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[2026] NSWSC 1030
Supreme Court of NSW
2026-08-28
Coleman J
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Page v Airag Aviation Services Pty Limited [2026] NSWSC 1030
Hearing dates: 21 July 2026
Date of orders: 28 August 2026
Decision date: 28 August 2026
Jurisdiction: Common Law
Before: Coleman J
Decision: (1) Pursuant to s 4 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW), the plaintiff has leave to join QBE Insurance (Australia) Limited (QBE) as second defendant to the proceedings. (2) The plaintiff has leave to file and serve an amended statement of claim in the form attached at Exhibit “AK-11” to the affidavit of Amabel Nancy Kuan affirmed on 24 March 2026. (3) QBE pay the plaintiff’s costs of the motion.
Original judgment source is linked above.
Catchwords: CIVIL PROCEDURE — application to join insurance company as a defendant to the proceedings — whether there is an arguable case that the policy responds to liability — held that it is arguable that the bodily injury through the plaintiff's psychiatric condition arises from that negligence — leave granted to join the insurance company as second defendant
CONTRACTS — construction of terms of the insurance policy — where insurance company says it is not arguable that any liability of the defendant to the plaintiff falls within the scope of the insuring clause — where insurance company seeks to rely on a condition precedent to exclude coverage — held that it is not possible or appropriate to determine at this interlocutory stage whether the condition precedent applies
Legislation Cited: Civil Aviation (Carriers’ Liability) Act 1959 (Cth)
Civil Aviation Safety Regulations 1998 (Cth)
Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW)
Insurance Contracts Act 1984 (Cth)
Cases Cited: Aquamore Finance Pty Ltd v Australis Consulting Pty Ltd t/a Castles Valuers [2026] NSWSC 248
Avant Insurance Ltd v Burnie [2021] NSWCA 272
Clark v Avant Insurance Ltd; Stevens v Avant Insurance Ltd [2022] NSWCA 175
Government Insurance Office (NSW) v RJ Greene & Lloyd Pty Ltd (1966) 114 CLR 437
Pel-Air Aviation Pty Ltd v Casey (2017) 93 NSWLR 438; [2017] NSWCA 32
Quintano v B W Rose Pty Ltd [2008] NSWSC 793
Wayland v Bird [2017] NSWCA 2
Wieck v Wayoutback Desert Safaris Pty Ltd [2023] NSWSC 134
Workers’ Compensation Board of Qld v Technical Products Pty Ltd (1988) 165 CLR 642; [1988] HCA 49
Category: Procedural rulings
Parties: Alexander Page (Plaintiff/Applicant)
Airag Aviation Services Pty Limited (Defendant/Respondent 1)
QBE Insurance (Australia) Limited (Respondent 2)
Representation: Counsel:
R S McIlwaine SC with R Quickenden (Plaintiff/Applicant)
C L W Street (Defendant/Respondent 1)
T Brennan SC (Respondent 2)
Solicitors:
Shine Lawyers (Plaintiff/Applicant)
Norton Wilson Lawyers (Defendant/Respondent 1)
Carter Newell Lawyers (Respondent 2)
File Number(s): 2020/00353587
Publication restriction: Nil
On 31 December 2017, a De Havilland Canada THC-2 Beaver float plane operated by Sydney Seaplanes Pty Ltd crashed into Jerusalem Bay in the Ku-ring-gai Chase National Park. All five passengers on board, and the pilot, were killed.
Among the passengers was Heather Bowden Page. She was 11 years of age.
The plaintiff is the father of Heather. He has commenced proceedings against Airag Aviation Services Pty Ltd (the defendant). The defendant, by its employees, including a licenced aircraft maintenance engineer (LAME) Mr John Land, performed service and maintenance on the aircraft from time to time.
The plaintiff alleges that a cause of the crash was the incapacity of the pilot to properly fly and control the aircraft when he became disoriented, incapacitated and lost control of the aircraft. It is alleged that this occurred as a result of the pilot suffering hypoxia through the ingestion of toxic carbon monoxide gas which entered the passenger cabin from the engine bay.
In summary, the plaintiff alleges that the carbon monoxide gas inhaled by the pilot entered and was present in the passenger cabin because of the negligent maintenance and service of the aircraft by the defendant, thus causing the pilot’s disorientation, incapacity and hypoxia. It will be necessary to return to some of the particulars of negligence alleged by the plaintiff later in these reasons.
The defendant has denied it was negligent. A Notice to Admit Facts has been served by the plaintiff. The defendant denies all the facts in that notice.
QBE Insurance (Australia) Limited (QBE) issued an Airport Owners & Operators Liability Policy (the policy) for the period 4 May 2017 to 3 May 2018, insuring the defendant against liability arising out of an accident to the extent set out in the policy. I will refer to some of the specific terms of the policy below.
By Amended Notice of Motion filed 7 April 2026, the plaintiff seeks an order pursuant to s 4 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (the Act) joining QBE as second defendant and leave to amend the statement of claim.
Both the plaintiff and QBE led evidence and made submissions. The defendant was represented but took no position and made no submissions on the questions to be determined.
The parties placed before the Court a significant amount of evidence. The Court was not taken to most of the material, nor was much of it referred to in the written submissions or oral addresses. That is not intended to be a criticism; the issues narrowed significantly by reason of appropriate concessions made by Mr T Brennan SC for QBE, making reference to that evidence unnecessary. I will not, therefore, set out all the evidence tendered, but only that necessary for the purposes of these reasons.
3 Definitions
(1) In this Act:
claimant—see section 4.
court means a court or tribunal of New South Wales.
insured liability means a liability in respect of which an insured person is entitled to be indemnified by the insurer.
insured person means a person who is, in respect of a liability to a third party, entitled to indemnity pursuant to the terms of a contract of insurance, and includes a person who is not a party to the contract of insurance but is specified or referred to in the contract, whether by name or otherwise, as a person to whom the benefit of the insurance cover provided by the contract extends.
liability means a liability to pay damages, compensation or costs.
4 Claimant may recover from insurer in certain circumstances
(1) If an insured person has an insured liability to a person (the claimant), the claimant may, subject to this Act, recover the amount of the insured liability from the insurer in proceedings before a court.
(2) The amount of the insured liability is the amount of indemnity (if any) payable pursuant to the terms of the contract of insurance in respect of the insured person’s liability to the claimant.
(3) In proceedings brought by a claimant against an insurer under this section, the insurer stands in the place of the insured person as if the proceedings were proceedings to recover damages, compensation or costs from the insured person. Accordingly (but subject to this Act), the parties have the same rights and liabilities, and the court has the same powers, as if the proceedings were proceedings brought against the insured person.
(4) This section does not entitle a claimant to recover any amount from a re-insurer under a contract or arrangement for re-insurance.
5 Leave to proceed
(1) Proceedings may not be brought, or continued, against an insurer under section 4 except by leave of the court in which the proceedings are to be, or have been, commenced.
(2) An application for leave may be made before or after proceedings under section 4 have been commenced.
(3) Subject to subsection (4), the court may grant or refuse the claimant’s application for leave.
(4) Leave must be refused if the insurer can establish that it is entitled to disclaim liability under the contract of insurance or under any Act or law.
It is common ground that for the plaintiff to obtain the leave required, he must establish three things:
First, that he has an arguable case that the defendant is liable to him;
Second, that there is an arguable case that the policy responds to that liability; and
Third, that there is a real possibility that the defendant will be unable to satisfy any judgment against it in full.
(See: Aquamore Finance Pty Ltd v Australis Consulting Pty Ltd t/a Castles Valuers [2026] NSWSC 248 per Fagan J at [11]-[12], citing Avant Insurance Ltd v Burnie [2021] NSWCA 272 at [8] (per McCallum JA, Simpson and Emmett AJJA), and Clark v Avant Insurance Ltd; Stevens v Avant Insurance Ltd [2022] NSWCA 175 (Clark) at [27] (per Meagher, Beech-Jones JJA and Lonergan J)).
It is also common ground that the first and third of these requirements have been established. Accordingly, what is in issue is whether there is an arguable case that the policy responds to the liability of the defendant to the plaintiff as alleged in the statement of claim.
Even where these three elements are satisfied, the Court retains a residual discretion not to grant leave: Clark at [28] (per Meagher, Beech-Jones JJA and Lonergan J); Wayland v Bird [2017] NSWCA 26 at [26] (per Ward JA, Macfarlan JA and Emmett AJA agreeing); Wieck v Way**outback Desert Safaris Pty Ltd [2023] NSWSC 134 at [32] (per Payne JA). It was not submitted by the insurer that if the Court found that there was an arguable case that the policy responded, there was some reason why the Court should exercise the residual discretion and refuse to grant leave.
To assess whether there is an arguable case that the policy responds to the liability the defendant arguably has to the plaintiff, it is necessary to set out several of its terms as referred to by the parties in their arguments. The answer to the question to be determined depends on the construction of the policy.
The policy is described as an “Airport Owners & Operators Liability Policy”. The Schedule to the policy describes the nature of the defendant’s operations in respect to which the policy is effected as “aircraft repair and maintenance” at Hangar 17, Bankstown Airport, Hangar 3, Albion Park Airport, and “elsewhere in Australia during the course of business”. It is not necessary to set out the various limits of indemnity or deductibles (which differ) for events at those places.
The insuring clause is as follows:
The Insurers hereby agree to the extent and in the manner hereinafter provided, to pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay or by final judgment be adjudged to pay up to but not exceeding the amounts specified in the Schedule, to any person or persons as damages
(a) for bodily injury including death at any time resulting therefrom (hereinafter referred to as bodily injury) or
(b) for loss or damage to property of others (hereinafter referred to as property damage)
caused by accident occurring during the period mentioned in the Schedule and arising out of the hazards set forth in Sections 1, 2 and 3 below.
Section 1
Bodily injury or property damage
(a) in or about the premises specified in the Schedule, as a direct result of the services granted by the Insured
(b) elsewhere in the course of any work or of the performance of any duties carried out by the Insured or his employees in connection with the business or operations specified in the Schedule
caused by the fault or negligence of the Insured or any of his employees engaged in the Insured’s business or by any defect in the Insured’s premises, ways, works, machinery or plant used in the Insured’s business.
Section 1 is subject to exclusions which are not relevant to the determination of this matter.
The parties agree that Section 2 of the policy is irrelevant.
Section 3 of the policy provides:
Section 3
Bodily injury or property damage arising out of the possession, use, consumption or handling of any goods or products manufactured, constructed, altered, repaired, serviced, treated, sold, supplied or distributed by the Insured or his employees, but only in respect of such goods or products which form part of or are used in conjunction with aircraft, and then only after such goods or products have ceased to be in the possession or under control of the Insured.
It is common ground that the exclusions to Section 3 of the policy are not relevant.
One of the “General Conditions” of the policy also needs to be referred to:
- It is a condition precedent to the right of the Insured to be indemnified under this Insurance that:
…
(d) The Insured shall comply with all International and Government Regulations and Civil Instructions.
In order to be able to assess whether the plaintiff can establish an arguable case that the policy responds to the liability of the defendant, the following aspects of the plaintiff’s claim (as formulated and as proposed to be amended with respect to the alleged negligence of the defendant) are relevant. References to paragraph numbers are to the Proposed Amended Statement of Claim (PASOC).
The plaintiff pleads that a material cause of the crash was the incapacity of the pilot in command to properly fly and control the aircraft when he became disoriented, incapacitated and lost control of the aircraft as a result of suffering hypoxia through the ingestion of toxic carbon monoxide which entered the passenger cabin from the aircraft engine bay, thereby poisoning the pilot (PASOC [5]). It is alleged that the carbon monoxide gas inhaled by the pilot entered and was present in the passenger cabin because of the negligent maintenance and service of the aircraft by the defendant which caused the pilot’s incapacity, disorientation and hypoxia (PASOC [9]).
The particulars of the negligence are pleaded to be (PASOC [9]):
Particulars of Negligence by the First Defendant, its Servants or Agents
(i) Failing to properly inspect and test the exhaust system of the aircraft; (ii) Failing to replace 3 missing bolts which secure the panel in the wall separating the engine bay from the passenger cabin; (iii) Failing to observe pre-existing cracks in the aircraft’s exhaust collector ring which allowed leakage from the engine bay of carbon monoxide fumes into the passenger cabin; (iv) Failing to detect and observe there were missing bolts that secured a panel in the firewall separating the engine bay of the aircraft from the passenger cabin thus permitting carbon monoxide gas to ender the passenger cabin; (v) Failing to replace the missing bolts that secured the panel in the firewall separating the engine bay from the passenger cabin to prevent carbon monoxide gas entering into the passenger cabin; (vi) Failing to inspect and detect cracks in the aircraft exhaust collector ring which allowed carbon monoxide gas to leave into the aircraft engine bay; and (vii) Failing to replace the cracked exhaust collector ring with a serviceable exhaust collector ring. (viii) Failing to prevent cracks in the aircraft’s exhaust collector ring in the exhaust manifold enabled gases with high carbon monoxide concentrations to ingress from the exhaust system into the engine bay and the passenger cabin. (ix) Failing to prevent cracks in the aircraft’s fracturs in the exhaust manifold segments so as to prevent gases with high carbon monoxide concentrations ingressing from the exhaust system into the engine bay and the passenger cabin. (x) Failing to prevent carbon monoxide ingress into the aircraft’s passenger compartments by remedying the defects in the aircraft’s firewall, which separates the engine bay from the passenger compartment. (xi) Failing to repair or replace two of the four bolts in the left magneto access panel in conjunction with one bolt from the right magneto access panel, thereby not preventing carbon monoxide ingress into the passenger cabin. (xii) Failing to prevent the left and right magneto tubes being sufficient to prevent carbon monoxide entering the passenger cabin by the use of nonstandard cooling tubes constructed of rubber and not aluminium. (xiii) During the B check replacing the right magneto cooling tube with a heavy black concertina rubber hose instead of replacing it with aluminium. (xiv) During the B check replacing the left magneto cooling tube with an orange-coloured rubber hose for the left magneto, thereby not preventing carbon monoxide entering the passenger cabin. (xv) Applying pressure to the LAME who used nonstandard issue cooling tubes so as the aircraft would be purportedly put in a flying condition quicker than using the standard tubes. (xvi) By using nonstandard issue cooling tubes carbon monoxide was able to enter the passenger cabin. (xvii) Failing to properly carry out an A check and B check so the faults with the magneto access panel in the firewall and/or the magneto cooling tubes and/or the cracks in the exhaust, thereby enabling carbon monoxide to enter the passenger cabin. (xviii) Failing to replace the five bolts in the magneto access panel in accordance with regulation 42.420 of the Civil Aviation Safety Regulations 1988 (Cth) specifying that only standard issue parts are to be fitted to an aircraft. (xix) Positioning the left magneto access panel upside down so as to not prevent carbon monoxide gases entering the passenger cabin. (xx) Failing to direct the LAME to properly install bolts to seal the area between the engine and the cabin to prevent the risk of carbon monoxide fumes leaking into the passenger cabin. (xxi) Failing to supervise the LAME to properly install bolts to seal the area between the engine and cabin to prevent carbon monoxide fumes entering the cabin. (xxii) Failing to ensure the use of standard bolts that fitted exactly to seal the hole to ensure no carbon monoxide gases were capable of leaking the from the engine exhaust into the passenger cabin. (xxiii) Using nonstandard bolts resulted in vibrations from the aircraft operating and causing the bolt and nut place to become loose in flight, thereby enabling carbon monoxide gases to enter the passenger cabin. (xxiv) Failing to replace the worn magneto access panel bolts with standard issue bolts so as to prevent carbon monoxide gases entering the passenger cabin. (xxv) Using standard AN3-3A bolts, they being noncompliant with the regulation 42.420 of the Civil Aviation Safety Regulations 1988 (Cth) and being contrary to prudent aviation maintenance practice so as to prevent carbon monoxide fumes entering the passenger cabin.
It is alleged that by reason of the defendant’s negligence, the aircraft crashed, killing the plaintiff’s daughter and causing the plaintiff to suffer a “recognised psychiatric illness and thereby suffering consequential loss, damage and future needs”. Particulars are then given of the psychiatric illness and physical injury. As to the latter, it is particularised that the plaintiff suffered a physical injury to the brain “as a consequence of the psychiatric condition (PTSD) deriving from the sudden and unexpected death of the plaintiff’s daughter” (PASOC [10]).
In oral submissions, Mr McIlwaine SC for the plaintiff further summarised the way in which the plaintiff puts its case against the defendant (Tcpt, 21 July 2026, pp 10-11). He said that a material cause or contribution to the gas leak and thus the incapacitation of the pilot was that the repair or maintenance carried out by the LAME, Mr Land, was negligent. He said the carbon monoxide was able to leak through the engine bay and into the passenger cabin through a breach in the firewall of the cabin. Mr McIlwaine said that even if the carbon monoxide did not get into the cabin that way, the engine gases somehow escaped from the engine bay and that should not have happened. One of the allegations was that the LAME used incorrect bolts in a service or maintenance of the aircraft. This allowed the carbon monoxide to escape into the passenger cabin. Mr McIlwaine said the question that will arise for determination at trial is how the pilot came to be incapacitated by the ingestion of carbon monoxide.
The plaintiff submits that it is plainly arguable that the liability he has against the defendant is captured by the policy. He submits that is so on a proper construction of the insuring clause and the policy.
The plaintiff submits that his claim for damages is for damages for bodily injury caused by accident arising out of the hazards in Sections 1 and/or 3 of the policy. He submits that he has suffered loss and damage from PTSD (including physical injury to his brain) caused as a result of hearing of his daughter’s death.
Confronting the issue arising as to whether a recognised psychiatric injury amounts to a “bodily injury”, the plaintiff submits that it is arguable he has suffered “bodily injury”. He relies in this regard on the report of Professor Rodney Scott of 23 July 2025. In that report, Professor Scott opined that the plaintiff has sustained a physical injury to his brain “as a consequence of his psychiatric condition (PTSD) deriving from the sudden and unexpected death of his daughter”. The plaintiff relies on Pel-Air Aviation Pty Ltd v Casey (2017) 93 NSWLR 438; [2017] NSWCA 32 at [46]-[47] and [53] (Pel-Air) (per Macfarlan JA, Ward JA and Gleeson JA agreeing). I will return to this authority below.
The plaintiff submits that it is reasonably arguable that he has coverage under Section 1 of the policy. He says it is arguable that his bodily injury was caused by the negligent performance of the maintenance by the LAME in the course of his work for the defendant, including at Rose Bay. The plaintiff says this arguably comes within the ambit of that section.
The plaintiff also submitted that it is arguable that Section 3 of the policy responds to the defendant’s liability to him. He submitted that it is arguable that his bodily injury arose out of the use of the wrong bolts put into the aircraft in the course of the repair or service by the LAME as an employee of the defendant.
In so far as QBE seeks to rely on the condition precedent in General Condition 6(d) of the policy, the plaintiff submits that whether this condition precedent has been met will depend on what factual findings are made at the trial. It was submitted that it cannot be determined on this application whether the defendant breached the Civil Aviation Safety Regulations 1998 (Cth) (Civil Aviation Safety Regulations) thereby causing loss to the plaintiff. Although the plaintiff has included particulars of the defendant’s negligence breaches by the LAME of such regulations, it was submitted that there are other particulars of negligence also alleged which do not assert breaches of any regulations. Until the findings of fact are made at trial after a consideration of all the evidence, it was submitted that the cause of the plaintiff’s loss could not be determined, nor could the question of whether the condition precedent has been complied with.
(a) first, it is only against the liability of the defendant to pay damages; (b) secondly, the only damages relevant are “damages for bodily injury”; (c) thirdly, while bodily injury is extended to include death, the reference to death is limited to death which results “therefrom”, that is death which results from the bodily injury; (d) fourthly, the bodily injury must be caused by an accident; and (e) fifthly, the bodily injury must arise relevantly out of the hazard mentioned in Section 3, that is, the causing of the bodily injury by the use of goods or products “which form part of or are used in conjunction with” aircraft at a point in time after those goods or products have ceased to be in the possession of the defendant.
QBE accepted that the “accident” is the crash of the aircraft. It can be noted that Senior Counsel submitted that the only possible relevant section of the policy which identified an insured hazard was Section 3. He submitted that Section 1 did not apply as the hazard there insured is bodily injury arising in the course of any work or the performance of any duties carried out by the insured or his employees in connection with the business. On no view, it was submitted, could this apply to any liability of the defendant to the plaintiff in the circumstances of this accident.
Senior Counsel for QBE said that authority shows that an indemnity against liability for, or in respect of, an injury is narrower than an indemnity against any liability or loss in respect of, or for, that injury (see Workers*’* Compensation Board of Qld v Technical Products Pty Ltd (1988) 165 CLR 642; [1988] HCA 49 at 646 per Wilson and Gaudron JJ and 655 per Deane, Dawson and Toohey JJ). Therefore, the plaintiff’s claim for damages for psychological shock suffered by him learning of the death of his daughter is not a claim for damages in respect of her injury (or death). Rather, it might be a claim in respect of the injury or death of the daughter. It is not therefore covered by the policy.
As to Section 3 of the policy, QBE submitted the hazard was the possession or use of aeronautical products, but only once they had left the possession of the insured. Senior Counsel submitted that the simple point is that the plaintiff’s injury, however it is characterised, was caused by his learning of his daughter’s death. It did not arise out of the possession or use by anyone or any product. That is, Senior Counsel submitted that the policy does not respond because the plaintiff’s bodily injury must have been caused by an accident and the bodily injury must have arisen out of the hazards. Senior Counsel said QBE’s case is that the policy does not respond to bodily injury caused by an accident, which accident occurred during the period of insurance, and which arose out of the hazards in either Sections 1, 2 or 3 of the policy. He did accept, however, that is an arguable construction of the policy (Tcpt, 21 July 2026, p 15(30)-(32)).
QBE submits that when one looks at how the plaintiff’s claim is pleaded, it can be seen that it is said that the aircraft crash killed the plaintiff’s daughter and caused him to suffer a recognised psychiatric illness, thereby causing him consequential loss and damage. That is, it was the crash which caused the psychiatric illness. Senior Counsel submitted that even when one considers Professor Scott’s report, the only plea of loss or damage resulting from any injury is limited to the consequence of psychiatric injury. True it is, there is said to be a physical injury consequential upon the psychiatric injury, but there is no plea that bodily injury was caused by the accident. Thus, coming back to the insuring clause, there is no liability asserted in the pleading for damages for anything other than psychiatric injury. He submitted it does not matter that there might be bodily injury consequential upon that psychiatric injury.
In addition, Senior Counsel referred to that part of the insuring clause which refers to coverage being for damages “… for bodily injury including death at any time resulting therefrom…”. It was submitted that not all deaths are included. Here, the liability asserted is a liability for an injury that results from death, but it is the death of the daughter which leads to the injury to the father. He submitted if that is a bodily injury, it is a bodily injury one step further along to that which the policy contemplates. He submitted no indemnity is provided for a liability for damages for an injury (bodily or otherwise) which results from death, but this is the liability the plaintiff asserts.
Senior Counsel for QBE also submits that condition precedent 6(d) applies to exclude coverage. He submits its operation is clear; in the context of a policy insuring airport operators, including maintenance organisations such as the defendant for liabilities they might incur in respect of aeronautical products, compliance with laws governing dealing with aeronautical products is the bare minimum standard or quality expected of the insured.
QBE submits that on the pleaded case of the plaintiff, there is no question that there was non-compliance by the defendant with civil aviation regulations by using non-approved bolts or other non-approved parts in its maintenance of the aircraft. Once there is non-compliance of any kind, the condition precedent operates. It is a condition precedent to indemnity.
QBE accepts that the provisions of s 54 of the Insurance Contracts Act 1984 (Cth) (Insurance Contracts Act) would apply. Section 54 is in these terms:
54 Insurer may not refuse to pay claims in certain circumstances
(1) Subject to this section, where the effect of a contract of insurance would, but for this section, be that the insurer may refuse to pay a claim, either in whole or in part, by reason of some act of the insured or of some other person, being an act that occurred after the contract was entered into but not being an act in respect of which subsection (2) applies, the insurer may not refuse to pay the claim by reason only of that act but the insurer's liability in respect of the claim is reduced by the amount that fairly represents the extent to which the insurer's interests were prejudiced as a result of that act.
(2) Subject to the succeeding provisions of this section, where the act could reasonably be regarded as being capable of causing or contributing to a loss in respect of which insurance cover is provided by the contract, the insurer may refuse to pay the claim.
(3) Where the insured proves that no part of the loss that gave rise to the claim was caused by the act, the insurer may not refuse to pay the claim by reason only of the act.
(4) Where the insured proves that some part of the loss that gave rise to the claim was not caused by the act, the insurer may not refuse to pay the claim, so far as it concerns that part of the loss, by reason only of the act.
(5) Where:
(a) the act was necessary to protect the safety of a person or to preserve property; or
(b) it was not reasonably possible for the insured or other person not to do the act;
the insurer may not refuse to pay the claim by reason only of the act.
(6) A reference in this section to an act includes a reference to:
(a) an omission; and
(b) an act or omission that has the effect of altering the state or condition of the subject - matter of the contract or of allowing the state or condition of that subject - matter to alter.
However, QBE submits that the act of non-compliance could reasonably be regarded as being capable of causing or contributing to the crash of the aircraft (assuming this is a loss in respect of which insurance cover is provided) such that QBE may refuse to pay the claim: Insurance Contracts Act, s 54(2). Further, it submits that there is no way the plaintiff could prove that no part of the loss that gave rise to the claim was caused by the breach of the Civil Aviation Safety Regulations. On its own case, the defendant was in breach of the Civil Aviation Safety Regulations, and these are relevantly part of the particulars of negligence said to give rise to the loss.
Senior Counsel for QBE expanded upon this point in oral submissions. He said that on the plaintiff’s case, the first proposition is the crash was caused by pilot error, which is common ground. Next, the pilot error was said to be caused by incapacitation. That will be an issue at trial. Third, the pilot’s incapacitation was said to be by reason of elevated levels of carbon monoxide in his blood. QBE accepts there is evidence of that. Fourth, it is alleged the elevated carbon monoxide levels were caused by that gas being in the cabin before the crash. That may be an issue at trial. The inference the plaintiff asks to be drawn is that the level of carbon monoxide in the cabin was so high before the crash that the pilot’s blood levels were as elevated as the post-mortem results indicated.
The plaintiff alleges in his pleading that all of this was caused by the matters pleaded as particulars of negligence. It was submitted that what cannot be determined is the level of carbon monoxide in the cabin at any point. The trial judge could never find that there was elevated carbon monoxide in the cabin as a result of one of the particulars of negligence but not the others. Therefore, the plaintiff could never establish that the carbon monoxide did not enter the cabin because of the breach of the Civil Aviation Safety Regulations by the LAME in using incorrect, non-approved parts. Therefore, QBE submits s 54(4) of the Insurance Contracts Act would never come into play.
I do not accept the construction of the insuring clause proffered by QBE. That is, I do not consider the insuring clause reads so that the policy only responds to damages for bodily injury, with the only relevant bodily injury being that to the plaintiff’s daughter. I do not accept that the policy is limited to a claim for damages for any bodily injury (or death resulting therefrom) to the plaintiff’s daughter. I consider that it is arguable that the plaintiff’s claim for damages for his PTSD (if it constitutes bodily injury) is a claim for damages for bodily injury which, if the other requirements of the policy are met, would be indemnified.
I do not think that reference to the authorities construing different statutes, including workers compensation legislation (see [30] of QBE’s written submissions) are of great assistance to QBE in this case. Those authorities depended on the construction of those statutes in the context of the facts in those cases. Here, what is in issue is the construction of the policy of insurance and an application of the facts as known at this early stage of the proceedings to assess whether it is arguable that the policy responds to the liability the defendant may have to the plaintiff.
I do not accept the submissions of QBE that as the liability asserted is a liability for a bodily injury suffered by the plaintiff that results from his daughter’s death, that it is a bodily injury one step further along to that which the policy contemplates. The insuring clause provides that indemnity is granted for damages for bodily injury “… including death at any time resulting therefrom… caused by an accident…” (emphasis added) arising from one of the hazards identified in (relevantly) Section 3. QBE’s submissions ignore the words “including death… resulting therefrom”. The policy covers bodily injury, which may include death resulting at any time from that bodily injury. For example, if a person died from bodily injury, then that death would constitute bodily injury for the purposes of the policy. Whether damages for that bodily injury (death) would be indemnified under the policy would depend on the facts of each particular case.
QBE submitted that the policy only responds to a bodily injury which is caused by an accident and which bodily injury arises out of the hazards in Sections 1, 2 or 3 of the policy. Here, QBE says that the bodily injury (if it is bodily injury) suffered by the plaintiff, even if caused by the accident, does not arise from, relevantly, the use of any goods or products (being the non-approved incorrect bolts or parts).
I do not accept this is the proper, or only arguable, construction of the insuring clause. I consider that it is arguable that assuming the plaintiff suffered bodily injury, that bodily injury was caused by the accident, which arose from the use of incorrect and non-approved parts by the LAME or one of the other particulars of negligence alleged by the plaintiff.
Even if the construction proffered by QBE is correct, it is arguable that any bodily injury suffered by the plaintiff was caused by the accident (being the crash of the plane) and which bodily injury arises from the use of the non-approved and incorrect bolts or parts (or one of the other particulars of negligence alleged). The term “arises from” is a term requiring that there be some connection between the claim and the specified matter, but the requisite nexus is satisfied by a less proximate relationship than the phrase “caused by”: see Quin**tano v B W Rose Pty Ltd [2008] NSWSC 793 (Quintano) at [7] (per Brereton J); Government Insurance Office (NSW) v RJ Greene & Lloyd Pty Ltd (1966) 114 CLR 437 at 445 (Menzies J). In Quintano*,* Brereton J said at [8]:
It will satisfy the requirement that a claim “arise from” a matter, if it originates in, springs from, or has its foundation in, that matter [cf Walton v National Employers’ Mutual General Insurance Association [1973] 2 NSWLR 73, 84]. A cause of action arises from a set of material facts, proof of which found the cause of action. Similarly, a claim arises from the underlying facts that, if established, justify the claim. In my view, a claim can be said to arise from a matter – at least – if it has a foundation in that matter, so that the matter is one of the underlying facts that, if they exist, together justify the claim.
The plaintiff claims damages for his bodily injury caused by the crash of the plane (the accident), and that the bodily injury (using QBE’s example) has a foundation in the use of the incorrect bolts or other parts or negligent servicing of the aircraft. It is arguable, therefore that the bodily injury arises from that negligence.
In my opinion, it is arguable that any liability of the defendant to the plaintiff is captured by the insuring clause.
I also consider it arguable that the plaintiff’s claim is one for bodily injury. True it is that his claim is for psychiatric injury, namely PTSD. However, the report of Professor Scott opines that there has been physical damage to his brain caused by the PTSD.
Pel-Air was a case that dealt with a claim under the Civil Aviation (Carriers’ Liability) Act 1959 (Cth) (Carriers’ Liability Act) which gives the 1999 Montreal Convention relating to Carriage by Air force of law in Australia. Under the Carriers’ Liability Act*,* carriers are only liable for damage sustained in case of death or bodily injury of a passenger upon condition that the accident which caused the death or bodily injury took place on the aircraft or in the course of embarking or disembarking. The primary judge there determined that the PTSD suffered by the plaintiff was a bodily injury. On appeal, Macfarlan JA surveyed authorities, both Australian and overseas, relevant to the question of whether PTSD was a “bodily injury”.
At [46]-[51], his Honour set out the conclusions from the authorities (Ward JA and Gleeson JA agreeing):
[46] The expression “bodily injury” connotes damage to a person’s body, but there is no reason to regard this as excluding consideration of damage to a person’s brain. Thus if the evidence in a particular case demonstrates that there has been a physical destruction of a part or parts of the brain, “bodily injury” will have been proved. This conclusion is consistent with this Court’s decisions in Kotsambasis and American Airlines (see [25] and [26] above). It is also compatible even with the narrower view adopted by Lord Hope (with whom Lords Mackay and Steyn agreed) in Morris v KLM Airlines (see [33]-[36] above). Likewise it does not conflict with the American cases to which I have referred, although the suggestion in some of those cases that a “bodily injury” must be “palpable, conspicuous physical injury” (for example Bobian at [44] above) elevates the threshold to too high a level. It is sufficient if physical injury can be proved.
[47] As will be apparent from my references above at ([19] to [23]) to the medical evidence in the present case, there was no proof here that Ms Casey’s PTSD resulted from actual physical damage to her brain. However the more difficult question that arises is whether the biochemical changes in her brain, of which there is evidence in the present case (see [21] above), constitute “bodily injuries”. My conclusion is that they do not.
[48] The two relevant Australian cases (Kotsambasis and American Airlines) are silent on this issue. However in Morris v KLM, the majority of the members of the House of Lords (Lords Hope, Mackay and Steyn) held that such biochemical changes do not constitute “bodily injuries”. Those Lords disapproved of the decision in Weaver and the first instance decision in Little Rock ([31] above). The former found for the plaintiff where there was evidence of “actual trauma to brain cells structures”, which in fact went beyond the evidence in the present case. In the latter, the evidence referred to “brain dysfunction” which conforms more closely to the evidence in the present case. Lords Hope, Mackay and Steyn took the view that a relevant injury to the brain had to be “capable of being demonstrated by means of an examination of the body of the passenger” (at [33] above), and therefore the psychiatric injuries in both the cases before the House of Lords were not compensable.
[49] Lords Nicholls and Hobhouse took a more benign view of the decision in Weaver and seemingly accepted it as authoritative. However this was a minority opinion.
[50] The US Supreme Court decision in Eastern Airlines v Floyd did not determine the present question, but the more recent American decisions in Little Rock (on appeal), Bobian and Jane Doe (see [42]-[45] above) are against Ms Casey’s claim. In Little Rock, evidence of abnormal brain functioning was found to be insufficient. In Bobian, claims were rejected because there was no evidence that the claimants’ brains had “changed physically from an earlier state” and in Jane Doe, Weaver was treated as wrongly decided.
[51] Consistent with these case authorities, I consider that it is insufficient for a claimant to prove that the function of his or her brain has changed or even that chemical changes have occurred in it. In the absence of compelling medical evidence to the contrary, such malfunctioning or chemical changes cannot fairly be described as “injuries” to the body. Moreover, importance must be attached to the adjective “bodily” as a limiting word. It clearly draws a distinction between bodily and mental injuries: mental injuries are covered only if they are a manifestation of physical injuries, or if they result from physical injuries (including physical injuries to the brain).
At [53], his Honour held that the primary judge’s conclusion that the plaintiff’s PTSD was a “bodily injury” because normal functioning of her brain was impaired was, in the absence of evidence of physical damage to the brain, incorrect. Whilst this case is not a claim under the Carriers’ Liability Act, his Honour’s survey of the authorities and his conclusions at [53] are relevant.
In this case, the report of Professor Scott opines that:
5.1 The traumatic event to which [the plaintiff] was exposed is associated with epigenetic modification that changed heterochromatin to euchromatin and euchromatic to heterochromatin (i.e. physical change in his genome) in cells of his brain that affects his capacity to effectively interact with his environment.
5.2 In lay terms, based on the assumptions I have been given as well as the documents and medical opinions provided, I am of the opinion [the plaintiff] has sustained a physical injury to his brain as a consequence of his psychiatric condition (PTSD) deriving from the sudden and unexpected death of his daughter.
Accordingly, by reason of this opinion that there has been a physical injury to the plaintiff’s brain, it is arguable that he has suffered a bodily injury. Whether or not there is a finding that there is physical damage to the plaintiff’s brain will depend upon all of the medical evidence to be considered a trial.
QBE also argues that the only claim for loss pleaded by the plaintiff is loss caused by his psychiatric injury, namely the PTSD. QBE submits that the evidence at its highest only indicates that any physical damage to the plaintiff’s brain was caused by the PTSD and there is no coverage under the policy for bodily injury consequential upon the psychiatric injury.
I do not accept that the manner of the present pleading precludes the plaintiff from establishing that it is arguable that the policy responds to the loss he says he has suffered. The essence of the plaintiff’s claim is one of loss and damage arising from the negligence of the defendant which caused him to suffer a recognised psychiatric injury. The PASOC at [10] include particulars of psychiatric illness and physical injury to the brain as a consequence of the psychiatric condition. I consider it is arguable that the bodily injury, namely the damage to his brain caused by the PTSD, is bodily injury indemnified under the policy if the other terms and conditions of the policy are proven at trial as being satisfied.
I do not consider that it is possible or appropriate at this interlocutory stage to determine whether the condition precedent to indemnity will apply. I consider that this will depend on the factual findings made by the trial judge after a consideration of all of the evidence that is before the Court.
I accept that some of the particulars of negligence relied upon by the plaintiff set out at [28] above themselves rely on breach of the Civil Aviation Safety Regulations by the LAME. However, not all of them do. I do not know whether those particulars that do rely on breach of those regulations will be made out. Reference was made by Senior Counsel for QBE to a police interview with the LAME, Mr Land, which was said to constitute admissions as to conduct that must have been in breach of Civil Aviation Safety Regulations. I do not consider that I am able to reach that conclusion at this interlocutory stage. That evidence may not be admitted at trial; it may be tested or there may be other evidence.
Nor do I know, or can I determine at this interlocutory stage, which of the other particulars of negligence (if any) will be made out. It may be that after a consideration of the whole of the evidence the plaintiff establishes negligence by the defendant in the servicing or maintenance of the aircraft which does not involve any breach of the Civil Aviation Safety Regulations. Whether that negligence was a cause, or the cause, of the leak of the carbon monoxide into the cabin leading to the incapacitation of the pilot and the crash are all matters that can only be determined at trial after all of the evidence that is admitted can be considered.
For the same reasons, I do not consider that I can find that s 54 of the Insurance Contracts Act operates in the manner submitted by QBE on this application. It may be that if there is an act of the insured that breaches the Civil Aviation Safety Regulations as I have discussed above, s 54(2) may be enlivened. However, on the current material before me and having regard to the nature of the application I am deciding, namely whether the plaintiff has an arguable case that the policy responds to indemnify any liability of the defendant, I cannot conclude that it will not be possible to prove that no part of the loss that gave rise to the claim was caused by an act which may have been in contravention of the Civil Aviation Safety Regulations or otherwise triggered condition precedent 6(d) of the policy. I am not able to accept the submissions of QBE to the contrary.
I therefore cannot exclude that it may be established at trial after a consideration of all of the evidence that some part of the loss giving rise to the claim was not caused by an act which triggered condition precedent 6(d) of the policy, thus enlivening s 54(4) of the Insurance Contracts Act.
For the above reasons, I consider the plaintiff is entitled to the relief he seeks.
The orders of the Court are:
Pursuant to s 4 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW), the plaintiff has leave to join QBE Insurance (Australia) Limited (QBE) as second defendant to the proceedings.
The plaintiff has leave to file and serve an amended statement of claim in the form attached at Exhibit “AK-11” to the affidavit of Amabel Nancy Kuan affirmed on 24 March 2026.
QBE pay the plaintiff’s costs of the motion.
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Airag Aviation Services Pty Limited
(1966) 114 CLR 437
(2017) 93 NSWLR 438
(1988) 165 CLR 642