Sinfein Pty Ltd v State Government Insurance Commission

[1996] HCATrans 331

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P31 of 1996

B e t w e e n -

SINFEIN PTY LTD

Applicant

and

STATE GOVERNMENT INSURANCE COMMISSION

Respondent

Application for special leave to appeal

DAWSON J
McHUGH J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

FROM PERTH BY VIDEO LINK TO CANBERRA

ON MONDAY, 4 NOVEMBER 1996, AT 2.17 PM

Copyright in the High Court of Australia

MR C.L. ZELESTIS, QC:   May it please your Honours, with my learned friend, MR G.J. PYNT, I appear for the applicant.  (instructed by Pynt McKay)

MR G.P. MILLER, QC:   May it please your Honours, I appear with my learned friend, MR M.L. WILLIAMS, for the respondent.  (instructed by Phillips Fox)

DAWSON J:   Thank you.

MR ZELESTIS:   Your Honours, the special leave question in this case concerns the true construction of the statutory form of compulsory motor vehicle insurance policy, and, in particular, the construction of the provisions of the amended provisions of that form of policy which deal with the causal connection between the driving of a motor vehicle and the insurance, the injury that is suffered and which, therefore, control the insurance cover which the policy provides.  Lying beneath that question is the true approach that should be adopted for the construction of such a policy.  Our contention is that it should not be seen simply as an insurance policy to be construed in accordance with the principles which may govern insurance policies generally, but ought to be construed in the light of the underlying purposes of the legislation.  In our submission, that is particularly important in this context when, following the decision of this honourable Court in Dickinson, the Act was amended in 1987 so as to confine the scope of the statutory cover. 

In our submission, what has been lost sight of in this exercise is that even when so defined this is a form of policy which was part of a statutory scheme which protects not only motorists, owners, and drivers, but also all people who use the road or come near the road and who may suffer injury arising out of motor vehicles.  So, our submission is that when a phrase is introduced into the Act, as happened here in 1987, to narrow the causal test, but in a way which itself admitted of considerable doubt and involved ambiguity, the resolution of the doubt and the ambiguity should have been by reference to the underlying statutory purpose and not a more arid question of whether insurance law adopts a direct or proximate test and whether that is different from the common law test of causation. 

This statutory scheme is similar to many in Australia.  It provides that owners must insure their vehicles in the statutory form.  It provides for a judgment obtained by a plaintiff, if unsatisfied, to be enforced against the statutory insurer, the State Government Insurance Commission, and also provides that in the case of uninsured vehicles, an unsatisfied judgment can be enforced against the statutory body.  So, in our submission, there is no doubt about the underlying purpose of the legislation.  It is to provide protection for owners, motorists and people who come near the road alike.

KIRBY J:   You say in your application that this is a matter of importance not only in Western Australia but elsewhere in Australia.  Is there a common form policy that is relevant or is it a peculiar problem for Western Australia?

MR ZELESTIS:   There is a similar problem but not an identical problem in Victoria.  In Victoria the words “directly caused by” have been introduced but they have retained “arising out of” from the old formula, and that has really thrown up a problem of its own kind.

KIRBY J:   So it looks as though this is peculiar to your state, to Western Australia.

MR ZELESTIS:   Yes, I think we must accept that.

KIRBY J:   That is against special leave, is it not?

MR ZELESTIS:   As we have also said ‑ ‑ ‑

KIRBY J:   That is an argument against special leave.

MR ZELESTIS:   Yes, I can see the force of that, your Honour, but nevertheless this is legislation which really has the potential to affect almost every citizen in the land because it is just about impossible to go about one’s daily life these days without somehow coming into contact with a road and a motor vehicle, whether as driver/owner or ‑ ‑ ‑

KIRBY J:   I think I would correct that.  It is every citizen in Western Australia upon which the Full Court of the State has passed.

MR ZELESTIS:   No, but the principle which has been enunciated ignores the underlying statutory object of the legislation and at least two of their Honours appear to have approached the resolution of the issue by reference to the construction of the policy upon insurance law principles, and it is that error of principle ‑ ‑ ‑

DAWSON J:   Mr Zelestis, I take you to be saying that the policy of the legislation is to ensure that there is cover in a wide range of circumstances.  Is that what you are saying?

MR ZELESTIS:   I am saying something I think a little more specific.

DAWSON J:   But may I just put this to you before you go on.  The policy of the amendment which was passed was to restrict to a narrower confine the cover by substituting for “arising out of” “directly caused by”.  Is that not so?

MR ZELESTIS:   It is undoubted that the general thrust of the intention of the amendment was to restrict cover.  We entirely accept that.  But, nevertheless it threw up a doubt as to the true test of causation which the legislature had sought to invoke.  In our submission, in resolving that doubt the court, at least two of their Honours, had resort to insurance law principles and overlooked the fact that even amended and even with an intention to narrow the scope, the words in question still existed in a statute which was essentially pursuing a public protective purpose.  So that the words should be read as amply as reasonably possible, not by reference to principles which have their origins in contracts negotiated freely between the parties.  Of course, that is the distinguishing hallmark here, that nobody can negotiate the term of this policy, it is compulsory and really reflect the Parliament’s view of the degree to which the public ought obtain protection by such a scheme.

KIRBY J:   Your point is, I take it, that although in this case this was a claim for indemnity, the point in issue has now been determined in a way that could affect people making direct claims?

MR ZELESTIS:   Yes; in a sense this was a case about the construction of the policy but it is impossible, in our submission, to divorce the construction of the policy from the construction of the Act because the Act dictates the terms of the policy and compels it to be obtained in those terms.  So, in our submission, there is an important point of principle not only as to what the policy means but perhaps more importantly as to the way in which the courts ought approach the construction of a policy when it is the product of such a statutory scheme.

Might I take a moment to show your Honours how the Full Court approached the question of construction.  The Chief Justice, of course, was in the dissent here, he found in our favour.  His Honour noted at page 40 in the application book some features of the legislation and the change which had been made as a result of the High Court’s decision in Dickinson, and one must bear in mind, pausing there, that Dickinson, of course, was a case which involved the policy responding in circumstances where the vehicle was not being moved, was not been driven and was not running out of control.  One of the two things which the amending legislation in 1987 set out to achieve was to prevent the policy responding in circumstances where the vehicle was not actually being driven or running out of control.

At page 41 his Honour noted the three or four principal sections, sections 4,6,7 and 8, which give effect to the broad elements of the statutory scheme which I described a moment ago.  His Honour, at page 42 notes at lines 35 to 50 the changes in the legislation, the critical words introduced at line 35:

“death of or bodily injury to any person directly caused by, or by the driving of, such motor vehicle.”

Then an aid in section 3(7) to the construction of that.  Then his Honour notes the arguments at page 43 lines 10 to 30 and notes the statutory context and notes again the statutory context at line 45 on page 43 but concludes there that:

it is appropriate to look to insurance law for guidance in the interpretation of the expression “directly caused by”.

So, his Honour, although finding in our favour, has approached the question of construction we would say on far too narrow a basis by reference simply to what an insurance law history might teach us the words “directly caused by” means.  That is legal history.

Now Justice Ipp dealt with the matter at page 64.  His Honour was against us, and at the foot of page 64 line 55, his Honour said:

It is to be borne in mind that this appeal involves the construction of an insurance policy -

and then his Honour goes on into insurance law and on page 65 at lines 45 to 55 concludes that what is imported by this policy is a narrower test than the ordinary common law test of causation.

Justice Parker dealt with the matter a little less clearly at page 83.  His Honour found, in this case, that he did not really have to decide the ultimate question of construction because on either of two views being propounded he found that there was not causation established in fact, but at the bottom of page 83 line 57 his Honour does at least refer to the intention of the legislature and that it was to provide that there should be this narrower causal connection, but in referring to the intention of the legislature at this point his Honour has not looked at the underlying purpose of the amended Act as a whole; his Honour has simply relied upon the fact that the amending Act, served or intended to narrow the scope of cover and did not then set the narrow cover in the context of the underlying policy and, in our submission, failed to do what his Honour should have done and that is then give the policy the most ample and beneficial construction possible, because of the underlying social purpose whcih is of fundamental importance in our society.

On the facts, the Chief Justice found that the causal connection was established by the application of the ordinary common law test.  Justices Ipp and Parker effectively said, whichever test of causation you apply, the policy does not respond, but, in our submission, it is an unsafe and unsatisfactory basis upon which to leave the case if we are right in the construction, because what ‑ ‑ ‑

McHUGH J:   But what is your construction, Mr Zelestis?

MR ZELESTIS:   We say that the policy does admit of the construction given by the Chief Justice, which is that it imports the common law test of causation.  The value judgment being made, we would go a little further than his Honour and say not in the context of an insurance policy, but the value judgment being made in the context of a compulsory statutory scheme of insurance, designed to protect the public ‑ ‑ ‑

McHUGH J:   But that submission seems to give no weight to the word “directly”.

MR ZELESTIS:   Well, it does, your Honour, because one can give that weight from the history.  It is an intention, or it reflects an intention to move away from the old formula, which had been given an extremely broad construction.  But it did not compel the conclusion that something narrower than the common law test of causation was invoked and ‑ ‑ ‑

McHUGH J:   But surely it does.  I mean, if it was the common law test, you would simply have “caused by”  Instead, you have got “directly caused by”.  And whatever view you took in this case, it seems to me very difficult to say that this personal injury was directly caused by the driving of a motor vehicle.

MR ZELESTIS:   Well, can I deal with the second question first, your Honour?  In our submission, it is not difficult, as his Honour the Chief Justice found, to say that it was directly caused, because what happened here was that the fire was started by the driving of the truck, and the plaintiff was injured when trying to put out that very fire.  And, indeed, the burns which he suffered when the petrol was spilt resulted from the previously burnt ground obviously being still sufficiently hot and smouldering to set alight the petrol.

McHUGH J:   The direct cause of his injury was not driving, but the fact that he spilt petrol on the ground that was already burnt.  That was the direct cause of it.

MR ZELESTIS:   When he was endeavouring to put out the fire.  As his Honour the Chief Justice held, your Honour, there were a series of steps, none of which involved any intervening act which broke the chain of causation.  The fact that fire was caused ‑ ‑ ‑

McHUGH J:   Well, there would not have been an injury but for the spilling of the petrol.  That was the direct cause of his injuries.  The fire was background.  You could not have had the injury without the fire, but it certainly was not the direct cause of it.

MR ZELESTIS:   In our submission, your Honour, the driving of the truck which caused the fire brought about a chain of circumstances under which it was inevitable that people would respond to the fire and try to put it out, and in those circumstances, it is, in our submission, not difficult at all to conclude, as his Honour the Chief Justice did, that there was a causal connection sufficient to satisfy the test posed by the policy.  We say that the matter is clearer - and, indeed, their Honours Justices Ipp and Parker did not approach it this way - when one bears in mind the underlying statutory purpose which should inform the value judgment which is made when applying the common law test of causation.

In our submission, when their Honours Justices Ipp and Parker held against us that even if they applied the common law test, we would not succeed, they did not pay any or any sufficient regard to the context, the statutory context in which the value judgment thrown up by the question of causation fell to be dealt with.  It appears to have been accepted on all sides in the case that “directly” in this policy did not mean “immediate”.  It did not preclude a number of steps, a number of events occurring as a result of the initial driving and some mishap from that.  So once one takes that step of accepting that “direct” does not mean “immediately direct”, one, with respect, opens the causal test to circumstances such as these where there are a series of, in our submission, direct consequences all flowing from the initial driving of the motor vehicle.

So, in our submission, your Honours, not only is there an important question of construction, not only is there an important question of principle as to how contracts are to be construed when they are the result of this

unusual statutory scheme, unusual in the sense that contracts are not normally the product of this scheme, but also the case is one in which if the point which we seek to make good is made good, that we can succeed on the facts as the Chief Justice’s reasons reveal.  Those are our submissions.

DAWSON J:   Mr Miller, we need not trouble you. 

This application concerns the interpretation of the words “death or bodily injury caused by or by the driving of the vehicle” contained in a policy of insurance under the Motor Vehicle (Third Party Insurance) Act 1943 Western Australia. We are not persuaded that the majority in the Full Court were in error in reaching the conclusion which they did and they were not in error in having regard to insurance law in the interpretation of the expression in question. In any event, the case turns largely upon its own facts. For all of these reasons, the applicant has not made out a case for granting special leave. Special leave is accordingly refused.

MR MILLER:   May it please the Court, I move for an order that the applicant pay the respondent’s costs.

DAWSON J:   Can you say anything about that, Mr Zelestis?

MR ZELESTIS:   No.

DAWSON J:   Is refused with costs.

AT 2.36 PM THE MATTER WAS CONCLUDED