Morris v FAI General Insurance Co Ltd

[1995] QCA 157

IN THE COURT OF APPEAL	[1995] QCA 157
SUPREME COURT OF QUEENSLAND	Appeal No. 242 of 1994
Brisbane
Before	Fitzgerald P. Davies J.A. Pincus J.A.

[Morris v. F.A.I. General Insurance]

BETWEEN:

KATRINA MARY MORRIS

(Plaintiff) Respondent

AND:

FAI GENERAL INSURANCE COMPANY LTD

(Defendant) Appellant

REASONS FOR JUDGMENT - FITZGERALD P.

Judgment delivered 05/05/1995

I agree with Davies and Pincus JJ.A. that this appeal should be dismissed, with costs.

There were potential difficulties with the form of the action, in which the respondent, who was injured by the appellant's insured, sued the appellant not the tortfeasor: cf. Manufacturers' Mutual Insurance Limited v. New World Fabrications Pty Ltd (1987) 4 A.N.Z.I.C. 60-775.

The primary judge found that there was an assumption adopted by the respondent and induced by the appellant's letter of 11 September 1987 that the appellant admitted liability and would not rely on the limitation period. The appellant's principal argument was that such an assumption was not justified by the terms of its letter; the sole foundation for this argument was the proposition that the appellant's statement that it was "prepared to accept [the respondent's] claim for personal injuries" in conjunction with a request for "copies of the relevant medical reports, to enable us to give consideration to an offer for quantum" does not convey that liability is accepted but merely that there is a present intention to do so, with, presumably, an implicit reservation that that intention might alter and liability might be denied.

In my opinion, that was not the effect of the appellant's letter, and courts should not encourage such pedantry, or the injustice which it would produce.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 242 of 1994.

Brisbane

[Morris v. FAI Insurance]

BETWEEN:

KATRINA MARY MORRIS

(Plaintiff) Respondent

AND:

FAI GENERAL INSURANCE COMPANY LTD

(Defendant) Appellant

__________________________________________________________________

___

Fitzgerald P.
Pincus J.A.

Davies J.A.

__________________________________________________________________

___

Judgment delivered 05/05/1995

Joint Reasons for Judgment of Pincus and Davies JJ.A. Separate concurring reasons
of Fitzgerald P.
__________________________________________________________________

___

APPEAL DISMISSED WITH COSTS
__________________________________________________________________

___

CATCHWORDS:	CONTRACT - estoppel - assumption - detriment - personal injuries - whether letter from insurer advising "we are prepared to accept your client's claim for personal injuries" estopped it from relying on Limitation of Actions Act when proceedings commenced out of time.
S. 11 Limitation of Actions Act 1974. Giblin v. Duggan (Full Court 8/3/81) Q.S.C.P. case 7522 Newton, Bellamy & Wolfe v. SGIO (Qld) [1986] 1 Qd.R. 431 Commonwealth v. Verwayen (1990) 170 C.L.R. 394
Counsel:	Mr S C Williams Q.C. for the appellant. Mr B O'Donnell Q.C. for the respondent.
Solicitors:	McInnes Wilson and Jensen for the appellant. Quinlan Miller and Treston for the respondent.

Hearing date:30 March 1995.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 242 of 1994.

Brisbane

Before Fitzgerald P.
Pincus J.A.
Davies J.A.

[Morris v. FAI Insurance]

BETWEEN:

KATRINA MARY MORRIS

(Plaintiff) Respondent

AND:

FAI GENERAL INSURANCE COMPANY LTD

(Defendant) Appellant

JOINT REASONS FOR JUDGMENT - PINCUS J.A. & DAVIES J.A.

Judgment delivered 05/05/1995

This is an appeal from a judgment of the District Court in an action brought by a

woman who was injured in a motor cycle accident. The defendant, now appellant, is the

third party insurer of a car driven by one Taylor, which came into collision with a motor

cycle on which the respondent was a pillion passenger, causing the respondent

personal injury.

The respondent's action was brought not in tort, but on the basis of contract or

estoppel. The judgment obtained was to the effect that the appellant is estopped by its

conduct from relying on s. 11 of the Limitation of Actions Act 1974 "in respect of the

action instructed" (sic) by the respondent for damages for personal injuries arising out

of the accident mentioned. The judgment implies that an action, apart from that in which the judgment was obtained, has been instituted by the respondent to recover damages

for personal injuries, but that appears not to be so. It is unnecessary to consider any

difficulties arising from the way in which the action was framed or from the form of the

judgment, for the appellant, through its counsel, has indicated that it will if the appeal

fails consent to an order for assessment of damages in such sum as is appropriate,

having regard to the respondent's injuries caused by the accident.

After the occurrence of the accident in which the respondent was injured, on 20

January 1985, the respondent engaged a solicitor, Mr Ian Barron, to represent her in

seeking damages. On 15 August 1985 Mr Barron sent a letter to the registered owner

of the vehicle driven by Mr Taylor, identifying the accident and claiming that it was

caused by Mr Taylor's negligence. The letter concluded: "In due course when our

client's injuries have stabilised, you will be further informed.". On 1 September 1987 Mr

Barren wrote to the manager of the appellant a letter bearing a heading giving some

details of the accident; the body of the letter read as follows:

"We refer to our letter dated 15 August 1985 addressed to the manager,
Hertz Lease.

We observe from a Main Roads search that you were the insurer of the vehicle as at the date of the incident.

We enclose a copy of a report from Dr G. Bendeich dated 19 June 1986 and a further report from Dr Bendeich dated 3 March 1987.

Our client has suffered a significant injury and we have instructions to commence proceedings. Would you please let us know within the next twenty-eight days whether it is your intention to offer a settlement in this matter and, if so, of what amount.

Failing a response, proceedings will be issued."

Since the accident occurred on 20 January 1985, this letter was written less than five months before the three year time limit for bringing action expired, a fact which adds some significance to the second last and last sentences of the letter; it was

necessary for Mr Barron to obtain an early indication of the third party insurer's attitude,

to ensure that any action brought would not be out of time.

Mr Barron's letter elicited the following reply from the appellant, dated

11 September 1987, well within the period of 28 days mentioned by Mr Barron:

"We acknowledge receipt of your correspondence dated 1st September,
1987, together with enclosures.

We wish to advise we are prepared to accept your client's claim for personal injuries.

Would you please forward to our office, copies of the relevant medical reports, to enable us to give consideration to an offer for quantum."

The primary judge made a finding concerning the attitude of Mr Barron who gave

evidence before her. Her Honour said:

"Barron believed the defendants had accepted his offer and had admitted liability to save the cost of litigation. He phoned the plaintiff, read out the letter to her and advised her that it was not necessary to commence proceedings within the three year time limit, as the defendant had contractually committed itself and she therefore had six years to sue."

It appears that Mr Barron was reluctant to issue proceedings if it was not necessary to

do so, because of an apprehension that in those circumstances the plaintiff might not

obtain an order for costs.

On 1 June 1989 Mr Barron wrote to the appellant again, providing further

information relating to damages. The letter concluded:

"We imagine that since this matter is a quantum only one that it is capable of being resolved however if satisfactory progress has not been made within the next twenty eight days proceedings will be issued. We should mention that in respect of the operation of any limitation period our client relies on the principle established in State Government Insurance Office (Queensland) -v- Kieth Charles Newton and Peggy Joanne Bellamy (CCH 60-649)."

This passage shows that Mr Barron was by 1989, when the three year time limit

had expired, concerned about that limit. On 4 July 1989 the solicitors for the appellant

wrote to Mr Barron to inform him that their client denied all liability in the matter.

The primary judge held that there was no contract between the parties arising out

of the correspondence, but that there was an estoppel. This conclusion was based on

the view that it was reasonable for the plaintiff to rely upon the appellant's acceptance of

her claim for personal injuries "as indicating an admission of liability and an indication

of the defendant's intention not to rely upon the limitation period...". Her Honour also

held that the letter -

"...has induced the plaintiff through her solicitor to assume that the defendant would accept the obligation to pay the plaintiff damages, in circumstances where the defendant knew that if it did not give such an intimation, proceedings, and the cost thereof, would follow. That is a clear and reasonable assumption from the letter. Acting on that assumption, the plaintiff has failed to issue proceedings within the statutory time limit and has thereby placed herself in a position of very significant disadvantage and has acted to her detriment.

The defendant has plainly induced the plaintiff's assumption by at least the implied representation in the letter that the defendant had accepted liability for the plaintiff's damages".

The principal argument advanced by Mr Williams Q.C., who led for the appellant,

was that on the authority of Giblin v. Duggan, (Full Court, 19 March 1981) reported in

Queensland Supreme Court Practice case 7522, the reference to preparedness to

accept the claim, in the appellant's letter, could not be treated as a definite acceptance

of that claim. In Giblin v. Duggan the claim was based in contract and it was held that a

letter, written by an insurer responding to a threat of proceedings, did not conclude a contract. The former letter asked for an indication that the insurer was prepared to

admit liability and was prepared to compensate the plaintiff. The insurer's reply stated

that:

"We have investigated this matter and are prepared to accept liability on behalf of our insured driver. Please submit the relevant medical report to our office to enable us to give consideration to an offer for quantum".

That was held to be "merely a statement of intention to accept liability" and not to be

consistent with the existence of a concluded contract.

In a subsequent decision on rather similar facts, Newton, Bellamy and Wolfe v.

State Government Insurance Office (Qld) [1986] 1 Qd.R. 431 Giblin v. Duggan was

distinguished and it was held that an insurer's letter which said "it is confirmed that

liability is not in issue" made an agreement. McPherson J (as his Honour then was), in

discussing the distinction between Newton, Bellamy and Wolfe on the one hand and

Giblin on the other remarked:

"In the court below the learned judge considered that the decision in Giblin v. Duggan turned on the use in that case of the expression 'are prepared to accept' as indicating on the part of the defendant something less than finality in the intention to put a firm offer. With respect, that is in my opinion the correct view of the ratio in that case. The point is, it must be conceded, a fine one". (440)

We agree that the distinction between the two cases seems fine, but would

respectfully doubt whether Giblin, treated as resting on the basis mentioned in Newton,

Bellamy and Wolfe, can be correct. In the context in which it was written, namely that of

a response to a demand for an indication that the insurer "is prepared to admit liability

and is further prepared to compensate our client for the damage he has suffered", the

statement that the insurer was prepared to accept liability would not, to the ordinary

recipient, imply that the insurer wished to give further consideration to the question of

liability, or otherwise to reserve its position about liability. But it is unnecessary for the purposes of disposition of this case to consider the means of reconciling these two Full

Court decisions, or to overrule the decision in Giblin, for here the judgment which is

attacked was based on estoppel, not on contract as in Giblin.

In The Commonwealth v. Verwayen (1990) 170 C.L.R. 394, although a majority

of the court held that the Commonwealth should not, in view of its conduct, be permitted

to defend on the basis of the relevant Limitation of Actions Act, only two judges (Deane

and Dawson JJ) adopted that view on the basis of estoppel. There was, therefore, a

minority of judges in favour of that view; the three judges who dissented held that there

was no estoppel. Nevertheless, it seems that the proper course is to treat the

reasoning of Deane and Dawson JJ as at least persuasive, on the topic now in issue, if

not binding: China Ocean Shipping Co. Ltd. v. P S Chellaram & Co. Ltd (1992) 28

N.S.W.L.R. 354 at 380, 381 per Kirby P., The Commonwealth v. Clark [1993] Aust.

Torts Reports 62,127 (another "Voyager" case) at 62,154 to 62,155.

In Verwayen, the detriment which brought success for the plaintiff was not, as

here, refraining from bringing an action in reliance upon a representation by the

Commonwealth that it would pay. The action in that case was started many years out of

time; the High Court prevented the Commonwealth from pleading (inter alia) the

Limitation of Actions Act when it had earlier, although outside the limitation period, in

effect admitted liability. That admission was made in March 1985 and the change of

mind was in May 1986, a little over a year later. What Verwayen did on the assumption

that the statute would not be pleaded was "to allow the litigation to proceed for more

than a year without taking any steps to bring it to a conclusion by way of settlement or, if

necessary, withdrawal" (461). That is a detriment which is, at least in general, much

less in magnitude than letting the time run out.

Deane J made in Verwayen an analysis of the relevant estoppel rules, only part

of which is of immediate relevance:

"2. The central principle of the doctrine is that the law will not permit an unconscionable - or, more accurately, unconscientious - departure by one party from the subject matter of an assumption which has been adopted by the other party as the basis of some...course of conduct...which would operate to that other party's detriment if the assumption be not adhered to...

4. [the estopped party] must have played such a part in the adoption

of, or persistence in, the assumption that he would be guilty of unjust and
oppressive conduct if he were now to depart from it". (444)

In his judgment in Clark Ormiston J points out that the creation of a relevant

assumption is essential, but it is not essential that there be a "belief as to a state of

affairs resulting from a representation express or implied" (62154). In that case the

plaintiff was held to have adopted an assumption that the defendant would not rely on

the limitation defence and that was held to have been induced by the Commonwealth's

actions. There, as in Verwayen, the actions relied on had occurred well after the

limitation period expired, but nevertheless it was held that the Commonwealth was

estopped from relying on that defence.

The appellant is faced with a finding that there was an assumption, adopted by

the respondent and induced by the letter of 11 September 1987, that the respondent

admitted liability and would not rely on the limitation period. It is not submitted that

these findings can be interfered with, but the contention is that the terms of the letter

were not such as reasonably to justify the assumption. It is also contended in effect that

no estoppel can arise because the appellant was entitled to proceed on the basis that

Mr Barron was aware that such expressions as were used in the appellant's letter could

not amount to a binding admission of liability.

In our opinion, once one accepts that the assumption mentioned by the primary

judge was adopted by the respondent as a result of the letter of 11 September 1987,

the question becomes whether it would be unjust and oppressive on the part of the

appellant to depart from it. It was not necessary for the respondent to show that every

recipient of such a letter would treat it as making the institution of proceedings

unnecessary; it is enough that the respondent did so. Then the appellant's difficulty is

that its letter of 11 September 1987 is well capable of conveying to a prospective

plaintiff that liability will not be disputed and that it is unnecessary to institute the

proceedings threatened by the letter to which the appellant's letter was an answer.

Further, it must have been evident to the appellant that its letter could give rise to the

very assumption which the respondent adopted; Mr Williams Q.C. stressed that people

involved with litigation of this sort would be familiar with the Giblin case, in which a

similar letter led to the identical assumption. Subject, then, to the question of detriment,

it must follow that a departure from the assumption thus induced would be

unconscionable and cannot be permitted.

It is our view that a detriment is sufficiently shown here. It is true that the conduct

of the respondent's solicitor, in failing to pursue the matter further with the appellant for

such a long period after receipt of the letter of 11 September 1987, is difficult to defend,

but the only part of that delay which is material is the period between receipt of the letter

of 11 September 1987 and expiration of the limitation period, on 20 January 1988.

That the respondent failed to institute proceedings during that period is properly treated

as a consequence of the appellant's conduct in sending the letter of 11 September

1987.

In our view the judge's finding of estoppel was correct. We note that her Honour

adjourned the further hearing of remaining matters in issue to a date to be fixed. The

appeal will be dismissed with costs.