BETWEEN : STATE GOVERNMENT INSURANCE COMMISSION

Insurance - Third Party Liability Insurance - Owner negligently placed obstruction on road - Driver injured by obstruction - Claim by driver against owner under compulsory Third Party cover for bodily injury - Whether indemnity limited to third party claims - Held indemnity not so limited

Motor Vehicle (Third Party Insurance) Act 1943 s 6(1)(b) and Third Schedule

Australian Iron & Steel Pty Ltd v Government Insurance Office of New South Wales (1990) 20 NSWLR 633

BHP By-Products Pty Ltd v Fawcett (1959) 77 WN (NSW) 156

Campbell v Epping [1970] Tas SR 215

Commissioner for Prices and Consumer Affairs (SA) v Charles Moore (Aust) Ltd [1977] HCA 38; (1977) 14 ALR 485

Halvorsen v Mary Kathleen Uranium Ltd, unreported; SCt of Qld; No 3689 of 1983; Library No 87/256

King v Government Insurance Office of NSW (1959) 77 WN (NSW) 164

Mills v Meeking [1990] HCA 6; (1990) 91 ALR 16

Quinn v Government Insurance Office of NSW (1958) 77 WN (NSW) 186

Saraswati v R [1991] HCA 21; (1991) 100 ALR 193

Skelton v Collins (1966) CLR 94

State Government Insurance Commission v Sinfein Pty Ltd (1996) 15 WAR 434

1 PIDGEON J: This is an appeal from a decision of his Honour Judge Charters, who held that the appellant, the State Government Insurance Commission, was liable to give indemnity for injuries received by the respondent's employee when the employee was driving the respondent's vehicle. The indemnity was claimed under a policy of insurance, which issued pursuant to the Motor Vehicle (Third Party Insurance) Act 1943.

2 The employee, in the course of his employment with the respondent, was driving the respondent's motor vehicle along a road on the respondent's mine site. The employee was injured when he collided with a hump which the respondent had constructed across the road and which the employee did not see. The employee, in an action against the respondent, alleged that the respondent was negligent in failing to warn of the hump. His Honour found that the respondent was negligent in constructing the hump without placing warning signs. He held, further, that there was contributory negligence on the part of the employee. The respondent, in a third party notice, claimed that the employee's injuries were directly caused by, or by the driving of, the motor vehicle and that it was therefore entitled to indemnity from the appellant by virtue of the provisions of sections 4 and 6 of the Act.

3 There was a submission, at the trial, that the injury was not caused by the driving of the vehicle. His Honour found that it was. He said that the temporal connection between the injury and the driving was immediate and there is no appeal from this finding. This submission was concerned, primarily with s 3(7) of the Act.

4 The other submission before the trial judge was that the insurer was not obliged to indemnify the respondent against injury to the driver. It was submitted that the policy was restricted to giving indemnity to the respondent in respect of claims by persons whom the driver injured. The learned Judge rejected this submission on the basis that it was contrary to existing authority. The appeal is against this portion of his Honour's finding.

5 The essence of the appellant's argument is that indemnity is given to the respondent as vehicle owner for claims against it by third parties and it is not a policy which covers injury to a driver. It is submitted that this interpretation promotes the purpose or object underlying the Act which is a "Third Party Insurance" Act the object of which is to make it compulsory to insure against claims brought by "third parties" being other persons who are negligently injured and it would not include a driver in this situation. This argument found favour with Menzies J in Fawcett v BHP By-Products Pty Ltd [1960] HCA 59; (1960) 104 CLR 80. Menzies J, however, declined adopt it by reason of a contrary decision of the House of Lords.

6 The section being considered in that case and which determined this question was s 10 (1) (b) (i) of the New South Wales Act which was very similar to s 6 (1) (b) of the Act in this State in its earlier form. I shall set out sub-paragraph (b) of s 6 of the Act in this State in its earlier form, printing in bold the words which were subsequently changed.

"6(1) In order to comply with this Act a policy of insurance must -

(b) except as provided in this section insure the owner of the vehicle mentioned in the policy and any other person who at any time drives that vehicle, whether with or without the consent of the owner, in respect of all liability for negligence which may be incurred by that owner or other person in respect of the death of or bodily injury to any person caused by, or arising out of the use of the vehicle in any part of the Commonwealth."

7 The words, which Menzies J was considering, when deciding this particular question, were the words "to any person" appearing in the second last line of the sub-paragraph. His Honour said at p89:

"But Jacobs was the driver and it is necessary to consider whether the indemnity of the owner covers liability for bodily injury to the driver which arises out of the use of the motor vehicle. Were it not for the decision of the House of Lords in Digby v General Accident Fire and Life Assurance Corporation Ltd [1943] AC 121, I would have been prepared to decide that a policy issued in compliance with s10 of the Act would not provide the owner with indemnity against liability to the driver or the driver with indemnity against liability to the owner, but that the owner and driver should each have indemnity against liability to other persons, described as third parties, only."

8 His Honour referred to the fact that the case of Digby was different to the extent that the owner was claiming under the policy for injuries she received as a passenger in respect of the negligence of the driver who was her chauffeur. Menzies J said in respect of this

"In Digby's case_,_ however, it was decided that a policy issued in compliance with the corresponding English Act did provide the driver with indemnity against liability to the owner and the words "to any person" in the phrase under consideration does cover an owner who has established the liability of his driver for physical injury caused by the use of the motor vehicle. I see no valid basis to distinguish this decision when it is an owner who claims to be indemnified against liability to a driver....."

9 Dixon CJ and Kitto J agreed with the reasons of Menzies J. The other point being decided in Fawcett's case was whether, at the time the plaintiff was injured, a mechanical loader was a motor vehicle when it was carrying out loading. In order to decide that particular question, Menzies J considered and construed that portion of the sub-paragraph reading "bodily injury...caused by, or arising out of the use of the (motor) vehicle." It was held that the policy covered the use of the mechanical loader as a loader as well as its use as a vehicle.

10 We were referred to subsequent cases where Fawcett's case was followed but those cases were considering the phrase "arising out of the use of" appearing in the sub-paragraph. What was followed was limited to that part of Fawcett's case dealing with these particular words. We were referred to no subsequent case where the phrase "to any person" was considered. A subsequent case examining the phrase "arising out of the use of" was State Government Insurance Commission v Stevens Bros Proprietary Limited [1984] HCA 32; (1984) 154 CLR 552. There was no submission that the policy did not extend to the injured driver but was limited to persons he might have injured. The question which arose is whether the injuries were caused by, or arose out of the use of, a motor vehicle when the circumstances were that the injury was received in the course of unloading a mobile compressor from a truck. The court, in determining that the injury was so received, applied that aspect of Fawcett's dealing with the phrase "arising out of the use of". What was said by Menzies J in interpreting the words "to any person" still stands without having been considered further in any case to which we were referred.

11 Mr Lawrence submits there is now a proper basis for this Court not to follow this interpretation. His submission is that Menzies J would have upheld the view now being propounded had he had not felt bound to follow the House of Lords decision. The argument continues that the courts in Australia are no longer required to follow these decisions and consequently can approach the matter afresh. It is submitted that, in approaching the matter afresh, the court should now apply section 18 of the Interpretation Act and have regard to the purpose and object of the Act I have earlier set out. It is submitted that this would lead to the conclusion that the indemnity is limited to other persons the driver negligently injures. The submission goes further insofar as it now open to the court to consider, in appropiate circumstances, intrinsic material. This is one of those circumstances and, it is submitted, the intrinsic material would support the view now being proposed.

12 The first hurdle I would see to the view now being proposed is that this interpretation could well exclude the appellant being liable to pay out on a judgment obtained against an insured owner on a finding that the owner negligently permitted the driver to drive a defective vehicle. The question arises whether this view would be inconsistent with the purpose and object of the Act and whether or not the purpose and object extends to ensuring that all persons injured by a motor vehicle should be able to obtain payment from the compulsory insurer in the event of the owner not being able to pay the judgment.

13 The words to be interpreted are the words " to any person". The context in which these words appear is:

"all liability for negligence which may be incurred by that owner or other person in respect of the death of or bodily injury to any person..."

14 This could mean, by giving the section its widest interpretation, that a claim for negligence by the driver against the owner is a "liability for negligence incurred by the owner". The submission, however, is that if one has regard to other sections of the Act (e.g. s22); to the words in brackets in the title to the Act namely "Third Party Insurance" and the purpose or object of the Act there should be a more restrictive meaning, which meaning limits the indemnity to claims by other persons, namely third parties. This interpretation was supported by the majority in the Court of Appeal in Digby's case (1940 2 KB 226**).** MacKinnon LJ (at 232) set out the submission made that the policy must be construed as a whole and having regard to its purpose and nature and the English legislation "any person" in the sentence means a "third party". His Lordship upheld this submission saying that the policy must be construed as a whole and it would be erroneous to construe any single sentence "with that rigorous exactness which in so many cases has for so long defeated the intention of testators". In the present case, we have been called upon to construe a section of the Act as distinct from a policy. This would make no difference as the policy, which is in the Third Schedule, follows the wording of the Act. In the House of Lords two of their lordships favoured the view now being propounded but the majority rejected it in favour of the more literal interpretation. They restored the judgment of the trial judge who also favoured the more literal interpretation. As mentioned, the preferred view of Menzies J was the more restricted view favoured by the Court of Appeal and the minority in the House of Lords.

I have referred to cases in the High Court interpreting the the phrase "arising out of the use of" when deciding whether the item causing injury was being used as a vehicle when the injury was caused. It must be observed that a wide interpretation was given to the words being considered. A further example of this is Government Insurance Office of New South Wales v R J Green and Lloyd Pty Ltd. [[1966] HCA 6; 1965] 114 CLR 437. The court held that an injury received in the operation of a hoist on the tray of a stationary truck was an injury received out of the use of the motor vehicle within the meaning of a policy. Barwick CJ referred to the Act in order to interpret the policy said in respect of the expression "arising out of"(at 444):

"It is the injury which must be caused or arise out of the use, not the liability for the injury."

15 These words were adopted by the High Court in Dickinson v The Motor Vehicle Insurance Trust [1987] HCA 49; (1987) 163 CLR 500 at 504 which again was considering the meaning "arising out of the use of". In that case one of two young children left in a motor car by their father sustained severe burn injuries when the floor mat caught alight through one of the children playing with a box of matches. The trial Judge found that the negligence of the father consisted of leaving the injured child and her brother unattended in the motor car when the brother, at least, had ready access to a box of matches. The High Court, in a joint judgment, held that the injuries were caused by or arose out of the use of the motor car. It was to overcome the effect of this case that the Parliament by the enactment of the Motor Vehicle (Third Party Insurance) Act 1987 deleted the words "caused by or arising out of the use of" and substituted the words "directly caused by, or by the driving of,". This substitution was made throughout the Act. The sub paragraph of s 6 now reads:

(b) except as provided in this section insure the owner of the vehicle mentioned in the policy and any other person who at any time drives that vehicle, whether with or without the consent of the owner, in respect of all liability for negligence which may be incurred by that owner or other person in respect of the death of or bodily injury to any person directly caused by, or by the driving of, the vehicle in any part of the Commonwealth."

16 These amendments may affect the application of those cases to which I have referred which have considered whether injuries caused by plant on a vehicle have arisen out of the use of the vehicle. The words "any person" being the words on which Menzies J based his decision were not changed. The insertion of the word "directly" does not affect this case as his Honour found that the injury was caused by the driving of the vehicle and it is not suggested, in these circumstances, that it was not "directly" caused. This is particularly so having regard to the fact that the driver's negligence was found to be a contributing cause.

17 Mr Laurence refers to the second reading speeches relating to this amendment to support the interpretation he is now seeking. He refers in addition to second reading speeches introducing the original legislation both in this State and in New South Wales. There have been many differing judicial views as referred to in Digby's case and alluded to by Menzies J. In these circumstances it is open to look at this extrinsic material. There is in these speeches, as indeed there was in the speech introducing the original legislation, much to support the view Mr Laurence is now propounding. As I mentioned, the very words in brackets in the title to the Act give support to this view. Mr Laurence also refers to ss 22 and 29 as giving further support. Menzies J referred to two sections which also appear in our Act relating to the making of claims which supported the view he expressed but did not follow. These factors must be weighed up. I would, however, see it of significance that, although the Parliament, in 1987, deleted the words "caused by or arising out of the use of" in order to negate the effect of Dickinson's case, it did not purport to negate the effect of that portion of Fawcett's case based on the words "any person" when the decision based on these words was a long standing one and accepted and acted upon in this State. Parliament did not amend the words "any person" to limit the expression to third party claims.

18 I have weighed up this factor. I have considered the purpose and object underlying the Act as submitted by Mr Lawrence. I consider, however, that a principal object is that the situation does not arise where a person, who receives injury caused by or by the driving of a motor vehicle, is not without a remedy if the owner of the vehicle is unable to meet a judgment. This would be the situation in the circumstances to which I have referred of an owner negligently permitting a driver to drive a defective vehicle. The driver would be without indemnity if the owner could not meet a judgment. The wide interpretation followed by the High Court when considering other parts of the sub-clause and particularly the passage by Barwick CJ I have set out is consistent with the object to which I have referred. I do not consider it has been shown that what was said in Fawcett's case so far as it related to the point under consideration is no longer the law in Western Australia.

20 IPP J: I have read the reasons to be published by Pidgeon J. I agree with them and his Honour's conclusions. I have nothing further to add.

21 WALLWORK J: I agree with the reasons for judgment of Pidgeon J. There is nothing I wish to add to those reasons.