QBE Insurance (Australia) Ltd v CGU Workers Compensation

BACKGROUND 2On 7 November 2005 Mr Peter Horwood was a driving a forklift along Talc Street Broken Hill. The forklift toppled onto its left side. Mr Horwood suffered significant injuries. His left hand was amputated. 3QBE provided compulsory third party insurance ("CTP") for the forklift in accordance with the Motor Accidents Compensation Act 1999 (the "MAC Act"). The forklift was registered in the name of Levira Pty Ltd ("Levira"), a company connected with Megbuy in the manner explained below. 4Mr Horwood was employed by Megbuy. He was driving the forklift in the course of his employment. In accordance with its obligation under s 155(1) of the Workers Compensation Act 1987 (the "WC Act") Megbuy obtained a policy of insurance from CGU concerning its employees, including Mr Horwood. 5It was admitted on the pleadings that in January 2008 Mr Horwood commenced proceedings in the District Court. A statement of claim bearing the date November 2008 reveals that he sued only Megbuy. He pleaded that Megbuy was both his employer and the "owner" of the vehicle. He asserted that Megbuy's liability to him was governed by the MAC Act. 6QBE assumed the carriage of the proceedings on behalf of Megbuy. In late November 2008 a defence was filed admitting ownership of the forklift but denying liability and alleging contributory negligence on the part of Mr Horwood. Particulars of the allegation of contributory negligence were provided in July 2009. In November 2009 an amended defence was filed admitting liability. The allegation of contributory negligence remained. 7On 7 December 2009 "Heads of Agreement" were entered into between Mr Horwood, QBE and CGU. It records an agreement to settle the claim for $1,500,000.00 inclusive of costs and agreement on an amount to be repaid to CGU in partial repayment of the workers compensation payments that Mr Horwood had received to that time. 8Consent orders between Mr Horwood and QBE were prepared and signed. They bear the date 8 December 2009. It was admitted on the pleadings that the proceedings were settled on 10 December 2009. I infer that the consent orders were made by the District Court around that date. Cases do not usually settle without a court making some orders finally disposing of them. The orders provided for a verdict in favour of Mr Horwood for $1,500,000.00. QBE paid that sum shortly afterwards. 9Even though it was a party to the Heads of Agreement, neither in that document nor at any other time did CGU agree to or acquiesce in Megbuy's admission of ownership of the forklift. The admission of ownership of the forklift by Megbuy was not a matter that significantly affected QBE's exposure to a claim from Mr Horwood. It was the insurer of whatever entity owned the forklift. Presumably Mr Horwood would have sought to join Levira if Megbuy's ownership of the forklift was seriously contested. However whether or not Megbuy was the owner of the forklift was of great significance to CGU. It only insured Megbuy. It did not insure Levira.

SCOPE OF THE POLICIES AND ISSUES IN DISPUTE 10In describing claims for contribution between insurers in the case of double insurance in Albion Kitto J stated (at 352) that: "What attracts the right of contribution between insurers ... is simply the fact that that each contract is a contract of indemnity and covers the identical loss that the identical insured has sustained." In AMP Workers Compensation Services (NSW) Ltd v QBE Insurance Ltd [2001] NSWCA 267; (2001) 53 NSWLR 35 ("AMP v QBE"), the Court of Appeal extended the principle's operation to encompass some situations where the two insurers covered the same loss but did not indemnify the "identical insured" but only because of a choice exercised by the injured plaintiff as to which party to sue. This extension was not directly relevant to this matter as this part of QBE's case involved an alleged liability of an alleged "common insured", namely Megbuy. 11AMP v QBE also confirmed that the time at which questions of double insurance are to be determined are "the time of the casualty" (at [17] per Handley JA). Subject to certain qualifications which are presently immaterial, this aspect of AMP v QBE was followed in QBE Insurance (Aust) Ltd v Lumley General Insurance Ltd [2009] VSCA 124; (2009) 24 VR 326. Both parties conducted this matter on the basis that the relevant date for ascertaining the existence of the alleged common obligation to insure Megbuy for the alleged identical loss was the date of Mr Horwood's accident, namely 7 November 2005. 12The starting point for considering QBE's claim is to identify the scope of cover of the policies provided by each of CGU and QBE bearing in mind that there needs to be a "contract of indemnity", "covering the identical loss" for the "identical insured". 13The scope of the CTP policy provided by QBE as at 7 November 2005 was set out in section 10 of the MAC Act which relevantly provided: "10 Third-party policies A third-party policy under this Act is a policy that is in the following terms: Third-party Policy The insurer insures the owner of the motor vehicle and any other person who at any time drives the vehicle (whether or not with the consent of the owner) against liability in respect of the death of or injury to a person caused by the fault of the owner or driver of the vehicle: (a) if the motor vehicle is not one to which paragraph (b) applies-in the use or operation of the vehicle in any part of the Commonwealth (whether or not on a road), or (b) if the motor vehicle is subject to an unregistered vehicle permit under the Road Transport (Vehicle Registration) Act 1997-in the use or operation of the vehicle on any road in any part of the Commonwealth. In this policy, words and expressions have the same meanings as in the Motor Accidents Compensation Act 1999." (emphasis added) 14The definition of "owner" is set out at [41] below. Further there is a definition of "injury" in s 3 which repeats the reference to "fault" in s 10 but introduced further causation tests which are discussed below at [116] to [131]. It provided: "injury: (a) means personal or bodily injury caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle if, and only if, the injury is a result of and is caused during: (i) the driving of the vehicle, or (ii) a collision, or action taken to avoid a collision, with the vehicle, or (iii) the vehicle's running out of control, or (iv) such use or operation by a defect in the vehicle, and (b) includes: (i) pre-natal injury, and (ii) psychological or psychiatric injury, and (iii) damage to artificial members, eyes or teeth, crutches or other aids or spectacle glasses, and injured person means a person who suffers such an injury." 15It is necessary to note one feature of the MAC Act which QBE emphasised in its submissions. Part 4.3 of the MAC Act imposes various duties upon insurers, claimants and the insured in respect of compensations claims. Sub section 80(1) imposes a duty on an insurer to "endeavour to resolve a claim, by settlement or otherwise, as justly and as expeditiously as possible". Sub section 81(1) imposes a duty upon an insurer to give "written notice to the claimant as expeditiously as possible whether the insurer admits or denies liability for the claim, but in any event within three months after the claimant gave notice of the claim under section 72". Sub section 82(1) imposes a duty upon an insurer to make "a reasonable offer of settlement" to a claimant within certain specified time periods. Three matters should be noted about these provisions. First, as was submitted on behalf of CGU, these provisions do not have the effect of imposing a liability upon an insurer such as QBE that does not exist. They do not require it to either admit liability or make an offer of settlement of payment of a sum in circumstances where the insured is not liable. Second, these provisions do not convert the cover that is provided by s 10 into some form of claims made policy. Third, any analysis of the manner in which an insurer such as QBE conducted itself with respect to a claim must bear in mind the obligations imposed on it by these provisions. 16The policy obtained from CGU by Megbuy pursuant to s 155(1) of the WC Act provided cover for Megbuy's liability under the WC Act (ie workers compensation benefits) but also extended cover to "the employer's liability [arising] independently of [the WC Act] .... for any injury to any such worker." The definition of "injury" in s 4 of the WC Act relevantly meant "personal injury arising out of or in the course of employment". This meant that cover was provided by CGU to Megbuy for any liability it incurred in favour of its employees arising out of their use and operation of a motor vehicle in the course of their employment. 17Most claims against an employer for which they are indemnified by the extension of the workers compensation policy in s 155(1) of the WC Act are subject to the restrictions on damages imposed by Division 3 of Part 5 of the WC Act. However s 151E(2) provides that that Division does not apply to awards of damages to which Chapter 5 of the MAC Act applies. Sub-section 122(1) of the MAC Act provided that Chapter 5 of the MAC Act applied to "and in respect of an award of damages which relates to the ... injury to a person caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle" (emphasis added). The meaning of those terms in the MAC Act has been already been noted. Thus the cover provided by CGU to Megbuy under the extension to its workers compensation insurance policy fully covered any liability Megbuy might incur to its employees that resulted in damages being calculated in accordance with Chapter 5 of the MAC Act 18These proceedings were initially commenced in the Commercial List of the Equity Division. CGU's "defence" was set out in a document entitled "Statement of Issues". In that document CGU put in issue whether Megbuy satisfied the statutory definition of owner in the MAC Act. It follows from the above that the question as to whether Megbuy was the owner of the forklift affected a number of elements of the double insurance claim. Megbuy's ownership of the forklift was a necessary precondition to it being liable to Mr Horwood for damages calculated in accordance with Chapter 5 of the MAC and consequently affected the scope of CGU's obligation to indemnify Megbuy. It was also a necessary precondition for QBE being obliged to indemnify Megbuy under the statutory CTP policy described by s 10 of the MAC Act. 19Paragraph A8 of QBE's pleading recited the fact of the settlement of the proceedings against Megbuy for $1.5 million. Paragraph A8 of CGU's pleading responded by stating: "Agreed and the defendant agrees that the sum of $1.5M inclusive of costs was a reasonable sum in the circumstances." Paragraph A7 of QBE's pleading recounted its belief at the time the proceedings commenced that the only basis upon which CGU resisted the claim for contribution was the assertion that it was not the owner. In response QBE pleaded (at [A7] ): "Denied - there are further grounds upon which the defendant refuses to contribute. Mr Horwood's injury is not an injury as defined under the [MAC Act] because it was not caused by the fault of the owner in the use or operation of the vehicle nor was it as a result of and caused during such use or operation by a defect in the vehicle." 20Paragraph B3(a) of CGU's pleading was in similar terms and the balance of the pleading denied the existence of QBE's obligation to indemnify Megbuy. 21Standing alone [A7] of CGU's pleading puts in issue all the elements of the definition of injury including "fault" and "ownership". However the scope of the pleading is complicated by [A8]. At least one way of construing an admission that a settlement sum represented a "reasonable amount in the circumstances" is that it is an admission that the sum agreed represents a reasonable compromise having regard to the likelihood of liability under the MAC Act being established and the likely range of damages. If that is what the pleading meant then it would cut across so much of the denial of the satisfaction of "injury" as it involves a denial of at least "fault" on the part of the owner. 22At the hearing Mr Campbell SC who appeared with Mr McCarthy for CGU explained that his client's admission in [A8] only meant that it accepted that the settlement figure represented a reasonable assessment of the quantum of Mr Horwood's claim but that CGU denied that there was any "fault" of Megbuy and, even if there was, it was not a fault that fell within the statutory phrase "injury". Mr Cavanagh SC who appeared with Mr Khandhar for QBE submitted that this position was not open on the pleadings. He contended that the only issue that CGU could agitate was the ownership of the forklift, although he sought to meet all of CGU's contentions if that submission was not accepted. Mr Campbell SC pointed to a letter sent by CGU's solicitors dated 2 March 2010 to QBE's solicitors in which it complained that it was not aware of the basis for QBE's admission of a breach of duty by Megbuy and the basis upon which Mr Horwood's claim fell within the definition of "injury". 23With some reluctance I accept Mr Campbell SC's submission as to the effect of the pleadings. Without any limitation on what the phrase "reasonable in the circumstances" in [A8] of CGU's pleading means I do not consider that QBE can use it to cut across [A7]. The phrase could be a reference to the circumstance that the settlement figure was negotiated with Mr Horwood after QBE and Megbuy had already admitted ownership and liability (as that had occurred prior to agreement over the settlement sum being reached). However, the admission in [A7] operates to prevent CGU from arguing any point concerning the failure of QBE to discount Mr Horwood's claim on account of any contributory negligence on the part of Mr Horwood. This allegation was still on foot at the time of the settlement in December 2009 and not specifically traversed in CGU's pleadings. It clearly was a "circumstance" prevailing at the time the settlement was reached. Mr Campbell SC did not specifically submit that the settlement was unreasonable on account of any failure to address whether there was contributory negligence on the part of Mr Horwood, although he did submit that Mr Horwood's error was the cause of the accident.

THE DECISION IN ZURICH V GIO 24The parties were not only in dispute about what was in dispute they were also in dispute about the evidentiary framework that should be adopted to resolve what was in dispute. 25QBE submitted that any issue concerning Megbuy's liability to Mr Horwood under the MAC Act, whether Megbuy is the "owner" of the forklift or whether there the definition of "injury" was satisfied should be determined by considering only whether the settlement that it reached on behalf Megbuy represented a "reasonable compromise" respecting those issues. CGU submitted that those matters needed to be re-litigated afresh in this Court. QBE also postulated an alternative position concerning the definition of "injury" which I address below at [40]. 26QBE relied upon the Court of Appeal's judgement in Zurich Australian Insurance Ltd v GIO General Ltd [2011] NSWCA 47 ("Zurich v GIO"). Given its significance to these proceedings I will address it in some detail. 27In Zurich v GIO, a family bus and coach business was operated through two companies, Caringbah Bus Services Pty Ltd ("Caringbah") and Tiger Tours Pty Ltd ("Tiger"). Zurich was the third party insurer of a coach registered in the name of Caringbah. GIO was the workers compensation insurer of Tiger. 28A driver employed by Tiger sued Caringbah for an injury he suffered while working on the coach. He did not sue Tiger. It was agreed that, if he had only sued Tiger in its capacity as his employer, then he would not have exceeded the thresholds for recovery found in Division 3 of Part 5 of the WC Act (at [7]). Caringbah admitted liability to pay damages under the MAC Act and the amount (at [9]). Implicit in that admission was an acceptance that it was the "owner" of the coach (at [9]). It seems that the only defence raised by Caringbah was that its liability should be reduced by reason of s 151Z(2)(c) of the WC Act. It operated to reduce the injured driver's damages by the amount that Caringbah would have recovered by way of contribution from Tiger as a joint tortfeasor but could not as a result of the operation of Division 3 of Part 5 of the WC Act. The injured driver countered this defence by contending that both Tiger and Caringbah were "owners" of the coach and thus there was no reduction because that meant that Tiger was liable under the MAC Act (as s 151E(2) rendered the restrictions in Division 3 of Part 5 of the WC Act inapplicable: see [17] above). The District Court found that Tiger was also an "owner" and thus there was no reduction in the verdict against Caringbah (at [12]). 29Zurich's subsequent attempt at recovery from GIO involved an application of the extension of the double insurance principle discussed in AMP v QBE as Zurich and GIO did not insure the same insured. In the Court of Appeal, GIO resisted recovery on two bases. First it contended that Zurich was not obliged to indemnify Caringbah because it was not the, or even an, owner of the coach (at [50]). Second it contended that Tiger's liability had not been proved between Zurich and GIO and it was not bound by the District Court's findings because neither Tiger nor GIO were party to the District Court proceedings (at [51]). This aspect of Zurich is not relevant to this case as it does not involve any equivalent of Tiger. The only "common insured" is Megbuy. 30In relation to GIO's first contention, Giles JA held: "57.Since contribution involves sharing a common burden, the first insurer must establish the liability for which it must provide indemnity under its policy. However, if the liability of the first insurer's insured has been judicially determined or has been the subject of a reasonable compromise, that suffices for contribution, and the second insurer cannot put in issue in contribution proceedings the liability of the common insured. 58.That is implicit in, for example, Government Insurance Office of New South Wales v Royal Exchange Assurance of London (1965) 82 WN (NSW) Pt 1 468 at 474; C E Heath Underwriting Insurance (Aust) Pty Ltd v State Government Insurance Commission (1983) 34 SASR 1 at 7; and Drayton v Martin (1996) 67 FLR 1 at 15, and as to compromise reflects the sensible and commercial reality that liability is commonly resolved by settlement and parties should not be required to litigate to a conclusion. It is consistent with the position in cases such as Edwards v Insurance Office of Australia Ltd (1933) 34 SR (NSW) 88, the cases ultimately turning on the policy wording, under which it is sufficient for an insured claiming against one insurer which has wrongly repudiated its obligation to indemnify to prove that the settlement reached with the injured person was reasonable; see also The Distillers Co Bio-Chemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1 at 9-10 per Menzies J and 25-6 per Stephen J, and Costi v Rodwell (1985) VR 287 at 289. Only as an illustration, in the AMP case the liability of Graupner to Mitchell was established by a settlement. 59.There is no reason why this should not be so where there are different insureds rather than a common insured. In the present case the liability of Caringbah to Mr McLellan, if Caringbah was owner of the coach, could not be doubted. That it was reasonable for Caringbah (and Zurich acting in its interests) effectively to admit that it was owner of the coach is established by GIO's concurrence in it doing so. The concurrence was not that Caringbah might admit liability and "defect" if it saw fit, with GIO reserving its position, but that it was appropriate that liability and "defect" be admitted. That it was reasonable for Caringbah to compromise the damages at $352,000 is similarly established by GIO's concurrence. ................ 63.Zurich was only obliged to indemnify Caringbah if Caringbah was "owner" of the coach, within the Zurich statutory policy. Presumably Caringbah invoked the Zurich policy, and there is no reason to conclude other than that Zurich thought at the time that Caringbah was the or an owner of the coach: the only question in the District Court proceedings was whether Tiger was also owner of the coach. That Zurich reasonably thought that Caringbah was the or an owner of the coach, and so was entitled to indemnity in respect of any liability to Mr McLellan, is established by GIO's concurrence in effective admission of Caringbah's ownership. 64.There is the equivalent of a reasonable settlement with Caringbah. It would not be consistent with the natural justice and general principles of justice on which contribution on the basis of double insurance rests that, having concurred in Zurich shouldering the burden of indemnifying Caringbah as owner of the coach, including "owner" within Zurich's statutory policy, GIO should not have to share the burden. " (emphasis added) Allsop P (at [1]) and Young JA (at [82]) agreed with Giles JA. 31The parties debated the correctness and scope of the statement of Giles JA in [57] of Zurich v QBE that where the liability of the first insurer's insured has "been the subject of a reasonable compromise" the "second insurer cannot put in issue in contribution proceedings the liability of the common insured". 32On the first day of the hearing Mr Campbell SC objected to the tender by QBE of a letter from Mr Horwood's solicitors to a Mr Oates enclosing an unsigned statement of Mr Oates. Mr Oates was another employee who worked for Megbuy and the statement referred to the poor state of the driving mechanism on the forklift (see below at [83]). The tender was undertaken to establish that there had been a reasonable compromise of the claim against Megbuy in that the statement represented evidence that was likely to be available at any hearing of Mr Horwood's claim and it was material known to both sides of the litigation. In objecting to the tender Mr Campbell SC accepted that, at the very least, the effect of [57] of Giles JA's judgement enabled the "liability" of Megbuy to be established by demonstrating a reasonable compromise (although he took issue with the scope of that principle as asserted by the QBE). However, Mr Campbell SC contended that the statement was obiter dicta and, respectfully, submitted that it was incorrect. 33I allowed the tender of the material. I was not asked and did not place any restriction on the use to which it might be put. In allowing the tender I was not prepared to determine at that point in the trial that the Court of Appeal's statement was incorrect and should not be followed. In announcing my ruling I indicated that Mr Campbell SC was not precluded from repeating the submission in final address. I also stated QBE were on notice of CGU's contention and had to make the appropriate forensic choices in running their case against the contingency that Mr Campbell SC's point was ultimately accepted. 34Mr Campbell SC submitted that the passage in Zurich v GIO at [57] "was obiter because in that case the liability of the plaintiff had been established by a judgement in the District Court." On reflection I do not think that is quite correct. The only judicial determination on the merits in Zurich v GIO was the determination by the District Court that Tiger was the owner of the coach in addition to Caringbah. The liability of the 'first insurer's insured" or "common insured", ie Caringbah, under the MAC Act was admitted and the subject of consent orders reflecting that admission. The only judicial determination that occurred in Zurich v GIO was a matter affecting the quantum of that liability. In this case the liability of Megbuy under the MAC Act was admitted in November 2009 and then the subject of consent orders in December 2009. 35In submitting that the reference to "reasonable compromise" in Zurich at [57] was incorrect Mr Campbell SC referred to three decisions noted at the commencement of [58], ie GIO v Royal Exchange, C E Heath v SGIC and Drayton v Martin. He submitted that none of those authorities suggested that a reasonable compromise sufficed to establish the liability of the "common insured". I agree that none of the passages cited in those three cases suggests that. However, my reading of [58] is that Giles JA was not suggesting that those cases supported the proposition that reasonable compromise was sufficient to entitle a party to a double insurance contribution. I read his Honour as relying on those cases to support the reference to "judicially determined" in [57]. The reasoning supporting the reference to "compromise" in [57] is the balance of [58]. 36If the matter was open for me to decide then I would have thought that Mr Campbell SC might be on surer ground in relation to his argument concerning the balance of [58]. The general position is that an insured under a liability policy can only recover against their insurer if they were actually under a liability to a third party on a proper analysis of the law and facts. A settlement does not suffice. The insured must demonstrate that it was or would have been liable (Enterprise Oil Ltd v Strand Insurance Co Ltd [2007] Lloyd's Rep IR 186 at [27] and [72] citing McDonnell Information Systems Ltd v Swinbank & Ors [1999] Lloyd's Rep IR 98). A reasonable settlement will normally be sufficient to establish the amount of the insured's liability but not the liability itself (Lumbermen's Mutual Casualty Co v Bovis Lend Lease Ltd [2005] Lloyd's Rep IR 74, 84). As noted in Zurich v GIO at [58] where there is conduct amounting to a repudiation of the insurance contract, especially conduct in which the insurer breaches the contract by denying liability and refusing to defend or settle, it may be sufficient if the insured can prove that the settlement with the injured person was reasonable (see Distillers Co Bio Chemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1 at 9, per Menzies J; and Edwards v Insurance Office of Australia Ltd (1933) 34 SR (NSW) 88)). However the conduct must amount to a repudiation of the policy. In Distillers the insurer forced the insured to defend the claims made against it. It did not assume carriage of the claims on its behalf. Given the wording of the policy that did not amount to a repudiation by the insurer (Distillers at 10, per Menzies J). It is understandable how the principles concerning the position between an insured and repudiating insurer can translate to a claim for equitable contribution from a non-repudiating insurer against a repudiating insurer. However it is not clear how the cases dealing with a repudiation support the "reasonable settlement" limb of the principle formulated by Giles JA in Zurich v GIO at [57]. It does not appear that the form of policy created by Division 1 of Part 7 of the WC Act is of such a nature that the refusal of an insurer such as CGU in this case (or GIO in that case) to meet or participate in the defence of the claim against the employer amounts to a repudiation. I say "appears" because no argument before me was directed towards this aspect of [58] of Giles JA's judgment in Zurich v GIO. 37However I do not consider that it is open for me to take a contrary view to the proposition stated in [57] of Zurich v GIO concerning "reasonable compromise". The passage was affirmed by three judges of appeal. As I have stated Zurich v GIO was not a case where the liability of the common insured (ie Caringbah) was "judicially determined". The manner in which Caringbah's liability to the coach driver and Zurich's obligation to indemnify Caringbah arose in Zurich v GIO was no different to that which Megbuy incurred to Mr Horwood here, namely a defence was filed admitting liability under the MAC Act followed by an agreed amount for damages that was reflected in a consent order. The reference to "reasonable compromise" in the judgment of Giles JA at [57] was an essential step in the reasoning that led to the outcome in Zurich v GIO, and it forms part of the ratio of that case. I am not free to depart from it although I can acknowledge any doubts I have as to its correctness (see Minister for Environmental Planning v San Sebastian [1983] 2 NSWLR 268 at 315). To the extent I have doubts I have stated them. Accordingly I consider that the question that arises in relation to Megbuy's liability to Mr Horwood is whether the sum of $1.5M represented a reasonable compromise of any liability it had to Mr Horwood under the MAC. I address that issue below at [76] to [111]. Against the contingency that my conclusion is wrong I have also addressed the liability of Megbuy de novo (at [112] to [115]). 38The more difficult question for me concerns the scope of the statement in [57] of Zurich v GIO. Conceptually it is not difficult to differentiate between the matters affecting the liability of the common insured to the injured claimant and matters affecting the obligation of the first insurer to provide cover to the common insured. However what if those matters overlap? In stating that the second insurer, in this case CGU, cannot put in issue in contribution proceedings the liability of the "common insured" does that prevent the putting in issue of matters concerning the liability of the common insured to the injured claimant which are also necessary elements of the obligation of either the first or second insurer to indemnify the common insured for that liability? 39One such matter in this case is whether or not Megbuy was the "owner" of the vehicle. In this case, each of the admission of liability in the defence, the heads of agreement and the consent orders all necessarily involved an admission that Megbuy was the "owner" of the forklift within the meaning of s 4 of the MAC Act. Its ownership was a necessary element of it being liable to pay damages to Mr Horwood calculated in accordance with the MAC Act, as it was for Caringbah in Zurich v CGU. In Zurich v CGU the admission of ownership by Caringbah was concurred in by GIO. In this case CGU has continually resisted that assertion. My reading of [59], [63] to [64] in Zurich v GIO when taken with [75] is that this issue was resolved adversely to GIO because of the reasonable belief on the part of Zurich that Caringbah was the owner which was concurred in by GIO through the course of the proceedings. I read the reference in [64] to the concurrence being the "equivalent of a reasonable settlement" at suggesting that something equivalent to a reasonable compromise was necessary because a reasonable compromise on the part of Zurich that reflected an admission of ownership was considered necessary but not sufficient. In the absence of that concurrence it seems to me that that GIO would have been entitled to put in issue Caringbah's ownership of the forklift as that was a matter that went directly to Zurich's obligation to provide cover. In this case Megbuy's ownership of the forklift is a necessary component of QBE's obligation to provide cover and ascertaining the scope of cover provided by CGU. There was no concurrence in the admission of ownership by Megbuy and QBE on the part of CGU. In my view that must be addressed afresh by me. I address it at [41] to [60] below. (I also address that issue on the basis that a reasonable compromise on that issue suffices: [60].) 40The more difficult matter concerns the approach to be adopted to the question of whether the circumstances of Mr Horwood's accident meant that the definition of "injury" in s 3 of the MAC Act was satisfied. Again each of the admissions of liability in the defence, the heads of agreement and the consent orders all necessarily included an admission that the definition of "injury" was satisfied in relation to Mr Horwood's claim. However they are also necessary components of QBE's obligation to provide cover under the MAC Act and critical to ascertaining whether CGU's was obliged to provide cover for a liability quantified in accordance with Chapter 5 of the MAC Act. Given the manner in which [57] of Zurich v GIO is expressed I do not see how the question of "fault" of the owner can be re-litigated afresh if the Court is satisfied there was a reasonable compromise of "liability". However, the remaining aspects of the definition of "injury" (other than the definition of owner) are all matters of characterisation of that liability. At the very least, a consideration of whether the (alleged) liability being compromised falls within the definition of "injury" must be a relevant component of whether the compromise was reasonable. I consider that I should approach the matter by asking whether the alleged liability that was being compromised satisfied the definition of "injury". If it did not then the compromise would not be reasonable. If it did then that conclusion would inform but not determine any assessment of whether or not the compromise was reasonable. I address this aspect in [116] to [131] below.

WAS MEGBUY THE OWNER OF THE FORKLIFT AS AT 7 NOVEMBER 2005? 41As at 7 November 2005, section 4 of the MAC provided: "4 Meaning of "owner" of motor vehicle (1) For the purposes of this Act: (a) in the case of a motor vehicle that is registered, the owner is: (i) each registered operator of the vehicle within the meaning of the Road Transport (Vehicle Registration) Act 1997, unless the operator has sold or ceased to have possession of the vehicle, and (ii) each person who, although not a registered operator of the vehicle, is a sole or joint owner of the vehicle, unless that person has sold or ceased to have possession of the vehicle, and (iii) if any such registered operator or owner has sold or ceased to have possession of the vehicle-any person who solely or jointly or in common with any other person is entitled to the immediate possession of the vehicle, or (b) in the case of a motor vehicle that is unregistered, the owner is any person who solely or jointly or in common with any other person is entitled to the immediate possession of the vehicle, or (c) in the case of a motor vehicle to which a trader's plate is fixed, the owner is the trader to whom the trader's plate is issued. (2) For the purposes of this section, a person is taken not to have ceased to have possession or, as the case may be, not to have acquired possession of a motor vehicle where a change of possession occurs by way of: (a) any hiring (not being a hiring under a hire-purchase agreement) or lending of the vehicle for a period not exceeding 3 months, or (b) the passing of the possession of the vehicle to a bailee for the purpose of sale or disposal or for the purpose of alteration, repair, renovation, garaging, storing or other like purpose not involving the use or operation of the motor vehicle for the benefit of the bailee." 42It was common ground that, as at 7 November 2005, Levira was the registered owner of the forklift. However, QBE contended that s 4(1)(a)(iiii) of the MAC Act was engaged in that, as at that date, Levira "ceased to have possession" of the forklift and Megbuy, either by itself or in common with others, was "entitled to immediate possession". 43The principal of Megbuy and Levira was and is Mr Terry Capper. On or about 25 June 2007 he signed a statement that was provided to QBE. It confirmed the details of Mr Horwood's employment by Megbuy. In paragraphs [5] to[11] he stated: "5. Levira Pty Ltd is a private company. It does not trade. It was created several years ago to operate a transport business. That business is now operated by Megbuy Pty Ltd. There was a problem with money a few years ago and so I decided to use Megbuy to operate the trucking business. 6.I am a sole director of Levira Pty Ltd. I am the sole director of Megbuy Pty Ltd. 7.Their operating addresses is 86 Pinnacles Place Broken Hill and the registered business address is 43 Edward Street Norwood SA. NRA Johnson is the company accountant and it is at that address. 8.Levira Pty Ltd bought a forklift about 10 years ago (about 1997). It was second hand. Levira Pty Ltd had held the registration and the insurance since. I did not change the ownership to Megbuy Pty Ltd as there was no need. 9.Although Levira Pty Ltd is not operating it has not been dissolved or wound up. Levira Pty Ltd also owns a truck. The truck had nothing to do with the accident. 10.The forklift was registered as QBU 771. The rego was NSW. 11.It was serviced and maintained internally at 86 Pinnacles Place Broken Hill ... ". 44Mr Capper gave oral evidence addressing two topics. First, he was examined and cross-examined on the question of whether or not Megbuy answered the statutory definition of "owner" of the forklift as at 7 November 2007. Second, he was cross-examined by Mr Campbell SC in an effort to rebut any suggestion that there was some defect with the forklift in an endeavour to demonstrate that there was no liability on the part of Megbuy to Mr Horwood. At the conclusion of the cross-examination by Mr Campbell SC, Mr Cavanagh SC applied for, and was granted leave, under s 38 of the Evidence Act 1995 to cross-examine Mr Capper on the second topic. I agreed to that course because his evidence on this issue was "unfavourable" to the interests of CGU assuming that it was incumbent upon me to determine the liability of Megbuy to Mr Horwood de novo. The following concerns the evidence that Mr Capper gave on the first topic. His evidence on the second topic is discussed at [92] to [95]. 45Mr Capper explained that some time in the 1990s Levira purchased the transport business known as "Robertson Carriers" and Megbuy purchased the business known as "Johnston Transport". At the time of that purchase he was not a director of Levira or Megbuy, however he was a shareholder. Later he became the sole director of both companies. He explained that initially Megbuy, trading as Johnson Transport, operated its business from 86 Pinnacles Place Broken Hill and that Levira, trading as Robertson Carriers, operated its business "out of the rail yard in Broken Hill". Prior to 2000, the two businesses were conducted independently of each other. One set of employees was devoted to undertaking deliveries on behalf of Robertson carriers and another set undertook deliveries for Johnston Transport. At some later point both businesses were operated from 86 Pinnacles Place, Broken Hill. 46Mr Capper stated that, "sometime in the 2000s" but before 2005 Levira ceased trading and the two businesses were then operated by Megbuy. It employed staff and paid bills. Megbuy staff serviced all the equipment including the forklift. Megbuy paid for all expenses associated with the forklift including insurance. He stated that the forklift was available for use by employees of Megbuy at all times (including Mr Horwood). He also stated that, after Megbuy assumed the conduct of both businesses, Levira did not trade, employ staff or operate accounts ("it just sat there basically"). 47The picture presented of complete non-activity on the part of Levira after the merger of the two businesses was qualified under cross-examination. Mr Capper agreed that Levira engaged at least one employee, Gordon McMasters. At first he stated he could not recall when Mr McMasters was employed but eventually agreed it was at least later than 2005. Apparently Mr McMasters was also injured in his employment. On 1 May 2007 Mr Capper wrote to WorkCover on Levira letterhead setting out his wages for the period 3 July 2006 to 2 April 2007. Mr Capper agreed that Mr McMasters had been injured using a forklift owned by a bakery while delivering bread. However he denied that Levira was a party to the contract with the bakery company. He claimed that Mr McMaster was undertaking "a job for Megbuy". Mr Capper agreed that Mr McMasters had worked at 86 Pinnacles Street, Broken Hill while employed by Levira. Mr Capper denied that Mr McMasters ever used the forklift the subject of the proceedings or that he used the truck registered to Levira. Mr Capper maintained that this truck was also used in the business of Megbuy. 48There was tendered a Deed of Company Arrangement which had been signed by each of Levira, Megbuy and two other companies of which Mr Capper was the principal (Katam Pty Ltd and Samphire Pty Ltd). It was executed in October 2005. It recorded the appointment of an administrator to all of the companies on or about 9 September 2005. Mr Capper denied that all of these companies were trading up to the date the Deed of Company Arrangement was signed. It was suggested to Mr Capper that the Deed was the result of the issue of a statutory demand by the Australian Taxation Office. Mr Capper queried with the questioner when this occurred. He was asked, and answered as follows: "Q: That [the statutory demand] was the start of the trouble? A: The trouble had started before 2005." 49Three further matters should be noted about the evidence given by Mr Capper concerning the ownership of the vehicle. 50First, the forklift was kept at 86 Pinnacles Street Broken Hill from at least the point in time that Mr Capper said Megbuy assumed the conduct of Levira's business. Mr Capper explained that this property was owned by him and his wife and that there were no lease arrangements between them and any of the four companies that I have referred to above. 51Second, insofar as various costs and expenses associated with the businesses were paid for, Mr Capper explained that they were all paid out of one common bank account and then dispersed to meet those expenses. I infer that this included the payment of the green slip for the forklift truck. Mr Capper could not recall the entity that owned this bank account. The effect of his evidence was that this expense was ultimately borne by Megbuy. 52Third, although Mr Capper accepted that Mr McMasters continued to drive a truck owned by Levira, he did not accept that any employee of Levira after 2006 ever drove the forklift. He maintained that it was driven and maintained by employees of Megbuy. 53Mr Capper's certainty as to the lack of activity involving Levira from 2005 was clearly undermined by the material shown to him concerning Mr McMasters. Further, his record keeping for all the companies appear to have been generally shambolic so that an assessment of the steps taken with these companies is largely dependent upon his imperfect recollection. While I have significant misgivings about his evidence on the state of repair of the forklift (see [95]), I nevertheless accept the thrust of his evidence that, at some time prior to 2005, Levira had substantially ceased trading activity and the business of Robertson Carriers was assumed and conducted by Megbuy. There was no apparent reason for Mr Capper to seek to overstate the role of Megbuy and understate that of Levira in his evidence. I formed the impression that he had adopted a simple "strategy" to conduct his businesses via Megbuy and not via Levira because of some difficulty with the ATO (which was not developed in the evidence). At two points in his evidence he clearly stated that Megbuy had assumed the conduct of Levira's business prior to 2005. I do not see that as inconsistent with the issue of a statutory demand at some unspecified point and the entry into of a Deed of Company Arrangement in October 2005. 54I accept and find that Levira did not utilise the forklift in connection with any activity that it was carrying on as at 7 November 2005 and had not done so since the beginning of 2005. I find that as at November 2005 and since the beginning of 2005 it was being maintained and used as needed by employees of Megbuy from the usual place of business conducted by Megbuy, namely 86 Pinnacles Street. To the extent that in 2005 and 2006 Levira was conducting business, it was only the activity of employing Mr McMasters who was undertaking deliveries in fulfilment of Megbuy's contract. He did not use the forklift or the truck owned by Levira. 55The parties referred me to the Court of Appeal's decision in Havas v Standard Knitting Mills Pty Ltd [2001] NSWCA 295; (2001) 52 NSWLR 293. It addressed the definition of "owner" in s 3 of the Motor Accidents Act 1988 as in force as at 14 June 1995. Subsections 3(a)(ii) and 3(4) of that definition were not relevantly different to ss 4(1) and 4(2) of the MAC Act as applicable to this case. The registered owner of the vehicle in question (Universal) was in the same group of companies as the respondent to the appeal (Standard) who was found to be an "owner" of the vehicle by virtue of its entitlement to immediate possession. In addition to the link between the companies, the facts which gave rise to the finding that Universal ceased to have possession and Standard was entitled to immediate possession were recorded in the judgment of Hodgson JA as follows (at [9]): "After the purchase, the forklift went to the [Standard's] premises (which were distinct from Universal's premises) where it was used and permanently garaged. From this time, the respondent and his employees had physical possession of the vehicle and its keys and exclusive use of the vehicle, and the vehicle was used in the respondent's commercial operations. Invoices for maintenance of the vehicle were marked with initials identifying the respondent, and according to a past employee of the respondent called at the hearing by the appellant, this meant (at least during the time of her employment from 27 January 1997 to 21 January 2000) the cost of those services was borne by the respondent." 56In addition at [15] - [19] Hodgson JA (with whom Steyn and Heydon JJA agreed) rejected a contention that the entitlement to immediate possession in the former s 3(3)(a)(ii) (current s 4(1)(a)(iii)) was one that had to be maintainable against not only third parties but the registered owner. Further, against the contingency that that conclusion was wrong, Hodgson JA found that the circumstances gave rise to an inference that Standard had an immediate right to possession against Universal as Universal could not disrupt Standard's operations by taking the forklift without notice (at [24] see also Heydon JA at [2] who based the entitlement of Standard to resist a claim for immediate possession on an implied contractual term). 57I am satisfied that as at 7 November 2005 Levira had ceased to possess the forklift and Megbuy had an entitlement to immediate possession of it. Since at least the beginning of 2005 the forklift been used by employees of Megbuy. It had been serviced by Megbuy. The cost of its repairs and insurance had been borne by Megbuy via the mechanism I have described above. There is nothing to suggest that any other entity had anything to do with the forklift from early 2005. In that sense Megbuy's use was "exclusive". Unlike Havas, the premises that the forklift was garaged at, namely 86 Pinnacles Street Broken Hill, were not distinct from the premises of Levira. However, to say that 86 Pinnacles Street was Levira's business premises only invites an inquiry as to what business it conducted there. From early 2005 its business was limited to no more than the engagement of Mr McMasters and it is not clear whether that was undertaken prior to or as at 7 November 2005. He had nothing to do with the forklift. 58In his written submissions Mr Campbell SC submitted that the suggestion that Levira had ceased to have possession of the forklift was not made good because it was premised upon a contention about the cessation of its operations. He submitted that the premise was flawed because of the doubt surrounding Mr Capper's evidence by reason of the engagement of Mr McMasters. That is addressed by the above findings. 59Mr Campbell SC also contended that QBE had not negatived the operation of s 4(2) of the MAC Act. It is not necessary for me to dwell on the question as to which party bears the onus in relation to the application of s 4(2) as the findings I have made discharge any onus that may have been imposed on QBE. My findings reach back to the beginning of 2005. If the arrangements by which Megbuy came to use the forklift could be described as a "lending" for the purposes of s 4(2)(a) of the MAC Act then, on my findings, they were a "lending" for a period that exceeded 3 months (see Havas at [12]). Further, the circumstances in which Megbuy came into the possession of the vehicle mean that it was repaired, maintained and used by it for its own benefit and not that of Levira. Thus s 4(2)(b) does not operate to qualify the satisfaction of s 4(1)(a)(iii) either. 60Accordingly, I am satisfied that as at 7 November 2005 Megbuy was the "owner" of the forklift. I have reached that standard of satisfaction by considering the matter myself de novo. If, contrary to the view I have expressed in [39], this analysis should be undertaken by only determining whether it was reasonable for QBE to compromise the question of ownership, then I am satisfied that it was. The only real difference between the evidence before me and the material that was before QBE is that which emerged in cross-examination of Mr Capper concerning the engagement of Mr McMasters. The information QBE had available to it during Mr Horwood's proceedings clearly demonstrated that Megbuy was the "owner" of the forklift.

OUTSTANDING OBJECTIONS 61I have described at [32] to [34] above the debate that occurred at the point QBE sought to tender the letter from Mr Horwood's solicitors to Mr Oates with the enclosed unsigned statement. After my ruling Mr Cavanagh SC tendered further material in an effort to demonstrate both that there was a "reasonable compromise" of Megbuy's alleged liability and, in the event that contrary to my ruling noted at [33], it was ultimately found that QBE is required to demonstrate Megbuy's liability de novo, that it was so liable. 62With some of that material I allowed the tender but made directions under s 136 of the Evidence Act restricting the use that could be made of the evidence so that it could only be relied on as demonstrating that the compromise was reasonable (see [63], [82] and [89] below). With two items of evidence Mr Campbell SC accepted that the material was admissible in light of the ruling noted at [33], did not seek a direction under s 136 but did make an objection to its tender which he contended would be necessary to decide in the event that ultimately I (or a higher Court) reached a different view to that stated in Zurich v GIO at [57]. I heard argument on the objections and indicated I would rule on them in my final judgment. However, I have doubts about this approach. In my view the appropriate manner in which to proceed was to seek a direction under s 136 at the time of tender. In any event what follows are my reasons for upholding one and rejecting another of Mr Campbell SC's "contingent objections" to the tender of these two items of evidence. The second item of evidence is considered below, when I address Megbuy's liability on the basis that, contrary to my finding at [37], I am required to consider the question of liability de novo. 63The first of these two items was a running log of a WorkCover investigation into Mr Horwood's accident. The log includes a note of a conversation between the WorkCover investigator and Mr Barry Gillett. Mr Gillett was employed by Megbuy until early 2005 and undertook work on the forklift. It was common ground that he was not a qualified mechanic. The log includes the following entry as made, I infer, by a member of staff at WorkCover: "On 7 June 06 I have a phone discussion with Barry Gillett (an ex employee who was responsible for repairs and maintenance of plant used by other employees of Megbuy Pty Ltd). He stated that the Nissan forklift truck did have defects with the steering mechanism. He was of the opinion that the steering defects could have been the cause of the accident. He left employment with Megbuy Pty Ltd approximately six months prior to the incident." (emphasis added) I 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. 64Mr Campbell SC objected to the tender on the basis that any representations in the document were not admissible as exceptions to the hearsay rule under s 69(2) of the Evidence Act because they were "made in connection with an investigation relating or leading to a criminal proceeding" (s 69(3)(b)). It was common ground that no criminal proceeding resulted from WorkCover's investigation, however it was contended this did not preclude the operation of s 69(3)(b). 65In R v Rondo [2001] NSWCCA 540; (2001) 126 A Crim R 562 Smart AJ at [96] (with whom Spigelman CJ and Simpson J agreed) described the words "in connection with" in s 69(3)(b) as having "a wide import". It was found that a "custody management record" recording various events that occurred while the appellant was in custody and the times when they occurred was not admissible as a business record because it fell within s 69(3)(b). The precise connection between the representations in the record and a potential criminal prosecution is not made clear in the judgement beyond the fact that the document was sent to a justice in support of the issue of a "detention warrant" under former Part 10A of the Crimes Act 1900 authorising his ongoing detention prior to his being charged. 66In Nye v New South Wales & Ors [2002] NSWSC 1268; (2002) 134 A Crim R 245 O'Keefe J rejected a submission that transcripts of a Royal Commission were excluded under s 69(3)(b) (at [18]). His Honour found that the connection between the conduct of a Royal Commission and the instituting of a prosecution was insufficient given that "[a]t most, the Royal Commissioner could make a recommendation that consideration be given to the prosecution of certain individuals" (at [18]). At [17] O'Keefe J suggested that a narrow construction of s 69(3)(b) was to be preferred so as not to unduly to "curtail the admission of evidence that could rationally affect the assessment of the probability of the existence of a fact in issue." 67It does not appear that O'Keefe J was referred to the decision in Rondo. In Thomas v State of New South Wales [2008] NSWCA 316; (2008) 74 NSWLR 34 at [6] Hodgson JA agreed with O'Keefe J's conclusion in Nye but held that Royal Commission transcripts were excluded by s 69(3)(a) (at [7]; Campbell JA agreeing at [17] and Gyles AJA dissenting on this point at [87]). Again no reference was made to Rondo but the discussion by Campbell JA of the width of the expression "in connection with" in Thomas at [19] to [21] was consistent with Rondo. It is the approach that I am bound to apply. 68As at 2005 and 2006 WorkCover investigations were governed by Part 5 of the Occupational Health and Safety Act 2000 ("OHS Act"). Prosecutions were governed by Part 7. Section 86 mandated the reporting of certain workplace accidents to WorkCover. Part 6 included s 91 which made provision for the issue of "improvement notices" requiring the remedying of any contravention of the OHS Act or the regulations. It also included s 93 which enabled the issue of prohibition notices prohibiting the carrying out of any activity which in the opinion of an investigator was said to involve an immediate risk to health or safety of a person at a place of work. The OHS Act contemplated that the investigation of workplace accidents might lead to criminal prosecutions, lesser forms of enforcement action or to no enforcement action being taken. 69The WorkCover log records that an investigation commenced in November 2005 and in the early part of 2006 various improvement notices were issued. The conversation with Mr Gillett referred to above occurred on 7 June 2006. The log contains an entry for 13 June 2006 recording the opinion of a Workcover officer that "the incident requires full investigation and that it was upgraded to Category B". The entries for 15 August 2006, 14 September 2006 and 11 October 2006 record consideration being given to whether a prosecution would be commenced. In the end result no such prosecution occurred. 70It seems that by the time of the representation made by Mr Gillett to a WorkCover officer on 7 June 2006 the only matter to be considered by WorkCover was whether a prosecution would be commenced or not. In my view this is more than sufficient to result in s 69(3)(b) being engaged. The representations were clearly made "in connection with" an investigation. By at least 7 June 2006 the investigation was clearly one "relating to ... a criminal proceeding" even if one did not eventuate. The evidentiary status of a representation under s 69 of the Evidence Act is not altered by a decision made after the time that it is made not to commence a prosecution. 71The second document which was the subject of an objection that I reserved upon was a signed statement of Mr Oates bearing the date 25 June 2007. Mr Oates was not made available for cross examination. Mr Cavanagh SC sought to tender the statement in accordance with ss 63(1) of the Evidence Act. It was said that Mr Oates was "unavailable" to give evidence and, in particular, that "all reasonable steps have been taken, by [QBE], to find [Mr Oates] or secure his ... attendance, but without success" (see ss 4(1)(f) of Part 2 of the Dictionary to the Evidence Act). 72The evidence said to establish that Mr Oates was unavailable was set out in an affidavit from QBE's solicitor. On 19 December 2011 he retained a private investigator to locate Mr Oates. He provided him with Mr Oates' last known residential address in Broken Hill and last known contact telephone numbers. The investigator worked through the holiday period. On 6 January 2012 he reported that he had identified a "Facebook" account for Mr Oates, contact details for a number of "key relatives" and a "possible suspect residential address". He reported that he had spoken to someone who answered the phone number that he had obtained for the "key relatives" but that this person had seemed "evasive and protective of [Mr Oates] and his whereabouts". 73On 10 January 2012 the private investigator reported that he was unable to locate the current whereabouts of Mr Oates. He stated that he had been able to locate an "active Facebook account" for Mr Oates. Mr Oates' "Facebook wall" recorded that his current city was Broken Hill and that his listed work was said to be the "Sturt Club". The investigator contacted the Sturt Club which advised that Mr Oates was a member and not an employee and that, to the best of their knowledge, he was "working in Queensland in mining; most likely Townsville". They advised that he flew in and out of Broken Hill. The investigator also reported that inquiries had been made of a neighbour of a relative of Mr Oates. The neighbour confirmed that the relative was Mr Oates' brother, that Mr Oates did not live with his brother and was not known to the neighbour. The private investigator also reported that Mr Oates was recorded on the electoral roll at an address in Broken Hill but he was not recorded as owning real estate in New South Wales or Queensland. Although his mobile account was still "live" he never answered or returned calls. 74The end result of the inquiries was that there was no address for Mr Oates and his "Facebook wall" did not contain an accurate statement of where he worked. To the best of the investigator's knowledge he was working in the mining industry in Queensland. There was no form of electronic search that could assist in further refining the search in Queensland. 75In AJW & 2 Ors v State of New South Wales [2003] NSWSC 803 Bell J concluded at [15] to [16] that "all reasonable steps" have been taken to find a witness in circumstances where the plaintiffs had retained an experienced investigator to locate the witness. Her Honour inferred that the investigator had carried out the enquiries that "might reasonably be expected to have been undertaken by a competent investigator". I am similarly satisfied here. QBE satisfied me that Mr Oates was "unavailable" and his signed statement was admissible under s 63 of the Evidence Act. The status of his unsigned statement is addressed below.

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.

WAS THE DEFINITION OF INJURY SATISFIED? 116The remaining issue with the double insurance claim is whether the findings I have made concerning ownership and the existence of a liability owing from Megbuy to Mr Horwood meant that the definition of "injury" in section 3 of the MAC Act was satisfied. I have set out in [14] above that definition. 117Mr Horwood's statement of claim alleged that Megbuy was the "owner" of the vehicle, the vehicle was in use at the time of the accident and the vehicle was defective. He did not seek to confine himself to any of the limbs specified in (a)(i) to (iv) of the definition of "injury". As between QBE and CGU, Mr Cavanagh SC sought to rely on all four limbs. He contended the liability of Megbuy to Mr Horwood that was compromised (or established) could be characterised as having been caused by the fault of the "owner" (i.e. Megbuy) in the use or operation of the vehicle (i.e. its maintenance or allowing it to be "used") in circumstances when the physical injury to Mr Horwood was both "as a result of" and was "caused" during any of (a)(i) to (iv). 118Mr Campbell SC contended that, even if QBE had demonstrated to the relevant standard a "liability" of Megbuy arising from its failure to maintain the forklift or allowing it to be used, the definition of injury was not satisfied, or even capable of satisfaction. Mr Campbell SC contended that, insofar as QBE relied upon (a)(iv) of the definition of injury, the reference to "such use or operation" was a reference to the "use or operation" referred to in the opening words of the definition of "injury", which in this case was maintenance. He contended that, even if the injury could be seen "as a result of such use or operation", it could not have said to have been caused "during" such use of operation. Further, in relation to sub paragraphs (a)(i) to (iii) Mr Campbell SC contended that, while the physical injury to Mr Horwood might have been caused during one of those activities, it was not "as a result" of any those activities. Mr Campbell SC referred me to the decisions in Allianz Australia Insurance Ltd v GSF Australia Pty Ltd & Anor [2005] HCA 26; (2005) 221 CLR 568 ("Allianz v GSF""), Zurich Australia Insurance Ltd v CSR Ltd [2001] NSWC Act 261; (2001) 52 NSWLR 193 ("Zurich v CSR") and Zotti v Australian Associated Motor Insurers Ltd [2009] NSWCA 323 ("Zotti"). 119If accepted, Mr Campbell SC's submission would have the consequence that CTP insurers do not provide cover in the event that an owner does not maintain a vehicle resulting in a defect which is causative of harm suffered to a person who is driving the vehicle or collides with the vehicle. This strikes me as counter intuitive to say the least but that does not mean it is not correct. To address it I will refer to the three cases that Mr Campbell SC referred to in chronological order. 120In Zurich v CSR Spigelman CJ construed the reference to "such use or operation" in (a)(iv) of the definition of "injury" in the MAC Act as a reference to the "use" or "operation" referred to in the opening words of the definition of "injury" and not to the forms of use referred to in sub paragraphs (a)(i) to (a)(iii) (driving collision etc) (at [31] to [32]): "The second submission was that the word "such" in (a)(iv) did not refer to the words "use or operation" in the opening words of par (a), but referred to the "use or operation" comprised in (i), (ii) and (iii), that is "driving", "collision" and "running out of control". This construction would deprive (iv) of all content. Paragraph (a)(i) applies to any injury "caused during ... driving". That encompasses every injury "caused during ... driving ... by a defect in the vehicle". The same is true of pars (ii) and (iii). The construction advanced by the Appellant would leave (iv) with no work to do. The word "such" in (iv) is, in my opinion, a reference to the preceding use of the precise words which immediately follow it, i.e. "use and operation". The repetition of this phrase in (iv) was necessitated by the fact that the sub-paragraphs are all qualified by the word "during". It makes sense to speak of something occurring "during" driving, a collision or running out of control. It makes no sense to speak of something occurring "during" a defect. The words are repeated to identify a time dimension for (iv)." (emphasis added) 121Zurich v CSR concerned a defect in a truck which was said to be the absence of any form of hydraulic or mechanical assistance for lifting a ramp at its rear (at [68]). The claimant had been injured in the course of his employment while lifting the ramp (at [1]). If the phrase "such use or operation" in (a)(iv) was only referrable to the forms of use referred to in (a)(i) to (iii) then the injury would not be capable of being covered by the MAC Act because it would not have occurred during any of those forms of use. In the emphasised part of the above passage Spigelman CJ confirmed that, in a circumstance where a defect had "caused an accident" while the car was being driven, then that would be caught by (a)(i) of the definition. The defect "would be the cause" and the physical injuries that were occasioned would be both a "result of" and "caused during" the driving of the vehicle. 122In Allianz v GSF a truck was fitted with a mechanical unloading system which conveyed the containers to the rear of the truck where they were removed by a forklift. The mechanical unloading system became inoperative and an employee was directed by his employer to convey the containers manually to the rear of the truck. He was injured while doing so. The employee sought to argue that he fell within sub-paragraph (a)(iv) of the definition of "injury". It was not open to the employee to contend that he fell within any of (a)(i) to (a)(iii) because the injury was not caused during the driving of the vehicle, a collision involving the vehicle or the vehicle running out of control. 123At [87] to [94] Gummow, Hayne and Heydon JJ addressed the proper construction of the definition of "injury". Their Honours proceeded upon an acceptance of the correctness of the construction of sub paragraph (a)(iv) adopted in Zurich v CSR at [88] to [89]. Their Honours construed the definition of "injury" in the context of (a)(iv) as follows, (at [93] to [94]): "In argument, some suggestion was conveyed that the terms "result" and "cause" have different meanings and, in particular, that "cause" narrows "result". That is not so. The drafting in the second part of paragraph (a) of the definition seeks to accommodate two cumulative criteria and does so by telescoping them into a grammatical contortion. One criterion is that the injury be sustained during certain events, including the driving of the vehicle or a collision with a vehicle or its running out of control. The other criterion is that the injury be sustained as a consequence of those events. The phrase "a result of" is linked to the first or temporal criterion; the phrase "is caused by" is linked to the second criterion. In sub paragraph (iv), the temporal criterion is that the injury be as a result of the use or operation of the vehicle because it was sustained during that activity. The other criterion is by the injury being caused by a defect in the vehicle". 124Their Honours then addressed the second criterion identified in [94], namely whether the injury was "caused by a defect in the vehicle". On that issue, their Honours held that the phrase "if and only if ... directs attention to notions of predominance and immediacy rather than to more removed circumstances" (at [102]). Their Honours found that it was the system of work and, in particular, the direction to the injured worker which had the relevant predominant quality of, and immediacy to, the plaintiff's injury. The defect in the unloading system was not a defect by which the accident was caused in the necessary statutory sense (at [103]). 125The judgment of McHugh J was to similar effect. His Honour considered that Zurich v CSR had correctly construed (a)(iv) of the definition of injury (at [25]). McHugh J identified three aspects of causation that arise in a case under (a)(iv) of the definition of "injury". The first aspect of causation was that the accident be "caused by the fault of the owner in the use of the operation of the vehicle". The "fault" of the owner in Allianz v GSF was satisfied by both the direction given by the employer to the injured employee as well as the failure by the owner to fix the defective unloading mechanism. The fault was also found to be in the use of the operation of the truck as it was in the use of the transport of employer's goods (at [22]). The second aspect of causation as to whether there was a defect in the vehicle was that the injury must be "a result of and is caused during ... such use or operation by the defect in the vehicle" (at [23]). In addressing that, McHugh JA agreed with the Court of Appeal in Zurich v CSR that the phrase "such" in sub paragraph (a)(iv) of the definition refers to the opening words of the paragraph and not sub paragraphs (i) to (iii). McHugh J accepted a finding in the Court of Appeal that the loading or unloading of a vehicle was such use or operation (at [27]). The third aspect of causation was said to be whether the physical injury was sustained "as a result of and is caused by a defect in the vehicle" (at [31]). McHugh J found that there was a "defect in the vehicle" but that the injury was not caused by the defect but the employer's direction to convey the containers manually to the rear of the truck. It was the direction that was the proximate cause of the injury. In so finding McHugh J stated (at [57]): "In my opinion, however, the second and third requirements of the causal inquiry (whether the injury was "a result of and ... caused during ... such use ... by a defect in the vehicle") was not satisfied. Mr Oliver's injury was no doubt as a result of the defect. But it does not follow that, for the purpose of the Act, the injury was caused by the defect in the vehicle. Where the injury is sustained as a consequence of a defect in the vehicle and does not fall within sub paragraph (i)(ii) or (iii) it would not be "caused by" the defect unless the connection between the defect and the injury is more than a "result of" the defect, When the case falls within sub paragraph (iv), the definition applies only where "the injury is a result of and is caused ... by a defect". (emphasis added) 126Callinan J reached the same result. His Honour agreed that the operative cause of the injury was not any defect in the vehicle but the negligent and dangerous direction by the employer given as to the movement of containers (at [129]). However Callinan J did not accept the starting point of the other judgments concerning the correctness of the construction of sub paragraph (a)(iv) enunciated in Zurich v CSR. His Honour found (at [133]): "I am unable to agree. The expression "use or operation" is explained, qualified and further refined by sub-pars (i), (ii) and (iii). The word "such" is a reference to that expression as so refined or qualified. Sub-paragraph (iv) does have work to do. It is important to note that the introductory words of the definition speak of the fault of the owner or driver of a motor vehicle. An owner who is not driving the vehicle would not ordinarily be at fault and responsible for an injury within sub-paragraphs (i) and (ii). An owner although he or she could conceivably be at fault when the vehicle ran out of control as contemplated by sub-par (iii), would generally be unlikely to be so. More probably such an event would result from a failure of the last driver to secure the vehicle properly after driving it, or to control it properly when driving it. A running out of control could also be of course a result of a failure by the owner to rectify a defect such as a malfunctioning brake or gearbox. On the other hand the "fault" of an owner would be more likely to be the failure say, of that owner to service the vehicle regularly in order to discover some defect in it, or to rectify a defect in it of which he or she should be aware. In other words the purpose of sub-paragraph (iv) is to sheet home liability for an injury caused by the fault of the owner, if the injury is a result of a defect causing it, during such use or operation, that is, whilst it is being driven as contemplated by sub-pars (i) and (ii) or running out of control as contemplated by sub-par (iii) in circumstances in which the driver has not been at fault." (emphasis added) 127In Zotti the appellant had an accident when he lost control of his bicycle at an intersection. Less than two hours previously there had been a motor vehicle collision at the intersection which had led to an oil slick remaining on the road. The claim did not fall within sub paragraph (a)(iv) as there was no suggestion of a defect in any vehicle. Instead, it was contended that it fell within sub paragraph (a)(ii) of the definition. Having regard to the use of the word "sustained" at [94] in the judgment of Gummow, Hayne and Heydon JJ in Allianz v GSF (see above at [123]) the Court of Appeal felt constrained to treat the definition of "injury" as only enabling the recovery in a sub paragraph (a)(ii) case where the injury had been "sustained during a collision with the vehicle" (at [32], per Spigelman CJ, at [47] per Allsop P, at [60] per Hodgson JA, at [66] per McColl JA, and at [109] to [111] per Campbell JA). The Court then addressed whether or not the injury in that case could be held to have been sustained "during" the collision and rejected that contention. 128Both Allianz v GSF and Zurich v CSR involved cases where the injured employee was not injured either as a result of or during one of the activities specified in (a)(i) to (iii) of the definition of injury. In Zurich v CSR at [31], Spigelman CJ had expressly contemplated that sub paragraph (a)(i) "encompassed every injury 'caused' during ... driving ... by a defect in the vehicle" and stated that the same was true of sub paragraph (a)(ii) and (iii). His Honour envisaged sub paragraph (a)(iv) as expanding the scope for recovery to those whose injuries are caused by a defect in cases that do not involve any of the activities in sub paragraph (a)(i), (ii) and (iii). McHugh J in Allianz v GSF at [57] also contemplated a circumstance where injury could be sustained "as a consequence of a defect in the vehicle" during an activity specified in sub paragraph (a)(i), (a)(ii) or (a)(iii) of the definition of "injury". The judgment of Gummow, Hayne and Heydon JJ in Allianz v GSF accepted the correctness of Zurich v CSR. Their Honours appear to have to proceed upon the correctness of what Spigelman CJ contemplated in Zurich v CSR concerning sub paragraphs (a)(i) to (a)(iii). At the very least they did not disavow it. 129In Allianz v GSF Callinan J disagreed with the construction stated by Spigelman CJ in Zurich v CSR. His Honour confined the operation of sub paragraph (a)(iv), but nevertheless confirmed its application to the circumstance of a physical injury caused by a defect in the vehicle which is the fault of the owner and which is sustained during one of the activities specified in (a)(i), (ii) or (iii). 130Thus, one matter that is common to all the judgments in Allianz v GSF is an acceptance that the very scenario put forward by Mr Horwood falls within the definition of injury. It either falls within sub paras (a)(i) to (iii) in the view of McHugh J, or sub paragraph (a)(iv) according to Callihan J. The judgment of Gummow, Hayne and Heydon JJ appear to accept the former. Accordingly I do not accept the submission of Mr Campbell SC that either Allianz v GSF or Zotti has the consequence that Mr Horwood's case could not fall within any of sub paragraphs (a)(i) to (a)(iv) of the definition of injury. 131It follows from this and my findings as to ownership that I consider that the "liability" of Megbuy that was compromised, or established before me (at [115]), is a liability that answers the description of "injury" in s 3 of the MAC Act.

CONCLUSION ON DOUBLE INSURANCE CLAIM 132In summary I have found that: (i)As at 7 November 2005 Megbuy was the owner of the forklift with the meaning of s 4 of the MAC Act ([60]). If, contrary to the conclusion I reached in [39], I was only required to determine whether QBE acted reasonably in causing Megbuy to admit ownership then, I have found that it so acted (at [60]); (ii)Subject to considering the definition of "injury", the settlement of Mr Horwood's claim against Megbuy represented a reasonable compromise of the liability alleged against Megbuy (at [110]). If, contrary, to my conclusion in [37], I was required to determine de novo whether Megbuy was liable to Mr Horwood then I am so satisfied ([115]); and (iii)The combination of my findings as to ownership of the forklift by Megbuy and the liability of Megbuy meant that the definition of "injury" in s 3 of the MAC Act was satisfied ([131]). 133It follows that QBE has established an entitlement to recover contribution from CGU. Each contract of insurance was a contract of indemnity. It covered the identical "loss" (ie liability to Mr Horwood) that the "identical insured" (ie Megbuy) sustained. 134Subject to considering the claim for recoupment, it was not disputed that the appropriate apportionment of the settlement sum paid to Mr Horwood and CGU's costs of defending his proceedings would be 50% each. This follows from the statement of Kitto J in Albion at 350 that the burden is shared "pro rata". Interest would also need to be added. Also, as I understand the position, a credit of $100,000 in favour of CGU would need to be allowed as provided for in clause 11 of the Heads of Agreement. I will direct the parties to confer as to the appropriate sum to be calculated and bring in appropriate forms of orders including as to costs.

RECOUPMENT 135In Limit (No 3) v ACE Insurance Ltd [2009] NSWSC 514 ("Limit v ACE"), the plaintiff was an excess of loss insurer to a joint venture. It became obliged to indemnify the joint venture only because the primary insurer, ACE, wrongly refused to meets it obligations to the joint venture. The payments made by the plaintiff removed a burden otherwise imposed upon ACE (at [280] to [281]). Thus it was not a case involving "double insurance" in the sense discussed in Albion in that the insurers "were not jointly liable at the time of casualty" (at [286]). Rein J held that this propelled the claim "into one more akin to recoupment" (at [286]). His Honour described the elements of a claim for recoupment as being firstly that the party seeking recovery was "compelled, or was compellable, by law to make the payment", secondly that the party "did not officiously expose himself to the liability to make the payment" and thirdly that "his payment discharged a liability" of the party from whom recovery was sought (at [289]). His Honour cited Goff and Jones, The Law of Restitution (6th ed), Sweet & Maxwell at para 15.001 in support of that description and then reviewed a number of cases (at [292] to [315]) before concluding at ([316]) that it was "just and equitable to order recoupment of any liability of which ACE was relieved by Lloyd's payment". 136QBE's claim in recoupment was said by it to only arise in the event that its double insurance claim failed. In that event it claimed that it was entitled to recoup the entirety of the payment that was made to Mr Horwood. As the double insurance claim has succeeded it does not arise. Further, given that I have found that both QBE and CGU fully insured Megbuy for the same loss, then any application of a principle of "recoupment" could not lead to any different result that an apportionment pro rata that arises on a contribution claim (see Albion at 350 per Kitto J). However in deference to some of the arguments I make two observations about the recoupment claim. 137First, if QBE had failed on its double insurance claim then that would have been either as a result of Megbuy not having been found to be the owner of the forklift or Mr Horwood's claim not having fallen with the definition of "injury" in s 3 of the MAC Act. In either case it would have meant that QBE's obligation under the CTP policy created by s 10 of the MAC Act did not respond to the claim against Megbuy. Subject to one matter discussed next and despite various submissions made by QBE to the contrary, that would have lead to the result that, unlike the plaintiff in Limit v ACE, QBE had not made a payment that it was "compelled, or was compellable, by law to make". The duties imposed by ss 80 to 82 of the MAC Act do not impose any duty upon QBE to make a payment or offer of settlement in respect of a liability that is not covered by the CTP policy. In that result QBE would have been seeking recovery in respect of a payment that was not made by it pursuant to any legal obligation or under the threat of the enforcement of a legal obligation but only under a bona fide belief as to the existence of such an obligation. The obstacles in the face of recovery in those circumstances are considerable. None of the cases discussed by Rein J in Limit v Ace address that situation. The discussion in the plurality judgment in Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129 at [45] to [48] would not appear to accommodate recovery in such circumstances (see Zurich v GIO at [77]). 138Second, if QBE had only failed in its double insurance claim because it was found that Megbuy was not the owner then it might still have been arguable that the payment that was made by it was "compellable" under law because QBE was still obliged to indemnify the other potential owner, Levira. However once that scenario is contemplated one needs to consider the potential liability of Megbuy as the employer so as to apply the statutory regime in s 151Z of the WC Act. The task of speculating about whether there is any room for the operation of the principle of recoupment in the context of those provisions based on scenarios that are not reflected in my findings would be a futile exercise.

Orders 139The Court makes the following orders: (1)Stand over the proceedings to 9 May 2012 at 9.30am before Beech-Jones J; (2)Direct the Plaintiff and the Defendant confer as to the appropriate form of orders to reflect this judgment (including as to costs); (3)Direct the Plaintiff and the Defendant to, on or before 4 May 2012, file and serve either a form of order that it is agreed reflects this judgment or, failing agreement, their own forms of order reflecting this judgment (including as to costs); (4)There be liberty to apply.

Amendments 10 May 2013 - Amend date in quote to read "[7] November 2005" Amended paragraphs: 79 10 May 2013 - Replace "underlined" with "italicised". Amended paragraphs: 63, 82, 89 10 May 2013 - Insert italicised emphasis (underlined emphasis was not imported by Caselaw). Amended paragraphs: 13, 17, 30, 63, 81, 89, 120, 125, 126 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 May 2013