Mercantile Mutual Insurance (Australia) Limited v AAMI Limited

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

PRIESTLEY JA MEAGHER JA GILES JA

MERCANTILE MUTUAL INSURANCE (AUSTRALIA) LTD v AAMI LTD

3 GILES JA: Jax Tyres supplied and fitted a tyre to Miss Restell's car. The tyre was a second hand tyre which had been retreaded by Dominion Tyres. It was defective, in that there was rusting of the steel plies prior to the retreading and the retreading process added excess rubber resulting in an uneven undertread rubber depth. While the car was being driven by Miss Restell a few days later the tyre failed due to separation of the tyre tread from the carcass of the tyre, within the original carcass structure and not at the interface between the original carcass and the new tread. The car left the road and rolled over, and a passenger, Miss Harvey, was severely injured.

4 Mr Harvey brought proceedings against Miss Restell, Jax Tyres and Dominion Tyres. All were found liable. Miss Restell was found liable for negligence on the ground that prior to the failure of the tyre warning noises or vibrations were heard and she ought to have heard or noticed such phenomena and taken appropriate action. Jax Tyres was found liable for negligence on the ground that it ought to have known that the tyre was likely to be unsafe because of age cracks in the tread and a plug which did not confirm with the requisite Australian standard. Dominion Tyres was found liable for breach of s 75AD of the Trade Practices Act on the ground that it caused the use of the excess rubber. Responsibility for the injury to Miss Harvey was apportioned 10 per cent to Miss Restell, 70 per cent to Jax Tyres, and 20 per cent to Dominion Tyres. Jax Tyres was required to indemnify Miss Restell for her 10 per cent of the responsibility.

5 Jax Tyres had public liability insurance cover with Mercantile Mutual. Mercantile Mutual was liable to indemnify Jax Tyres in relation to the injury to Miss Harvey, although whether as to her 70 per cent of the responsibility only or as to the indemnity for Miss Restell's 10 per cent of the responsiiblity as well was not explored.

6 As the owner of the car, Miss Restell had third party insurance cover with AAMI. Mercantile Mutual brought proceedings against AAMI contending that it was entitled to contribution from AAMI under the principles of double insurance considered in Albion Insurance Company Ltd v Government Insurance Office of New South Wales (1969) 121 CLR 342. Newman J held that it was not. Mercantile Mutual appealed.

7 Mercantile Mutual's argument involved the initial proposition that the employee of Jax Tyres who fitted the tyre to Miss Restell's car ("the tyre fitter") was insured under the AAMI insurance against liability in respect of the injury to Ms Harvey. There was then a bifurcation into a principal argument and a subsidiary argument.

8 By the principal argument Jax Tyres' subrogation to the rights of the tyre fitter under the AAMI insurance, by virtue of s 6(1) of the Employers' Liability Act 1991, meant that AAMI was liable to indemnify Jax Tyres in relation to the injury to Miss Harvey, and there was double insurance.

9 By the subsidiary argument, put without great enthusiasm by reference to what was described as "challenging reasoning" in State Government Insurance Commission (SA) v Switzerland Insurance Australia Ltd (1995) 22 MVR 10, the tyre fitter was entitled to the benefit of the Mercantile Mutual insurance, so that again there was double insurance.

10 Newman J had not accepted the initial proposition, and it had not been necessary for his Honour to go further.

11 The argument for the initial proposition rested on the meaning and effect of provisions of the Motor Accidents Act 1988 ("the Act").

12 The AAMI insurance was in the terms required by s 9 of the Act, namely - "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 owner) against liability in respect of the death of or injury to a person caused by the fault of the owner or the driver of the vehicle: (a) if the motor vehicle is not one to which (b) applies - in the use or operation of the vehicle in any part of the Commonwealth (whether or not on a public street), or (b) … In this policy, words and expressions have the same meaning as in the Motor Accidents Act 1988." 13 The definitions in s 3(1) of the Act included - (i) that "driver" - " … means a person driving a motor vehicle, and includes: (a) a person riding and operating a motor cycle; and (b) a person for the time being in charge of a motor vehicle;" (ii) that "fault" meant "negligence or any other tort"; and (iii) that "injury" - "(a) means personal or bodily injury caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle if, and only if, the injury is a result of and is caused during: (i) the driving of the vehicle; or (ii) a collision, or action taken to avoid a collision, with the vehicle, or (iii) the vehicle's running out of control, or (iv) such use or operation by a defect in the vehicle … ." 14 Section 3(1) also included a definition of "death" in the same terms as the definition of "injury" save for referring to death rather than personal or bodily injury and injury.

15 By s 3(6) of the Act, a reference to the use or operation of a motor vehicle "includes a reference to the maintenance or parking of the vehicle".

16 The steps in Mercantile Mutual's argument for the initial proposition were - (1) The tyre fitter was in charge of Miss Restell's car at the time of fitting the tyre. (2) Therefore the tyre fitter was the driver of Miss Restell's car. (3) The injury to Miss Harvey was caused by the fault of the tyre fitter. (4) Therefore the injury to Miss Harvey was caused by the fault of the driver of the car. (5) The fitting of the tyre was maintenance of Miss Restell's car. (6) Therefore the injury to Miss Harvey was caused by the fault of the driver of the car in its use or operation. (7) The injury to Miss Harvey was the result of and was caused during the driving of Miss Restell's car or its running out of control. In the result, it was said, all ingredients in the AAMI insurance necessary for insurance against liability in respect of the injury to Miss Harvey were made out. 17 It did not seem to be in contention that the injury to Miss Harvey was caused by the fault of the tyre fitter, as distinct from the fault of Jax Tyres, although that was mildly questioned during the hearing of the appeal. That the fitting of the tyre was maintenance of Miss Restell's car did not seem to be in contention. What was in contention was (i) whether the tyre fitter was in charge of Miss Restell's car at the time of fitting the tyre so as to make him the driver of the car for the purposes of the Act; and (ii) whether the injury to Miss Harvey was the result of and caused during the driving of the car or its running out of control for the purposes of the Act.

18 It was not suggested that the tyre fitter drove the car in the ordinary sense of the word. Mercantile Mutual relied on the extension in the definition of 'driver' to include a person for the time being in charge of a motor vehicle.

19 The identity of the tyre fitter was not known. Miss Restell took the car to the premises of Jax Tyres, accompanied by Miss Harvey. She saw the proprietor, Mr McLeod, and asked whether a second hand tyre could be purchased and for how much. A price was given. Miss Harvey then reversed the car into a bay within the premises. The car was left in the bay with the keys in it, and Miss Restell and Miss Harvey waited in a waiting room. The car had to be raised up while the wheel was removed and the tyre was fitted, but whether this required movement within the bay was not established. In due course payment was made, and Miss Restell and Miss Harvey re-entered the vehicle in the bay. Miss Harvey drove it away.

20 Mercantile Mutual submitted that on these facts the tyre fitter was in charge of Miss Restell's car so as to be the driver of the car for the purposes of the Act. It may be inferred that the tyre fitter had the ability to drive the car, in that the keys were in the car while it was in the bay and had it been necessary to move the car under its own power in order to fit the tyre he could have moved it. It may also be inferred that he exercised control over the car to the extent of raising it up while the wheel was removed and the tyre was fitted. More than that, however, was not shown, and Miss Restell and Miss Harvey had put the car in the bay for the limited purpose of having the tyre fitted and were waiting nearby for the completion of that task. If the tyre fitter could be said to be in charge of Miss Restell's car, the extent of his authority over it was limited, and was subject to the over-riding presence of Miss Restell and Miss Harvey.

21 "Driver" when used in the Act is closely related to "drives", found for example in s 9 together with "driver" ( see also the terms of the AAMI insurance), and to "driving", found for example in the definition of "injury", and in s 31 together with "driver". The Act refers to "driver", "drives" and "driving" in the context of liability in respect of the death or injury to a person caused by the fault of the driver in the use or operation of a motor vehicle, providing for insurance against such liability (ss 8 and 9), direct recovery from an insurer (s 25), recovery from a fund if there is no insurance (s 27), and recovery over by the fund from the driver (s 31). The amplification of the meaning of "driver" to include a person for the time being in charge of a motor vehicle must accommodate the three related words, and must also accommodate the requirement that there be fault of the driver in the use or operation of a motor vehicle. Whether the fault was in the use or operation of a vehicle is a question of fact, not susceptible of a simple test (see NRMA Insurance Ltd v NSW Grain Corporation (1975) 22 MVR 317 at 322), but whatever constitutes being a driver must be in the use or operation of the vehicle.

22 "Driving" connotes the activity of driving, and the word is used with that connotation in the Act. The primary meaning in the definition of "driver" is a person driving, that is, engaging in the activity of driving. When the primary meaning is amplified by the inclusion of a person for the time being in charge of a motor vehicle, the person must be in charge of a vehicle which is being driven although not driving it himself. It is necessary that there be a driving of the motor vehicle, since being in charge of a motor vehicle can not of itself amount to fault. No doubt the driving can be without being seated in the driver's seat or intending to drive the vehicle (see Shortland County Council v Government Insurance Office of New South Wales (1973) 2 NSWLR 257 and W P Smith Pty Ltd v State Government Insurance Commission (1983) 2 ANZ Ins Cas 60-0509), but the effect of the amplification is that a person in charge of the motor vehicle at the time of the driving, although not a person driving it, is to be regarded as engaged in the activity of driving it. This accommodates the three related words.

23 It also accommodates the requirement for fault of the driver in the use or operation of a motor vehicle. Being in charge of the vehicle at the time of driving allows use or operation of the vehicle in which there can be fault, where simply being in charge of the vehicle does not. The expansion of use or operation by s 3(6) of the Act does not affect this, the expansion serving to make it clear that both maintenance and parking constitute use of the vehicle (see NRMA Insurance Ltd v NSW Grain Corporation at 323). It is still necessary that there be a driver at fault in the maintenance or parking.

24 It follows, in my view, that the tyre fitter was not in charge of Miss Restell's car so as to be a driver for the purposes of the Act. He was at best a repairer of the car. There was no driving of the car by which he could become a driver because for the time being in charge of it.

25 This is sufficient for the conclusion that Mercantile Mutual's initial proposition should not be accepted, and for the disposal of the appeal. Again it is not necessary to go further.

26 I propose that the appeal be dismissed with costs.

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.