Re FAI General Insurance Company Ltd

[1997] QCA 405

IN THE COURT OF APPEAL	[1997] QCA 405
SUPREME COURT OF QUEENSLAND

Appeal No. 2898 of 1997

Brisbane

[VACC Insurance Company Ltd v. FAI General Insurance Company Ltd]

BETWEEN:

VACC INSURANCE COMPANY LIMITED

(ACN 004 167 953)

(Respondent) Appellant

AND:

FAI GENERAL INSURANCE COMPANY LIMITED

(ACN 000 327 855)

(Applicant)	Respondent
McPherson JA Williams J Lee J

Judgment delivered 7 November 1997

Separate reasons for judgment of each member of the Court, all concurring as to orders made.

APPEAL ALLOWED. ORDERS OF CHAMBER JUDGE SET ASIDE. NOTICE OF MOTION DISMISSED WITH COSTS TO BE TAXED. RESPONDENT PAY APPELLANT’S COST OF APPEAL TO BE TAXED.

CATCHWORDS:	INSURANCE - Motor vehicle insurance - car collided with a second car and further down the road, collided with a third car - passengers of second car claimed for personal injuries against first car - apportionment of liability between insurers - statutory deed under Motor Accident Insurance Act 1994 (Qld) governs apportionment between insurers - whether deed excludes law of negligence - liability depends on whether car “involved” in the “incident” - whether two cars or three cars “involved” in incident giving rise to claim - meaning of “involved” - meaning of “incident”.
ARBITRATION - Commercial arbitration - whether manifest error of law on the face of the award. s5(1)(b) Motor Accident Insurance Act 1994 (Qld) Schedule 2 Motor Accident Insurance Regulation 1994 (Qld)
` Counsel:	Mr JJ Clifford QC for the appellant. Mr SC Williams QC for the respondent.
Solicitors:	Gadens Ridgeway for the appellant. Clayton Utz for the respondent.
Hearing Date:	24 October 1997

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 2898 of 1997

Brisbane

Before McPherson J.A.
Williams J.
Lee J.

[VACC Insurance Co. Ltd. v. FAI General Insurance Co. Ltd.]

BETWEEN:

VACC INSURANCE COMPANY LIMITED
ACN 004 167 953

(Respondent) Appellant

AND

FAI GENERAL INSURANCE COMPANY LIMITED
ACN 000 327 855

(Applicant) Respondent

REASONS FOR JUDGMENT - McPHERSON J.A.

Judgment delivered 7 November 1997

I agree with the reasons of Williams J. and the orders proposed by him for disposing of this

appeal.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 2898 of 1997

Brisbane

Before McPherson JA
Williams J
Lee J

[VACC Insurance Co Ltd v. FAI General Insurance Co Ltd]

BETWEEN:

VACC INSURANCE COMPANY LIMITED

(ACN 004 167 953)

(Respondent) Appellant

AND:

FAI GENERAL INSURANCE COMPANY LIMITED

(ACN 000 327 855)

(Applicant) Respondent

REASONS FOR JUDGMENT - WILLIAMS J

Judgment delivered 7 November 1997

Both the appellant and the respondent are licensed insurers for purposes of the Motor Accident

Insurance Act 1994 (“the Act”) and the Motor Accident Insurance Regulation 1994 (“the Regulation”).

A dispute arose between them which was referred to referees appointed pursuant to the provisions of

the statutory deed to which each was a party (s.65 of the Act; s.19 and Schedule 2 of the Regulation).

A significant part of the decision of the referees was not in accordance with the submissions of the

respondent, and it applied by motion to a Chamber Judge to have that part of the decision reversed

pursuant to s.38 of the Commercial Arbitration Act 1990 on the ground that there was “a manifest error of law on the face of the award”. The Chamber Judge accepted the submissions made on behalf of the

respondent and effectively reversed the relevant part of the decision of the referees. The appellant

appeals to this court contending that the decision of the referees was correct; inherent in that was the

proposition that there was no manifest error of law in the decision of the referees such as would entitle

the Chamber Judge to substitute his own decision.

The Act introduced what was largely a new scheme regulating claims for damages for personal

injury arising out of motor vehicle accidents. For present purposes there are some provisions of the

legislation which are relevant. “Motor vehicle accident” is defined as “an incident in which personal

injury is caused by, through or in connection with a motor vehicle”. “Claim” means “motor vehicle

accident claim” which is in turn defined as follows: “a claim for damages based on a liability for personal

injury arising out of a motor vehicle accident ...” The term “liability” is not defined though its meaning

can be gathered from a consideration of s.5(1)(b) of the Act: “This Act applies to personal injury

caused by, through or in connection with a motor vehicle if, and only if, the injury - ... (b) is caused,

wholly or partly, by a wrongful act or omission in respect of the motor vehicle by a person other than

the injured person”. It follows that for there to be a motor vehicle accident claim it must be with respect

to personal injury caused effectively by negligence in respect of the motor vehicle.

The Act makes provision for insurers to become “licensed insurers” for purposes of the Act

and s.65 provides that a “licensed insurer is bound by the industry deed”. Amongst other things the

industry deed may “deal with the apportionment of liability ... between licensed insurers”.

Section 19 of the Regulation provides that the approved form of the industry deed shall be that

set out in Schedule 2 of the Regulation. Clause 2(2) of the Deed provides that definitions in the Act

apply to terms used in the Deed unless the contrary intention appears. “Claim costs” means for purposes of the Deed “costs of an insurer on a claim”. Clauses 5 and 6 of the statutory deed are at the

centre of the current dispute; they provide, so far as is relevant:

“5.(1)

If 2 or more insurers are liable or potentially liable on a claim ... the insurers must resolve questions about which insurer is to be the claim manager and the basis on which claim costs are to be shared between them as soon as practicable after notice of the claim is given ...

(2)

If a question about which insurer is to be claim manager, or about the basis on which claim costs are to be shared, has not been resolved within 2 months after the notice of claim is given, the question is taken to be in dispute between the insurers, and they must immediately give notice of dispute to the Commission.

(3)

The Commission may refer a dispute of which notice is given under subsection
(2) to a referee.
...

6.(1)

The basis on which claim costs are to be shared between licensed insurers that are liable, or potentially liable, on the claim is to be decided by agreement between them.

(2)

However, if -

(a)	a person makes a claim for personal injury arising out of a motor vehicle accident in which 2 or more motor vehicles were involved ...; and
(b)	the motor vehicles are all of the same class and all registered in the State; and
(c)	the claimant is not the driver of a motor vehicle involved in the accident; and
(d)	no insurer has a right of recourse against an insured person; and
(e)	the insurers have not decided the basis on which claim costs are to be shared between them within 2 months after the notice of claim is given;

the claim costs are to be shared between the licensed insurers in the proportions that the number of motor vehicles insured by each insurer bears to the total number of vehicles involved in the accident.”

Clause 6 provides that the referee is taken to be appointed under the Commercial Arbitration Act 1990

and also that the referee’s decision and orders are to be binding on all parties.

Section 10 of the Regulation deals with the contents of a notice of claim given pursuant to s.37

of the Act. For present purposes s.10(1)(b)(ix) should be noted; the notice should contain “details of

negligence on which the claim is based”.

The relevant background facts are not in dispute. On the morning of 25 June 1995 a collision

occurred on the Brisbane Valley Highway near Wanora between a Ford Fairlane sedan insured by the

appellant and a Ford Telstar sedan insured by the respondent. That collision occurred because the

Ford Fairlane, which was travelling west, moved onto its incorrect side of the roadway. After the

impact between those two vehicles the Ford Fairlane continued along its incorrect side of the highway

and collided with a Subaru motor vehicle also insured by the appellant. The Subaru was some 60-70

feet behind the Telstar. The relevant motor vehicle accident claim was made by or on behalf of

passengers in the Telstar.

The appellant and the respondent were unable to agree as to the basis on which claim costs

should be shared with respect to the subject motor vehicle accident claim and that question was one of

the issues referred to referees (three barristers). The contention of the respondent was that three motor

vehicles “were involved” in the “incident” and that in consequence the licensed insurer of each of the

three vehicles should contribute one-third of the claim costs. The contention of the appellant was that

only two vehicles “were involved” so far as the relevant motor vehicle accident claim was concerned

and that in consequence the licensed insurers of each of those two vehicles should bear one-half of the

claim costs.

The referees found in favour of the appellant, but the learned Chamber Judge concluded that

such decision revealed a manifest error of law; in consequence he set aside that decision of the referees

and substituted a decision to the effect that three vehicles were involved and each of the licensed

insurers of those three vehicles had to contribute one-third. It is from that decision that this appeal is

brought.

The reasoning of the referees on the relevant issue for present purposes was as follows:
“The word 'involve' means entangled, implicated, included or concerned. In our
opinion it cannot be said that the Subaru was entangled, implicated, included or
concerned with the injuries to the people in the Telstar. The relevant claims all arise out
of the collision between the Fairlane and the Telstar and there was no collision between
the Telstar and the Subaru. ... it is clear that the personal injuries to those persons in
the Telstar only arose out of the impact between the Fairlane and that Telstar. The
Subaru did not come into contact with the Telstar. In those circumstances it could not
be said on any fair reading of cl.6(2)(a) that the Subaru was involved in the motor
vehicle accident out of which any relevant personal injury claims were made. It follows
therefore, there were only two vehicles involved and the other provisions in cl.6(2)
having been complied with, the claims costs ought to be shared in accordance with
cl.6(2) of the Deed. That is to say, equally.”

It was therefore ordered by the referees that the relevant claim costs be shared equally between

VACC and FAI.

The basis on which the learned Chamber Judge reversed the referees can be gleaned from the

following passages from his reasons for judgment:

“The argument for FAI was essentially that the question here was a question of law upon which the referees erred. The argument for VACC was that their decision was simply one of fact, the application of an Act to a particular set of circumstances, and the question of error therefore did not fall for decision of the Court under s.38 of the Commercial Arbitration Act 1990.

Mr Clifford conceded that if the decision of the referees was one which on the facts of the case could not rationally have been reached by them then there would be an error of law. In my view, that is a description of the finding of the referees in the present case.

It seems to me that it simply was not open to the referees to find that there was more than one incident on the highway in the second or two in which the events, the subject of the claims, took place.

In my judgment there was one incident. That incident involved two collisions. But that does not seem to matter. The intent of the legislation, I would observe, is not to apportion responsibility between insurers by reference to fault of the insured driver but rather to resolve disputes in the manner prescribed by the Regulations without regard to fault.

In my view, there is a manifest error of law by failing to regard the undisputed facts of being capable of only one interpretation. That is the interpretation that there was one accident within the meaning of the definition.”

At the outset of his submissions to this court senior counsel for the respondent said:

“Could I firstly invite your Honours ... to pull the drain plug on everything your Honours have learnt over the years and now understand in relation to negligence and causation because those considerations and issues form no part of the determination of liability among insurers under the industry deed. The deed is intended to provide on a swings and roundabout basis a mechanism whereby liability among insurers is determined quickly and to a formula irrespective of considerations of negligence and causation.”

There is a grain of truth in those propositions, but as a broad statement of principle the submission must

be rejected. The term “caused” is used in the definition of “motor vehicle accident” and in s.5(1)(b) of

the Act; “liability” (or a derivative) is used in the definition of “motor vehicle accident claim”, s.65 of the

Act, and in cll.5(1) and 6(1) of Schedule 2 of the Regulation; “wrongful act” is used in s.5(1)(b) of the

Act; and “negligence” is used in s.10(1)(b) of the Regulation. The use of those terms and expressions

throughout the Act and Regulation clearly indicates that the traditional concepts of negligence, liability

and causation still play an important role in the resolution of claims made pursuant to the legislation,

including the resolution of disputes as to contribution between licensed insurers.

Certainly cll.5 and 6 of the industry deed are designed to provide a formula for a speedy and

inexpensive resolution of questions as to contribution between licensed insurers with respect to claim

costs. But two features of cll. 5 and 6 cannot be ignored. Firstly (as provided for by the opening words

of cl.5) there must be two or more licensed insurers “liable or potentially liable on a claim”. The

remaining provisions of cll.5 and 6 could not make a licensed insurer “liable or potentially liable” if such

liability was not established by other provisions of the legislation (for example, s.5(1)(b) of the Act).

What is important to note about s.5(1)(b) of the Act is that the “wrongful act or omission” which causes

the personal injury must be “in respect of the motor vehicle”. Earlier in the section there is reference to “a motor vehicle” but when subsequently there is reference to “the motor vehicle” that can only mean

that the Act creates liability in a licensed insurer where the particular vehicle insured by that licensed

insurer was a cause, through a wrongful act or omission, of the personal injury. Some wider

involvement for apparent purposes of cll.5 and 6 of the industry deed would not operate to extend that

liability.

Secondly, one cannot overlook the use of the words “a person makes a claim for personal

injury arising out of a motor vehicle accident” in cl.6(2) of the deed. When one reads those words in

the light of the definitions of “motor vehicle accident”, “claim”, and “motor vehicle accident claim”, and

in the light of s.5(1)(b) of the Act, it becomes clear that the “2 or more motor vehicles” referred to in

that paragraph must be limited to two or more motor vehicles which caused, by a wrongful act or

omission in respect of each of them, the personal injury. Only if that test was satisfied would there be

a basic liability in the licensed insurer. Again it must be reiterated that cll.5 and 6 of the industry deed

cannot create a liability in a licensed insurer not otherwise established by the provisions of the legislation.

It is not necessary for this court to determine the force and effect which should be given to the

expression “potentially liable” in cl.5. At least it would ensure that the licensed insurer of a vehicle which

could be held to have been a cause of the personal injury through some wrongful act or omission with

respect to it was caught by the provisions of cll.5 and 6. To that extent, as suggested by senior counsel

for the respondent, the provisions are designed to avoid costly litigation between licensed insurers to

determine apportionment of liability. But such considerations cannot extend the threshold consideration

which I have discussed above.

If the submissions made by counsel for the respondent, and the reasoning of the Chamber Judge, are correct then it would make no difference whether the third vehicle was in the position of the Subaru here, or was a vehicle lawfully and properly parked on the side of the road. Assume the impact

in question between the Fairlane and the Telstar causing the personal injuries the subject of the claim

made here, and then have the Fairlane subsequently collide with a lawfully parked vehicle some 100

yards down the road. The licensed insurer of the parked vehicle would not be liable because it could

not be said that that parked vehicle was caught by s.5(1)(b) of the Act.

It will always be a question of fact whether or not the personal injury the subject of the claim

was caused, wholly or partly, by a wrongful act or omission in respect of a particular motor vehicle.

That liability will have to be established (either on an absolute or potential basis) before the licensed

insurer of that vehicle becomes obliged to agree upon a basis of cost sharing pursuant to cll.5 and 6 of

the industry deed.

The learned Chamber Judge concentrated on the “incident” and ignored the other matters of

critical importance in answering the question put to the referees. In my view the referees arrived at the

correct decision. There was no manifest error of law on the face of the record, and the Chamber Judge

in consequence had no proper basis for interfering with the award.

The appeal should be allowed, the orders of the Chamber Judge set aside, and in lieu thereof

it should be ordered that the notice of motion be dismissed with costs to be taxed. The respondent

should pay the appellant’s costs of the appeal to be taxed.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 2898 of 1997

Brisbane

Before McPherson JA
Williams J
Lee J

[VACC Insurance Company Ltd v. FAI General Insurance Company Ltd]

BETWEEN:

VACC INSURANCE COMPANY LIMITED

(ACN 004 167 953)

(Respondent) Appellant

AND:

FAI GENERAL INSURANCE COMPANY LIMITED

(ACN 000 327 855)

(Applicant) Respondent

REASONS FOR JUDGMENT - LEE J.

Judgment delivered 7 November 1997

I agree with the reasons of Williams J and the orders proposed.