QBE Insurance (Australia) Limited v Wesfarmers General Insurance Limited

QBE Insurance (Australia) Limited v Wesfarmers General Insurance Limited - [2010] NSWSC 855 - NSWSC 2010 case summary — Zoe

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12 As a result of the fire the plaintiff suffered severe injury, loss and damage as particularised in the Statement of Particulars filed herewith." 7 The plaintiff claims that the defendants were negligent in a variety of ways, any one or more of which caused his injuries. A number of the particulars of negligence refer to the state of the shearers' quarters. It is suggested that the defendants were negligent because the electrical wiring in the shearers' quarters was not inspected or adequately maintained, there were no smoke detectors installed in the shearers' quarters, there were no fire extinguishers installed in the shearers' quarters, and that there was no adequate or recognisable fire screen to surround the fire place in the shearers' quarters. Additionally, there are allegations which seem to relate to the appropriateness of allowing the plaintiff, and his father, to sleep in the shearers' quarters and the reasonableness of so doing. Finally there are allegations of negligence against the second defendant for failing to provide any immediate adequate first aid for, or care and attention to, the injuries of the plaintiff. 8 By their defence, the two defendants dispute that they were negligent and deny that they were in any way liable with respect to the fire which occurred and the injuries which were sustained. 9 In paragraph 6 of their defence of 5 March 2007, the defendants plead that the injuries to the plaintiff: "Were wholly caused by the negligence of his father Ibrahim El Hayek, and that the negligence of the said Ibrahim El Hayek severed any causal connection between any act or omission on the part of the defendants and the happening of any injury." 10 Particulars of that negligence are provided which in various ways assert that the plaintiff's father, Mr Ibrahim El Hayek, created the risk of injury to the plaintiff by the misuse of fire and flammable substances in the vicinity of the plaintiff. 11 The principal proceedings have not yet been heard and determined. Accordingly, there has been no judicial determination of the factual circumstances surrounding the occurrence of the fire and the causes of the plaintiff's injuries. The allegations in paragraph 6 of the defendant's defence have not been tested or determined. 12 First Insurance Proceedings: On 9 June 2010, the Court ordered that there be decided as a separate question before the hearing of the principal proceedings, a number of issues which related to the claim made by the defendants, Mrs Vasic and Mr Fairey, for indemnity from QBE and Mercantile Mutual Insurance (Australia) Limited ("MMI") under a contract for insurance 63A138551PLB ("the QBE policy") issued by QBE and MMI to the defendants with respect to the property at Mulga Creek Station Byrock. 13 On 15 June 2010, I delivered judgment in which I held that the QBE policy responded to the plaintiff's claim and that Mrs Vasic and Mr Fairey were entitled to indemnity under that policy: El Hayek v Vasic [2010] NSWSC 634. 14 An application for leave to appeal, and the appeal, were heard concurrently by the NSW Court of Appeal on 24 June 2010. The Court made orders on that day granting QBE leave to appeal from my decision and dismissing the appeal with costs. On 15 July 2010, the NSW Court of Appeal published its reasons: QBE Insurance Australia Limited v Vasic [2010] NSWCA 166. 15 The contents of those judgments adequately explain the issues debated between the parties at that time. 16 After the orders were made by the NSW Court of Appeal dismissing QBE's appeal to that Court, but before reasons were delivered, QBE commenced these proceedings by a summons originally filed on 28 June 2010.

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18 The nature of a claim for contribution was identified by the High Court of Australia in Albion Insurance Company Ltd v Government Insurance Office of NSW (1969) 121 CLR 342 at 345, where Barwick CJ, McTiernan and Menzies JJ said: "There is double insurance when an assured is insured against the same risk with two independent insurers. To insure doubly is lawful but the assured cannot recover more than the loss suffered and for which there is indemnity under each of the policies. The insured may claim indemnity from either insurer. However, as both insurers are liable, the doctrine of contribution between insurers has been evolved. It began in the second half of the eighteenth century with Lord Mansfield's decisions with respect to marine insurers and there is no doubt that it now applies generally to insurance which provides the insured with an indemnity … The doctrine, however, only applies when each insurer insures against the same risk, although it is not necessary that the insurances should be identical … The essential element for contribution is that, whatever else may be covered by either of the policies, each must cover the risk which has given rise to the claim. There is no double insurance unless each insurer is liable under his policy to indemnify the insured in whole or in part against the happening which has given rise to the insured's loss or liability." 19 In the same decision, Kitto J (with whom Windeyer J agreed), said at p 362: "What attracts the right of contribution between insurers, then, is not any similarity between the relevant insurance contracts as regard their general nature or purpose or the extent of the rights and obligations they create, but is simply the fact that each contract is a contract of indemnity and covers the identical loss that the identical insured has sustained; for that is the situation in which "the insured is to receive but one satisfaction" (to use Lord Mansfield's expression) and accordingly all the insurances are "regarded as truly one insurance" …" 20 QBE relies on the fact that as of 4 July 2003, when the fire the subject of the principal proceedings occurred, the first defendant, Mrs Vasic, but not the second defendant, Mr Fairey, was insured by the Wesfarmers policy. 21 It claims that both of the QBE policy and the Wesfarmers policy cover the same risk, which is the risk which has given rise to the plaintiff's claim. 22 Wesfarmers denies QBE's right to contribution because it submits that insurance cover did not exist under the Wesfarmers policy for the risk which has given rise to the plaintiff's claim.

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Relevant Facts 23 The parties agreed on some of the facts, and some remained in dispute. The agreed facts are as follows: "1. Ahmed El Hayek has brought proceedings in the Supreme Court claiming damages from Josslyn Vasic and Charles Fairey for negligence arising out of injuries sustained on 4 July 2003 at Mulga Creek Station, Byrock (the property), a rural property of 42,000 acres near Bourke, NSW. 2. At the time of the incident, the property was owned by Mrs Vasic and managed by Mr Fairey. 3. On 3 July 2003, Ahmed El Hayek attended the property in the company of his father, Ibrahim El Hayek, who made contact with Mr Fairey. Ibrahim El Hayek paid an amount of money to Mr Fairey for accommodation and for use of the property for the purpose of hunting. 4. Ibrahim El Hayek was a licensed shooter, and was visiting the property for the purpose of hunting for feral animals. 5. Ahmed El Hayek and his father were shown by Mr Fairey to the shearers' quarters being the accommodation available to them for the night of 3 July 2003. 6. At about 4:30 am on 4 July 2003, a fire started in the shearers' quarters. At the time, Ahmed El Hayek was asleep in the shearers' quarters. 7. Ahmed El Hayek suffered personal injury caused by the 4 July 2003 fire. 8. QBE has been found liable to indemnify Mrs Vasic and Mr Fairey in respect of Ahmed El Hayek's claim in the Supreme Court proceedings. 9. At the time of the fire, Mrs Vasic was insured by Wesfarmers under Rural Plan Insurance Policy number 03 RPL 2002243 (Wesfarmers policy). 10. The terms of the Wesfarmers policy are contained in the following documents: 10.1 Wesfarmers "Renewal Schedule" for policy No. 03 RPL2002243 with attached Certificate of Insurance covering: 10.1.1 Risk 001/001 Standard Home; and 10.1.2 Risk: 001/004 Farm legal liability; 10.2 Wesfarmers 'Alteration Schedule' for policy No. 03 RPL2002243 with attached Certificate of Insurance covering: 10.2.1 Risk 001/007 Farm property damage; and 10.2.2 Risk: 001/008 Standard Home; 10.3 Rural Plan booklet (containing wordings for 16 different policies). 11. At all material times Paul Blenkhorn was an agent of Wesfarmers." 24 The facts which were not agreed deal with two discrete areas. The first area is the nature and extent of the activities on Mulga Creek Station. The second area is what facts exist which are permissible to be taken into account, by way of extrinsic or surrounding facts when considering the proper interpretation of the Wesfarmers policy. It is convenient if I address the nature and extent of the activities on Mulga Creek Station at this stage of the judgment. The other factual issue will be dealt with in due course.

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Extrinsic Facts 58 Before turning to the interpretation of the relevant policies, it is necessary to have regard to any extrinsic or surrounding facts established by the evidence, which may be relevant to the policy. 59 The principles which attend the question of surrounding circumstances were reviewed and restated by the NSW Court of Appeal in the appeal in the first insurance proceedings. Allsop P said: "35. It is clear from the binding Australian authorities that the scope of the surrounding circumstances, knowledge of which is to be attributed to a reasonable person in the situation of the contracting parties (not one or some only of them), is to be understood by reference to what the parties knew in the context of their mutual dealings. As Lord Wilberforce said, this does not involve a species of constructive notice. Constructive notice implies a degree of enquiry by reference to some external standard. Just because something is available to be found does not make it relevant, if the parties did not know of it. The reasonable person may be taken to know of things that go beyond those that the parties thought to be important or those to which there was actual subjective advertence by the parties. Further, the circumstances may include such things as the legal context to the transaction, especially if a market is involved. Nevertheless, the scope of the relevant material is necessarily bounded by the objective task of the reasonable person giving meaning to the words used by the parties in the circumstances in which the contract came to be written, by reference to what the parties knew ..." 60 The evidence which may be regarded as constituting surrounding circumstances can be taken from the evidence of Mr Blenkhorn. Mr Blenkhorn, at the time the Rural Plan was entered into, was the relevant Area Manager for Wesfarmers. He was also in business on his own account. 61 His evidence was that he had no independent recollection of the transaction by which the first defendant obtained her insurance. However, he was able to say by reference to various of the documents in the file what, on the probabilities, having regard to his usual practice, and the practice which then existed in the office, is likely to have occurred. 62 The sequence of events leading to the obtaining of the insurances seems to be this:

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(g) Whether there are any steps taken by way of advertisement or other marketing such as signage, advertising and the like, to promote the subject activity as a business and distinguish it from the farming activity undertaken on the Mulga Creek Station. 74 Ultimately, although these indicia may be relevant, it is a matter for the Court in each individual case to make an assessment of the extent and degree to which the subject activity is undertaken as a separate activity from other activities on the farm, and hence whether it can be described as a separate business. 75 The extent of the evidence about the subject activity did not include any accounting evidence by way of profit and loss accounts or balance sheets, nor any evidence of what the tax returns of the first defendant (if any) showed. There was no evidence tendered of any separate marketing or promotional activities, and the evidence of the continuous and regular nature of the process was that hunters visited about once a month usually for a weekend. This suggests that the activity was not continuous but rather would be properly described as intermittent. 76 Such income as there was from the subject activity was deployed for the benefit of, by way of improvements to, the farm. There is no evidence that there was any expenditure on the subject activity in addition to that being expended on the farming business. On the contrary, the sense which I obtained from the evidence was that the second defendant managed to undertake the activity as a part of his ordinary course of being a manager of the farm and it seemed to require little additional time. 77 The totality of this evidence, and the description of the interaction between the farming business and the subject activity in combination suggests that there was only one business being undertaken. 78 Counsel for Wesfarmers sought in submission to articulate one additional basis for a finding that the businesses of farming on the one hand, and the subject activity on the other, were separate and distinct. 79 She submitted that whilst the shooting of feral animals may ordinarily be a part of the farming business, where conducted by employees of the farm or else contractors retained to do so who were being paid by the farming business, that was not so with respect to hunters who paid to visit the property and undertake the hunting. The discriminating feature upon which counsel relied was the nature and extent of control which may be administered by the owner or manager of the farm business over the subject activity. She argued that in the first two categories to which I have referred the farm owner or manager would have complete control over the activity of the shooters. They would be able to indicate when and where the shooting was to take place and in respect of what animals. Counsel argued that this was not so with respect to hunters who, having paid their money to come onto the property, would then be free to roam without control and shoot as they wished. 80 This argument was initially attractive. But upon analysis I do not think that there is any significant difference between the degree of control which the farm owner or manager is capable of exercising in any of the three categories. Where a person pays to come onto the property, the farm owner or manager, by reason of ownership of the property and also by reason of granting permission to enter the property, is capable of controlling how, when, where and what the visitors shoot. I do not think that any of these things are beyond the capacity for control of the farm owner or manager. They would simply be imposed as conditions upon the entrant onto the property. If the entrant did not comply with the conditions it would be open to the farm owner or manager to invite the entrant to leave. 81 Analysed in that way, I am not persuaded that the nature and degree of control is a discriminating feature, nor that there is any real difference in the degree of control in any of the categories as Wesfarmers submitted. 82 In this case, I am satisfied that the control of feral animals was a necessary activity for the proper and ongoing management of, and maintenance of, the "Cropping Farm" business, on Mulga Creek Station. 83 That it was viewed in this way is clear from the evidence of Mr Fairey. That it was viewed in the same way by Wesfarmers can be inferred from the fact that Mr Blenkhorn, the relevant Area Manager for Wesfarmers, had an understanding that the shooting of, and the control of feral animals, was likely to be conducted on a property in the Bourke region in 2000, and when the Proposal form was sent, as required, to Wesfarmers to confirm the insurance which had been issued under a Cover Note, Wesfarmers accepted the Proposal form without taking any further action to enquire about the disclosed paid accommodation activity in the shearers' quarters to amend or alter in any way the insurance cover which had been issued. 84 It is important, so it seems to me as well, that the insured was not asked any specific question on the Proposal which would lead to the indication of what percentage or proportion of the farm income came from other on-farm activities, and generally what place the other activities bore in the farming business. Such material would have been necessary if cover was intended to be confined in the way that Wesfarmers now argues. 85 Accordingly I am satisfied that the activity upon which the plaintiff, Mr Ahmed El Hayek, and his father, Mr Ibrahim El Hayek, were engaged at the time the fire occurred, was an activity which formed part of the farm business, described as "Cropping Farm (not cane)" being undertaken by Mrs Vasic. 86 That being so, I am satisfied that Wesfarmers is obliged to indemnify Mrs Vasic under the farm legal liability policy. 87 Even if I had not been satisfied that the subject activity was an integral part of the farm business, the claim by Mr Ahmed El Hayek upon Mrs Vasic would in my view still have been covered by the policy. This is because the personal injury sustained by Mr Ahmed El Hayek was caused by an occurrence, namely the fire in the shearers' quarters, which was " … in connection with …" the farm business. 88 Although it must depend on the context, the phrase "in connection with" is one of broad meaning and wide connotation requiring merely a relationship between one thing and another: Selected Seeds Pty Ltd v QBEMM Pty Ltd [2009] QCA 286 at [22]; Drayton v Martin (1996) 67 FCR 1 at 32 per Sackville J; Our Town FM Pty Ltd v Australian Broadcasting Pty Ltd (1987) 16 FCR 465 at 479 per Wilcox J. 89 The coverage clause is directed to the issue of whether the occurrence is connected to the farm business. Here, the occurrence was connected to the farm business because the fire took place in the shearers' quarters which was one of the farm buildings used for the purpose of the farm business in which Mr Ahmed El Hayek was accommodated as a paying guest. This was the activity described on the Proposal as one of the uses to which the shearers' quarters was put. 90 The occurrence took place whilst the farm business was being undertaken. In short, the occurrence happened on the farm, whilst the business was in existence and during a disclosed activity. There is a sufficient causal connection. 91 In those circumstances, it seems to me that the width of the coverage clause is sufficient for Wesfarmers to be obliged to indemnify Mrs Vasic for the claim made by Mr Ahmed El Hayek. 92 In light of these two conclusions, it is unnecessary for me to analyse the balance of the submissions by QBE as to how this policy may otherwise respond.

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