JSV and JAV v Christian Outreach Centre - [2000] NTSC 36

JSV & JAV & Ors v Christian Outreach Centre & Anor [2000] NTSC 36
PARTIES:JSV AND JAV BY THEIR LITIGATION GUARDIAN SRV
and

SRV AND AV

AND

CHRISTIAN OUTREACH CENTRE

and

FAI GENERAL INSURANCE COMPANY LIMITED

TITLE OF COURT:  SUPREME COURT OF THE NORTHERN TERRITORY
JURISDICTION:  SUPREME COURT OF THE NORTHERN TERRITORY EXERCISING TERRITORY JURISDICTION
FILE NO:No 144 of 1996 (9616356)
DELIVERED:  8 June 2000
HEARING DATES:  7 April 2000
JUDGMENT OF:   MILDREN J
CATCHWORDS:
REPRESENTATION:
Counsel:
First Plaintiffs:  Not party to preliminary question
Second Plaintiffs:
Defendant:B Cassells
Third Party:  McMurdo QC with J Kelly
Solicitors:
First Plaintiffs:  Peter McQueen
Second Plaintiffs:  Peter McQueen
Defendant:David Winter and Associates
Third Party:  Clayton Utz
Judgment category classification:    A
Judgment ID Number:
Number of pages:  10

IN SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN
JSV and JAV and Ors v Christian Outreach Centre & Anor [2000] NTSC 36

No. 144 of 1996 (9616356)

BETWEEN:
JSV AND JAV BY THEIR LITIGATION GUARDIAN SRV

First Plaintiffs
AND:
SRV AND AV

Second Plaintiffs
AND
CHRISTIAN OUTREACH CENTRE
  Defendant
AND
FAI GENERAL INSURANCE     COMPANY LIMITED
  Third Party

CORAM: MILDREN J
REASONS FOR JUDGMENT
(Delivered 8 June 2000)
MILDREN J:

The second plaintiffs are the parents of the first plaintiffs and members of the congregation of the Christian Outreach Centre. In the Statement of Claim it is alleged that in July 1993 the second plaintiffs entered into a contract with the defendant to attend a live-in bible instruction course at the defendant's premises in Darwin for a period of six weeks, commencing on 1 August 1993. It is alleged that it was a term of the contract that at times when the second plaintiffs were attending classes, the defendant would provide properly supervised and qualified childcare and schooling for the first plaintiffs in either a crèche or preschool conducted on the premises. It is alleged that the defendant owed a duty of care towards the first and second plaintiffs to ensure that the first plaintiffs were properly supervised and kept safe and secure and that whilst the first plaintiffs were in its care, the defendant breached that duty as a consequence of which:
1.        the first plaintiffs were sexually assaulted at the defendant's premises     by an Aboriginal youth known as "Big Stephen", then resident at the        premises;
2.        JSV was anally raped and assaulted by Big Stephen    with the assistance of three other Aboriginal youths at the premises;                and
3.        JAV was anally and vaginally raped and assaulted by Big Stephen.
Damages are claimed for the defendant's negligence and also for causes of action pleaded in contract and for breach of fiduciary duty which partially overlap the claim in negligence. In addition, exemplary damages are claimed. It is not alleged that the defendant is vicariously liable for the deliberate torts committed by Big Stephen and the three other Aboriginal youths.
The defendant, in addition to denying liability, has joined the Third Party and seeks indemnity under a policy of insurance. The Third Party has denied liability to the defendant on a number of grounds, one of such grounds being that "the contract of insurance does not cover any claims arising from molestation".
On 16 December 1999, Master Coulehan ordered that the following questions be tried as preliminary issues between the defendant and the Third Party pursuant to O47.04 of the Supreme Court Rules:
1. If the facts alleged in the plaintiff's further amended statement of claim are correct, is any entitlement of the defendant to be indemnified by the third party, pursuant to the policy the subject of the defendant's claim against the third party, excluded by the operation of the term of the policy which provided that "policy will not cover any claims arising from molestation."
2. If the answer to question 1 is yes, is any entitlement of the defendant to be indemnified by the third party in respect of costs and expenses incurred by the defendant in the defence or settlement of the plaintiff's claim as pleaded in the plaintiff's further amended statement of claim also excluded by the operation of the term of the policy which provides that "Policy will not cover any claims arising from molestation", regardless of whether or not the defendant is liable to the plaintiff as alleged?
The policy is a Professional Indemnity Policy. The indemnity is contained in clause 1:
THE COMPANY AGREES subject to the limitations, terms and conditions hereinafter mentioned or endorsed hereon: 1. To indemnify the Insured against any claim or claims for compensation first made against the Insured during the period of cover specified in the Schedule and reported to the Company during the period of cover specified in the Schedule. (a) for breach of professional duty in the conduct of the practice (as defined herein and referred to in the Schedule) by reason of any negligence, whether by way of act, error or omission whenever or wherever the same was or may have been committed or alleged to have been committed on the part of the Insured or his or their predecessors in business or any person now or heretofore employed by the Insured or his or their predecessors in business or hereafter to be employed by the Insured during the subsistence of this Policy, in the conduct of the practice conducted by or on behalf of the Insured or his or their predecessors in business in their professional capacity as specified in the Schedule; and (b) by reason of any negligence, whether by way of act error or omission whenever or wherever committed or alleged to have been committed arising in respect of any appointments held individually by the Insured when acting as trustees, receivers, managers, liquidators, directors or secretaries of companies, including partial secretarial work such as share transfers and the like or as clerk or manager of a charity provided the fees received from such appointments form part of the Income of the practice and provided also that such claim or claims would have been covered under (a) above but for the fact that such person was so acting and provided that there shall be no cover for claims arising from the Insured acting in any of the aforesaid capacities in connection with a business or company in which the Insured has a financial and proprietary interest.
By an endorsement attaching to and forming part of the policy:
It is hereby declared and agreed that the following amendments are made to the specification attaching to and forming part of the within policy with effect from 30.3.1996
• (not relevant) • policy will NOT cover any claims arising from molestation
• policy is extended to cover volunteer work for activities undertaken for and on behalf of the insured...
In all other respects, the policy remains unaltered.
It is not in contention that the plaintiffs first claimed against the defendant subsequent to 30 March 1996.
Counsel for the Third Party, Mr McMurdo QC, submitted that the primary meaning to be given to the word "molestation" is to assault sexually. Counsel for the defendant, Mr Cassells, submitted that the word "molest" and its derivatives is a word of wide import, and that as the policy does not give any assistance to the reader of the sense in which it is used, the word is ambiguous and should be construed contra proferentem. I was referred by both counsel to a number of dictionary definitions. The Oxford English Dictionary 2^nd Edn, Vol IX (1991) refers to "molestation" as "the action of molesting, or the condition of being molested; annoyance; hostile or vexatious interference; vexation; distress". "Molest" is given a number of meanings including "to cause trouble, grief, or vexation"; "to interfere with or meddle with (a person) injuriously or with hostile intent". Interestingly, none of the meanings refer to sexual assault. Similarly, the Macquarie Dictionary (1981 1^st Edn) defines "molest" to mean "to interfere with annoyingly, injuriously or with hostile intent" but the 2^nd Edition (1990) and the 3^rd Edn (1997) give as its prime meaning "to assault sexually", and as its second meaning "to interfere with annoyingly or injuriously". Butterworths Australian Legal Dictionary (Eds. Dr PE Nygh and P Butt) (1997) also refer to two meanings:
to act with the intent to annoy, and to annoy with ordinary and reasonable feeling: In the marriage of Moio [1984] FLC 91-575...In relation to a child, to abuse sexually.
In R v Cook (1983) 37 RFL (2d) 93 (Ontario Provincial Court) Naismith Prov J said of the expression "sexual molestation" appearing in s47 of the Child Welfare Act (Ontario):
There has been much said about the fact that there is no definition of sexual molestation in the Act. And we were referred to some definitions. Oxford defines molestation as annoyance, hostile or vexatious interference. Webster defines it as a cause or state of harassment. Counsel has shown me a definition of molest which begins: "molest is a wide ranging word which I should be reluctant to define or paraphrase...I don't think I want to go any further with definitions. Obviously there are a number of definitions of "molestation"; and of "condition" and of "sexual", but unfortunately none in the Act to help us as to just exactly what the legal test is...it is not clear as to precisely what a "condition of sexual molestation" is.
I think what these references show is that the word "molestation" had, at the time that this policy was entered into, at least two principle meanings, one of which was to assault sexually. The question then is, what meaning ought to be given to it in the policy? An insurance policy is subject to the same general rules of construction as any other written contract: see Australian Casualty Co Limited v Frederico (1985-86) 160 CLR 513 at 520. In Prenn v Simmods (1971) 3 All ER 237, Lord Wilberforce said, at 239-40:
In order for the agreement...to be understood, it must be placed in its context. The time has long passed when agreements, even those under seal, were isolated from the matrix of facts in which they were set and interpreted purely on internal linguistic considerations. There is no need to appeal here to any modern, anti-literal, tendencies, for Lord Blackburn's well-known judgment in River Wear Comrs v Adamson provides ample warrant for a liberal approach. We must, as he said, enquire beyond the language and see what the circumstances were with reference to which the words were used, and the object, appearing from those circumstances, which the person using them had in view. Moreover, at least since 1859 (Macdonald v Longbottom) it has been clear enough that evidence of mutually known facts may be admitted to identify the meaning of a descriptive term...
I may refer to one other case to dispel the idea that English law is left behind in some island of literal interpretation. In Utica City National Bank v Gunn the New York Court of Appeals followed precisely the English line. Cardozo J in his judgment refers to "the genesis and aim of the transaction" citing Stephen's Digest of the Law of Evidence, and Wigmore on Evidence. Surrounding circumstances may, he says, 'stamp upon a contract a popular or looser meaning' than the strict legal meaning, certainly when to allow the latter would make the transaction futile. 'It is easier to give a new shade of meaning to a word than to give no meaning to a whole transaction'.
It is apparent from the proposal and the policy that both parties knew that the defendant was a church which conducted school activities, and employed pastoral staff, teachers and general staff and, from its claims history, that it conducted Church Family camps. Both parties would have been aware of the notorious fact that in the last decade or so there have been numerous complaints of sexual assault brought against members of various Christian churches and that convictions have been recorded in some instances. Some of the persons involved have been priests or ordained religious celebrants; others have been teachers or other volunteers in charge of children. Both parties were aware that in 1994 it was claimed that a member of the defendant church had "touched" a fourteen year old boy attending a Church Family Camp. There is no similar history or general background in relation to interfering with others annoyingly, injuriously or with hostile intent, in such a way as may be likely to give rise to a claim in damages.
With this background in mind, what can be discerned from the policy? First, it is a professional indemnity policy. It provides indemnity for negligence; it does not provide any indemnity for deliberate torts. In fact, criminal or malicious acts by the insured or its servants are expressly excluded by the policy: see Exclusion (b). Consequently, if it was meant to exclude claims for sexual assault committed directly by the insured or those for whom the insured was vicariously liable, it was unnecessary because deliberate torts were not part of the indemnity, and were excluded also by Exclusion (b). Next, the policy covered volunteer workers, so deliberate torts committed by them were excluded also. But on the other hand, as the defendant conducted school activities, it was open to claims in negligence for any breach of its non-delegable duty of care, and such a claim could arise if someone other than the insured, its servants, agents or volunteers sexually molested a child under the defendant's care - which is precisely this case. I consider that the meaning of "molestation" in the policy is "to assault sexually".
Mr Cassells submitted that the claim in this case does not "arise from" molestation; in his submission, it arose from the defendant's breach of duty. I reject this submission. I consider that the words "arising from" indicate a causal connection between the molestation and the claim. If Mr Cassells' submission were correct, the exclusion would become meaningless. In negligence cases, there is no liability without damage. What the words "arising from" require is a causal connection between the damage and the molestation. It is not to the point that there will also be a causal connection between the breach of duty and the damage, as this is inevitable if the claim under the policy is to succeed.
Mr Cassells next submitted that the acts of rape, both anally and vaginally, could not amount to molestation. I do not agree. Rape is itself a form of sexual assault, albeit the most serious form. In fact in this Territory, the common law offence of rape was replaced with the statutory offence of aggravated sexual assault: see s192(1) and (4) of the Criminal Code, in the form in which it appeared until it was repealed and replaced with a new provision in 1994. In R v McMinn (1982) VR 53, Starke ACJ said:
The word "molest" is a very wide one and in my opinion wide enough to include sexual intercourse by force.
This supports my own view. I therefore reject this contention.
Next, Mr Cassells submitted that the kind of sexual molestation which was caught by the exemption ought to be restricted to acts of sexual molestation carried out by servants or agents of the defendant in circumstances where the negligence of the defendant has played an enabling role - for example, if the defendant had employed a paedophile when a background check would have revealed this. The difficulty with this argument is that criminal acts by servants or agents are excluded by Exclusion (b) of the policy.
Finally, Mr Casells relied upon the contra preferentem rule, but that rule is only a rule of last resort and I do not have to resort to it to resolve the question of construction; see The Western Australian Bank v The Royal Insurance Co (1908) 5 CLR 533; M.G.I.C.A. Ltd v United City Merchants (Australia) Ltd & Anor (1986) 4 A.N.Z. Ins Cas, 60-729. In any event, the rule only applies where there is an ambiguity in the sense that some other interpretation favourable to the insured is reasonably open. That is not the case here, despite Mr Cassells' valiant efforts to persuade me otherwise.
In conclusion, I consider that if the facts as pleaded in the further amended statement of claim are made out, that the defendant is not entitled to indemnity under the policy. Consequently, I would answer the first question "Yes". It was conceded by Mr Cassells that in these circumstances the second question must also be answered "Yes". In those circumstances, Mr McMurdo QC submitted that the Third Party is entitled to judgment on the Third Party Notice and asked that I enter judgment accordingly. This was not opposed by Mr Cassells. Accordingly there will be judgment for the Third Party on the Third Party Notice, and the defendant is ordered to pay the Third Party's costs to be taxed. I certify for two counsel.
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