Nominal Defendant v Morgan Cars Pty Ltd

[1974] HCA 16

HIGH COURT OF AUSTRALIA

Barwick C.J., McTiernan, Menzies, Stephen,and MasonJJ.

THE NOMINAL DEFENDANT v. MORGAN CARS PTY. LTD.

(1974) 131 CLR 22

10 May 1974

Motor Vehicles (N.S.W.)

Motor vehicles (N.S.W.)—Hire for fixed period—Hirer to return to owner at expiration of term or earlier demand—Collision during period of hire and before demand for return—Whether owner entitled to immediate possession of vehicle at time of collision—Motor Vehicles (Third Party Insurance) Act 1942-1965 (N.S.W.), ss. 5*, 32(1)**. * Section 5 of the Motor Vehicles (Third Party Insurance) Act 1942-1965 (N.S.W.) defines "owner" to mean "any person who . . . is entitled to the immediate possession of the motor vehicle". ** Section 32(1) provides: "Any amount properly paid by the nominal defendant in satisfaction of a claim made or judgment recovered against him and the amount of any cost and expenses properly incurred by him in relation to any such claim or to the proceedings in which the judgment was obtained may be recovered by the nominal defendant as a debt from the person who, at the time of the occurrence out of which such claim arose or in respect of which such judgment was obtained, was the owner of the motor vehicle or, where at the time of such occurrence some other person was driving the vehicle, from the owner and the driver jointly or from either of them severally".

Decisions

May 10.
The following written judgments were delivered:-
BARWICK C.J. I have had the advantage in these appeals of reading the reasons for judgment prepared by my brother Menzies. I agree with him that the appeals should be dismissed. I am in accord with his conclusion that to succeed in his claim against the respondent the appellant had need for the reasons my brother gives to establish that the respondent at the time of the occurrence was the owner of the car according to the definition of owner in s. 5 of the Motor Vehicles (Third Party Insurance) Act, 1942-1965. I agree that the nominal defendant did not do so. But I would be content to rest that conclusion, as did Jacobs J.A. and Taylor A.J.A. in the Supreme Court, merely on the absence of any demand by Morgans for the return of the car without deciding that the contract of hire gave Morgans a right at any time without cause or reason to demand that the car under hire be returned by the renter to the respondent's Brisbane address. It would, in my opinion, be a strange contract in a business sense which so provided, particularly if the hire charges had been prepaid and no provisions were made for any reimbursement to the person hiring the car. Rather, I should think that to give business sense to the provision for a return on demand, the contract should be construed as giving the right to demand the return of the car only when there was some cause under or within the contract for its return. However, I prefer the course taken by Jacobs J.A. in the Supreme Court in leaving this question of construction undecided, a decision not being necessary to the resolution of the case. On either view of the contract a demand by Morgans was necessary before the right to possession would have reverted to it.

In my opinion, the appeals should be dismissed. (at p24)

McTIERNAN J. I agree that the appeal be dismissed for the reasons which are stated in the judgment of Menzies J. (at p24)

MENZIES J. These are appeals from judgments of the Court of Appeal of the Supreme Court of New South Wales reversing judgments of Nagle J. in proceedings by the nominal defendant (N.S.W.) against Morgan Cars Pty Ltd. - a company registered and resident in Queensland - under s. 32 of the Motor Vehicles (Third Party Insurance) Act, 1942-1965 (N.S.W.) (the Act) (1972) 1 NSWLR 580 . (at p24)

2. Morgan owned a motor car which was registered in Queensland and insured in respect of third party liability under the Motor Vehicles Insurance Acts 1936-1968 (Q). The car was rented to one Olofsson - not a resident of New South Wales - to drive it into New South Wales and Canberra and to return it to Morgan at 490 Queen Street, Brisbane. While being driven by Olofsson in New South Wales the car was involved in a collision in which Phillip Elb and Florence Elb were injured. Olofsson was killed. Dr. and Mrs. Elb sued the nominal defendant for damages pursuant to s. 15(2) of the Act and having proved negligence on the part of Olofsson they recovered damages as follows: Phillip Elb $12,500; Florence Elb $4,500. The nominal defendant had joined Morgan as third party in each action and judgment was entered against that company for $12,500 and $4,500 respectively. These latter judgments were reversed by the Court of Appeal. (at p25)

3. No question arises about the judgments against the nominal defendant; the problem is whether, at the time of the collision, Morgan was the owner of the car for the purposes of s. 32(1) of the Act for, if it were not, the nominal defendant was not entitled to judgment against it. (at p25)

4. In the Act, unless the context or subject matter otherwise indicates or requires, "owner", when used in reference to a motor vehicle means, where the motor vehicle is not registered under the Motor Traffic Act 1909, as amended, (N.S.W.), "any person who solely or jointly or in common with any other person is entitled to the immediate possession of the motor vehicle". (at p25)

5. In support of the appeal counsel for the nominal defendant presented two arguments. The first was that the context or subject matter indicated that in s. 32 of the Act the statutory definition was inapplicable. This contention cannot be sustained. By virtue of s. 32 the nominal defendant may recover if judgment, either under ss. 15(2) or 30 of the Act, has been recovered against him. It is plain, and it was conceded, that when the nominal defendant seeks to recover in respect of a judgment under s. 30, the question "who was the owner?" of the motor vehicle at the relevant time must be determined in accordance with the statutory definition. It is quite impossible to construe the words "the owner" in s. 32 differently in a case where the nominal defendant is seeking to recover in respect of a judgment obtained under s. 15(2). Furthermore, I cannot find an acceptable meaning for the words "the owner" which would comprehend both the statutory definition and an owner at common law or an owner as defined in the legislation under which the motor vehicle was in fact insured in another place at the time when the occurrence giving rise to liability happened. The Court of Appeal so decided and I agree. (at p25)

6. The success of the appeal depends, therefore, upon a decision whether Morgan was, at the time of the collision, the person "entitled to immediate possession of the motor vehicle". (at p25)

7. Here it becomes necessary to refer in some detail to the contract under which Olofsson was in possession of the car at the time of the collision on 7th August 1968. It is called a "Rental Agreement" and it was made between Morgan and Olofsson. The leading provision is as follows:

"Morgan Rent-A-Car Service herein called 'Morgan' hereby rents to the undersigned Renter for the term set out hereon the motor vehicle herein described and herein called 'vehicle' . . ."

The term of the agreement was twenty-eight days between 11th July 1968 and 8th August 1968. It appeared from the agreement that Olofsson had paid Morgan $350, made up of various amounts, to cover all charges in respect of the car for that term. (at p26)

8. Condition 1(a) was as follows:
"Renter acknowledges and agrees that vehicle is the property of Morgan; that vehicle is in good mechanical condition; that vehicle together with all tyres, tools accessories and accoutrements will be returned in the same condition as when received, ordinary wear and tear excepted, to the place specified overleaf, not later, than the date and time specified or sooner if demanded by Morgan." (at p26)

9. By cl. 4 the renter undertook to comply with and enforce enumerated provisions as follows:

"(a) Vehicle must not be driven by any person other than Renter who signed rental agreement and any person nominated by Renter and approved by Morgan; (b) Vehicle must at all times be driven carefully and with due consideration for other persons; (c) Vehicle must not be overloaded by conveying any load in excess of that for which constructed; (d) Vehicle must be adequately secured when not in use and protected from damage from frost; (e) Sufficient oil must be kept in the engine sump, gearbox and rear axle; (f) The tyres must be kept properly inflated; (g) The milometer must not be interfered with or damaged; (h) Vehicle must not be driven on other than formed roads; (i) Vehicle must not be used for the carriage of passengers or goods for hire or reward for any illegal purpose in racing pacemaking reliability trials speed or hill climbing tests or whilst being tested in preparation therefor or to propel or tow any vehicle or trailer; (j) Vehicle must not be used in contravention of the provisions of the Motor Traffic Act and regulations of the State of Queensland or of any corresponding enactment in the other States or Territories of the Commonwealth of Australia or the Territory of Papua and New Guinea; (k) Renter must forthwith inform Morgan of any loss of or damage to vehicle and of any fault developing therein and must not drive vehicle whilst in an unsafe condition. (1) Vehicle must not be driven by any person who is not duly authorised and licensed if necessary under all relevant laws by-laws and regulations to drive vehicles for the purpose for which it is being used;

(m) Vehicle must not be driven or left in the charge of any person under the influence of intoxicating liquor or of any drug; provided always that Renter shall not violate these provisions if he proves that driver of vehicle (other than Renter or any nominated driver) at time when breach was committed was driving or using vehicle without consent of Renter." (at p27)

10. At the time of the collision no demand under condition 1(a) had been made. His Honour would have found that at the time of the collision Olofsson was driving the car under the influence of intoxicating liquor, in breach of sub-cl. (m), but rightly regarded that circumstance as having no significance in deciding whether or not Morgan was the owner of the car at the time of the collision. (at p27)

11. Were it not for the condition in the agreement that Olofsson would return the car before 8th August 1968 "if demanded by Morgan" - condition 1(a) - there could be no question but that on 7th August 1968 Morgan was not "entitled to immediate possession of the motor vehicle" which had been rented to Olofsson until 8th August 1968. The problem, therefore, as I see it, is whether Morgan's right, on 7th August 1968, to demand that the motor vehicle be returned to its Brisbane address, is sufficient to require a different conclusion. (at p27)

12. In the Court of Appeal Jacobs J.A., having said that "If a bailment is terminable at will without notice the bailor may be said to have the right to immediate possession", said (1972) 1 NSWLR, at p 585 :

"I, therefore, take the question to be whether under the hiring agreement between Morgans and Olofsson the latter was at the time of the accident a mere bailee at will or during pleasure. In my opinion he was more than that. He had hired a vehicle for 'the term set out . . .' and that term was from 11th July 1968 to 8th August 1968. At the time of the accident that term was still current. It is true that the hire was upon terms and conditions which included a condition that the vehicle would be returned not later than the date and time specified 'or sooner if demanded by Morgan' but it is not possible to read these last words as giving Morgan a right without any notice and without any allowance in respect of the balance of the term to immediate possession of the vehicle. It may be that they must be taken to refer to a demand which might otherwise be lawfully made by Morgans, for example, after rescission of the agreement for breach. But certainly a demand was necessary, and, until it was made and a reasonable opportunity was given to comply with it, Olofsson had the right to the possession of the vehicle."

Taylor J. said (1972) 1 NSWLR, at p 587 :

"Morgan Cars Pty. Ltd., the owner, had the right to demand the return to it at any time, but until this demand was made on the hirer, his right of possession for the full period remained.

Morgan Cars Pty. Ltd. did not at any time before the occurrence, exercise its right to demand its return and thus determine Olofsson's right to possession of the vehicle. Thus Morgans were not entitled to the immediate possession of their vehicle at the time the accident occurred." (at p28)

13. I do not read condition 1(a) as conferring a limited right upon Morgan, i.e. to demand that the car be returned during the currency of the term only if the renter was already in breach of the agreement. Sometimes provisions of the sort under consideration are so limited; see, for instance, Nominal Defendant v. Andrews (1969) 121 CLR 562 . Here, however, there is no such limitation expressed and it is not, I think, necessary to imply one. In my opinion Morgan could have demanded at any time that the car be returned to its Brisbane premises, notwithstanding that there is not in the agreement itself any provision for the adjustment of moneys paid to cover the whole term in the event of premature termination. Upon such a demand the renter would, I think, have been bound to return the car to the place specified, i.e. 490 Queen Street, Brisbane. (at p28)

14. Is then an owner entitled to immediate possession, if, having rented a car for a term, he has no more than the right during that term to demand that it be returned to him at a particular place and the renter is obliged to comply with that demand? (at p28)

15. This is not a case where an owner at law has the right to have his chattel handed over to him immediately upon demand. Had Morgan demanded possession of the car in Sydney as the renter was setting out on the journey in the course of which the collision occurred, Olofsson would have been within his rights in refusing to comply with that request for his only obligation was to take the car to Morgan's premises in Brisbane. (at p28)

16. It may be that, where an owner at law who has rented a car for a term but with a right to demand and to get immediate possession upon demand during that term, such an owner could be said to be entitled to immediate possession of the vehicle at any time during the term. To determine that question authorities such as Bradley v. Copley (1845) 1 CB 685 (135 ER 711) and Manders v. Williams (1849) 4 Ex 339 (154 ER 1242) would require consideration. However that may be, it is my opinion that the limited right given to Morgan by condition 1(a) is not sufficient to justify a conclusion that Morgan was, during the term for which the car was rented to Olofsson, the person who was entitled to immediate possession of the car. (at p29)

17. Accordingly, in my opinion, the appeals should be dismissed. (at p29)

STEPHEN J. On 7th August 1968, one Oloffson, who had earlier hired a motor car in Brisbane from the respondent, Morgan Cars Pty. Ltd. for a term of twenty-eight days, was driving it in Sydney when it collided with a car driven by Dr. Elb and in which Mrs. Elb was a passenger. Oloffson was killed in the collision and each of the Elbs, who were injured, sued the nominal defendant pursuant to s. 15(2)(a)(ii) of the Motor Vehicles (Third Party Insurance) Act, 1942 (N.S.W.) alleging negligence on the part of Oloffson. They each recovered judgment against the nominal defendant and from these judgments no appeal was brought. The nominal defendant had joined in each of those actions Morgan Cars Pty. Ltd. as third party, claiming contribution or indemnity and relying upon what it contended to be its rights against Morgan Cars Pty. Ltd. as owner of Olofsson's car. The learned trial judge held the nominal defendant to be entitled to recover over against Morgan Cars Pty. Ltd. in these third party actions. (at p29)

2. Morgan Cars Pty. Ltd. succeeded in its appeals to the Court of Appeal Division (1972) 1 NSWLR 580 and the nominal defendant now appeals to this Court. (at p29)

3. The nominal defendant's rights as against Morgan Cars Pty. Ltd. arise exclusively from the terms of s. 32(1) of the Act the relevant portion of which is as follows:

"32. (1) Any amount properly paid by the nominal defendant in satisfaction of a claim made or judgment recovered against him and the amount of any costs and expenses properly incurred by him in relation to any such claim or to the proceedings in which the judgment was obtained may be recovered by the nominal defendant as a debt from the person who, at the time of the occurrence out of which such claim arose or in respect of which such judgment was obtained, was the owner of the motor vehicle or, where, at the time of such occurrence some other person was driving the vehicle, from the owner and the driver jointly or from either of them severally."

The point at issue is the meaning in this sub-section of the phrase "the owner of the motor vehicle". The nominal defendant as appellant, contends that on either of two alternative views Morgan Cars Pty. Ltd. was the "owner" of the car driven by Olofsson. (at p30)

4. The appellant must overcome the difficulty that "owner" is defined in s. 5 of the Act, in the case of an unregistered vehicle such as was Olofsson's car which was registered in Queensland and was thus exempt from registration in New South Wales, as meaning "any person who . . . is entitled to the immediate possession of the motor vehicle". He seeks to avoid this difficulty in two alternative ways. Either, he says, the statutory definition of "owner" is not applicable to s. 32(1) in the present case and, instead, "owner" in that section means a person in the situation of Morgan Cars Pty. Ltd., that is a person insured in respect of the relevant risk under a compulsory third party policy, or, if the statutory definition be applicable, the terms of the hiring of the car by Olofsson were such that Morgan Cars Pty. Ltd. was entitled to immediate possession of the car at the time of the collision, thus answering the description of "owner" as defined. (at p30)

5. The first of these two submissions begins by drawing attention to the terms of s. 15(2)(a) of the Act which provides that when an insured driver is dead or cannot be served with process the authorized insurer under the relevant New South Wales compulsory third party policy, if any, may be sued; if the insured driver is instead insured under a compulsory third party policy issued in conformity with the relevant laws of another State the nominal defendant, rather than the insurer under that policy, is to be sued. In the former case the third party insurer which received premiums in respect of the insurance of the car whose driver was at fault thus bears the ultimate liability; it was submitted, with attractive logic, that, consistently with discernible legislative policy, the nominal defendant's right of recovery over under s. 32, when it has incurred liability under s. 15(2)(a)(ii) in respect of a car insured inter-State, should be against the inter-State third party insurer which has likewise been the recipient of the premiums in respect of the car at fault. This logical pattern of ultimate liability would, it was said, ensue only if "owner" in s. 32, the recovery section, were treated as meaning, in the case of recovery of a liability incurred by the nominal defendant under s. 15(2)(a)(ii), the person who as owner was insured under the applicable inter-State third party insurance legislation and who is referred to as owner in s. 15(2)(a)(ii). (at p30)

6. This submission called in aid what was said, in Nominal Defendant v. Bagot's Executor and Trustee Co. Ltd. (1971) 125 CLR 179 , to be the legislative scheme of the South Australian counterpart of the present Act, a scheme which envisages that "the burden of the damages is ultimately borne by the insurer of the motor car concerned" (1971) 125 CLR, at p 183 . In support of this submission attention was also called to the fact that in all States of the Commonwealth and in the two mainland territories (being the prescribed parts of the Commonwealth referred to in s. 15(2)(a)) the applicable third party insurance legislation requires third party insurance to be effected by the owner of a motor vehicle which he rents to another under a short term hiring agreement, as was the car in the present case. (at p31)

7. All this was designed to show that, in terms of the opening words of s. 5 of the Act, the context or subject matter of s. 32(1) indicates or requires the giving to "owner" in that section of a meaning other than its defined meaning. (at p31)

8. However it is common ground that s. 32(1) applies in all cases where the nominal defendant seeks to recover as against a third party and that it is therefore applicable both to those cases in which he has incurred initial liability under s. 15 and to those in which the provisions of s. 30(1) have resulted in imposing initial liability upon him. Where the nominal defendant seeks to recover from a third party in respect of liability he has incurred under s. 30(1) the phrase "the owner of the motor vehicle" in s. 32(1) cannot have the meaning for which the appellant contends; it cannot refer to the owner who has effected third party insurance on the vehicle because s. 30(1) deals with the very opposite situation, in which the vehicle is uninsured. In such a case the meaning of "owner" as defined in s. 5 of the Act must apply. (at p31)

9. Once this be accepted it must follow that the appellant's submission involves giving a fluctuating meaning to "owner" in s. 32(1) which will vary depending upon the particular circumstances of the recovery action in question; if it follow upon establishment of liability against the nominal defendant under s. 15(2)(a)(ii) "owner" in s. 32(1) will, so the submission goes, describe as liable in that recovery action a person having quite different attributes from those possessed by the person it describes as liable when the nominal defendant's original liability is incurred under s. 30(1). (at p31)

10. I do not regard such a result as a permissible construction when the application of a statutory definition is in issue. In any particular use of the defined word in later sections of the Act the statutory definition will either apply or, because of context or subject matter, will be inapplicable. But neither particular context nor special subject matter can justify the giving to a particular occurrence of a word its defined meaning for some purposes but not for others. I cannot here accept an interpretation which displaces the statutory definition of "owner" in its application to that word where used in s. 32(1). It follows that the appellant's first submission fails; "owner" in s. 32(1) must bear its defined meaning. (at p32)

11. The appellant's second, alternative, submission accepts the view that it is the defined meaning of "owner" that applies in s. 32, but contends that that meaning of "owner" is applicable to Morgan Cars Pty. Ltd. because it was, at the time when the collision took place, entitled to the immediate possession of the car driven by Olofsson. (at p32)

12. For this purpose the nominal defendant relies upon the terms of the rental agreement under which Olofsson hired the car from Morgan Cars Pty. Ltd. in Queensland. This agreement, a printed standard form prepared for use by Morgan Cars Pty. Ltd., provided, by the insertion of details in the blanks provided for that purpose, that Olofsson should rent the car for the term of twenty-eight days and that it should be returned on the last day of that period to a specified address in Brisbane from which it had been rented out, being the head office of Morgan Cars Pty. Ltd. On the back of the single sheet agreement appeared a large number of printed conditions of which the first read, in part:
"1. (a) Renter acknowledges and agrees that vehicle is the property of Morgan; that vehicle is in good mechanical condition; that vehicle together with all tyres, tools accessories and accoutrements will be returned in the same condition as when received, ordinary wear and tear excepted, to the place specified overleaf, not later, than the date and time specified or sooner if demanded by Morgan." (at p32)

13. It is the last six words of this paragraph upon which the appellant relies for the contention that Morgan Cars Pty. Ltd. falls within the statutory definition of "owner", being a person entitled to the immediate possession of the car. Olofsson was, it is said, no more than a bailee at will so that, the bailment being terminable at will without notice, the bailor had at all times the right to immediate possession. (at p32)

14. Whatever may be the precise nature of the power conferred upon Morgan Cars Pty. Ltd. by the last six words of condition 1(a) they cannot on any view entitle it to immediate possession of the car. A bailor who bails a chattel at will, the bailment being determinable without notice, may no doubt retake possession whenever he chooses to do so. However under this agreement there is a hiring out for a specified term and the provision of condition 1(a) which is relied upon by the appellant is not concerned with any right on the part of Morgans Cars Pty. Ltd. to take possession but rather with the acceleration of the performance of Olofsson contractual duty to return the car "in the same condition as when received, ordinary wear and tear excepted, to the place specified overleaf". If a demand were to be made by Morgan Cars Pty. Ltd. in terms of condition 1(a) it could not lawfully be followed by the immediate taking of physical possession; at most it would entitle it to have Olofsson thereupon drive the car back to the head office of Morgan Cars Pty. Ltd. in Brisbane and there effect its return. The contrast between this and a right to immediate possession is most marked if, for example, the demand is thought of as being given to Olofsson while he is using the car in Sydney. Whether condition 1(a) even goes this far may be open to doubt in view of the seeming conflict between the hiring for a term provided for on the face of the agreement and this arbitrary power of early termination of the terms, without, apparently, any abatement of hiring charges. However, it is unnecessary further to consider this question or to decide whether a demand under condition 1(a) may be given without cause assigned or only if the hirer is in breach of any one of the numerous stipulations concerning the manner of use of the car, as the appellant asserted Olofsson was, or, perhaps, only if his breach is one which may be regarded as fundamental in character. (at p33)

15. The existence of a power on the part of a bailor to require a bailee to return bailed chattels to the bailor's premises upon demand by the bailor has never, so far as I am aware, been suggested as giving rise to an entitlement by the bailor to immediate possession of the chattel. It certainly cannot have this effect at a time when there has been no exercise of that power by the making of any demand at all upon the bailee. Here no such demand was ever made upon Olofsson. In my view Morgan Cars Pty. Ltd. was not entitled to the immediate possession of the car driven by Olofsson and is not, therefore, an "owner" of the car as defined in s. 5 of the Act. (at p33)

16. I would dismiss this appeal. (at p33)

MASON J. I would dismiss the appeal for the reasons expressed by Stephen J. in the reasons for judgment which he has prepared. (at p33)

Orders

Appeal dismissed with costs.