Barrie Toepfer Earthmoving and Land Management Pty Ltd v CGU Insurance Ltd

The terms of the policy

1. The policy describes itself as a "Commercial Motor Vehicle Policy". The general insuring clause provides: Subject to the terms conditions and exclusions of this policy as agreed by You and Us, We agree to provide indemnity in respect of any Motor Vehicle described in the Schedule against loss damage or liability as hereafter mentioned arising out of an Accident or theft, Provided … (4) Your Motor Vehicle is being used in connection with Your occupation or business, or in the case of a sedan or station sedan, Your occupation, business or private use.
2. "You" and "Your" refer to the insured, Earthmoving: Judgment [169]. The vehicles described in the policy schedule (which was not reproduced in the appeal papers) included "dozers, excavators, prime movers, tractors and trailers" used in the insured's business: Judgment [172].
3. "Accident" is defined to mean "an unintended, unforeseen, unlooked-for happening or mishap, which is not expected or designed". As such it has its ordinary and natural meaning as an unintended or unexpected event or happening which results in loss, damage or liability: Australian Casualty Co Ltd v Federico [1986] HCA 32; 160 CLR 513 at 527.
4. The indemnity "hereafter mentioned" is described in four numbered sections ("Loss or Damage", "Legal Liability", "Law Costs" and "Principals and Employers Indemnity"). Those sections are followed in turn by the exclusions and conditions to which reference is made in the general insuring clause.
5. Section 1 insures against loss or damage to a motor vehicle. Section 2 relevantly provides: Where Your Motor Vehicle … is unregistered, then this entire Section 2 following does not apply. (a) We will pay any amount up to a liability limit of $25,000,000 in total … which You are held legally responsible to pay as a result of an accident, for damages in respect of: (A) Bodily injury (fatal or non-fatal) to Another Person (B) Damage to property of Another Person If caused: (1) by You using Your Motor Vehicle; or … (3) by merchandise or equipment/components of Your Motor Vehicle, falling on/in or from Your Motor Vehicle.
6. The expression "Another Person" as used in this section is defined, where the insured is a corporation, to mean any individual other than "a person who is a director, partner or employee acting as same".
7. The seventh exclusion relevantly provides: We will not pay for: … (7) Loss or damage or liability caused by: … (f) A wilful act or connivance by You or any person acting for or on Your behalf … (i) Recklessness by You or any person acting on Your part or by reckless failure to comply with any statutory obligations and by-laws or regulations imposed by any public authority, for the safety of Motor Vehicle/s and, for the carriage of goods and merchandise.
8. The introductory clause to the Conditions and condition 3 are in the following terms: We may refuse to pay a claim, or may reduce the amount payable under a claim to the extent that Your breach of any condition of this policy causes or contributes to loss, damage or liability or prejudices Our interest or rights, in respect of that claim. … 3. REASONABLE CARE You and any person acting on Your behalf must exercise reasonable care and precautions to prevent loss or damage to the Motor Vehicle, and comply with all statutory obligations and by-laws or regulations imposed by any public authority, for the safety of the Motor Vehicle/s and, for the carriage of goods and merchandise.

Onus

1. Although Mr Toepfer, a director of Earthmoving, was given leave to appear on its behalf at the trial, the conduct of the company's case against the insurers was substantially undertaken by the RTA, no doubt because it was in its interests that the company's insurance respond to the RTA's claim: Judgment [10]-[12].
2. The insurers correctly accepted that they had the onus of establishing the application of the exclusion: see generally McLennan v Insurance Australia Ltd [2014] NSWCA 300; 313 ALR 173. However, they maintained in argument (but not by the form of their pleadings) that the insured had the onus of proving it had complied with condition 3. As will be seen, the primary judge accepted this submission.

Exclusion 7(i)

1. The insurers argued that exclusion 7(i) applied because the insured's liability for the damage to the bridge had been caused by Mr Luck's "recklessness" in driving over it. From the insured's perspective, that was said to be recklessness by a "person acting on Your part". The same recklessness was said to constitute a breach of the obligation in condition 3 to "exercise reasonable care and precautions to prevent loss or damage" to the vehicle and to have caused the insured's liability to the RTA.
2. The insurers also maintained that within the language of the exclusion there was a "reckless failure" by Mr Luck to comply with two statutory obligations. They were identified as reg 76(1) of the Road Transport (Vehicle Registration) Regulation 1998 (NSW) (the reference should have been to reg 57(1) and to the vehicle standard specified in cl 76 of Sch 4 to that Regulation as in force in April 2003) and Australian Road Rules, r 102 (which was incorporated into New South Wales law by reg 6 of the Road Transport (Safety and Traffic Management) (Road Rules) Regulation 1999 (NSW)). The former contained a general prohibition on the use of any vehicle which was over a height of 4.3m. The latter provided that a driver must not continue to drive beyond a clearance sign if the height of the vehicle exceeded the height indicated on the sign.
3. These allegations of recklessness on the part of Mr Luck were contested. In addition, it was submitted on behalf of the insured that the exclusion did not apply to him or his conduct because he was not within the expression "any person acting on Your part". No separate argument was addressed to the significance, if any, of the absence of similar words in the second part of the exclusion commencing "or by reckless failure". It was also argued on behalf of the insured that neither of the statutory obligations relied upon was one imposed "for the safety of [motor vehicles] and, for the carriage of goods and merchandise" so as to attract the possible operation of the second part of the exclusion. That argument equally applied to the insurers' reliance on the similarly phrased obligation in condition 3.

Condition 3

1. The insurers maintained that condition 3 imposed two obligations, neither of which was complied with. The first was to exercise "reasonable care and precautions" to prevent loss or damage to the prime mover and low loader. The second was to comply with statutory obligations of the kind referred to above, that obligation not being qualified by the words "exercise reasonable care and precautions". The breach of each obligation was said to have caused Earthmoving's liability to the RTA.
2. The insured's position was that Mr Luck had not failed to exercise "reasonable care" (understanding that obligation as requiring that he not act recklessly) and that neither limb of condition 3 applied to his conduct because he was not within the expression "any person acting on Your behalf". It was also submitted that condition 3 did not apply to a claim to an indemnity against liability for damage to a third party's property because in its terms, it was concerned only with the avoidance of damage to insured property. Finally, the insurers' submission as to the obligation imposed by the second limb of condition 3 being absolute was contested.

Findings and conclusions of the primary judge

1. The primary judge proceeded on the basis that the insurer had the onus of proving exclusion 7(i) applied, while the insured bore the onus of proving that it had exercised reasonable care and precautions to prevent damage to the insured vehicle as required by condition 3: Judgment [123]. In addressing the principal factual issue raised by the insurers in relation to the exclusion and the condition, his Honour was "satisfied" that Mr Luck was "reckless" in proceeding onto the bridge without stopping or slowing: Judgment [145], [152]. He therefore concluded that the insurer had established that it was entitled to refuse indemnity by reason of Mr Luck's recklessness: Judgment [176]. Not surprisingly in view of this finding, his Honour also found that Earthmoving had not discharged its onus of proving that it had complied with condition 3.
2. His Honour also considered an alternative argument advanced by the insurers. That argument was that upon becoming aware as he commenced to cross the bridge that the excavator was striking it, Mr Luck was reckless in failing to bring the vehicle to a stop earlier than he did. This argument did not depend on Mr Luck having been reckless in driving onto the bridge in the first place. His Honour dealt with and accepted the argument, but only on the basis that Mr Luck had been aware from the outset that there was a danger that the load would strike the bridge: Judgment [152]. His Honour was satisfied that Mr Luck's conduct in proceeding onto the bridge and continuing in the manner in which he did was reckless. As appears below, the insurers press their original argument on appeal, although it is not the subject of a ground of contention, and could only provide a partial answer to the claim for an indemnity.
3. The primary judge held that exclusion 7(i) and condition 3 applied to Mr Luck as an employee of the insured and to his conduct: Judgment [175]-[177]. He did not address the insurers' argument that the obligation imposed by the second limb of condition 3 was an absolute one. This is the ground identified in the insurers' notice of contention (that the insured did not comply with all statutory obligations and regulations imposed by a public authority for the safety of vehicles and the carriage of goods and merchandise).
4. Nor did the primary judge address two other arguments made in the insured's interest because neither was an answer to his finding of "recklessness". Those arguments were that the statutory obligations said to have been breached were not within the description of the obligations contained in exclusion 7(i) and the second part of condition 3; and that a breach of the first obligation in condition 3 could not be relied on in answer to a third party liability claim.

The issues in the appeal

1. In the order in which I propose to deal with them, the issues raised by the notice of appeal and notice of contention are: 1. Whether the primary judge erred in holding that the insured bore the onus of proving compliance with condition 3 (ground 5). 2. Whether the primary judge erred in finding Mr Luck was "reckless" within exclusion 7(i) and in breach of the obligation to exercise "reasonable care and precautions" in condition 3 (grounds 1, 2, 3, 4, 6 and 7). 3. Whether the primary judge should have held that condition 3 imposed an absolute obligation on the insured to comply with the relevant statutory obligations and, if so, whether there was a breach of that condition entitling the insurers to deny liability (contention). 4. Whether the primary judge erred in holding that exclusion 7(i) and condition 3 applied to Mr Luck or his conduct (ground 8). 5. Assuming Mr Luck was not reckless in commencing to drive across the bridge, whether he was reckless and in breach of condition 3 by continuing to do so.
2. As I have already noted (see [31] above), this last question is not raised by any ground of contention. However, it was relied on and argued, without objection. It was also the subject of further written submissions from each party received after the oral argument.
3. In relation to condition 3, Earthmoving continues to argue that the statutory obligations relied on are not of the kind described in that condition. However it maintains that argument only in response to the insurers' notice of contention.

Onus of proof in relation to compliance with condition 3 (ground 5)

A Preliminary Point

1. The question of onus of proof arises in relation to the first limb of condition 3 only if the insurer can rely on a breach of that obligation to defeat a claim for indemnity by the insured against its liability to third parties. It is by no means obvious that the insurer is entitled to rely on condition 3 in that way.
2. Mr Cavanagh SC, who appeared with Mr Gow for the insured, initially submitted that the language used in the first limb entitled the insurer to resist a claim for indemnity only to the extent that the insured's failure to take reasonable care caused or contributed to loss or damage to the insured vehicle itself. On this construction, notwithstanding any lack of care by the insured, the insurer is not entitled to rely on the first limb of condition 3 to resist a claim for indemnity against the insured's liability to third parties resulting from the operation of the vehicle. A similar argument might be made in relation to the second limb of the condition.
3. In the course of argument, Mr Cavanagh's attention was drawn to the opening words of the conditions, which refer to a breach of any condition causing or contributing to "loss, damage or liability". In view of this language, Mr Cavanagh seemed not to press his argument. He indicated that he would return to the issue later, but did not do so.
4. In these circumstances, it is appropriate to proceed on the basis that the first limb of condition 3 is potentially available to the insurer in resisting the insured's claim to be indemnified against its liability to third parties arising out of the use of the vehicle. However, in doing so, I should not be taken as expressing a view as to whether this is the correct construction of the condition.

Onus of Proof

1. The insurers submitted to the primary judge, citing Kodak (Australasia) Pty Ltd v Retail Traders Mutual Indemnity Insurance Association (1942) 42 SR (NSW) 231, Albion Insurance Company Ltd v Body Corporate Strata Plan No 4303 [1983] 2 VR 339 and Legal and General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390, that the insured bore the onus of proving that condition 3 had been complied with. No contrary argument appears to have been made in the interests of the insured.
2. None of those decisions compels the conclusion that the insured bore the onus of proving compliance with the condition in this policy. Kodak makes clear that the question of onus turns on the nature of the particular clause and the terms of the policy. In Albion Insurance that question was not in issue on the appeal (at 342) and in Eather it was conceded by the insured on appeal that he bore the onus of bringing himself within the relevant condition (at 393). Neither decision suggests that the underlying principles are not those stated in Kodak. Nor does the more recent judgment of this Court in Vero Insurance Ltd v Power Technologies Pty Ltd [2007] NSWCA 226; 14 ANZ Ins Cas 61-745. In that case, the liability policy issued by Vero did not include a clause conferring a right to refuse or reduce any claim for breach of a condition and the question of onus did not arise in the appeal (at [13]). Finally, although the general question of onus was raised by the respondent insured in CGU Insurance Ltd v Lawless [2008] VSCA 38; 15 ANZ Ins Cas 61-755, an argument that the onus rested on the insurer was abandoned (at [38]).
3. In Kodak, Jordan CJ (delivering the judgment of the Court) said (at 237) when addressing the question of onus: Obviously the question of where the onus lies must in every case depend primarily upon the nature of the condition and the provisions of the policy.
4. That statement was approved by the High Court (French CJ, Gummow, Hayne, Heydon and Kiefel JJ) in Wallaby Grip Limited v QBE Insurance (Australia) Limited [2010] HCA 9; 240 CLR 444 at [27]: As the judgments in Kodak (A/asia) Pty Ltd v Retail Traders Mutual Indemnity Insurance Association and Munro Brice & Co v War Risks Association Ltd make plain, the matter of proof follows largely upon the construction of the terms of the contract of insurance and the insurer's promise contained within it. See also this Court's decision in McLennan v Insurance Australia Ltd at [14].
5. In Kodak the statutory form of workers' compensation policy provided, by its insuring clause, that the insurer would indemnify the employer against all sums for which it should be liable subject to "the due and proper observance and fulfilment by the employer of the conditions hereunder" (at 231). Those conditions included an obligation to "take all reasonable precautions to prevent injuries".
6. As Jordan CJ observed (at 234-235) the condition in question was "expressed as a condition to which the existence of an obligation to indemnify is made subject". His Honour had earlier (at 234) made the following observations as to provisions described as conditions in insurance policies: … A term in a policy of insurance which is expressed to be a condition may be a condition going to the operation of the policy as a binding document, or it may be a condition affecting only the insurer's liability to pay under what is admittedly a binding document: Maynard v Goode [(1926) 37 CLR 529 at 540] .... That is, it may be a condition a breach of which is intended to entitle the insurer to treat the policy as a document which never became binding on him, or to treat a policy which had become binding on him as no longer binding, or, on the other hand, it may be a provision a breach of which is intended merely to entitle him, according to the terms of the document, to refuse to make a payment under it, either because the breach prevented an accruer of liability to pay or because it operated to release the insurer from a liability which had in the first instance accrued: L'Union Fire Accident and General Insurance Co Ltd v Klinker Knitting Mills Pty Ltd [(1938) 59 CLR 709 at 717] …. Which of these characters should be attributed to any particular condition or provision is a question of construction depending on its language and context. The mere fact that a provision is in terms called a condition precedent will not make it such if it is incapable of operating otherwise than as a condition subsequent or incapable of operating as a condition at all: London Guarantie Co v Fearnley [(1880) 5 App Cas 911] …
7. This is not an exhaustive statement of the possible consequences under a contract of insurance of the breach of a provision which describes itself as a condition. In The Law of Insurance Contracts (6th ed, 2009, Informa), Professor Clarke notes (at [26-2G], pp 856-857): The possibilities in descending order of importance are that the condition is (a) a condition precedent so that breach rules out payment by the insurer, (b) a suspensive condition such that breach rules out payment until it is corrected, and (c) a minor contract duty, breach of which does not prevent recovery, but may render the insured liable in damages to the insurer for loss (if any) caused to the latter by the breach.
8. Here the general insuring clause (see [15] above) provides that the insurers' agreement to indemnify is subject to "the terms, conditions and exclusions of this policy". That agreement is qualified by the introductory clause to the conditions, which says that the insurers "may refuse to pay a claim", or "may reduce the amount payable under a claim", if there has been a breach of a condition. The right to refuse to pay or to reduce a claim is only "to the extent that [the insured's] breach of any condition of this policy causes or contributes to loss, damage or liability". That right arises in circumstances where there is "loss, damage or liability" to which Section 1 or 2 of the policy would otherwise apply, and entitle the insured to an indemnity.
9. In Wallaby Grip, the High Court recognised the distinction between an exception and a limitation as to the amount payable under an indemnity, but said that in each case the onus is on the insurer (at [35]): The difference between the two is that an exception may prevent an insurer's liability from arising, whereas a limitation of the kind here in question operates after the obligation to indemnify has arisen and upon the amount payable pursuant to it. It limits the extent of the insurer's liability. What they have in common is the purpose of limiting an insurer's liability, where the circumstances necessary for it have otherwise been shown to exist. In each case the insurer should bear the onus of proving the limitation.
10. The High Court also explained in Wallaby Grip at [36] that the legal burden of proof arises from the principle that he who alleges must prove. Earthmoving claimed that its liability to the RTA for damage to the bridge was caused by the use of its motor vehicle. As such that liability was within the description in Section 2 and the insurers' liability to indemnify arose, subject to the application of an exclusion or there having been a breach of a condition which was causative of all or part of that liability. Accordingly, to justify a refusal to pay all or part of that claim by reference to condition 3, the insurers had to allege and prove breach of the condition and causation. It follows that the insurers bore the onus in that respect and that ground 5 must be upheld.

Did the primary judge err in finding Mr Luck was "reckless" (grounds 1, 2, 3, 4, 6 and 7)

The relevant principles

1. It was not controversial before the primary judge or in this Court that notwithstanding slight differences between the language used in condition 3 and that considered by Diplock LJ in Fraser v B N Furman (Productions) Ltd [1967] 1 WLR 898 (at 905-906) and by this Court in Eather (at 393), the obligation to exercise "reasonable care and precautions" required that any person on whom the obligation was imposed take such precautions to prevent loss or damage to a motor vehicle as that person considered reasonable having regard to the dangers which were recognised: see Eather at 407 (per McHugh JA).
2. In Fraser v Furman his Lordship said (at 906), speaking of a condition which required that the insured "take reasonable precautions to prevent accidents and disease": ... What, in my judgment, is reasonable as between the insured and the insurer, without being repugnant to the commercial purpose of the contract, is that the insured, where he does recognise a danger should not deliberately court it by taking measures which he himself knows are inadequate to avert it. In other words, it is not enough that the employer's omission to take any particular precautions to avoid accidents should be negligent, it must be at least reckless, that is to say, made with actual recognition by the insured himself that a danger exists, and not caring whether or not it is averted.
3. It was also common ground in the appeal (as it was before the primary judge) that conduct which constituted a breach of the first limb of condition 3, because it was "reckless" in the sense referred to by Diplock LJ, would also constitute "Recklessness" as that word is used in exclusion 7(i).

The evidence

1. Mr Luck was named as second defendant but not served. He did not give evidence and no party relied on the failure of any other party to call him as justifying the drawing of a Jones v Dunkel [1959] HCA 8; 101 CLR 298 inference adverse to that party.
2. Two statements made by Mr Luck were tendered in evidence by the RTA, without objection. On 17 April 2003, two days after the accident, Mr Luck was questioned by the police and the questions and answers recorded in a police notebook. He also made a statement dated 16 May 2003 which was attached to the claim form submitted to the insurers.
3. Mr Luck's answers when interviewed by the police included: Q. Can you tell me what happened as you crossed the bridge? A. … As I went up onto the bridge, onto the flat part, I started to hear a clicking noise, like a tyre with a bubble in it. I said to the excavator driver "What's that?" He didn't say anything and the noise was getting louder. I thought there was something major wrong so I put my left hand flasher on and I started to move over. I started to brake. I said to Greg the excavator driver "I think we are hitting the top". I thought I've got to stop. By the time I stopped, I was all the way over to the left hand side of the road … on the other side of the bridge. I got out and had a look at the excavator and I couldn't see anything wrong … At this stage I wasn't even sure what was causing the noise it was making. Then a lady in a car pulled up next to me and said "You've demolished the bridge". … … Q. Is there anything else you wish to add? A. All I can say, is if I was hitting the bridge, I had no knowledge that I was or thought it would hit the bridge. I had been to the RTA checking station, just before I got to the bridge. … The RTA made me move the machine forward about 300 mm, and move the bucket [and] boom forward so the bucket was at the front of the trailer at the highest point of the trailer. The RTA then told me to put paint marks on the trailer where the machine was to go, so we would know for next time. I thought that this made the boom higher than it was before but I didn't think that it would be any problem.
4. Mr Wyborn gave evidence in the insurers' case. His affidavit sworn 18 May 2012 was read. Attached to that affidavit were a transcription of his police interview held on 7 May 2003, a statement to the police dated 11 June 2003 and an earlier statement given to a loss assessor dated 30 April 2003. At the conclusion of his oral evidence in chief, he was cross-examined by Mr Toepfer briefly, and by senior counsel for the RTA.
5. Mr Wyborn's statement to the assessor included the following description of what happened as the vehicle crossed the bridge: When we entered the bridge I heard some noise but it was not a loud noise, however as we continued our journey by the time we reached halfway the noises got louder and I began to be thrown around the cabin a bit. We reached the end of the bridge and stopped, we got out of the truck to assess the situation, I was surprised at the small amount of damage sustained by the boom of the excavator. We got back in the truck and started to drive away however the engine boiled … we called the company mechanic … I then got in the ute with the mechanic and we drove back across the bridge to see if any damage had occurred.
6. His answers given during an electronically recorded police interview two weeks later included the following (SCC is Senior Constable Collier and GW, Mr Wyborn): SCC: Mate, just in relation to the incident on 15th April there, do you want to tell me what happened on that day? GW: Ah ... I asked the truck driver as we were pulling out should we move that and he said no the RTA guy said this is where we've got to have it and so we just went back home. We approached the Hexham bridge and I said to him mainly, part joke "I hope we're under 4.8 metres" - because there was a sign there. He said "Me too". And we continued across the bridge. Probably would have been a quarter of the way over and we started - I heard a - what would you say (laughs) - a contact noise and as we kept going it just got louder and louder until we stopped over the other side and just sort of checked if everything was alright and then pulled out up around the corner and we realised that the truck had a problem … … SCC: So after you moved the weight around - and you sort of could see the weight, did anyone put a tape measure over it or …? GW: No - that wasn't even a consideration, because we weren't worried about the height, all we were worried about was the weight - the height sort of never came into it - the RTA guy - and he didn't even consider it and I don't think Lucky did either.
7. Mr Wyborn was asked about three comments he had made to Mr Luck concerning the height of the excavator. The primary judge made findings as to each of them. None of those findings is challenged. The first was made as they were leaving the weighing station (Judgment [133], [138]): Q. As you were driving out of the station, do you remember saying something to the driver about the height of the excavator? A. Mmm, correct. Q. What did you say to him? A. To the words to the effect of [sic], 'Um, do you think we should move this?' Q. Why did you say that to him? A. Because of the height. Q. What was your concern about the height of the excavator in its adjusted position? A. Just that it looked too high. Q. And did you say anything to that effect to the driver? A. Yes, that. Q. … I should ask you, did Mr Luck say anything in response to you having pointed that out to him? A. Yes, he said, 'That's the way the RTA wanted it.'
8. The primary judge also found that the following further statements were made (Judgment [140]): (i) Whilst proceeding in a southerly direction, Mr Wyborn observed that the shadows of the excavator looked something like a long neck dinosaur. He asked Mr Luck "[Are] you sure you don't want to turn this around?" Mr Luck replied: "Nup, that is the way the RTA have told us to do it". This conversation took place about halfway between the weigh station and the bridge (T245 L30-49). (ii) As they approached the bridge, there was a sign that indicated Low Clearance 4.8m: see [8] above. Having seen the sign when he was about 50m away from it, Mr Wyborn said to Mr Luck "I hope we are under 4.8 Lucky" to which Mr Luck replied "Me too".
9. In cross-examination Mr Wyborn was asked by counsel for the RTA about the comment made as they approached the bridge: Q. And as you told Constable Collier, was it Constable Collier you spoke to. You said to him part joking "I hope we're only 4.8"? A. Like I said it was an off the cuff thing. I didn't for one minute, neither of us. Q. Thought you were going to hit the bridge? A. No. I mean height has never been an issue with us so neither of us thought of it. Q. You just didn't think of it? A. We'd just been down to the RTA and they told us to go. Q. I'll come back to that in a minute. While you were at the RTA there was no talk about height, there was no discussion about it? A. No. Q. Didn't come into it? A. No. Q. Didn't come into your mind as the operator? A. It never has because it's never been an issue.

The findings and reasoning of the primary judge

1. The primary judge did not discount completely the evidence of Mr Luck. He observed at [92]: When assessing the honesty and reliability of witnesses, I take into account that they were required to give evidence of events that occurred some nine years before they entered the witness box. Furthermore, I give less weight to the statements made by Mr Luck to police and the insurance investigator, as unlike Mr O'Neil and Mr Wyborn, he did not give evidence, and his account of events was not subject to cross-examination.
2. His Honour found Mr O'Neill to be an unimpressive witness: Judgment [94], [105]. However, that conclusion did not assume any relevance in the findings made as to Mr Luck's knowledge and appreciation of the height of the load. His Honour described Mr Wyborn as being "overall … a genuine witness": Judgment [106], [137]. He also noted that in his oral evidence Mr Wyborn agreed that his recollection was better at the time he made his statements than it was at the time of the trial, more than nine years later.
3. The primary judge made two relevant findings which are not challenged. They are that Mr Luck was aware before leaving the weighing station that the height of the load had been substantially increased, but that he was not aware of its precise height (Judgment [132]); and that Mr Wyborn expressed his concern about the increased height of the load to Mr Luck when they were departing from the weighing station and made the other statements referred to at [61]-[62] above. His Honour expressly declined to find that Mr Luck was aware the load was higher than the maximum height available on the bridge and was not satisfied that he was aware that the load's height was more than 4.8m: Judgment [141]. No express finding was made as to what Mr Luck believed the actual minimum clearance height available on the bridge might be. There is however a finding that he saw the 4.8m sign.
4. Having referred to the RTA's submission that the exchange between Mr Wyborn and Mr Luck as they proceeded onto the bridge could not be interpreted as a serious warning of risk because Mr Wyborn characterised it as "mainly, part joke", the primary judge continued at [143]: Whilst Mr Wyborn may have expressed himself with some jocosity and there had been no discussion about height at the weigh station, this was the third occasion that Mr Wyborn had expressed his concern about the height of the load to Mr Luck. Although Mr Luck may not have thought there was a problem with height when the load was reconfigured, he was obliged as the driver of the vehicle to ensure that the load was not over height. He could not dismiss Mr Wyborn's concern because he believed that the reconfiguration had been directed by Mr O'Neil. Moreover, it is plain that Mr Wyborn had drawn his attention to the height of 4.8m on the Low Clearance sign. I am satisfied on the balance of probabilities that at that time both men recognised that there was a risk that the load might exceed that height.
5. His Honour then noted that the insurers were not required to prove that Mr Luck actually knew that the load would hit the bridge. He concluded at [145]: I find that Mr Luck actually knew as the truck approached the low clearance sign that there was a danger that the height of the load was in excess of 4.8m and might strike the bridge. With that actual knowledge, he failed to take any measures to avert the danger but proceeded onto the bridge without slowing down. I conclude that Mr Luck made a deliberate decision to court the danger that the load would strike the bridge. I find that Mr Luck was reckless.

The challenge to the primary judge's conclusion as to recklessness

1. Earthmoving challenges the conclusion that Mr Luck was reckless. It is submitted that the primary judge erred in finding that Mr Luck and Mr Wyborn recognised there was a risk that the load was in excess of 4.8m and therefore might strike the bridge. It is said this conclusion is contrary to the evidence of Mr Wyborn and Mr Luck; that it involves the drawing of an inference as to Mr Luck's actual state of mind based on what he should have appreciated when Mr Wyborn drew his attention to the Low Clearance sign; that insufficient account was taken of Mr Wyborn's evidence that his comment when doing so was "mainly, part joke"; and that, consistent with his not believing that there was a risk of hitting the bridge, Mr Luck had responded to Mr Wyborn's earlier comments by saying that the excavator was loaded in the way "the RTA have told us to do it".
2. Earthmoving also submits that, in concluding Mr Luck proceeded onto the bridge knowing there was a danger the load might strike it and without taking any precautions to avert that danger, the primary judge did not give sufficient attention to the seriousness of that allegation, or to the unlikelihood that Mr Luck would have acted knowingly in such a way where there was also a risk of injury to himself and Mr Wyborn, as well as to the drivers and passengers in other vehicles on the bridge.

Whether the primary judge erred

1. There are two related difficulties with his Honour's holding that Mr Luck proceeded across the bridge without slowing, knowing there was a risk that the load might hit the bridge. The first concerns his finding that Mr Luck believed there was such a risk. The second concerns the conclusion at [145] that Mr Luck made a deliberate decision to "court" that danger.
2. Neither of these conclusions was based on any credibility findings, his Honour having accepted Mr Wyborn as an essentially honest witness and Mr Luck not having given oral evidence. Accordingly, in weighing the evidence, and drawing inferences and conclusions as to Mr Luck's state of mind, this Court need not make any particular allowance for the advantage of the primary judge in having seen and heard Mr Wyborn give evidence.
3. The reasoning in support of the primary judge's finding as to what Mr Luck knew is also the reasoning supporting the finding at [143] that both Mr Luck and Mr Wyborn recognised there was a risk that the height of the load might exceed 4.8m. It involves an implicit assumption that if there was a risk that the load exceeded 4.8m, there was for that reason a risk it would hit the bridge. At this point there was no consideration of the possibility that, whilst recognising there was a risk the load might exceed 4.8m, both men nevertheless did not believe there was a risk that it would hit the bridge because of the earlier involvement of the RTA. In this regard, Mr Luck's responses to Mr Wyborn as to the position of the excavator being as "the RTA wanted it" were consistent with his believing that whatever minimum clearance was available on the bridge, the RTA had been satisfied the height of the load did not exceed it.
4. His Honour's earlier reasoning, insofar as it seeks to support the finding as to Mr Luck's state of mind, focusses on an assessment of what the exercise of reasonable care called for in the circumstances Mr Luck faced. The primary judge accepted that Mr Luck initially may have thought there was no problem with the height of the repositioned load. However he rejected the suggestion that Mr Luck maintained that belief in the face of Mr Wyborn's subsequent expressions of concern because to do so would not have been consistent with his obligation as driver "to ensure that the load was not over height". His Honour reasoned that, acting in accordance with that obligation, Mr Luck "could not dismiss" those expressions of concern and found, although not expressly, that Mr Luck had not dismissed those concerns as without foundation.
5. The primary judge concluded that "both men recognised that there was a risk that the load might exceed" the minimum clearance height of the bridge: [143]. At [145] that risk is described as the "danger" that the load might strike the bridge. No more specific finding was made as to the likelihood of that risk coming to pass. In Fraser v Furman, Diplock LJ's reference to a recognised "danger" is to a risk which is sufficiently "real" as to require measures to be taken to avert or minimise it. In what immediately follows, I have assumed that the primary judge's finding is directed to a risk that could not have been dismissed as fanciful and which accordingly called for the taking of some measure to prevent or minimise it.
6. I respectfully disagree with the primary judge's finding that both men recognised there was such a risk. I consider that finding to be against the weight of the evidence and the probabilities. First, it is contrary to Mr Wyborn's statement, admitted into evidence, that he did not "for one minute" think the load was going to hit the bridge. No reason is given or apparent for the rejection of the truth of that statement.
7. Secondly, in his police interview, Mr Luck suggested that one of the reasons why he did not think there was a problem was that the load had been repositioned at the direction of the RTA. The primary judge rejected this as providing a continuing justification for Mr Luck thinking there was no risk in the face of Mr Wyborn's comments. In doing so, his Honour directed attention to what Mr Luck ought to have believed, had he acted reasonably and carefully, rather than what he in fact believed. Mr Wyborn's evidence was that in response to his first two comments Mr Luck said they should not move the excavator because it was loaded as the RTA "wanted it" or "have told us to do it" (see [60]-[61] above). Those responses were consistent with Mr Luck continuing to believe there was no problem, as he maintained in his statement to the police (see [56] above).
8. Thirdly, insufficient significance was given to the fact, as found, that Mr Wyborn's third comment was "mainly, part joke". From Mr Luck's perspective, the making of the statement in that way weighed in favour of the position being that, whilst his attention had been drawn to the increased height of the load, he still believed it was safe to proceed. Mr Luck had made his position clear by his previous responses. Mr Wyborn's comment was not made in terms that challenged the correctness of those responses. That he made the comment in a jocular way was wholly consistent with his having accepted Mr Luck's assessments and not considering there was a real risk they might hit the bridge.
9. Finally, there was no consideration by the primary judge of why Mr Luck would have driven the vehicle onto the bridge at approximately 60km/h without slowing if he had believed there was a realistic risk the boom could strike the bridge. Mr Wyborn said there was "a lot of traffic everywhere". It followed that Mr Luck's actions presented a risk of injury not only to himself and Mr Wyborn, but also to the occupants of other vehicles. It seems highly unlikely that Mr Luck would not have slowed on his approach to the bridge if he believed, as the primary judge found, there was a risk that the load would hit it.
10. The second difficulty with his Honour's conclusion as to recklessness (see [70] above) arises in part because he did not make any finding directed to the extent of the risk recognised by Mr Luck. Having found at [145] that Mr Luck had proceeded without slowing down or taking any other measure, his Honour concluded that he made a deliberate decision to "court" the danger that the load would strike the bridge.
11. In this context the notion of deliberately courting danger involves the taking of measures which are known to be an inadequate response to the recognised danger, or not taking any measures at all when it is appreciated that the taking of some measure is required: see [51], [74] above. An insurer bearing the onus of establishing non-compliance with an obligation to take reasonable precautions must prove that the insured has not taken such measures as it thinks are reasonable having regard to the danger which is recognised: Eather at 407 (per McHugh JA).
12. The absence of a finding as to the extent of the risk recognised by Mr Luck left open the possibility that he thought it was remote and could be discounted in view of the fact that the RTA had overseen the reconfiguration of the load.
13. The insurers did not establish that Mr Luck had not slowed or stopped the vehicle in circumstance where he believed the taking of such steps was reasonable to avoid the risk that the load might strike the bridge. It follows that the grounds challenging the primary judge's finding that Mr Luck's conduct was reckless within exclusion 7(i) and in breach of condition 3 should be upheld.

Whether the second limb of condition 3 imposed an absolute obligation to comply with the relevant statutory obligations (contention)

1. The text of condition 3 is set out at [22] above. The insurers contend that the words "exercise reasonable care and precautions" qualify the obligation "to prevent loss or damage to the Motor Vehicle" but do not qualify the obligation to "comply with all statutory obligations and by-laws or regulations". They say in effect that the imperative "You… must" qualifies the clause commencing with the verb "exercise" as well as the clause commencing with the verb "comply". They point to the comma preceding the "and" as indicating that what follows is also subject to that imperative. It is also argued that if the requirement to exercise reasonable care was intended to apply to the obligation to "comply", the preposition "to" would have appeared before that verb.
2. Earthmoving contests this interpretation. It refers to the heading to condition 3, "Reasonable Care", which it says describes the effect of the clause as imposing an obligation of compliance upon the insured, which is not absolute. Consistently with that position, it is submitted that the comma should be disregarded and the two clauses read as providing that the insured must "exercise reasonable care and precautions to prevent loss or damage to the Motor Vehicle and to comply with" the relevant statutory obligations. If the obligation to exercise reasonable care is construed as qualifying the duty to comply with statutory obligations, the insurers do not argue that it should not be read down in accordance with the principle in Fraser v Furman so as to require an assessment of the insured's conduct as described in [51]-[52] above.
3. In my view the condition should be read as the insured contends. The relevant principles are not in doubt. The policy, being a commercial contract, should be given a businesslike interpretation. In doing so, a construction which gives a congruent operation to the different parts of the policy is, where possible, to be preferred: Wilkie v Gordian Runoff Limited [2005] HCA 17; 221 CLR 522 at [15]-[16]. The heading forms part of the policy and, there being no clause saying it should be ignored, may be taken into account as a general description of the provision which follows: Digby v General Accident Fire and Life Assurance Corporation Ltd [1943] AC 121 at 136; The Tokio Marine and Fire Insurance Co Ltd v Costain Australia Ltd [1988] NSWCA 157; (1989) 5 ANZ Ins Cas 60-891 at 75,682 (per Mahoney JA, Samuels and McHugh JJA agreeing).
4. There is a significant difference between a provision requiring the exercise of reasonable care to comply with a statutory obligation, and one imposing an absolute duty to do so. The subject matter of condition 3 is not correctly described as "Reasonable Care" if the second limb of the condition is not also qualified by the words "reasonable care and precautions".
5. A duty to comply with statutory obligations is also imposed by the second part of exclusion 7(i). If the second limb of condition 3 is construed as also qualified by the introductory words, there is a general symmetry between the operation of the exclusion, with its reference to a "reckless failure", and the condition. Conduct which is in breach of the first limb of condition 3 may, as in this case, constitute "Recklessness" within the first part of exclusion 7(i), and conduct within the second limb of the condition would constitute a "reckless failure to comply with any statutory obligation" under the second part of the exclusion.
6. It follows that the insurers' notice of contention should be rejected. This removes the need to address the further argument (see [36] above) made by Earthmoving in response to that contention, other than briefly. The second limb of the condition applies to statutory obligations imposed for two purposes which are not expressed to be alternatives. They are "the safety of Motor Vehicle/s and … the carriage of goods and merchandise". Neither of the statutory provisions relied on (see [26] above) answers that description.

Whether the primary judge erred in holding that exclusion 7(i) and condition 3 applied to Mr Luck and his conduct (ground 8)

1. These questions also do not arise in view of my conclusion that the insurers have not made out the factual basis for the application of the exclusion or condition. I will however deal shortly with the arguments made.
2. It is submitted on behalf of Earthmoving that the expression "any person acting on Your behalf" in condition 3 and the expression "any person acting on Your part" in exclusion 7(i) only describe persons whose knowledge or belief is the knowledge or belief of the company because they are part of its directing mind and will in the sense explained by Reid LJ in Tesco Supermarkets Limited v Nattrass [1972] AC 153 at 170. Mr Luck was not a director, senior executive or someone who answered that description. He was a driver employed by the company and acted on its behalf only in that capacity.
3. In Kodak the condition under consideration required the insured "employer" to take all reasonable precautions to prevent injuries. Applying Woolfall & Rimmer Ltd v Moyle [1942] 1 KB 66, it was held (at 236) that negligence on the part of someone employed to take those precautions did not constitute a breach of the provision, if there was nothing to establish that the employer did not reasonably regard that person as competent to perform that role. Provisions such as those in issue in this case were no doubt included to extend the obligation imposed by the condition to persons employed by an employer to take the relevant precautions.
4. Accepting that Mr Luck's duties as an employee included taking care to prevent loss or damage to any insured vehicle that he was driving, or had responsibility for, he would in my view be a person acting "on Your behalf" within condition 3. Although the language in exclusion 7(i) is slightly different, the notion of "acting on Your part" equally is directed to a person acting for, or on behalf of or in the interests of the company in a relevant activity, and for that reason would include an employee such as Mr Luck.
5. It follows that each clause extended to conduct of Mr Luck whilst acting as an employee of Earthmoving in relation to the driving of the motor vehicle and compliance with any statutory obligation governing its operation and use.

Whether the primary judge erred in not holding Mr Luck was reckless in continuing to drive across the bridge

1. Having regard to my conclusion that the primary judge erred in finding that Mr Luck was reckless in driving onto the bridge, this question must be approached on the basis that, when the load of the vehicle first struck the bridge, Mr Luck had to respond to a sequence of events which he had not anticipated as likely.
2. The primary judge found that the boom of the excavator first struck one of the transverse beams on span 7; that Mr Luck "should have applied the brakes of the truck at an earlier stage than he did"; and that his conduct "in … continuing in the manner that he did was reckless". These findings proceeded on the assumption that "Mr Luck was aware of the danger that the height of the load was in excess of the low clearance height" before proceeding onto the bridge: Judgment [152].
3. In the absence of that finding, it was not established that in responding the way he did on first hearing the clicking noises, Mr Luck failed to take such steps as he considered reasonable for the safety of the vehicle having regard to the circumstances as he then perceived them. Mr Wyborn's evidence was that, when the clicking noise was first heard, there was uncertainty as to what was causing it; that the noise became increasingly more noticeable as they continued across the bridge; and that when the vehicle was more than half way across the bridge the noise became louder and he was "thrown around the cabin a bit" (see [58]-[59] above). Mr Wyborn did not think the truck could have been stopped more quickly, assuming that was to be done safely.
4. Mr Luck's evidence was that it would have taken about 100m to bring the truck to a stop. This would suggest that the vehicle could not have been stopped more quickly, assuming that any decision to do so was not made until the truck was about half way across the bridge.
5. Accepting that Mr Luck had to take account of the other traffic on the bridge when manoeuvring his vehicle into the left lane so that it could be stopped safely, I am not satisfied that the evidence establishes that in doing so he failed to do what he considered to be reasonable having regard to the position in which he found himself from the time the clicking noise was first heard.

Conclusion

1. The following orders should be made:
2. Appeal allowed.
3. Set aside order 2 made on 28 August 2014.
4. Judgment for the cross-claimant/appellant (Barrie Toepfer Earthmoving and Land Management Pty Ltd) against the cross-defendants/respondents (CGU Insurance Limited, Vero Insurance Limited and NTI Limited) on the amended cross-claim.
5. The respondents pay the appellant's costs of the appeal.
6. WARD JA: I agree with Meagher JA.
7. SACKVILLE AJA: I agree with Meagher JA.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 April 2016