Insurance Australia Limited v Dent

Judgment

1. BASTEN JA: Insurance Australia Ltd sought leave to appeal from the refusal of a judge in the District Court to join it as a party to proceedings. For the reasons given by Gleeson JA, I agree that the applicant should have been joined as a party, and that the consequential orders should be made.
2. The statutory scheme provided by the Motor Accidents Compensation Act 1999 (NSW) confers a power on a third party insurer to apply to the court to be joined as a party in order to argue that it has no obligation under the policy to indemnify the defendant, who will be the owner or driver of the vehicle: s 79. That provision has a double function: in addition to providing for the insurer to apply to be joined, it impliedly confers power on the court to consider and determine such an application. [1] The section is silent as to the circumstances in which it is appropriate for the court to accede to such an application.
3. The insurer is given powers under s 78 of the Act to conduct and take over the conduct of legal proceedings against an insured person. There is a slight awkwardness in the drafting because a third party policy, as defined in s 10(1) of the Act, insures both the owner of the vehicle and any other person who drives the vehicle, whether with or without the consent of the owner. It is not uncommon that the owner is being driven in the vehicle and is injured in an accident. Because both the owner and the driver are insured persons under the policy, it may seem awkward to refer to it as a "third-party policy". Nevertheless, in those circumstances, the statute (and the policy) must operate distributively so that the defendant driver is the "insured" for the purposes of s 79 of the Act. The plaintiff (and owner) for that purpose is the injured third party. The fact that the policy extends to a driver, whether authorised or unauthorised, sometimes gives rise to a colloquial reference to the "insured vehicle".
4. In the present case, the insurer is entitled to argue that it has no obligation under the policy because the injuries suffered by the plaintiff were not caused in the accident, but were the result of a prior assault by the driver, Mr Williams. It is not presently known whether Mr Williams will give evidence to that effect. If he does, there may be a unity of interest between the insurer and Mr Williams. If he does not, there will be a conflict of interest and the insurer may wish to cross-examine Mr Williams. A real possibility of a conflict of interest should be sufficient to justify the joinder of the insurer in the proceedings. In the absence of any persuasive countervailing consideration, the insurer should have been joined, on its application.
5. That being sufficient to dispose of the appeal, it is not necessary to consider what other circumstances might warrant the joinder of the insurer, nor to consider what steps might be required in the course of a trial, if the circumstances change.
6. GLEESON JA: The applicant, Insurance Australia Limited (NRMA), seeks leave to appeal against orders made by Sorby ADCJ on 6 September 2018 dismissing with costs an application by NRMA to be joined as a party to District Court proceedings pursuant to s 79 of the Motor Accidents Compensation Act 1999 (NSW) (the MACA): Dent v Williams (DC (NSW), Sorby ADCJ, 6 September 2018, unrep).
7. Leave is required because the orders made by the District Court are interlocutory: District Court Act 1973 (NSW), s 127(2)(a). The application for leave to appeal was heard concurrently with the appeal itself. For the reasons that follow, there should be a grant of leave to appeal, the appeal should be allowed and an order made under s 79 of the MACA joining NRMA as a party to the District Court proceedings.

Background to the District Court proceedings

1. The first respondent, Stephen Dent (Mr Dent), is the plaintiff in the District Court proceedings commenced against the second respondent, Braham Williams (Mr Williams), for personal injury damages in respect of a motor accident on 7 February 2015.
2. On 1 May 2015, Mr Dent completed a Motor Accident Personal Injury Claim Form (the Claim Form) which described the circumstances of the accident as follows: I was driving home from work, from Boggabri to Manilla. About 20km from Boggabri I came across a car on the right hand side of the road. The driver (Williams) was trying to get the car out of a ditch. I stopped, and got out of the car and asked Williams if he needed assistance as the car was also on fire. Williams got out of the car and assaulted me. Williams then got into my car and told me to get in also. As I was getting into the car, the driver took off unexpectedly, and I fell out of the car landing on the ground.
3. NRMA is the compulsory third-party insurer of Mr Dent's vehicle which at the time of the alleged accident was being driven by Mr Williams.
4. In response to Mr Dent's claim, NRMA asserted on 28 October 2018 that the injuries sustained by Mr Dent were the result of an unprovoked assault and not the result of a motor vehicle accident and that Mr Dent's incident "[did] not extend to CTP cover in the circumstances".
5. In his statement of claim filed on 9 April 2018, Mr Dent alleged that on 7 February 2015 Mr Williams was negligently driving a motor vehicle, which caused Mr Dent to fall from the vehicle and suffer injury. Mr Dent's pleaded case in par 2 is: The plaintiff was directed by the defendant to get into the car and during the course of entering the car, the vehicle accelerated unexpectedly and the plaintiff fell from the vehicle suffering injury.
6. The particulars of negligence include: failure to keep a proper lookout for the plaintiff, accelerating when the defendant knew the plaintiff was not securely in the vehicle, and accelerating the vehicle unexpectedly. The particulars of the injuries which Mr Dent claims arose from Mr Williams' negligence are: right hip bursitis, sacroiliac strain, post-traumatic stress disorder, chronic depression, and concussion.
7. NRMA did not file a defence on behalf of the driver, Mr Williams. Instead it filed a notice of motion seeking to be joined as a party to the proceedings pursuant to s 79 in order to argue that, in the circumstances of the case, it has no obligation under the policy to indemnify the defendant. An amended notice of motion was filed by NRMA on 9 August 2018.

Relevant legislative provisions

1. Section 79 of the MACA Act provides: An insurer may apply to the court to be joined as a party to legal proceedings brought against a defendant who is insured under a third-party policy with the insurer in order to argue that in the circumstances of the case it has no obligation under the policy to indemnify the defendant.
2. A "third-party policy" is defined in s 10(1) of the MACA as a policy in the following terms: The insurer insures the owner of the motor vehicle and any other person who at any time drives the vehicle (whether or not with the consent of the owners) against liability in respect of the death of or injury to a person caused by the fault of the owner or driver of the vehicle: (a) … in the use or operation of the vehicle in any part of the Commonwealth (whether or not on the road), …
3. "Fault" is defined in s 3 of the MACA as "negligence or any other tort".
4. Section 16 of the MACA provides: A licensed insurer is, despite any other law, liable to indemnify the insured persons under a third-party policy of the insurer in respect of any liability which the policy purports to cover.
5. "Insured person" is defined in s 3 of the MACA as "a person insured under a third-party policy".
6. Section 20 of the MACA confers rights on an insurer against an unauthorised driver of a motor vehicle. It provides: If: (a) a person uses or operates a motor vehicle without the authority of the owner or without reasonable grounds for believing that he or she had the authority of the owner, and (b) a licensed insurer pays any money or incurs any costs (under a third-party policy) in respect of a motor accident arising from that use or operation, the insurer may recover the money so paid and the costs so incurred from the person as a debt in a court of competent jurisdiction.
7. Section 23 of the MACA deals with the entry of judgment against a CTP insurer, and relevantly provides: (1) If a judgment obtained in any court relating to liability in respect of the death of or injury to a person caused by the fault of the owner or driver of an insured motor vehicle in the use or operation of the vehicle is not satisfied in full within 30 days after the judgment is entered, the court must, on the application of the judgment creditor, direct that the judgment be entered against the licensed insurer of the vehicle. … (4) If the court directs that the judgment be entered against the licensed insurer, the judgment may be enforced as a judgment against the licensed insurer to the extent to which it was not satisfied at the time it was so entered.
8. Section 78 of the MACA deals with the power of an insurer to act for an insured as follows: (1) When a claim is made against a person, the person's insurer may: (a) conduct and control negotiations in respect of the claim, and (b) conduct, or take over the conduct of, any legal proceedings in respect of the claim and may conduct those proceedings in the name and on behalf of the person, and (c) at any stage of those negotiations or proceedings, compromise or settle the claim, and (d) exercise any function conferred by this Act on the person in respect of the claim. (2) The person against whom the claim is made is required to sign all such warrants, authorities and other documents as may be necessary to give effect to this section. (3) If the person fails to do so or is absent or cannot be found, the insurer may sign the warrants, authorities or other documents on behalf of the person. (4) Nothing said or done by an insurer under this section in connection with the settlement of a claim or the conduct of proceedings in respect of a claim is to be regarded as an admission of liability in respect of or in any way prejudice any other claim, action or proceeding arising out of the same occurrence.
9. It follows that, although Mr Williams was not authorised to drive Mr Dent's vehicle, he is an "insured person" for the purposes of the legislation such that he is entitled to be indemnified under the third-party policy so long as the injuries suffered by Mr Dent were caused by the fault of Mr Williams in the use or operation of the vehicle. NRMA's position is that, if Mr Dent obtained a judgment against Mr Williams in the District Court proceedings, NRMA has a right of recovery against Mr Williams under s 20 of the MACA.

Joinder application

1. On the hearing of the joinder application, NRMA submitted that an insurer may seek to be joined as a party under s 79 of the MACA if it considers that the third-party policy does not apply as the incident does not involve any of the "driving indicia" referred to in s 3A(1)(a)-(d) of the MACA, which provides: (1) This Act (including any third-party policy under this Act) applies only in respect of the death of or injury to a person that is caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle and only if the death or injury is a result of and is caused (whether or not as a result of a defect in the vehicle) during: (a) the driving of the vehicle, or (b) a collision, or action taken to avoid a collision, with the vehicle, or (c) the vehicle's running out of control, or (d) a dangerous situation caused by the driving of the vehicle, a collision or action taken to avoid a collision with the vehicle, or the vehicle's running out of control.
2. NRMA submitted that it had evidence inconsistent with the pleadings that Mr Dent fell out of the car when it moved off, and that it should be joined as a party because there was a factual dispute and matters of credit to be put to Mr Dent as to whether his injuries were caused by the assault and not by the driving of the vehicle.
3. In support of its contention that Mr Dent was not injured in a motor vehicle accident, NRMA pointed to the absence of reference by Mr Dent to him being struck by or falling from the vehicle in the records of three statements he made immediately after the accident. One statement was contained in the history of the incident recorded in the hospital triage notes of Gunnedah District Hospital, which Mr Dent attended on 7 February 2015; another was made in the course of a police interview of Mr Dent while at the hospital and the third was a signed statement given by Mr Dent to the police on 8 February 2015, which did not refer to any fall from the vehicle but stated: I saw him get into my car which was still going and I went around to the front passenger door and tried to get into the passenger seat and stop him from stealing my car. He [started] taking off at that stage and I managed to get half into the car but went (sic) he accelerated away I had to get out.
4. In opposing the joinder application, counsel for Mr Dent submitted that the insurer should not be joined as a party because the defendant would be left unrepresented, and that the injury pleaded in par 2 of the statement of claim "gives rise, or means that the defendant is indemnified by the NRMA".

The primary judge's reasons

1. The primary judge noted that two matters were in dispute: (a) that as a result of the vehicle moving, Mr Dent fell to the road; and (b) Mr Dent was injured: at [6]. These matters went to breach and causation. He then referred to s 3A(1) of the MACA and observed that there was no issue that Mr Williams was the driver of the vehicle and the vehicle started to move in circumstances where Mr Dent was leaning into the passenger side window of the vehicle: at [10]. (I interpolate here that for present purposes, nothing turns on any conflicting statements by Mr Dent that he was leaning into the vehicle through the passenger side window, or the open passenger side door. It was common ground that Mr Dent was leaning into the vehicle when the vehicle moved off).
2. The primary judge then made the following finding at [11]: Leaving aside the disputed fact of alleged injury to the respondent, if injury did occur to the respondent [Mr Dent] it was, in my view, as a consequence of the driving of the vehicle, that is, the vehicle moving forward with respondent leaning into the vehicle.
3. After noting at [19] NRMA's submission that the phrase "in the circumstances of the case" in s 79 was wide enough to look at all circumstances relating to Mr Dent's claim, including the allegations of liability and any alleged injuries, the primary judge gave the following reasons for refusing the joinder application: [20] In my view this interpretation of s 79 is misconceived. In all motor vehicle claims all issues - liability, causation and damages - are in dispute with the filing and serving of a Statement of Claim. If the issues between the parties cannot be resolved in the mandated pre-trial procedures, then they are decided by a judge at trial. [21] Mr Jensen's submission that the Respondent's case on liability, causation and damages is so weak or non-existent that leave should be granted for the NRMA to be joined as a party fails to understand the purpose of s 79. [22] The joinder of the NRMA, if granted, would be for the sole purpose of resolving any dispute between the NRMA and the insured, in this case the owner of the motor vehicle and its driver at the time of the alleged incident. The Respondent's claim is against the insured motor vehicle and his dispute is with the owner or driver of the vehicle. This is made clear from the terms of s 79 where it states that the issue to be argued is whether the insurer has an "obligation under the policy to indemnify the Defendant". That clearly refers to a dispute between an insurer and the insured and not an insurer and a Plaintiff. Any issue between the insured owner of the motor vehicle (I was advised the driver of the motor vehicle is in jail) and the NRMA was not before me.

Issues on appeal

1. The notice of appeal contains six grounds which assert the misconstruction and misapplication of s 79 of the MACA (grounds 1, 2, 3, 4, 5 and 7). In addition, two grounds assert collateral errors in the primary judge's decision. One asserted error relates to the finding of fact at Judgment [11] which is set out at [25] above. This finding was said to be unnecessary and inappropriate on an interlocutory application (ground 6). The other ground relates to an asserted misunderstanding of NRMA's submissions (ground 8).
2. As the issues were refined in oral argument, the principal issue which emerged on appeal is whether NRMA should be joined as a party in circumstances where it contends that there is a conflict between its interests qua insurer and the interests of its insured, Mr Williams. Counsel for NRMA acknowledged that the assertion of such a conflict of interest was not specifically addressed before the primary judge.

Parties' submissions

1. It is not necessary to refer to NRMA's written submissions given the way the matter developed in oral argument. NRMA ultimately submitted that it should be joined as a party to the District Court proceedings because its interests as insurer and Mr Williams' interests as the insured driver are not necessarily aligned in defending the proceedings. The divergence in interests arises because NRMA seeks to allege that any injuries suffered by Mr Dent occurred as a result of a prior assault committed by Mr Williams and had nothing to do with the driving of the motor vehicle by Mr Williams. Counsel for NRMA adopted the following proposition stated by the presiding judge: … There's a conflict, as it were, between attacking more than the credit, the criminal conduct of your own insured, and at the same time seeking to rely upon his evidence for purposes of dealing with the actual motor vehicle movement. …
2. Unsurprisingly, Mr Dent emphasised that NRMA had not advanced any argument before the primary judge based on a conflict with the interests of the insured driver. Senior counsel for Mr Dent accepted that there was no prejudice to Mr Dent if NRMA was joined as a party to the District Court proceedings on this basis. However, if the appeal was allowed, counsel sought a special costs order in Mr Dent's favour.

Decision

1. The scope and meaning of s 79 of the MACA, in particular the expression "the circumstances of the case", is to be gleaned from the text of the provision considered in light of its context and purpose: SAS Trustee Corporation v Miles [2018] HCA 55; (2018) 92 ALJR 1064 at [20] (Kiefel CJ, Bell and Nettle JJ).
2. Plainly, s 79 is a facilitative provision. It gives the court a discretionary power to permit an insurer to be joined as a party to proceedings against a defendant with whom it has a third-party policy, "in order to argue that in the circumstances of the case it has no obligation under the policy to indemnify the defendant". That person may be either the owner or the driver of the vehicle, and includes an unauthorised driver of the vehicle. The latter follows from the definition of a third-party policy, which is set out at [12] above.
3. One relevant contextual consideration is that the insurer is given power under s 78 of the MACA to take over the conduct of proceedings on behalf of an insured defendant. Where the interests of the insurer and the insured owner or driver are aligned in defending the proceedings against the insured, ordinarily that it is likely to provide a good reason not to join the insurer as a separate party in proceedings against its insured.
4. Another relevant contextual consideration is that a judgment obtained against a defendant owner or driver of an insured motor vehicle may be enforced against the insurer if not satisfied in full within 30 days after the entry of judgment against the defendant: MACA, s 23. Three matters flow from this. One is that an insurer needs to ventilate any argument that it is not obliged to indemnify an insured before the entry of judgment against the insured defendant.
5. Next, s 79 permits such an argument to be advanced in the same proceedings to which the defendant is a party, rather than the insurer having to commence separate proceedings against the insured.
6. Third and related to the previous matter, s 79 recognises and permits all interested parties to be heard on the indemnity question in the one proceeding. That includes the plaintiff who is likely to have a practical interest in the indemnity question, albeit derivative on the success of his or her claim against the insured defendant.
7. As to the purpose of s 79, in the second reading speech of the Minister (the Honourable J W Shaw) relating to an amendment of the predecessor provision to s 79 of the MACA, being s 47A of the Motor Accidents Act 1988 (NSW)), it was said that the provision is apt to address the types of difficulties that can arise where there is a dispute between the insurer and the insured defendant about whether the liability of the defendant is covered by a CTP policy or some other type of insurance such as employers' liability or public liability or indeed some other cause of action. The Minister described the purpose of the amendment being "to give insurers a limited power to intervene in proceedings in relation to their liability to indemnify the person allegedly at fault".
8. In the present case, NRMA has not granted indemnity to the insured driver, Mr Williams, nor has it exercised its right to take over the defence of the proceedings on behalf of Mr Williams pursuant to s 78 of the MACA. The discretionary decision required of the court by s 79 is whether, in the circumstances of the case, NRMA should be permitted to argue an indemnity dispute advancing its separate interests as a party to the proceedings against Mr Williams. That dispute concerns whether the third-party policy does not respond to Mr Dent's claim because the injuries he suffered were caused by Mr Williams' prior assault, not connected with the use or driving of the vehicle. It is not presently known whether Mr Williams will give evidence to that effect.
9. Given that Mr Williams' conduct forming the basis of the alleged prior assault on Mr Dent, if established, may expose him to some other cause of action or possibly prosecution for a criminal offence, the interests of NRMA and the insured driver, Mr Williams, are not necessarily aligned in defending the proceedings. NRMA seeks to establish that any injuries suffered by Mr Dent occurred as a result of a prior assault by Mr Williams and were not caused by fault by Mr Williams "in the use or operation of a motor vehicle". NRMA may seek to cross-examine Mr Williams to this effect.
10. The primary judge seems to have rejected the joinder application on the basis that NRMA was doing no more than any other insurer defending a motor vehicle accident claim of seeking to challenge the issues of liability, causation and damage suffered in a motor vehicle accident. Implicit in that approach was an assumption that the interests of NRMA and the insured driver, Mr Williams, were aligned and accordingly there was no real indemnity question. That reading of the judgment accords with his Honour's view that the matter involved no more than a binary question: Mr Dent either suffered injury in a motor vehicle accident, in which case the CTP policy would respond, or he did not, in which case the proceedings would fail and NRMA would not have an obligation to indemnify Mr Williams under the policy.
11. The error in his Honour's approach was in failing to address a relevant consideration, namely, whether there was a real possibility of a conflict of interest between NRMA and the defendant, Mr Williams. In fairness to his Honour, NRMA did not draw his attention to the possible conflict with the interests of Mr Williams.
12. Counsel for Mr Dent did not object to a new point being raised on appeal, subject to the question of costs. No discretionary reasons against joinder of NRMA, such as delay, were raised. Given that concession, which was properly made, and that the new point is based upon the evidence which was before the primary judge, it is in the interests of justice and the "just, quick and cheap" resolution of the real issues in dispute that this Court re-exercise the discretion and determine the joinder application on the merits: Civil Procedure Act, s 56(2).
13. Having regard to the circumstances of this case, namely, that there is a real possibility of a conflict of interest between NRMA and the insured driver, Mr Williams, an order should be made under s 79 of the MACA joining NRMA as a party to the District Court proceedings.
14. Given the above conclusion, it is not necessary to separately address the grounds of appeal.

Costs

1. As to costs, ordinarily costs follow the event (Uniform Civil Procedure Rules 2005 (NSW), r 42.1), however, there is a good discretionary reason why a different costs order should be made in this case. Although NRMA has succeeded on appeal, it should pay Mr Dent's costs in this Court because the point on which NRMA has succeeded was not squarely raised before the primary judge, or in the draft notice of appeal or NRMA's written submissions served in advance of the hearing.
2. Mr Dent sought a special order as to costs, that NRMA pay Mr Dent's costs on an indemnity basis with such costs payable forthwith. I do not agree that such an order is appropriate.
3. As indicated, the new point raised on appeal arises from the evidence before the primary judge which demonstrated that there was a real possibility of conflict between the interests of NRMA and its insured driver. I do not regard NRMA's conduct in failing to expressly articulate the conflict of interest before the primary judge warrants the description of some delinquency or unreasonableness on its part, so as to attract a special costs order on appeal: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [44]; Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 616; Leichhardt Municipal Council v Green [2004] NSWCA 341 at [51], [57].

Orders

1. The orders that I propose are: 1. Grant leave to appeal. 2. Appeal allowed. 3. Direct the applicant to file a notice of appeal in the form contained in the White Book within 7 days. 4. Set aside orders 1 and 2 made by the primary judge on 6 September 2018, and in place order: 1. Grant leave to Insurance Australia Limited to be joined as a party to the proceedings in the District Court No 2018/297094 pursuant to s 79 of the Motor Accidents Compensation Act 1999 (NSW); 2. Costs of the joinder application are the intervenor's costs in the proceedings. 1. The applicant to pay the first respondent's costs of the proceedings in this Court.
2. McCALLUM JA: I agree with Gleeson JA.

Endnote

1. See The King v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141 at 165-6 (Dixon J); [1945] HCA 50. 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 June 2019