MEGBUY'S ALLEGED LIABILITY TO MR HORWOOD
76The photos of Mr Horwood's accident depict a forklift turned over on its left side in the middle of the street. In the foreground of the pictures is a motor vehicle parked adjacent to the kerb on the left hand side of the road. Immediately adjacent to the rear of the motor vehicle on the right hand side are are some tyre marks which veer to the right to the point where the forklift was tipped over. A police sketch indicates that at the rear of the vehicle the tyre marks were 24cm from the side of the vehicle and that the point the forklift turned over is 8.2 metres from that location. The sketch and the photos suggest that the forklift was driven close to the car. The brakes were applied. It swung to the right and, being top-heavy, turned on its left side.
77CGU tendered a series of documents which record the accounts Mr Horwood gave of the incident to the police, WorkCover inspectors, QBE and doctors. On the day of the accident he told a police officer that he was " ... travelling along Talc Street on to my next job. I lost control of the forklift and the next thing I know is it fell over." On 16 December 2005 a WorkCover inspector recorded that he stated that: "I was going from job to job on the forklift. Stated he was not speeding and was taking his time. The incident happened pretty quick - said that the camber of the road is pretty sharp, off to the gutter. He said that a wheel may have got caught in road surface. He said that he didn't really know what happened."
78On 2 May 2006 Mr Horwood advised QBE in his claim form that: "I was driving a forklift in Talc Street towards Galena Street, next thing that I remember of the accident was that it rolled on its left side. I believe the steep camber of the road caused the forklift to become unbalanced."
79On 21 February 2007 Dr Michael Long recorded the following history after having consulted with Mr Horwood on the previous day: "This occurred on [7] November 2005 when he was driving a forklift in the streets of Broken Hill en route to another point where he was delivering palettes. Evidently the forklift he was driving tipped over. However he does not recall the actual event or reason for it. The loss of consciousness he described as being instantaneous."
80To the extent that these histories recount that the "camber" of Talc Street falls away steeply off to the gutter it is not borne out by the photographs. Generally, the histories given by Mr Horwood rise no higher than him having no real recollection of what occurred immediately prior to the accident other than a recollection that he lost control.
81I have described the debate over the tender of both the unsigned statement of Mr Oates and the signed statement above. In paragraph [22] of his signed statement Mr Oates states:
"To me the forklift was faulty mechanically in its steering. It fish-tailed once you reached a certain speed. You had to overcorrect the steering. It was back wheel steering. I refer you to my other statement. It was maintained by mechanics at work." (emphasis added)
82I made a direction under s 136 of the Evidence Act in respect of the italicised portion of this paragraph restricting its use to only prove the fact that it was that a statement that was communicated to QBE as that was a matter relevant to an assessment by it of whether to compromise Mr Horwood's claim.
83The reference to "my other statement" I infer to be a reference to the unsigned statement, in particular, to paragraph 9 of that statement which was as follows:
"Prior to Peter's accident and when I was driving the forklift I noticed the following about it:
(a)The steering was very loose. You had to turn the steering anything up to 180 degrees to get the machine to turn.
(b)When turning the machine it could turn either very slowly or very sharply without warning. There was no consistency so I didn't know what the machine was going to do. I had to be very alert and very careful driving it.
(c)When the forklift got up to a certain speed, I'm not sure exactly what the speed was because there is no speedo, but it's when the machine was driven almost to its capacity, it would fishtail. The steering is on the rear wheels. When it starts to fishtail the steering became almost useless because it was too loose and you couldn't correct it. If you were not very careful you could lose control. It was easy to over correct.
(d)The brakes were never very good. Driving the machine on the roads around Broken Hill the brakes would squeal and were very dull. The stopping distance was inordinately long.
(e)In my experience of driving this machine prior to Peter's accident, and this includes the weeks leading up to Peter's accident, I almost had a number of accident's [sic] myself.
(f)Because the maximum speed of the machine was still well less than the speed limit I tended to drive the machine towards the edge of the roadway. This did not impede traffic. At the edge of the roadway usually was where the camber of the road was more pronounced.
(g)On many occasions I almost hit parked cars or lost control of the machine because the machine would wander and I couldn't correct it quick enough with the steering.
(h)On a number of occasions where I was hurrying to get to places to use the forklift on roads, it would fishtail. The only thing I could do on those occasions was basically hope that by taking my foot off the accelerator that the machine would centre itself. On a number of occasions, more than two, I thought that the machine was going to turn over on me."
84At [12] Mr Oates states that on a number of occasions he complained to Terry Capper about the steering of the forklift and that this was in the "short period leading up to Peter's accident".
85I have outlined above the relevant part of the contents of the running log of the WorkCover investigation including the conversation with Mr Barry Gillett.
86QBE tendered two reports from a firm of investigators it retained, GCI Group. Attached to one of those reports was a statement from the police officer who attended at the scene of the accident, Constable Paul Thompson, given on 8 June 2007. He recounts arriving at the scene of the accident and obtaining a brief statement from Mr Horwood, the effect of which I have set out above. He did not interview anyone at the scene of the accident and only spoke to Mr Horwood later at the hospital.
87One of the investigator's reports also included various file notes of discussions between the investigator and a number of witnesses. One of the witnesses spoken to was Mr Gillett. The interviewer's notes record that Mr Gillett stated that he was employed by Megbuy until 8 May 2005 and that he maintained the forklift until that time. He was recorded as stating, inter alia:
"The steering was not dangerous. There was a reasonable level of wear in the steering so that sometimes it could react very quickly and sharply and turn and other times one could turn the wheel and nothing happened. Then, you turned it a little bit more and there was sharp movement. Overall he states there was 'a lot of playing in the steering'.
Gus Gillett got quotes for repairs and parts to repair the steering, but Terry Capper always refused to have this work done. He does not know why, but assumed that Terry Capper did not want to spend the money.
The forklift could have 'speed wobbles'. He admitted that this is a common problem when forklifts are driven on a road."
88The investigator's report records that Mr Gillett also advised the investigator that by chance he was working near the accident and attended at the scene about 10-15 minutes after it occurred. He is recorded by the investigator as "speculat [ing] that the loose steering, and slope of the road where the accident happened may have combined to contribute to the accident".
89The investigator's log also included a file note of an interview with Kim Sanderson who had worked with Mr Capper since 1999. The log records Mr Sanderson being of the view that the forklift was "unroadworthy" but that "he never thought it was dangerous". The interview notes further record that Mr Sanderson advised the investigator that:
"... he was aware that the steering was 'a bit loose'. He concluded this due to his experience driving the forklift and finding that if he drove over a bump on a public road the machine could unexpectedly jump to the right. He also noted the driver needed to turn the steering wheel continuously to the left and to the right to keep the machine heading in a straight direction. The steering mechanisms are located at the rear of the forklift and this can add to the difficulties with driving.
.......
Kim Sanderson stated that it was his experience with [the forklift] that the steering suddenly jerking to the right was enough to cause the forklift to go out of control and tip over.
Kim Sanderson noted this was a common "failing" of forklifts and not just QBU 771. He speculated that there might be a manufacturing defect in all forklifts to cause them to behave as he described." (emphasis added)
I made a direction under s 136 of the Evidence Act in relation to the italicised portion of this extract to the same effect as that described in [82] above.
90The investigator's notes also record that they contacted Ty Ralph who was the Megbuy employee who took over the responsibility for the repair and maintenance of the forklift after May 2005. Again, it was common ground that Mr Ralph was not a qualified mechanic. The investigator's notes record that they spoke to Mr Ralph about the forklift but "surprisingly, he denied any knowledge of its mechanics".
91The investigator's notes also contain a note of discussion with a mechanic, Les Gers. He did not inspect the forklift prior to the accident. He recalled "some weeks/months" after the accident he had received a telephone call from Mr Ralph who had asked him to prepare an independent report for WorkCover. Mr Gers agreed to look at the forklift and gave Mr Ralph a verbal list of repairs. The work was carried out and he inspected the forklift. He did not recall the list but could recall the handbrake and headlights needed adjusting. This led to Mr Gers preparing a note for WorkCover stating the condition of the forklift complied with requirements. The document was tendered by CGU. It bore the date 12 October 2006.
92Mr Capper signed a statement dated 25 June 2007 which was provided to QBE. It relevantly stated:
"It [the forklift] was serviced and maintained internally at 86 Pinnacles Place Broken Hill. There are no records of the servicing and maintenance held. The driver checks the machine each day morning - oil and water levels. They run on LPG. There was nothing wrong with the forklift.
I have a defect book at 86 Pinnacles Place and there is no entry by Peter Horwood that there was anything wrong with the forklift.
To the best of my knowledge there was no defect in the forklift on 7 November 2005. The forklift was fine. Peter Horwood did not contact me that day to make any complaints about the forklift. We operated it the next day.
I have driven the forklift myself many times. It is old but reliable and has no quirks or oddities in its workings. It works every day without incident.
...
The forklift did not need any repair or maintenance as a result of the accident."
93As noted, Mr Capper also gave oral evidence concerning the state of repair and serviceability of the forklift. The substance of the evidence given by Mr Capper concerning the state of the repair of the forklift did not differ to any significant degree from that set out in his statement of 25 June 2007. He stated that at some time prior to the accident Mr Gillett was responsible for maintaining the forklift. He said the system of maintenance involved the recording in a log book of any difficulties as noticed by drivers. He stated that there was no defect recorded in the log book concerning the forklift. He stated that after the accident the forklift was investigated by WorkCover and an Improvement Notice was issued.
94When cross-examined on this topic by Mr Cavanagh SC (see above), Mr Capper accepted that, at some point prior to the accident and after Mr Gillett had left the company, his nephew, Mr Ralph, undertook maintenance of the forklift. He agreed that Mr Ralph was not a qualified mechanic. Further, while he asserted that maintenance records had been kept prior to the accident, he agreed that he had not been able to produce any such records at any time. He agreed the report of 12 October 2006 was prepared in response to investigation by WorkCover. He denied the suggestion that was put to him that, in the immediate period after the accident involving Mr Horwood, his nephew and another person had arranged for repairs to be done to the forklift and those repairs are reflected in the document that bears the date 12 October 2006.
95I detected considerable sensitivity on the topic of the state of the forklift by Mr Capper in giving evidence. At this point I make two observations about his evidence. First I consider that any insurer acting reasonably who was in possession of his statement and what it revealed about the qualifications of persons responsible for servicing the forklift and the absence of maintenance records would be distinctly unenthusiastic about defending a proceeding based on his evidence alone. Second, I do not consider that any such insurer would have had that enthusiasm revived if they had the opportunity, as I did, to observe Mr Capper give evidence on this topic. I will return to this when I address the position at [112] on the basis that my conclusion at [37] was wrong and it was incumbent on me to determine Megbuy's liability de novo.
96CGU also tendered through Mr Capper some maintenance records for the forklift, all of which relate to the period from March 2006 onwards.
97There was also tendered a letter to QBE from its solicitors to its Claims Manager dated 3 August 2007. This preceded the commencement of proceedings. The letter recounted the salient points of the evidence that had been gathered to that time including the material from Mr Oates. The authors commented that, if Mr Oates' allegations were accurate, then Mr Horwood was "likely to establish that he lost control of the forklift because of a mechanical defect" and that the defect was "well within the knowledge of the insured and its failure to rectify it constituted a breach of its duty of care". They noted that to that point in time Mr Horwood had not claimed that the loss of control of the forklift had anything to do with the steering mechanism but they apprehended that such an allegation would be made if proceedings were commenced. They noted that Mr Gillett had agreed that the steering was unpredictable and added that in their view "that would constitute a defect within the meaning of the [MAC] Act". They indicated they would like to obtain a statement from Mr Anderson but even without evidence from him "our belief is the breach of duty of care will be established". They then addressed the possibility of a reduction for contributory negligence which they at that time considered would be in the range 0% - 20%. The letter advised of a range of likely damages that would be awarded of $563,700.00 to $1,092,200.00 (inclusive of costs).
98In November 2008 Mr Horwood filed his statement of claim against Megbuy. The statement of claim pleaded that Megbuy was not only his employer, it was the owner of the forklift. It particularised Megbuy's negligence in terms that reflected the apprehension of QBE's solicitors, that is, it alleged a failure on the part of Megbuy to maintain the forklift and allowing the forklift to be driven whilst steering was excessively loose and erratic and might "fish-tail due to loose steering". The statement of claim alleged that Megbuy was liable because [it] was the owner of the vehicle, the vehicle was in use at the time of the accident and the vehicle was defective".
99QBE also tendered a letter from its solicitors to one of its claims managers dated 13 July 2009. This was well after proceedings had commenced. The letter summarised the effect of advice that had been obtained from counsel (Mr Cavanagh SC). It was said that counsel had noted the difficulty in reconciling Mr Capper's evidence with that of Messr Sanderson, Oates and Gillett. He noted the "critical evidence" from Mr Gillett which suggested that there had been "deficiencies in the steering of the forklift for some time prior to the accident". The letter extracted the following from counsel's advice:
"It is surprising that both [Gillett and Oates] would be so adamant and specific as to the deficiencies in the steering mechanism if there was absolutely no substance to such suggestion. It seems that these former employees will give evidence in the proceedings. It is highly unlikely that the Court would reject their evidence as being fabricated or speculative. They may not be able to offer an opinion as to the cause of the accident but they may be able to give sufficient evidence to provide a basis for the Court to make the appropriate findings".
100QBE's solicitors then added:
"We agree with counsel's conclusion that the defendant is at significant risk. The plaintiff sustained a serious injury. The Court will be loathe to conclude that this did not occur through the negligence of the defendant as owner of the registered forklift. You could procure expert evidence to analyse in greater detail the mechanics of the accident but our view is that this is unlikely to alter the final outcome and that liability should, in fact, be admitted in due course to contain costs."
101The letter referred to advice that had been provided in April 2009 that the most likely damages to be sought by Mr Horwood, or ordered by the Court, and costs would be "just over $1.2 million".
102Consistent with this letter on 26 August 2009 QBE's solicitor advised Mr Horwood's solicitor that they were instructed to admit liability "subject to preservation of the defence of contributory negligence." The chronology of events leading to the entry of the consent orders has been set out above. To that chronology I add that on 24 November 2009 QBE was advised by its solicitors of a revised range of damages of $824,750.00 to $1,615,000.00 (inclusive of costs) with a "most likely" figure of $1,249,000.00.
103The material obtained by QBE concerning the forklift revealed that it was old and, to the extent that it had been serviced, the persons who undertook that were not qualified mechanics (Messrs Gillett and Ralph). There were no records of it being serviced and maintained prior to Mr Horwood's accident. The advice given to QBE by its solicitors and Counsel accepted the likelihood of the acceptance of the evidence from Messrs Gillett and Oates. I agree with that assessment having regard to the material available to them. There was no apparent reason why their evidence would not be accepted. They had no interest in the outcome of the proceedings. Mr Capper's evidence was unlikely to be accepted. Of all the witnesses he had the greatest reason to be considered partial given his responsibility for the maintenance and use of the forklift. Mr Sanderson's evidence was equivocal but tended to support Mr Horwood's claim. It was unlikely that he would be called by either side.
104If the evidence of Messrs Gillett and Oates was accepted then it would have established that:
(i)the forklift had long standing deficiencies including loose steering, poor braking and propensity to "fishtail" at some speeds;
(ii)the defects were known to its owner (Mr Capper); and
(iii)Mr Gillett presented quotes for repairs and parts to repair the steering but Mr Capper refused to have the work done.
105The advice from QBE's counsel and solicitors did not descend to considering either ss 5B or 5C of the Civil Liability Act 2002 which were applicable (s 3B(2)). However I have no doubt that a conclusion that there was a breach of a duty of care follows from an acceptance of Messrs Gillett and Oates evidence. The existence of a duty of care owed by an owner of a motor vehicle to those who use it was not in dispute before me (see Harmer v Hare [2011] NSWCA 229 at [195] (per Whealy JA)). The risk of harm flowing from a defect in the steering mechanism was clearly foreseeable and not insignificant (s 5B(1)(a) and (b)). There were two obvious precautions that could have been taken to avoid it, namely undertake such steps necessary to have it fixed, or failing that, direct that it not be used at least on a public road. If those steps were not taken then the probability of harm resulting was reasonably likely and the likely seriousness of harm resulting from an accident of a forklift on a public road was significant (ss 5B(2)(a) and (b)).
106The evidence the investigator obtained from Messrs Gers and Gillett suggests that whatever defects the forklift had they were not expensive to repair. The undertaking of those repairs would clearly be precautions that a reasonable person would have undertaken in the circumstances. Even if it was not possible to ascertain the likely cost of repairing the forklift to the requisite standard, the magnitude of the risk posed by the forklift was such that I consider the burden of directing that the forklift not be driven on a public road and the social utility of the task that Mr Horwood was undertaking were strongly outweighed by the risks inherent in allowing a forklift with a defective steering mechanism to be driven (ss 5B(2)(c) and (d)). Accordingly I consider that, even if for some reason the forklift could not have been repaired, a reasonable person in the position of Megbuy would have directed that the forklift not be driven on a public road. I consider that a reasonable person in Megbuy's position would have taken the precaution, of either having the forklift repaired or, failing that, directed that it not be driven on a public road (s 5B(1)(c)).
107Neither of the tendered extracts from the advice of counsel to QBE or the advice from its solicitors specifically addressed causation. A pragmatic position appears to have been adopted. They gauged that the District Court would strain to find liability established in the circumstances of a plaintiff with a serious injury and a body of evidence suggesting a persistent defect with the forklift's steering mechanism. Mr Campbell SC contended that causation was not established on the material before QBE. He contended that the clear inference was that Mr Horwood braked heavily and swerved to avoid colliding with the parked car.
108At any hearing the evidence on causation was likely to be the evidence of Mr Horwood, the photos of the accident, the sketch of the scene and the evidence suggesting that it had a persistent defect in the steering mechanism. As noted, Mr Horwood had little recollection of the accident other than a recollection that he lost control. This recollection is at least consistent with the loose steering of the forklift being operative to cause the accident. Mr Horwood had driven the forklift on a number of occasions including on a public street. Although the forklift appears to have moved close to the back of the car depicted in the photos of the accident, it was not so close that I would expect a reasonably experienced driver of the forklift to overreact by turning as sharply as depicted by the tyre marks and the final position of the forklift. The more likely explanation for that having occurred is that at the point Mr Horwood sought to correct his course the defect in the steering exaggerated his correction. In my view it would have been reasonably open to the District Court to have found that factual causation was made out in relation to the failure of Megbuy to have the forklift repaired or removed from use on a public road (s. 5D(1)(a)). Further I consider that it is reasonably likely that it would have so found. If such a finding was made, a finding under s 5D(1)(b) of the Civil Liability Act would have followed.
109Mr Campell SC sought to characterise the agreement with Mr Horwood as a "complete capitulation near to the top of the range" rather than a settlement. He contended that QBE could not have reached any reasonable compromise on liability in the absence of expert evidence. He contended that, in the absence of such evidence, "an inference of negligence is not available from something unexpected or untoward in the operation of the machine" and referred to the passage from the judgment of Barwick CJ in Piening v Wanless [1968] HCA 7; (1968) 117 CLR 498 at 507 - 508. However this was not the factual scenario suggested by the evidence of Messrs Gillett and Oates. The defect in the steering mechanism that they described was not "unexpected" but was persistent although erratic. Expert evidence was not required to establish breach in this case.
110The test posed by Zurich v GIO requires me to determine whether QBE effected a reasonable compromise of Mr Horwood's allegation that it was liable to him for damages calculated in accordance with the MAC Act. Having regard to the admission in CGU's pleading as discussed at [19] to [23] above, the question for me is whether QBE's conduct in causing Megbuy to admit liability was reasonable. Having regard to the findings that I have made, I am satisfied that it was. It is necessary to note one matter concerning QBE's obligations under ss 80 to 82 of the MAC Act. In a different context, it might have been contended that overall the compromise that QBE effected was not reasonable because it admitted liability in August 2009 and only later negotiated over quantum and thus did so from a position of relative weakness. However, given the obligations imposed by QBE under the MAC Act I do not consider that its admission of liability can be held against it in this way. Having gathered evidence and advice that it was very likely to be found liable, QBE was acting entirely consistently with its obligations when it admitted liability.
111Consistent with the discussion at [40] above, these conclusions do not end the inquiry as to whether the compromise was reasonable. There is the remaining issue as to whether the definition of "injury" in s 3 of the MAC Act is satisfied.
112Before addressing that, I will revisit the question of the liability of Megbuy on the basis that my conclusion in [37] is wrong and it was incumbent on me to determine whether it was liable to Mr Horwood. On that basis the evidence that I am able to consider consists of the photos and sketch of the accident (see [76]), Mr Horwood's statements (see [77] to [79], Mr Capper's written statements and oral evidence (see [92] to [94]), the signed statement of Mr Oates other than the material the subject of a direction under s 136 (see [81] and [82]) and the letter signed by Mr Gers dated 12 October 2006 ([91]). It would also include the unsigned statement of Mr Oates because he has incorporated that by reference into his signed statement (see [83] above). It would not include the statement Mr Gillette made to the WorkCover inspector (see [63]) or the material from the Investigator's reports (see [86] to [91]).
113Considering that material alone there is still a sharp discrepancy between Mr Oates' evidence and that of Mr Capper. I find that, based on Mr Oates' statements, the forklift had persistent deficiencies including loose steering, poor braking and propensity to fishtail at some speeds. I reject the evidence from Mr Capper to the contrary. I have referred above to the misgivings I have about this aspect of his evidence. On this issue the absence of any service or maintenance records for the forklift for the relevant period and his use of unqualified personnel to maintain the forklift reinforces the doubts I have from having observed his evidence on this topic. Mr Oates' evidence was untested. However there is no reason apparent why he would provide a consistently false impression of the state of the forklift. The position is different for Mr Capper. His company, Megbuy, was ultimately responsible for the forklift. From an early point in WorkCover's investigation he must have realised that there could be adverse ramifications for either him or Megbuy if the forklift was allowed to be driven on a public road with a persistent defect.
114QBE had material which suggested that the option of repairing the persistent defect in the vehicle was relatively inexpensive but nevertheless rejected by Mr Capper. The material that I am considering at this point of the analysis does not support such a finding other than perhaps the letter from Mr Gers dated 12 October 2006. However the analysis at [105] to [106] above concluded that a breach of duty would still be established even if the cost of the repairs was not able to be ascertained because, in the absence of repair, it was incumbent on Megbuy not to allow the forklift to be driven, especially on a public road. The balance of the reasoning at [108] is also applicable. I make the findings on causation that I concluded that the District Court would have been reasonably likely to have made (see [108]).
115Accordingly, to the extent that it was incumbent on me to determine de novo whether Megbuy was liable to Mr Horwood, then I am satisfied that it was. The question as to whether it was a liability that results in the definition of "injury" being satisfied is addressed next.