Causation and compulsory third party insurance policies
49 The meaning of the expressions "caused by" and "directly caused by" has been considered in the context of legislation requiring the owners of motor vehicle to hold policies insuring against liability for death or bodily injury. Prior to the High Court's decision in Dickinson v Motor Vehicle Insurance Trust [1987] HCA 49; (1987) 163 CLR 500 such statutes typically required the policy to provide indemnity in respect of death or bodily injury "caused by or arising out of the use of a motor vehicle". Since that decision some legislatures have amended the relevant statutes (and concomitantly the policies they mandate) to introduce a requirement that the death or bodily injury be "directly caused".
50 The respondent submitted that Container Handlers in which the High Court considered the expression "directly caused by…[a] vehicle", in the Motor Vehicles (Third Party Insurance) Act 1943 (WA) supported the primary judge's decision because of the emphasis all members of the Court placed on the significance of the word "directly" as modifying the word "caused". That decision should be understood in the context of the construction exercise in which the Court was engaged, as well as in the light of earlier decisions.
51 The construction of compulsory motor vehicle third party insurance policies has typically turned on the interpretation of the statute pursuant to which the policy was required to be held. Thus the focus has been on the legislative purpose to be discerned from the statute: see, for example, Government Insurance Office (NSW) v R J Green & Lloyd Pty Limited [1966] HCA 6; (1966) 114 CLR 437 at 442 - 444 per Barwick CJ. In that exercise, "the object of a court is to ascertain, and give effect to, the will of Parliament": Wilson v Anderson [2002] HCA 29; (2002) 213 CLR 401 at [8] per Gleeson CJ. In contrast, the exercise of construing a private contract of insurance focuses on the parties' presumed common intention, objectively determined by reference to the text of the contract, the purpose and object of the transaction and, where relevant, the surrounding circumstances: Wilson v Anderson, above, at [8]; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 78 ALJR 1045 at [22] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ.
52 Kirby J emphasised this distinction in Container Handlers (at 840 [99]) when he said:
"In construing a policy, issued in terms adopted by a parliament to achieve legislative objectives, the interpreter enters a different realm of discourse. The object there, is not, as such, to uphold a bargain fairly defined between private parties. Ultimately it is to uphold the purpose of the legislature enacting that form of policy."
53 Gleeson CJ spoke to different effect in McCann v Switzerland Insurance Australia Limited (at [22]) where his Honour observed that "[a] policy of insurance, even one required by statute, is a commercial contract which should be given a businesslike interpretation". McCann v Switzerland Insurance Australia Limited concerned a professional indemnity policy which was required to be held s 41 of the Legal Profession Act 1987 (NSW) (see Hayne J at 609 [92]). Although s 41 required the policy to be approved by the Attorney-General, the wording of an approved insurance policy did not, as is frequently the case in respect of compulsory motor vehicle policies, reflect the terms of the Legal Profession Act itself.
54 Authorities which considered the expression "caused by or arising out of the use of a motor vehicle" accepted that it invoked the proximate cause rule. They also assimilated the concepts of "proximate" and "direct" cause. Most of the leading decisions were considered in the Full Court of Victoria's decision in Transport Accident Commission v Hoffman [1989] VR 197.
55 In Government Insurance Office (NSW) v R J Green & Lloyd Pty Limited at 447, Windeyer J said in respect of the compulsory third party policy in the form required by the Motor Vehicles (Third Party Insurance) Act 1942 (NSW) which provided cover for "all liability incurred by [the insured] in respect of the death or bodily injury to any person caused by or arising out of the use of the motor vehicle":
"The words 'injury caused by or arising out of the use of the vehicle' postulate a causal relationship between the use of the vehicle and the injury. 'Caused by' connotes a 'direct' or 'proximate' relationship of cause and effect".
56 In Dickinson v Motor Vehicle Insurance Trust the High Court construed the expression "in respect of the death or bodily injury to any person caused by or arising out of the use of the motor vehicle" as it appeared in the compulsory third party policy required by the Motor Vehicles (Third Party Insurance) Act 1943 (WA). The Court (at 502 - 503) approached the exercise essentially as one of statutory interpretation. It drew a distinction between the expressions "arising out of" and "caused by", saying (at 505):
"The test posited by the words 'arising out of' is wider than that posited by the words 'caused by' and the former, although it involves some causal or consequential relationship between the use of the vehicle and the injuries, does not require the direct or proximate relationship which would be necessary to conclude that the injuries were caused by the use of the vehicle: State Government Insurance Commission v Stevens Bros Pty Ltd ( 1984) 154 CLR 552 at 555, 559; 52 ALR 441."
57 Applying that interpretation, the High Court held that injuries caused to a child left in a stationary vehicle, which subsequently caught fire as a result of another child playing with matches, arose out of the use of the vehicle.
58 Following Dickinson v Motor Vehicle Insurance Trust, several decisions have considered the significance of amendments to motor vehicle third party insurance legislation which have inserted the adverb "directly" before the words "caused by" or "arising out of".
59 In two of these cases, Transport Action Commission v Treloar & Ors [1992] 1 VR 447 and Transport Accident Commission v Jewell [1995] 1 VR 300, the Full Court of the Supreme Court of Victoria considered the effect of amendments made in 1988 to the Transport Accident Act 1986 (Vic) which replaced the words "caused by, or arising out of a … vehicle" in the definition of "transport accident" with the words "directly caused by, or directly arising out of the driving of a motor car …". In both cases the Full Court accepted that the amendments reflected a legislative intention to alter the ambit of the previous provision: Transport Action Commission v Treloar & Ors at 452 per McGarvie and Gobbo JJ; at 462 per Brooking J; Transport Accident Commission v Jewell at 306 - 307 per Tadgell J (with whom Ormiston J agreed), at 816 per Smith J.
60 Their Honours have expressed a degree of bewilderment, however, as to the legislative purpose of inserting "directly" before "caused by" since "the authorities already establish that the bare words 'caused by' require a direct or proximate relationship": see Transport Action Commission v Treloar & Ors at 462 per Brooking J; Transport Accident Commission v Jewell at 306 per Tadgell J.
61 While recognising that the amendment should be given effect, both decisions, in my view, have treated the expression "directly caused by" as conveying the notion of proximate cause.
62 Thus in Transport Action Commission v Treloar & Ors McGarvie and Gobbo JJ concluded (at 452) that under the amended definition, a transport accident would only directly arise out of the driving of the relevant vehicle if there was "a direct and sufficient non coincidental nexus to enable it to be fairly said that the incident arose out of the driving". Brooking J did not seek to elucidate the words 'directly caused by, or directly arising out of, the driving': Transport Action Commission v Treloar & Ors at 466 - 467.
63 In Transport Accident Commission v Jewell, Tadgell J concluded (at 307) that the joint judgment in Transport Action Commission v Treloar & Ors was authority for the proposition "that an incident resulting in personal injury might be held to have been 'directly caused by' the driving of a motor vehicle even though the injury was not produced by any collision or other physical contact between the person injured and the vehicle." However he held (at 307) that "… [a] claimant injured by a motor vehicle in an incident occurring after its driving must demonstrate a temporal or other connection between the incident and the driving sufficient to prove the driving directly caused the accident".
64 Smith J only considered (at 316) the significance of the word "directly" in the expression "directly arising out of". He felt bound by the joint judgment in Transport Action Commission v Treloar & Ors to hold that "Parliament intended to introduce a more vigorous test of causation than would normally apply from the use of the words 'arising out of' ". His Honour thought it was not possible to define the test further but identified matters relevant to determining whether the definition applied as including "whether there were intervening factors, and their nature, and the period of time elapsed between the driving and the incident … [and] the significance of the driving as a causal factor".
65 The issue arose again in State Government Insurance Commission v Sinfein Pty Limited. In that case the Full Court of the Supreme Court of Western Australia considered the meaning of the expression "directly caused by … the vehicle" in the policy of insurance required by s 4(1) of the Motor Vehicle (Third Party Insurance) Act 1943 (WA) (the "Motor Vehicles Act"). Both Malcolm CJ (at 446) and Ipp J (at 452) held that the term "directly caused by" reflected Parliament's adoption of the concept of proximate cause in insurance law.
66 Parker J referred to Transport Accident Commission v Treloar and Transport Accident Commission v Jewell and noted (at 462) that those cases had not sought to define the expression "directly caused". His Honour concluded (at 462) that:
"…'directly caused by' was intended by the legislature to provide, and, in, the statute and in policies of insurance reflecting the statutory provision should be construed as requiring, a more proximate or direct relationship between a death or bodily injury and a motor vehicle or its driving than would be comprehended by the words 'caused by'."
67 The Motor Vehicles Act was considered in the High Court in Container Handlers. The facts can be taken from McHugh J's judgment (at 822 [1], 824 [10]) (footnotes omitted):
"1. During the course of transporting a truck on a low loader attached to a prime mover in outback Western Australia, Mr Ashley Sutton suffered a 'brutal injury' when, after having stopped to repair the low loader, a jack slipped and caused an axle of the low loader to fall, crushing his left hand against the chassis. The injury was the result of the negligence of Container Handlers Pty Ltd ('Container Handlers'), the owner of the prime mover and low loader, and its employee, Mr Jason Reibel. Mr Reibel was the driver of the prime mover which was hauling the low loader. Mr Sutton and Mr Reibel were carrying out the repair work after Mr Sutton noticed smoke and fumes coming off one of the left rear wheel hubs of the low loader. Mr Sutton said that there was a lot of grease everywhere and that the wheels 'were sort of out of shape, so it looked pretty serious.' When Mr Sutton told Mr Reibel what he had seen, Mr Reibel said that they would have to take both wheels off the low loader. The injury to Mr Sutton occurred shortly after Mr Reibel and Mr Sutton commenced the repair work. …
10. Mr Reibel inspected the wheels and decided that they would have to come off and that the axle would have to be chained so as to prevent it from dragging along the road. Mr Sutton assisted Mr Reibel to remove both wheels. Mr Reibel put a chain through two load-securing holes located in the side of the low loader. There were hooks on the ends of the chain. Mr Reibel's plan was to jack up the axle and then connect the hooks with each other to form a cradle to hold the axle. Mr Reibel jacked up the axle while Mr Sutton attempted to connect the hooks. Mr Sutton was precariously positioned in the wheel hub area of the low loader. He steadied himself by placing his left hand on the chassis. It soon became evident that the chain was not long enough. While Mr Reibel was attempting to jack the axle higher so that the ends of the chain would meet, the axle slipped off the jack. This caused the trail arm assembly that was connected to the axle to drop onto the chassis, crushing Mr Sutton's hand."
68 Mr Sutton successfully sued Container Handlers for damages for negligence. Container Handlers brought third party proceedings against its insurer seeking indemnity pursuant to the policy of insurance the Motor Vehicles Act required it to hold. It was unsuccessful at first instance, but succeeded in its appeal to the Full Court of the Supreme Court of Western Australia. The High Court granted special leave.
69 Section 4 (1) of the Motor Vehicles Act required Container Handlers to hold a contract of insurance under which it was insured for "any liability which may be incurred by the owner or any person who drives the motor vehicle in respect of the death of or bodily injury to any person directly caused by, or by the driving of, the motor vehicle". Section 6(1)(c) required the policy to be in a form substantially similar to that contained in the Schedule to the Motor Vehicles Act. That policy only responded if the injuries suffered by Mr Sutton were "directly caused by, or by the driving, [a] motor vehicle". Further, pursuant to s 3(7) of the Motor Vehicles Act, bodily injury to any person was not to be taken to have been "caused by a vehicle" if it was "not a consequence of the driving of that vehicle or of the vehicle running out of control". Plainly there was no question of the vehicle having run out of control.
70 In the High Court, Container Handlers conceded that the driving of the motor vehicle did not directly cause the injury to Mr Sutton so that the only question on the appeal was whether the injury was directly caused by the motor vehicle (see McHugh J, at 826 [16]). However, because of the inter-relationship between the policy and s 3(7), "even if the vehicle directly caused the death or bodily injury, the statutory policy only applied if Container Handlers could show that the death or bodily injury was a consequence of the driving of the vehicle or the vehicle's running out of control": see McHugh J at 827 [22]), 829 [30]).
71 The High Court allowed the appeal. In separate judgments, each member of the bench held that the injury to Mr Sutton was not a consequence of the driving of the vehicle: McHugh J (at 823 [3], 835 [66]); Gummow J (at 839 [94]); Kirby J (at 843 [117]); Callinan J (at 845 - 846 [132]); Heydon J (at 851 - 853 [156] - [162]).