. I am in agreement with those reasons and with the order proposed.
McKECHNIE J:
Introduction
This appeal raises for consideration the construction of the standard policy of insurance under the Motor Vehicle (Third Party Insurance) Act 1943, and also the construction of a warranty to that policy.
Factual Background
On 20 March 1990 the first respondent, Mr Leigh, then nearly 17, was employed as a labourer by the second respondent at its Benara Nursery premises.
He intended to proceed to morning tea by standing on the tow bar of a licensed tractor owned by the second respondent. It was being driven by another young man.
The tractor was not on a road or any place to which the Road Traffic Act 1974 applied.
Directly above the tow bar was a power take off. Mr Leigh asked the driver to turn off the power take off, thought he had done so, and mounted the tow bar. His foot was caught by the power take off which was still engaged and Mr Leigh was terribly injured.
In due course he issued proceedings against his employer claiming damages for negligence and/or breach of contract and/or statutory duty.
The employer denied negligence and claimed that Mr Leigh's injury was caused by or contributed to by his own negligence.
The employer issued third party proceedings against the appellant, the Insurance Commission of Western Australia, seeking indemnity under the compulsory policy of insurance which came into effect upon the licensing of the tractor.
The Commission, by its defence to the third party notice, denied that the employer was entitled to be indemnified on the grounds that, in breach of a warranty by the insured under the policy, the vehicle was being driven by a person who was unlicensed to drive.
Further, and alternatively, the third party claimed that the policy insured the defendant for liability for negligence and not in respect of liability for breach of contract.
The decision of the District Court
There was a combined trial of the action by Mr Leigh and proceedings under the third party notice.
The learned District Court Judge in summary held that the defendant breached its duty of care to the plaintiff by failing to provide a safe system of work in failing to ensure that its employees did not ride on tractor tow bars and tractor draw bars, and further failed to provide safe working plant and equipment by failing to provide a simple and inexpensive guard over the power take off on its tractors and by failing to provide competent properly trained staff.
The Judge declined to apportion any responsibility by way of contributory negligence to the plaintiff.
The Judge held that the employer was in breach of its duty of care in tort and in breach of implied terms of the contract of employment with the plaintiff that it would provide him with both a safe system of work and safe working plant and equipment.
In respect of the third party notice, the Judge held that a person does not have to be licensed to comply with the legislation regulating vehicles and their drivers but does have to be licensed to comply with legislation governing the insurance of such vehicles. The Judge noted that this is a curious result.
The warranty to the policy then applied to the circumstances of this case but there was a defence to breach of the warranty if the employer proved that the tractor was being driven by an unlicensed driver without the knowledge of the owner.
He found that the directors of the employer did not know the tractor driver was unlicensed and concluded therefore the tractor was driven without the knowledge of the owner. In those circumstances he found that the employer was entitled to an indemnity from the Insurance Commission.
The appeal to this Court
The appellant's amended grounds of appeal may be summarised.
Ground 1 asserts that the trial Judge erred in fact and law in finding that the employer had no knowledge the tractor driver was unlicensed.
Ground 2 asserts that the trial Judge erred in finding liability for indemnity because the finding of breach of contract meant there was no liability to indemnify under the policy, it being limited to an indemnity for tort.
Ground 3 challenges the finding that the plaintiff did not contribute to his injuries by his own negligence.
The Motor Vehicle (Third Party Insurance) Act 1943
The scheme of the Motor Vehicle (Third Party Insurance) Act is simple. At the time of the accident in 1990 the long title read:
"AN ACT to require owners of motor vehicles to insure against liability in respect of deaths or bodily injuries directly caused by, or by the driving of, such motor vehicles, to make certain provisions in relation to such insurance …. and for other purposes."
In general terms the scheme sets up a statutory fund to which a person may have recourse if he or she has obtained judgment against an insured person in respect of negligence causing death or bodily injury, being death or bodily injury directly caused by, or by the driving of, a motor vehicle specified in a policy of insurance under the Act: s 7(1).
It shall be no defence by the Commission that it is not liable under a policy of insurance by reason of the fact that the insured person has committed any breach of a warranty of a policy: s 7(4).
By s 7(5) the Commission is given a right of recovery for breach of a warranty in a policy of insurance against the insured person.
The requirements of the contents of a policy are set out in s 6(1)(b) which reads:
"except as provided in this section insure the owner of the vehicle mentioned in the policy and any other person who at any time drives that vehicle, whether with or without the consent of the owner, in respect of all liability for negligence which may be incurred by that owner or other person in respect of the death of or bodily injury to any person directly caused by, or by the driving of, the vehicle in any part of the Commonwealth;"
The policy is set out in the schedule and is as follows:
"The STATE GOVERNMENT INSURANCE COMMISSION, subject to the warranties and conditions contained in this Policy and to the provisions of the Motor Vehicle (Third Party Insurance) Act 1943, in this Policy referred to as 'the Act', agrees to insure the owner of the motor vehicle described in the Traffic Licence issued herewith and any other person who drives that motor vehicle, whether with or without the consent of the owner, in respect of all liability for negligence which may be incurred by the owner or other person in respect of the death of or bodily injury to any person directly caused by, or by the driving of, that motor vehicle in any part of the Commonwealth during the period from the date of the issue of this Policy to the date of expiry of the said Traffic Licence.
WARRANTIES
The owner warrants that the vehicle will not be -
(a)used for any other purpose than that stated by the owner in his application for this Policy;
(b)driven in an unsafe or damaged condition;
(c)driven by or in charge of himself or any other person who is unlicensed to drive or who is under the influence of intoxicating liquor.
It shall be a defence to any action in respect of the warranty contained in subclause (c) if the owner proves that the vehicle was so driven or in charge of such other person without his knowledge or consent.
CONDITIONS
1.The owner and any other person claiming indemnity under this Policy shall comply with the provisions of sections 10 and 11 of the Act.
2.Sections 7(5) and 15 of the Act are deemed to be incorporated in this insurance.
3.The Commission is entitled to all rights remedies and benefits which may accrue to it by virtue of the Act.
4.This contract of insurance is subject to the provisions of the Act."
The appeal turns on the construction of two phrases in the policy. The first is the phrase "in respect of all liability for negligence." The second is the phrase "unlicensed to drive."
"All liability for negligence"
The appellant argues that in a case where there are concurrent liabilities to pay damages under contract and tort, the contractual obligation has primacy. The appellant is only liable to indemnify against tortious liability. Therefore the appellant is not liable to provide an indemnity in the present case because the Judge found there had been a breach of contract and awarded damages accordingly. This conclusion is said to follow from Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1.
I am unable to accept the submission. There are a number of reasons why.
Firstly, the long title may be used as an aid, if one be needed, to the interpretation of the expression "all liability for negligence" where it appears both in s 6 and in the policy.
The long title does not limit in any way the requirement to insure against liability. The word "negligence" is not used in it. It is consistent with the purpose expressed in the long title and would promote the purpose of the Motor Vehicle (Third Party Insurance) Act to interpret the phrase "all liability for negligence" as comprehending liability for negligence whether arising in tort, breach of contract, or breach of statutory duty.
Secondly, the statutory scheme set up under the Motor Vehicle (Third Party Insurance) Act provides a form of compulsory third party insurance. While the scheme has similarities with ordinary contracts of insurance, there are significant differences. The obligations between insured and insurer are statutory obligations, in some ways analogous to contractual obligations, but they are not contractual obligations.
There is no competition to affect the setting of premiums and the calculation of insurable risk. Indeed, the Insurance Commission is required to provide coverage in situations where ordinary insurers could decline compensation: s 7, s 8, s 10. Conversely, the owner of a vehicle required to be licensed has no choice. He or she is obliged to pay the set premium and accept the policy.
The setting of premium levels is done to a statutory formula and subject in any event to Ministerial approval: s 3T. The formula does not include a provision for refusal of certain risks or exemption for certain classes of persons.
Claims may not be declined because the insured acted in breach of a warranty or made some act or omission which would otherwise void a contractual policy of insurance.
An injured party is entitled to claim against the Insurance Commission the unsatisfied portion of any claim notwithstanding any breach of any term, condition, or warranty of a policy: s 7(4). The Commission has rights of recourse against the policy holder, not the right to decline to indemnify.
These considerations suggest that Parliament was not intending to limit liability for negligence to particular causes of action in order to reduce the risk to the Insurance Commission or keep premiums competitive with the market.
Thirdly, the word "negligence" is susceptible of different meanings depending on its context.
One meaning refers to the rights which accrue when there is a breach of duty of care which in turn causes damage to another. These rights may be pursued in an action at law. When so pursued it is common and correct to refer to the action as a claim in tort for negligence.
Another usage of the word, both in common speech and in law, is as a noun describing general neglect, carelessness or failing to exercise reasonable care. When qualified by the adjective "contributory", negligence assumes this second meaning.
The use of the word "negligence" in the Act and the policy is of that character. It is not a term limited to the tort of negligence but encompasses any duty to take reasonable care, limited only by the nexus with motor vehicles and driving.
The use of the adjective "all" modifying "liability" both impels the conclusion that the word "negligence" is used in the second sense and provides itself further reason why Parliament should not be taken as attempting to limit liability in s 6 to cases involving liability for tort alone.
In consequence, the policy should be construed as applying to all claims for negligence, howsoever arising in contract, tort, or breach of statutory duty.
Having reached this conclusion from a textual analysis of the statute it is unnecessary to examine the appellant's submission based on Astley v Austrust Ltd (supra).
"Unlicensed to drive"
In 1990 all motor vehicles used in Western Australia were required to be licensed. A premium for a compulsory insurance policy in respect of the vehicle was paid at the same time.
The position as to the licensing of drivers was different. Licensing of drivers was and is undertaken pursuant to the Road Traffic Act 1974.
"'driver's license' means a licence issued under this Act authorizing a person to drive a motor vehicle of the class or classes therein specified, on a road."
Offences within the Road Traffic Act 1974 are created for driving a motor vehicle without a valid driver's licence on a road and are specified in the Road Traffic Act 1974.
"'road' means any highway, road or street open to, or used by, the public and includes every carriageway, footway, reservation, median strip and traffic island thereon."
It is common ground that the accident to Mr Leigh occurred while the tractor was in the grounds of the nursery; that is, not on a road as defined in the Road Traffic Act 1974.
The tractor driver did not require a licence even though the tractor did.
A licence is an authority to do something which would otherwise be wrong or illegal or inoperative: The Federal Commissioner of Taxation v United Aircraft Corporation (1943) 68 CLR 525 per Latham CJ at 533.
"Un" is a prefix meaning "not". Thus "unlicensed" is an adjective meaning:
"1.having no licence. 2. done or undertaken without licence; unauthorized." (Macquarie Dictionary)
In a situation such as this case, where no licence was required by the tractor driver to drive on the nursery property, the driver was neither licensed nor unlicensed at the time of the accident. His driving without a motor vehicle driver's licence, not being on a road was neither wrong, nor illegal. He did not need legal authority or permission to do it.
At the material time and place he was not "unlicensed to drive" within the meaning of the warranty. It has no application to the facts of this case.
Although the appellant made reference to general principles of insurance law, and the accepted meaning of similar phrases in other contracts of insurance, they are of no assistance in determining this case because of the particular factual circumstances.
In Allied Mutual Insurance Limited (Trading as AMI Insurance) v Crafts (1992) 7 ANZ Insurance Cases 61-138, Holland J suggested that the purpose of an analogous term in a private motor vehicle insurance policy was "to protect the insurer from the increased risk of a driver with a restricted licence having with him another young person not accompanied by a more experienced driver": at 77-713.
Even if this was the purpose of the clause in the policy, that purpose does not overcome the factual circumstance that the driver did not require a licence at the time of the accident and was consequently not "unlicensed".
Contributory Negligence
The trial Judge declined to apportion any liability for contributory negligence. His reasons are set out in his judgment at par 30:
"Here we have a young worker not quite 17 years of age who, seeing the power take off on the tractor spinning, albeit slowly, calls out to the tractor driver to turn off the power take off, sees him apparently go to do so and thereupon thinks it safe to mount the tractor's tow bar. I cannot see any degree of culpability on the part of the plaintiff in these events as they happened. Furthermore in terms of causation the direct cause of this accident was the defendant's neglect. Had the defendant properly instructed its work force not to ride on the tow bars of the tractors and enforced that rule with the degree of vigilance required of employers, and had the defendant employer discharged its duty to provide safe working plant and equipment by covering the power take offs on its tractors, put quite simply, the plaintiff would not have been exposed to any risk of injury at all. Put another way I decline to apportion any liability to the plaintiff. (See Podrebersek v Australian Iron and Steel Pty Ltd (1985) 59 ALJR 492.)"
In the course of cross‑examination Mr Leigh was asked if he remembered the precise moment when he put his foot on the universal joint:
"Why did you put your foot down on the universal joint when it was still turning?---Because I thought it was off, that's why I put my foot down. I thought the universal joint was off. I put my foot down and slipped and got caught and it got taken underneath in between the tow bar and the PTO with the universal joint on it.
Why did you think it was off?---Because I saw him go down and adjust something, so I thought it - automatically - was off.
Yes, but it was still turning, wasn't it?---Yes, that's right.
So why did you think it was off?---Because I - just told you, because I thought he had turned it off, I thought he adjusted something and I thought he had turned it off.
Was it your aim to stop the movement of the universal joint with your foot?---No."
The trial Judge accepted the evidence of Mr Leigh.
It was open for the trial Judge to reach the conclusion that in the circumstances there should be no culpability attaching to the plaintiff. There was a basis on which Mr Leigh believed the power take off had been disengaged at the time he put his foot on to the tow bar. It was open for the trial Judge to consider that was a reasonable belief in the circumstances, so Mr Leigh needed to do no more to be careful.
I would not interfere with the trial Judge's finding.
Conclusion
The appeal should be dismissed.
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