Motor Accidents Insurance Board v Watt

[2016] TASSC 45

[2016] TASSC 45

COURT:  SUPREME COURT OF TASMANIA

CITATION:                 Motor Accidents Insurance Board v Watt [2016] TASSC 45

PARTIES:  MOTOR ACCIDENTS INSURANCE BOARD
  v
  WATT, Blaize Andrew

FILE NO:  13/2013
DELIVERED ON:  25 August 2016
DELIVERED AT:  Hobart
HEARING DATES:  1, 16 August 2016
JUDGMENT OF:  Brett J

CATCHWORDS:

Procedure – State and Territory courts: jurisdiction, powers and generally – Declarations – Generally.
Supreme Court Rules2000 (Tas), r 103.
Motor Accidents (Liabilities and Compensation) Act1973 (Tas), ss 14, 17, 18 and 33A.
Ainsworth v Criminal Justice Commission [1992] HCA 10, 175 CLR 564; University of NSW v Moorhouse [1975] HCA 26, 133 CLR 1; Re O'Sullivan; The Union-Fidelity Trustee Company of Australia Limited v Fleming [1969] Qd R 516; CGU Insurance Ltd v Blakeley (2016) 327 ALR 564, cited.
Aust Dig Procedure [1028]

REPRESENTATION:

Counsel:
             Plaintiff:  K E Read SC, C Law
             Defendant:  B R McTaggart SC, J Bourke
Solicitors:
             Plaintiff:  Page Seager Lawyers
             Defendant:  Blissenden Lawyers

Judgment Number:  [2016] TASSC 45
Number of paragraphs:  28

Serial No 45/2016

File No 13/2013

MOTOR ACCIDENTS INSURANCE BOARD
v BLAIZE ANDREW WATT

REASONS FOR JUDGMENT  BRETT J

25 August 2016

1. The facts in this action are not in dispute and are admitted on the pleadings. On 1 August 2009, a motor vehicle owned by the defendant (to avoid confusion arising from the multiplicity of proceedings, I will hereafter refer to Mr Watt by name) and driven by Jamie Waller, collided with a traffic light pole. The vehicle was unregistered. In addition to Mr Watt and Mr Waller, the vehicle contained three occupants. One of them, Kane Fisher, was killed. The remaining occupants, including Mr Watt, each suffered personal injury.

2. On 19 July 2012, Mr Watt commenced an action against Mr Waller ("the substantive action") alleging that the accident was caused by his negligence and claiming damages for personal injury. Mr Waller, by his defence, denies negligence and asserts, in any event, that Mr Watt is not entitled to recover damages from him, having regard to the provisions of s 6 of the Civil Liability Act 2002. He also alleges contributory negligence. That action is still pending.

3. By s 14 of the Motor Accidents (Liabilities and Compensation) Act 1973 (the Act), the Motor Accidents Insurance Board ("the Board") is bound to indemnify Mr Waller, in his capacity as the user of the motor vehicle, in respect of liability incurred by him in respect of personal injury to a person resulting directly from a motor accident involving that motor vehicle. It is common ground that that statutory indemnity will apply to any damages awarded to Mr Watt in the substantive action. However, s 18 of the Act provides the Board with a right to recover payments made by it in discharge of its obligations in respect of a liability incurred by a person as a user of a motor vehicle, in circumstances where the relevant insurance premium has not been paid. It is an admitted fact that the vehicle was unregistered and uninsured at the time of the accident.

4. The action with which I am dealing was commenced by the Board on 15 January 2013. Among other relief (which is non-contentious), it seeks a declaration that the Board is entitled to recover from Mr Watt the amount of any payment it makes in or towards its obligations to indemnify Mr Waller pursuant to the statutory indemnity. It seeks such a declaration at this time despite the fact that the substantive action has not been determined and, hence, liability to pay damages at all is still in issue. The Board asserts that the utility in such an order is that if its entitlement to recover whatever it must pay to Mr Watt is declared now, its further involvement in that action will become otiose and it can withdraw from the action and thereby avoid unnecessary costs. It also alleges that the litigation generally will be pointless for the parties and will therefore be unlikely to proceed, which will save substantial cost to the public purse.

5. Mr Watt argues that the declaration should not be made, on the following bases:

   (a)The Court ought not exercise its discretion to make a declaration at this point in time. It is argued that the circumstances which are said by the Board to warrant the making of a declaration are hypothetical, in particular because the question of Mr Waller's liability, and the Board's consequent liability to indemnify him, have not yet been established.

   (b)In any event, Mr Watt argues that s 18 of the Act should be interpreted to except from the Board's right of recovery in the case of an uninsured motor vehicle, damages paid to the owner, where the owner suffers personal injury and is not the person who incurs liability.

6. The Court's power to make a declaratory judgment or order is expressly conferred by r 103 of the Supreme Court Rules 2000. That power includes the ability to make a binding declaration of right whether or not there is a claim for consequential relief. The power so conferred is discretionary and the ambit of the discretion is wide. A useful synopsis of the nature and application of the Court's jurisdiction to grant declaratory relief is contained in the decision of the majority in Ainsworth v Criminal Justice Commission [1992] HCA 10, 175 CLR 564 at 581-582:

   "It is now accepted that superior courts have inherent power to grant declaratory relief. It is a discretionary power which '[i]t is neither possible nor desirable to fetter … by laying down rules as to the manner of its exercise.' Forster v Jododex Aust Pty Ltd (1972), 127 CLR 421, at p 437, per Gibbs J However, it is confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions See In re Judiciary and Navigation Acts (1921), 29 CLR 257. The person seeking relief must have 'a real interest' Forster (1972), 127 CLR, at p 437, per Gibbs J; Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438, at p 448, per Lord Dunedin and relief will not be granted if the question 'is purely hypothetical', if relief is 'claimed in relation to circumstances that [have] not occurred and might never happen' University of New South Wales v Moorhouse (1975) 133 CLR 1, at p 10, per Gibbs J or if 'the Court's declaration will produce no foreseeable consequences for the parties Gardner v Dairy Industry Authority (NSW) (1977), 52 ALJR 180, at p 188, per Mason J; see also p 189, per Aickin J; 18 ALR 55, at pp 69, 71 respectively."

7. In this case, the first issue raised concerns whether or not the question in respect of which the Court is being asked to make a declaration is theoretical in the sense that it depends on circumstances which are hypothetical. The case law is replete with judicial statements attempting to explain the meaning of a theoretical question, and examples where the discretion has been exercised one way or the other based on an assessment as to whether or not the question is hypothetical. The clearest example of a theoretical question is a request for a court to provide an advisory opinion, one that is seeking a resolution of an abstract question of law, or does not relate to "the settlement of existing claims of right" between parties (see In Re The Judiciary and Navigation Acts (1921) 29 CLR 257). However, cases which involve a dispute as to the rights of parties inter se can also be hypothetical and, hence, inappropriate for the exercise of the discretion to grant declaratory relief. For example, in University of NSW v Moorhouse [1975] HCA 26, 133 CLR 1, the High Court overturned a declaration on the basis that it assumed circumstances which had not yet occurred and might never happen, and hence was hypothetical. Gibbs J said at 9:

   "Many other examples may be found in the books of cases in which a declaration has been refused because it was claimed in relation to circumstances that had not occurred and might never happen. There is no doubt that a declaration may be an appropriate remedy in an action brought by an owner of copyright to assert his rights, but a declaration will as a general rule not be made for that purpose unless it is established either that an actual infringement has occurred or that the defendant intends to take action that will amount to an infringement."

8. On the other hand, there are many cases where a declaration has been made and upheld on appeal, notwithstanding that some of the facts upon which it is based have not yet occurred, or it has otherwise been concerned to affect future events (see, for example, Re O'Sullivan; The Union-Fidelity Trustee Company of Australia Limited v Fleming [1969] Qd R 516; Sterling Nicholas Duty Free Pty Ltd v The Commonwealth [1971] 1 NSWLR 353).

9. Whether a proposed declaration is based on a hypothetical issue is a consideration which goes to the exercise of the Court's discretion in respect of its power to grant declaratory relief: The Union-Fidelity Trustee Company of Australia Limited v Fleming (above). My review of the cases suggests that the difficulty which courts have had in defining precisely what is meant by a theoretical question, at least in the sense that will make a grant of declaratory relief inappropriate, is nothing more than the difficulty inherent in attempting to formulate a specific test which will usefully apply to the infinite variety and combination of circumstances in which a court may be called upon to exercise its discretion in that regard. Rather than attempting to define the boundary between the hypothetical and the non-hypothetical for this purpose, a more cogent observation is that a court will be more inclined to exercise a discretion to make a declaratory order where the grant of such relief will resolve a real dispute which has arisen between parties in circumstances and on facts which have already occurred, and in which there is a real utility in the present resolution of that dispute, notwithstanding that the court may still be asked to assume the occurrence of some further circumstance or fact in order to determine the question. The requirement that the relief provide a resolution of a real dispute necessarily implies that the contingencies thrown up by the future fact or circumstance will be limited and predictable. The court's satisfaction that there will be real utility, in the interests of justice, in granting such relief prior to the occurrence of all relevant circumstances, is a strong factor in support of providing timely intervention in the as yet unresolved dispute.

10. This approach seems to have been the determinative factor for the Full Court of the Supreme Court of Queensland in The Union-Fidelity Trustee Company of Australia Limited v Fleming (above). In that case, the Full Court was concerned with a declaration as to the future rights of possible beneficiaries under a will. The persons with potential interest as beneficiaries were all represented before the Court and were able to persuade it that they had a real interest in an answer to those questions. As Hoare J said at 521-522:

    "So far as concerns the possible benefits under Clause 13 of the will the first four defendants, have an obvious practical interest in knowing whether, if they otherwise qualify and they survive the annuitants, they lose their benefits should they no longer be directors of the company. There is no need to elaborate on this aspect. Their interest in knowing now whether they lose the benefit that they will or may take in the event of their surviving both annuitants is a very real one to them.

    In the circumstances it is proper that the Court should answer such questions as will establish the interest to be taken by the employee directors (whoever they may be) in the event of their surviving the annuitants."

11. The question of utility can also be a determinative factor with respect to a court's jurisdiction to entertain a claim for declaratory relief. In CGU Insurance Ltd v Blakeley [2016] HCA 2, 327 ALR 564, the High Court dealt with a case in which liquidators had commenced proceedings against former directors of, and a consultant to, the company in liquidation. The proceedings sought recovery as a debt of monies owed by the company in liquidation to creditors, on the basis that the directors and consultant had breached statutory duties. One director and the consultant were each insured by CGU under a policy which could arguably provide indemnity in respect of the claims made by the liquidators. Notwithstanding that those claims had not yet been litigated and established, the liquidators sought a declaration that CGU was liable to indemnify the relevant defendants under the insurance policy.

12. The appeal to the High Court related to an order by the primary judge joining the liquidators' claim for a declaration against CGU with the proceedings against the directors and the consultant. The issue before the High Court was whether the claim against CGU raised a justiciable controversy, which was necessary for the claim to come within the federal jurisdiction of the Supreme Court of Victoria. The argument by CGU was that the liquidators' interests would be hypothetical, in the sense that they were contingent upon the insured bringing successful proceedings to enforce the insurance policy. Without that, it was argued, there was no real dispute for the determination of the Court and, hence, the Court lacked jurisdiction.

13. The majority held that there was jurisdiction because the liquidators had a real interest in establishing whether or not CGU would be liable to indemnify the defendants, notwithstanding that there was no claim on foot by them seeking indemnity. The rationale was that there was real utility in determining that issue at the same time that the liquidators' claim against the defendants was determined, because in a variety of circumstances, yet to arise, the liquidators would be entitled to recover directly the proceeds of the indemnity. The determination of CGU's obligations under the policy would effectively and finally determine that question. Nettle J, who agreed with the majority, noted that the joinder of CGU as a defendant on the question of its liability to indemnify the directors ought be dealt with in the same proceedings as those which would determine the primary question of the liability of the directors to the liquidators.

14. The majority went to some pains to define the difference between the jurisdiction of the Court in the sense of its "authority to decide" which depends on the existence of a justiciable controversy, as distinguished from the powers that a court may use in the exercise of that jurisdiction. The decision was only concerned with the former question, not with whether the Court in the exercise of its discretion would have granted the declaration. That question had not yet been determined by the court of first instance. However, the fact that the claim for the declaration would be determined at the same time as the related proceedings gave the proceedings seeking the declaration utility and, hence, satisfied the test of jurisdiction.

15. In this case, the fact that the substantive proceedings and the Board's consequent obligation of indemnity have not yet been determined means that there is clearly a theoretical or hypothetical element to the circumstances upon which the claim for declaratory relief is based. Despite this, there can be no real doubt that the Court has jurisdiction to grant the declaration. There is a real dispute between the parties as to the Board's right to recover from Mr Watt any damages payable to him arising from his action against Mr Waller. The external facts upon which that issue is based have already taken place; the accident, the circumstances of Mr Waller's driving which are said to have been in breach of his duty of care to Mr Watt, the causation of personal injury to Mr Watt, the consequent loss and damage upon which the assessment of damages will be based, Mr Watt's ownership of the motor vehicle at the time of the accident, and the fact that at that time the motor vehicle was unregistered and hence uninsured. The Board has a clear interest in knowing whether or not it has a legal right to recover any monies paid pursuant to its statutory indemnity. There are only two remaining questions upon which the Board's right of recovery will depend. They are:

    (a)will Mr Watt be successful in his action against Mr Waller; and

    (b)as a matter of law, in those circumstances, is the Board entitled to recover from Mr Watt any monies paid pursuant to its statutory indemnity of Mr Waller in respect of his liability to Mr Watt?

16. In this sense, the question is not purely academic, and there is a real issue for determination. This is so despite the hypothetical element arising from the fact that the substantive proceedings have not yet been determined. I am satisfied, therefore, that there is a real issue before me and I have jurisdiction, and hence a discretion, to grant the relief sought. However, the question still remains as to whether I should exercise that discretion to make the declaration at this time. Although the resolution of the substantive proceedings is in the future, and in that sense hypothetical, the parameters of the contingency are closely defined and predictable. Either Mr Watt will recover damages from Mr Waller which will trigger the Board's indemnity, or he will not. If Mr Watt is not successful in recovering damages from Mr Waller, then the Board will have no liability for indemnity and the question of its right to recover will be moot, and the declaration will not be engaged. However, in the very real event that Mr Watt recovers any damages at all, then the issue will no longer have any hypothetical element and the Board's right to recover will be a matter requiring immediate resolution.

17. The legal issue as to the application of s 18 to damages recovered by Mr Watt is the only real matter of dispute between the parties in respect of the Board's right of recovery. It is a purely legal question as to whether the right of recovery specified in s 18 extends to an owner of an unregistered and uninsured motor vehicle in circumstances in which the owner has not incurred liability and has suffered injury for which damages will be payable. In the sense that it is a purely legal question, it is capable of determination now on the facts which have already occurred and have been admitted, and is subject only to the Board actually incurring liability to indemnify. In these circumstances, I am satisfied that the exercise of discretion will depend heavily on whether there is real utility in the determination of this question, and the grant of declaratory relief thereupon, in advance of the finalisation of Mr Watt's claim for damages, or whether the issue of the Board's right of recovery is more appropriately determined at the same time, as or subsequent to, the substantive proceedings. In my view, the Court should only exercise its discretion to make a declaration in these circumstances if there is utility in the resolution of that dispute prior to the determination of the substantive proceedings.

18. In this regard, I observe that the grant of the declaration which is sought will not necessarily have any impact on the conduct of the litigation between Mr Watt and Mr Waller. That is a matter between those parties and is not directly affected by any right the Board may have to recover money paid pursuant to its statutory indemnity. Further, it is clear that confirmation of the Board's right of recovery will not terminate or affect in any way its liability to provide statutory indemnity to Mr Waller. The scheme contained in the Act is very clear, the statutory indemnity which arises by virtue of s 14 applies notwithstanding that the vehicle was uninsured. The statutory consequence of the lack of insurance is the Board's right of recovery pursuant to s 18.

1. The Board's argument as to utility is that a declaration of its right of recovery will avoid unnecessary costs in respect of the substantive proceedings. Mr Read SC submitted that confirmation of the Board's right of recovery pursuant to s 18, which will essentially involve determination of the legal issue concerning the application of s 18 to Mr Watt in the affirmative, will render the substantive proceedings, for all practical purposes and from the point of view of all interested parties, otiose. Accordingly, he argues, a determination of the question at this point will result in a considerable saving of legal costs to the Board and, indeed, to the parties.

2. His argument that the proceedings will be rendered otiose proceeds as follows. Although the Board has an ongoing obligation to indemnify Mr Waller in respect of damages, it is not obliged to involve or continue to involve itself in the proceedings (see s 17 of the Act). In circumstances in which its right to recover any damages paid pursuant to the statutory indemnity has been declared, then it would have no interest in the outcome of the proceedings, as any money it is required to pay under the indemnity will be immediately repaid to it by Mr Watt pursuant to its right to recover. Further, the proceedings in their current form would be of little interest to the parties themselves. Any damages payable to Mr Watt pursuant to liability incurred by Mr Waller as a result of his driving of the motor vehicle will be subject to the statutory indemnity. This would seem to me to be correct. It is not possible for Mr Watt to recover damages from Mr Waller in respect of liability incurred by Mr Waller arising out of his use of the motor vehicle which is not subject to that indemnity. This is the effect of the scheme put in place by ss 14 and 18 of the Act. The Board is bound to indemnify Mr Waller, irrespective of the fact that he was driving an uninsured motor vehicle, but in those circumstances the Board will have rights of recovery which, in its submission, include from the owner of the vehicle. It may well be that in respect of the action for recovery, Mr Watt may have rights of contribution against Mr Waller, but this is far from clear and does not require determination in this case. Whilst a claim for contribution may depend on the same allegation of negligence as that which underpins the substantive proceedings, such a claim would relate to economic loss arising out of the recovery of the damages by the Board, rather than for personal injury per se. Hence, any such proceedings would be based on a separate cause of action to that which is the subject of the substantive proceedings.

3. The submissions of Mr Read have considerable force, as far as they go. However, in the circumstances of this case, there seems to me to be a compelling reason why, irrespective of a declaration as to the Board's right of recovery, Mr Watt would have an interest in litigating the proceedings against Mr Waller to their conclusion, and the Board would have an interest in continuing to involve itself in the proceedings pursuant to its rights under s 17 of the Act. The effect of the relevant statutory provisions is that the Board, in exercising a right of recovery under s 18, in fact does so pursuant to the exercise of discretion. This is clear from the formulation that it "may recover the amount of those payments" from the owner. (See Acts Interpretation Act 1931, s 10A.) This view is consistent with the provisions of s 33A of the Act which provides:

   "33A    Determining whether to recover amount paid by Board

   In determining whether to exercise a right under Part III or IV to recover from a person an amount paid under that Part, the Board may take into account one or more of the following:

   (a)  whether a failure to pay any premium at all in respect of a motor vehicle or the correct premium for use of a motor vehicle in the circumstances or conditions in which a motor accident resulting in personal injury occurred was due to reasonable mistake or any other reasonable cause;

   (b)  whether the payment of that amount by that person would be likely to impose substantial hardship on that person or a dependant of that person;

   (c)  any other matter the Board considers relevant."

4. It is clear from this that one of the matters which the Board is permitted by statute to take into account in determining whether or not to exercise its discretion to recover from Mr Watt any monies paid under the indemnity, is whether the payment of that amount by him would be likely to impose substantial hardship on him or his dependant or dependants. It is difficult to see how the question of substantial hardship can be properly determined unless and until the amount of damages, which are the subject of recovery, is known. Further, it must be the case that both parties will retain an interest in the outcome of the substantive proceedings according to their respective interests in those proceedings, irrespective of a declaration as to the Board's right to recover, having regard to the real possibility that the Board, upon proper reflection in accordance with the Act, may exercise its discretion not to recover from Mr Watt.

5. When the Court reconvened for further submissions on this point, it was submitted on behalf of the Board that the question of financial hardship to Mr Watt will not arise as a relevant consideration in the determination process because the consequence of the declaration will mean that no payment of money will occur either from the Board to Mr Watt on the indemnity provided to Mr Waller, nor by Mr Watt to the Board on the exercise of its right under s 18. This submission ignores the clear distinction in the legislation between the Board's obligation of indemnity on the one hand and its right to recover money paid pursuant to that indemnity on the other. The declaration sought in this action will only declare the right of the Board to make recovery if and when its obligation of indemnity is engaged after a successful action for damages. It will not obviate Mr Watt's right to recover a judgment debt from Mr Waller, nor the Board's obligation to provide Mr Waller indemnity for such debt. It will also not impact in any way on the separate exercise by the Board of its discretion to make recovery pursuant to a declared right. If Mr Watt is successful in his action and the Board has a right to make recovery, and properly exercises its discretion to make such recovery, then I would agree that the practical outcome of the declaration might be that no money changes hands. However, that practical outcome does not change the nature of the legal obligations. What will actually take place will be payments, including the final payment of the damages back to the Board by Mr Watt, if that is the outcome. That will only occur if the Board exercises its discretion to recover that money from him.

6. The submissions on behalf of the Board at the reconvened hearing suggested that the Board may already have made a decision to make recovery of any sum which becomes subject to the indemnity. It was suggested that the Court is not entitled to embark on a collateral consideration of that decision. However, there is no evidence that such a decision has been made. Even if it has been made, it is clearly premature and can be altered by the Board. It would seem to me that Mr Watt would be entitled, in the event of a successful outcome to his damages claim, to request the Board to exercise its discretion not to recover the damages from him, and to claim in support of such request that he will suffer substantial hardship if recovery proceeds. If he recovers damages, it will be for loss actually suffered, and in those circumstances, it is not difficult to understand why a requirement to repay such amount to the Board, although not involving an actual payment because no damages will be in reality paid to him, would create substantial hardship. I see no reason why a decision by the Board to proceed with recovery, despite such a request would not be subject to judicial review pursuant to the Judicial Review Act 2000, s 4. In those circumstances, it is impossible to exclude the possibility that the Board may not recover the damages, irrespective of its right to do so.

7. Such a consideration does not involve, as was submitted, a collateral challenge to any decision already made or intended to be made, of the type explained by Wood J in Krulow v Glamorgan Spring Bay Council [2013] TASSC 33. Rather, it simply involves consideration of the effect and utility of the declaration which has been sought, having regard to the factual, procedural and statutory framework of the dispute. A consideration of the nature of the Board's obligation of indemnity, and a recognition of the fact that the Board may, on a proper and reviewable exercise of discretion exercised after the damages claim, decide not to recover pursuant to any declared right to do so, leads to the conclusion that there can be no utility in the determination of the Board's right of recovery prior to the determination of the substantive proceedings. This is because both parties will still retain their interest in the damages claim, irrespective of the declaration. The Board's interest, in particular, will be to seek to restrict its liability under the indemnity to that which is lawfully recoverable, against the contingency that, although it has the right to recover such damages, it may not do so after the exercise of discretion.

8. In those circumstances, a declaration prior to the determination of the damages claim must be hypothetical and of little, if any, utility. If the substantive action is unsuccessful, then questions relating to indemnity under s 18 will not arise, and any determination now would involve a declaration of law which is purely academic. The legal question can be just as easily determined once this hypothetical element has been removed from the proceedings, and the question of the Board's right to recover is elevated to the status of a dispute between the parties with certain consequences. It is at this point that there will be real utility in such a declaration.

9. It follows from what I have said that I am not persuaded that I should determine the proceedings for declaratory relief prior to the determination of the damages claim. Further, I am not prepared and do not believe it is appropriate or necessary to resolve the legal question which underpins those proceedings at this point. The question which then arises is the appropriate disposition of these proceedings. The plaintiff is unsuccessful in its claim for declaratory relief at this time, but it may well be that the appropriate disposition is to make an order joining these proceedings in their current form to the substantive proceedings so that both questions can be determined at the same time. It can be easily understood that in the event that Mr Watt is successful in his claim for damages, it might well be appropriate to then determine the Board's legal right of recovery, but in the event that the Board is successful in that argument, to grant relief by way of declaration rather than an immediate order for payment. This is so because of the comments I have made above concerning the need for the Board to be aware of the amount payable pursuant to the statutory indemnity before it can properly determine whether or not to actually recover the money pursuant to any declared right to do so.

10. Having regard to these considerations I will hear counsel before finally resolving that question.