State Government Insurance Office (Qld) v Brisbane Stevedoring Pty Ltd

(b) in the case of injury as aforesaid suffered on or after the first day of July, one thousand nine hundred and sixtythree, (except such an injury in respect whereof the employer is required by some other Act to provide against such liability as prescribed by such other Act) damages arising under circumstances creating also, independently of this Act, a legal liability in the employer to pay damages in respect of that injury.

The respondent employed a wharf labourer in connexion with the loading of cargo into a vessel standing at a wharf in Brisbane. To assist in the work of loading the respondent hired a mobile crane with a driver from Queensland Shipping Services Pty. Ltd. which became the second defendant in the present action. The conditions upon which the respondent hired the mobile crane with a driver, which were the usual conditions on which the second defendant hired machinery, included the following:

The company will not accept any liability for any loss, damage or injury whatsoever or howsoever arising, whether by the negligence of the company's servants or otherwise, out of the use of the crane by the hirer or any of his servants or agents or arising from any defect in the crane, gear, winch, derrick, tackle or any other part thereof and the hirer hereby indemnifies the company from all or any claims or actions for such loss, damage or injury arising as aforesaid. The crane driver while employed in or about the moving, driving or working of the crane, shall be for all purposes the servant of and in the employ of and under the control of the hirer and not of the company. These conditions will operate from the time the crane arrives at the place or places where it is required for use by the hirer, and will continue until it finally leaves such place or the last of such places.

In the course of the respondent's operations on the wharf the mobile crane toppled over and injured the wharf labourer employed by the respondent. It was then being driven by the driver supplied by the second defendant who, as between that company and the respondent was the servant and under the control of the respondent (see the term of the hiring agreement which I have quoted). The injured man sued both the respondent as his employer on the footing that the respondent was negligent in its system of work on the wharf and the second defendant on the footing that the driver of the mobile crane was sufficiently under the control of that company to make his carelessness in the operation of the crane a breach of the second defendant's duty to the plaintiff.

The mobile crane was a motor vehicle within the meaning of The Motor Vehicles Insurance Acts, 1936 to 1961, of the State of Queensland. The second defendant was its registered owner. In compliance with s. 3 of The Motor Vehicles Insurance Acts, the second defendant at all relevant times had on foot a policy of insurance indemnifying it against all sums for which it should become legally liable by way of damages for accidental bodily injury, fatal or non-fatal, to any person, with certain immaterial exceptions, caused by the use of the mobile crane. The respondent did not at any time have or maintain such a policy of indemnity.

The respondent gave a third party notice in the action pursuant to O. 17 of The Rules of the Supreme Court of Queensland claiming an indemnity from the appellant against its, the respondent's, liability to pay damages in respect of the injury to the plaintiff workman, such indemnity according to the respondent's claim to include any sums which the respondent should be required to pay the second defendant under the indemnity contained in the hiring agreement. Further, appropriate notices were given by each of the defendants to raise an issue of contribution between them under The Law Reform (Tortfeasors Contribution, Contributory Negligence, and Division of Chattels) Act of 1952 (The Law Reform Act) of the State of Queensland. Lastly, the second defendant claimed indemnity by the respondent under the contract of hiring for any liability for damages which might arise out of the plaintiff's claim.

The appellant as the third party in the action in answer to the respondent's claim for an indemnity under The Workers' Compensation Act policy, set up as defences, first, that the respondent was required by some other Act, namely, The Motor Vehicles Insurance Acts, to provide against liability to pay damages in respect of the injury of the worker employed by him, and thus within the exception in the promise of indemnity in the policy and, secondly, that any sum paid by the respondent to the second defendant under the indemnity in the hiring agreement would not be paid under a legal liability to pay damages for the injury to the workman within the scope of the indemnity in the workers' compensation policy.

The learned primary judge found negligence against both defendants treating the crane driver, notwithstanding the terms of the hiring agreement, as the employee of the second-named defendant whilst operating the crane for and under the control and direction of the respondent. Apparently on the footing that the particular conduct of the driver of the crane and the respondent's faulty system of work each equally contributed to the result, and notwithstanding the terms of s. 5 (c) of The Law Reform Act, he apportioned the responsibility for the injury to the plaintiff equally between the two defendants though he did not actually make an order for contribution. He found the indemnity contained in the hiring contract to be operative in the circumstances and ordered the respondent to indemnify the second defendant against the verdict returned for the plaintiff in the action. He ordered the appellant as third party to indemnify the respondent completely "in respect of all sums payable by the first defendant under this judgment in respect of damages including sums payable by the first defendant to the second defendant by way of indemnity against the second defendant's liability under this judgment for damages or contribution ". My earlier reference to s. 5 (c) of The Law Reform Act was to call attention to the fact that once it was decided that the indemnity between the respondent and the second defendant was operative no apportionment of responsibility was called for and no order for contribution under The Law Reform Act could be made. The effect of the order that the appellant completely indemnify the respondent was that the plaintiff became entitled to be paid the whole amount of the verdict out of the Workers' Compensation Fund set up by s. 5 of the Act. This is so because a finding that the respondent's liability for damages fell within the terms of the indemnity of the policy, provided the basis for a payment out of the Fund under s. 9A of the Act. The situation thus created was that the whole verdict became payable out of the Fund without any recourse against the respondent, because, having a policy conforming to s. 8, he was not liable to recoup the Fund under s. 8 (5) for any amount paid out of it to the plaintiff.

Once it was decided that the appellant was under an obligation to indemnify the respondent for the whole amount of the verdict and that the respondent was under an obligation to indemnify the second defendant in respect of the verdict there could have been no occasion for the payment by the respondent to the second defendant of any sum of money. Bearing in mind the identity of the appellant, there was no need to contemplate default on its part (see s. 6 of the Act and ss. 5, 9 and 9A with respect to payment out of the Workers' Compensation Fund). Also, an order for indemnity by the respondent required it to pay the verdict though such a course became unnecessary by the decision that the damages fell within the indemnity of the workers' compensation policy. Having regard therefore to the order for indemnity by the appellant there was no room for any sum to fall within the description of the words "including etc." which I have already quoted, as between the parties to the action. Consequently, the words in the order that the appellant indemnify the respondent "including sums payable by the first defendant to the second defendant by way of indemnity against the second defendant's liability under this judgment for damages or contribution" were, in my opinion, wholly inappropriate to the circumstances of the case and ought not to have been included in the order. Indeed, having regard to the structure of the Act in respect of the payment of compensation and damages, there was really no need to make an order for indemnity by the third party of the respondent. In my opinion therefore any further consideration of this matter can be on the footing that there was no apportionment of responsibility, no order for contribution between the respondent and the second defendant, and no reference in the order for indemnity by the appellant to any sums payable by the first defendant to the second defendant.

So regarded, no question arises as to whether or not sums which might in other circumstances have been paid by the respondent to the second defendant under the indemnity in the hiring agreement would have qualified for indemnity by the appellant under the workers' compensation policy. But, because of the form of the trial judge's order, this question was the subject of discussion in the Full Court in the appeal brought by the appellant.

The appellant's grounds of appeal to the Full Court were, firstly, as to the extent of the apportionment of responsibility as between the respondent and the second defendant; secondly, as to the basis of the verdict against the respondent; thirdly, as to the applicability in the circumstances of the exception contained in s. 8 of the Act and repeated in the policy; fourthly, as to the inclusion in the order of indemnity of the words I have quoted, it being claimed that any amount paid by the respondent to the second defendant under the indemnity contained in the hiring agreement was not within the terms of the policy, that is to say, was not paid in satisfaction of a legal liability by way of damages arising under circumstances creating, independently of the Act, a legal liability in the respondent to pay damages in respect of an injury to a worker employed by him.

The Full Court disposed of the appeal by deciding first that the exception in the policy did not apply because the respondent had not become bound under The Motor Vehicles Insurance Act to insure against its liability for damages for personal injury arising out of the use of the crane. Second, that the appellant was bound to indemnify the respondent as to the full amount of the verdict and, third, that any sum paid by the respondent to the second defendant under the indemnity contained in the hiring agreement would fall within the terms of the policy and could properly be included in the order for indemnity of the respondent by the appellant.

However, in the course of expressing its reasons for dismissing the appeal, the Full Court said:

The real ground of the third party's complaint would seem to be that its insured has by contract, given up a right to contribution which might have reduced the burden on the third party (I)n the end, the question with which the third party was concerned, was the extent to which an insured could, by contract, deprive an insurer of rights which it would otherwise have had by subrogation. If the insured should pay the whole of the damages, and the insurer should indemnify the assured in respect of the whole sum, then proceedings by the insurer, by way of subrogation, against the second defendant must necessarily have failed. The contract would have been a clear answer to the claim. In these circumstances, any possible right of the insurer in respect of its payment of the second defendant's share of the damage could be only against the first defendant. What proceedings could these be? An insured is not entitled to release a claim so as to defeat the right of the insurer, but nothing of that kind is suggested here. [1] 1. [1969] Qd. R. 46, at p. 73.

With these views of the Supreme Court I am in agreement. It was realized by the Full Court, as is the fact, that the appellant had not asserted against the respondent in the action a claim in damages for breach of a term of the policy of indemnity. It had merely contested its liability to indemnify the respondent for the amount of the verdict on the grounds already stated. The Supreme Court, rightly as I think, held that the appellant was bound to pay the full amount of the verdict. What does not seem to have been fully appreciated was that once that conclusion was drawn there was no room in this action for considering what would have been the position if the respondent had had to pay money to the second defendant under the indemnity in the hiring agreement. As I have already indicated, that was not a situation which in the circumstances of the action could arise. Thus the relevant quality of a payment under the indemnity did not arise for decision.

It is necessary however to deal with the question whether the indemnity described in s. 8 (1) (b) of the Act applied in the case of the injury to the plaintiff workman at all, having regard to the words of exception in that paragraph. In connexion with this point, the appellant has submitted that the respondent as the hirer of the mobile crane was an owner within the definition of that word in s. 2 of The Motor Vehicles Insurance Acts and that, therefore, s. 3 of the Acts required the respondent to provide against the liability by way of damages for accidental bodily injury to, amongst others, its workmen. The scheme of The Motor Vehicles Insurance Acts read with The Main Roads Acts, 1920 to 1965 of the State of Queensland is readily seen. A motor vehicle may not be registered without production of a certificate of insurance. In respect of every motor vehicle which is registered there must be a person registered as its owner in the records of the Commissioner of Main Roads. Persons who are not the owner of a motor vehicle in the ordinary acceptance of that word may be registered as the owner under The Main Roads Acts. Amongst such persons is the hirer of the motor vehicle (see definition). The policy of insurance issued under The Motor Vehicles Insurance Acts, which must be with the State Government Insurance Office (Queensland) or with some licensed insurer, may not be revoked during the period of the registration of the vehicle or of the renewal of the registration of the vehicle unless the registration or the renewal of the registration is sooner cancelled or surrendered. By s. 4 every such contract of insurance shall "inure in favour of the owner for the time being and his estate, notwithstanding any change in the ownership of such motor vehicle".

The appellant submits that the terms of s. 3 of the Acts require that any person who falls within the description of "owner" as defined in s. 2 must, during the time he satisfies that qualification, keep on foot a policy of insurance fulfilling the requirements of s. 3 (1); and this notwithstanding that there is on foot the policy of insurance taken out by the registered owner of the vehicle covering the period of the registration of the vehicle and without which the registration may not be effected or maintained. In my opinion, this submission should be rejected. The obligation of s. 3 is, in my opinion, placed upon the owner, whichever one of the categories to be found in the definition of owner he may satisfy. But in effect, if there is a registered owner, who, of course, may be a person in any one of these categories, it is only upon an owner who is the registered owner that an obligation is cast to obtain and maintain the policy of indemnity described in the subsection. That policy must cover the period of registration of the vehicle. There is no warrant for reading the section as requiring a policy of insurance to cover any other, and particularly any lesser, period such as the appellant submits, i.e., for the period of the hiring. But if there is no registered owner, as for example, in the case of a vehicle which has not been registered, it may be that the owner is obliged by s. 3 to insure even before he becomes registered. But whether this be so or not, and there is no present need to decide that point, in my opinion, in the case of a registered vehicle no person falling within the description of "owner" in s. 2 who is not registered as owner, is bound by s. 3 to take out a policy of insurance of the described kind. Consequently, in my opinion, the exception to be found in s. 8 (1) of the Act does not apply to the circumstances of the respondent and the indemnity in that policy conforming to s. 8 (1) (b) of the Acts does operate with respect to those circumstances. Consequently, as I earlier indicated, the whole verdict becomes payable out of the Workers' Compensation Fund.

However, in this appeal the appellant has pressed the view that the first defendant committed a breach of the terms of the policy by entering into a hiring agreement which contained the clause which I have set out earlier in these reasons. It was said that the result of that breach was that the appellant lost the amount of contribution it might otherwise have obtained from the second defendant, assessed as counsel claimed at one half of the verdict. The consequence was put by the appellant's counsel in the alternative, either that the order for indemnity of the first-named defendant by the appellant should be limited to one half of the verdict or that, if an indemnity to the full amount of the verdict were ordered, the first-named defendant should reimburse the appellant as to one half thereof.

The appellant also pressed an argument that any amount paid by the first defendant to the second defendant under the indemnity in the hiring agreement would not be a sum falling within the terms of the indemnity in the policy.

Although, as I have indicated, neither of these matters really arises in the circumstances of this case, I think I should shortly state what I consider to be the clear answer to the propositions each involve.

I will deal first with the second matter. The situation supposed was that a verdict for a plaintiff in respect of personal injuries caused to an employee of A by negligence in or in connexion with the use of a machine has been found against two defendants, A and B. A has by a binding agreement made prior to the commission of the relevant acts of negligence indemnified B against the consequences of the use by A of that machine. A has been indemnified by an insurer in the terms of s. 8 of the Act. B asserts against A his right of indemnity in respect of the verdict found against him (B). That right may be asserted before B has paid the amount of the verdict and an order may be made that A indemnify B. Such an order calls, not of course for a payment by A to B, but for the payment by A of the verdict. When A thus complies with an order to indemnify, he undoubtedly, in my opinion, is paying a sum of money which precisely falls within the indemnity described in s. 8 of the Act. Of course, on the other hand, the indemnity may be enforced by B after he has paid the amount of the verdict. But, though B's right to recover the amount which he has thus paid and A's obligation to pay it is derived from the contract of indemnity, the sum paid by A to B would none the less, in my opinion, constitute damages arising under circumstances creating a legal liability in A to pay damages in respect of the injury to A's employee. I cannot think that the circumstances that the indemnity is enforced after payment by B rather than before such payment can make any difference to the relevant quality of what A pays in performance of the contract of indemnity. Thus, in the situation supposed, in my opinion, any sum paid by the respondent to the second defendant under the indemnity in the hiring agreement would be properly included in the indemnity which the appellant may be ordered to afford the respondent under The Workers' Compensation Act policy. A different result might possibly follow if no verdict had been found against A, but I have no need to discuss that possibility in connexion with this case.

I turn now to deal with the first matter. It is settled law that an insurer who has paid the amount of a loss under a policy of indemnity is entitled to the benefit of all the rights of the insured in the subject matter of the loss and by subrogation may enforce them. This right of subrogation is inherent in the contract of indemnity. It has been put that it exists as a contingent right from the inception of the insurance. For my part, with respect, I do not find the description "contingent right" appropriate and satisfying. The right of subrogation as it seems to me does not depend for its existence as a right upon the occurrence of a loss under the policy. Its exercise is of course dependent upon the payment of the loss but as a right it exists from the moment of the making of the contract of indemnity. There is therefore no reason why a breach or threatened breach of the right could not be restrained by the insurer before the loss has occurred, though an occasion for such a course will probably be rare.

It is also settled law that an insured may not release, diminish, compromise or divert the benefit of any right to which the insurer is or will be entitled to succeed and enjoy under his right of subrogation. On occasions an attempt by the insured to do so will be ineffective against the insurer because of the knowledge of the circumstances which the person under obligation to the insured may have. On other occasions when the insured's act has become effective as against the insurer, the insured will be liable to the insurer in damages, or possibly, on some occasions for money had and received. But such conduct on the part of the insured will not in general avoid the insurer's liability to indemnify, though in some circumstances the insurer may be entitled to set off the amount of the damages against the amount otherwise payable under the indemnity. It does not seem to me to matter in these circumstances whether the insured effects the release or compromise, etc. of his relevant rights before or after the occurrence of the loss giving rise to the insurer's liability to indemnify, though, in general, because of the necessary relationship between the subject matter of the loss and the rights to which the insurer is entitled to succeed, instances of such release or compromise, etc. will be more likely to be found after the occurrence of the loss. In each of the decided cases this has been the case (see West of England Fire Insurance Co. v. Isaacs [1] ; Phoenix Assurance Co. v. Spooner [2] ; Horse, Carriage and General Insurance Co., Ltd. v. Petch [3] ; and Boag v. Standard Marine Insurance Co. Ltd. [4] ).

1. [1897] 1 Q.B. 226, C.A. 2. [1905] 2 K.B. 753. 3. (1916) 33 T.L.R. 131. 4. [1937] 2 K.B. 113.

The policy of insurance issued by the appellant in this case was statutory not merely in the sense that the respondent was bound by statute to enter into such a policy, or that its terms were fixed by statute, but in the less usual sense that the insurer was bound to issue the policy in such terms at the request of the respondent and at a premium set by or under the statute. These circumstances and the further fact that the provisions with respect to the policy form part of a statutory scheme of protection for workmen against the possibility of an employer being unable to pay for the consequences of injury received in employment, would make it impossible, in my opinion, for the insurer to refuse to perform the promise to indemnify in full because of some action on the part of the insured which reduced the benefit to the insurer of the right of subrogation. It may also preclude any such action in any circumstances warranting an avoidance of that promise. But these statutory features do not, in my opinion, render inappropriate the general law as to the right of subrogation or as to the consequences to the insured of action on his part which reduces the value to the insurer of that right of subrogation. The State Government Insurance Office, in my opinion, could sue its insured if the insured has released or compromised, etc. a right to which the insurer was entitled to succeed in the event of a relevant loss.

It was submitted in this case that the application of these accepted principles would result in the respondent being liable to the appellant for one half of the verdict. It was also said, as an alternative submission, that the second defendant and thus its insurer was liable to pay one half of the verdict to the appellant.

This second suggestion is readily dismissed. Nothing in the case could render the indemnity in the hiring agreement void or ineffective as against the appellant. Indeed, the appellant's argument begins, and can, in my opinion, only begin, upon the footing that that indemnity was effective to prevent any recourse by the appellant, as the insurer who has paid the loss, to the second defendant as a co-tortfeasor with the respondent.

The principal basis on which the appellant's counsel puts the appellant's claim to have lost the benefit of its admitted right of subrogation is that, but for the indemnity in the hiring agreement, an order for contribution could properly have been made by the trial judge as to one half of the verdict, which the appellant could have enforced in exercise of its right of subrogation. Therefore, it is said, to enter into such an indemnity was to damage the right of indemnity to the extent to which recourse might otherwise have been had against the second defendant.

But the right of subrogation is no more than a right to enforce and have the benefit of the insured's rights in relation to the subject matter of the loss which the insurer has paid: it includes, of course, a right to have such rights maintained pending the occurrence of a loss within the policy. But to hire a machine on the quoted terms just cannot be regarded, in my opinion, as a release, compromise or derogation from rights. It is a transaction which precluded rights arising which is quite a different matter. There never was any right of contribution from the second defendant at any time, neither an accrued nor a contingent right. The purchase of an article on terms which exclude warranties cannot be analysed as a transaction by which rights are given away or compromised. Warranties only arise in default of relevant agreement. A passenger purchasing an air or rail ticket with exclusion of liability or with limitations of liability never has the "excluded" rights, or rights extending beyond the limitations. So here, the hire of the crane with exclusion of liability in the hiring company and an indemnity to reinforce and secure the exclusion, was not a dealing with any right ever possessed by the respondent. There never was any right therefore to which the appellant was entitled to succeed or to enforce by virtue of the right of subrogation inherent in the contract of indemnity.

Thus, even if the proceedings could be regarded as including a claim by the appellant against the respondent for breach of the respondent's obligation not to release, compromise, etc. any right to which the appellant was entitled to succeed by virtue of its right of subrogation, in my opinion, there is no substance in the submission that the hiring of the crane on the terms quoted constituted a breach of that obligation. Nothing in the policy or in the general law required the respondent to create rights for the benefit of the insurer. What occurred here was that the insured in the course of and for the purposes of its business hired a crane with a driver in terms that it should acquire no rights against the second defendant for loss, damage or injury arising out of the use by the respondent or of its servants of the crane or out of any defect in the crane or its parts. That was not, in my opinion, in breach of any obligation resting on him. Nor was the creation in the respondent of an obligation to indemnify the second defendant against the consequences of the respondent's use of the hired vehicle such a breach. Whether or not the payment of money in performance of that obligation would satisfy the terms of the indemnity given by the appellant to the respondent is a separate question, the answer to which may depend as I have indicated upon, amongst other things, the existence of a liability in the respondent itself to pay damages in respect of the use of the vehicle.

In my opinion, however the present proceedings be regarded, this appeal should be dismissed.

A policy of insurance issued by the appellant to the respondent, being in the terms of form No. 2 in Schedule III to The Workers' Compensation Regulations of 1917 Q., indemnified the respondent against "all sums for which, in respect of injury to any worker employed by him, he may become legally liable by way of damages arising under circumstances creating a legal liability in [the respondent] to pay damages in respect of that injury".

A worker employed by the respondent was injured, and upon the trial of an action in which the respondent was the first defendant it was decided that the respondent was legally liable to pay the worker a sum by way of damages. It was further decided that the worker's injury had been caused by negligence on the part of a company which had been joined as the second defendant in the action, as well as by negligence on the part of the respondent, and accordingly the damages were awarded against both. The judge's reasons for judgment added that responsibility was to be apportioned equally between the first and second defendants for the purposes of contribution under The Law Reform, etc., Act of 1952 Q., but unfortunately the formal order used the word "liability" instead of "responsibility". The order then went on, in accordance with the reasons and notwithstanding that the apportionment had been described as "for the purposes of contribution", to order that the respondent indemnify the second defendant "in respect of damages and/or contribution payable under this judgment". The intention was, clearly enough, to order that the respondent indemnify the second defendant in respect of the damages payable to the plaintiff and that the second defendant should not be liable to make the contribution to damages which otherwise it would have been liable to make as between it and the respondent.

The authority for an apportionment of responsibility for the injury is to be found in the provisions of s. 5 (c) and s. 6 of The Law Reform, etc., Act of 1952 Q.; but s. 5 (c) expressly provides that no person shall be entitled to recover contribution from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought. Moreover s. 6 empowers the court in proceedings for contribution to direct that the contribution to be recovered from any person shall amount to a complete indemnity. As the second defendant was entitled, by virtue of a contract between itself and the respondent, to be indemnified against such a liability as the action established, the respondent was disentitled to an order for contribution as against the second defendant, and the second defendant was entitled to an order that the contribution to be recovered by it from the respondent should amount to a complete indemnity. Accordingly it was right for the judge, being of opinion that responsibility for the damage belonged to the respondent and the second defendant equally, to order that as between them the whole amount of the damages awarded to the plaintiff should fall upon the respondent. The judgment should be varied by substituting "responsibility" for "liability" - as it stands it not only departs from what the judge intended but is inconsistent with itself, for it begins (correctly) by adjudging that the plaintiff recover the amount of the damages "against both defendants" - but otherwise it is unexceptionable down to the point I have reached.

However, the respondent's insurer was joined in the action as a third party, and the judgment, after having regulated in the way I have described the mutual rights and liabilities of the plaintiff, the respondent and the second defendant, went on to deal with the position between the respondent and the insurer, who is now the appellant. It did so by ordering that the insurer completely indemnify the respondent in respect of all sums payable by the respondent under the judgment in respect of damages "including sums payable by the first defendant (the respondent) to the second defendant by way of indemnity against the second defendant's liability under this judgment for damages or contribution". That is to say, that the insurer was ordered to indemnify the respondent not only against having to pay damages to the plaintiff, but also against any amount the respondent might become liable to pay to the second defendant in the event of that defendant's paying some or all of the damages to the plaintiff.

The appellant insurer contends that this was not in accordance with the policy, because the policy extended only to sums for which the respondent might become liable "by way of damages", whereas any sums which the respondent might become liable to pay to the second defendant would be payable by way of debt. It is true that they would be payable by way of debt. If the second defendant had to sue for them they would be recoverable at common law under a common indebitatus assumpsit as money paid by the second defendant for the respondent at its request: Bullen & Leake, Precedents of Pleadings, 3rd ed. (1868), pp. 42, 175. But if the second defendant had to sue for them it would necessarily be because the insurer had not performed its promise to indemnify the respondent against its liability for damages under the judgment. Instead, the second defendant would have satisfied that liability for the respondent (for itself also, of course, but as between the respondent and itself for the respondent); and immediately upon its doing so the respondent would have had a cause of action against the insurer for breach of the insurer's promise of indemnity against the respondent's liability for damages. The judgment was therefore right in ordering the appellant insurer to indemnify the respondent in respect of all sums "payable" - whether yet paid or not - by the respondent to the second defendant by way of recoupment of the damages paid to the plaintiff.

A second contention on the part of the appellant was based upon an exception in the policy in respect of any liability of the respondent for damages in case of an injury to the worker "in respect whereof the employer is required by some other Act to provide against such liability as prescribed by such other Act". The "other Act" relied upon was The Motor Vehicle Insurance Acts, 1936 to 1961 Q.. I need only say as to this contention that I agree with the Chief Justice in regarding it as unfounded.

There remains a question whether the appellant is entitled to set off against its liability to indemnify the respondent in respect of the damages payable to the plaintiff the amount of the contribution which, but for the indemnity agreement between the respondent and the second defendant, it could have recovered from the second defendant by virtue of its general subrogation to the respondent's rights against that defendant as a tortfeasor jointly liable with the respondent in respect of the plaintiff's injuries.

According to the findings made at the trial the plaintiff was injured by negligence both of the respondent and of the second defendant, the respondent's negligence consisting in requiring the plaintiff to work under a system of work that was not reasonably safe in the circumstances, and the second defendant's negligence consisting in carelessness in the management of a crane driven by one of its employees. The crane was under hire from the second defendant to the respondent, and it was the hiring agreement that contained the indemnity provision. The relevant clause was in these terms:

The company will not accept any liability for any loss, damage or injury whatsoever or howsoever arising, whether by the negligence of the company's servants or otherwise, out of the use of the crane by the hirer or any of his servants or agents or arising from any defect in the crane, gear, winch, derrick, tackle or any other part thereof and the hirer hereby indemnifies the company from all or any claims or actions for such loss, damage or injury arising as aforesaid. The crane driver while employed in or about the moving, driving or working of the crane, shall be for all purposes the servant of and in the employ of and under the control of the hirer and not of the company. These conditions will operate from the time the crane arrives at the place or places where it is required for use by the hirer, and will continue until it finally leaves such place or the last of such places.

Because of the provision as to the employment of the crane driver, his working of the crane in the course of the hiring was, I think, a use of the crane by the hirer within the meaning of the clause, notwithstanding that the driver continued to be in the general employment of the second defendant. On this view of the matter the indemnity provision applies in respect of the plaintiff's claim, and as a consequence the respondent never acquired a right to contribution from the second defendant under The Law Reform, etc., Act of 1952. (This is why it seems to me important that the order as to apportionment between them should be expressed as relating to responsibility for the damage suffered by the plaintiff and not to liability.) The appellant argues for a general proposition to the effect that an insurer is entitled to recover from the insured the amount of any loss that may be suffered by the insurer by reason of the insured's having entered into a transaction with a third party whereby a right which the insurer would otherwise have had under the doctrine of subrogation, to recover from the third party some or all of the amount that it has to pay under the insurance, does not arise.

If it be assumed that the principle of such cases as West of England Fire Insurance Co. v. Isaacs [1] ; Phoenix Assurance Co. v. Spooner [2] ; Horse, Carriage and General Insurance Co. Ltd. v. Petch [3] , and Boag v. Standard Marine Insurance Co. Ltd. [4] , applies only where the insured, having acquired a right to recover against a third party in the event of a loss occurring which is covered by the insurance, renounces or prejudices that right, of course it has no application in the present case. The distinction between the non-acquisition of a right and the renunciation of a right acquired is clear. But the question here, it seems to me, is whether the principle of the cases cited goes so far that under a policy of insurance against liability for negligence, entered into in a jurisdiction where the law ordinarily annexes to such a liability a right of contribution from a joint tortfeasor if there be one, the insured owes a duty to the insurer not to do anything to prevent contribution from being recoverable from a person should that person become a joint tortfeasor with the insured in respect of an injury covered by the insurance.

1. [1897] 1 Q.B. 226. 2. [1905] 2 K.B. 753. 3. (1916) 33 T.L.R. 131. 4. [1937] 2 K.B. 113, at pp. 124, 128.

The answer, in my opinion, is that the insured owes no such duty, at least where, as in Queensland, the insurer could neither have refused to issue the policy nor have charged a higher premium if the insured had disclosed at the time of taking out the insurance an intention to enter into a contract exempting a person from the liability to contribute. There seems to be no authority directly on the point, but it is settled that where an insurance is effected without disclosure of an arrangement whereby a possible future right of the insurer to have recourse against a third party is negated the question whether the non-disclosure is a concealment of a material fact depends upon whether the insurer, to the knowledge of the insured, was accustomed to charge a higher premium in a case where there was to be no right of recourse than in a case where there was to be such a right: Tate & Sons v. Hyslop [1] . See also Phoenix Insurance Co. v. Erie and Western Transportation Co. [2] . That being so, it would be difficult to maintain that, in an insurance contract with an insurer who does not differentiate between cases where there will be a right to contribution from third parties and cases where there will not, there is an implied obligation on the part of the insured to refrain from making any special agreement preventing a right of recourse from arising. The appellant in the present case was bound by reg. 10 of The Workers' Compensation Regulations of 1917 Q. to issue a policy in one of the statutory forms upon payment of the proper amount of premium, and the rates of premium were fixed under s. 6 of The Workers' Compensation Acts, 1916 to 1966 Q.. I am therefore of opinion that the appellant's contention fails.

1. (1885) 15 Q.B.D. 368. 2. (1885) 117 U.S. 312, at p. 326 [29 Law Ed. 873, at p. 880].

I would vary the judgment of the primary judge in the manner indicated, but otherwise I would dismiss the appeal.

In my opinion this appeal should be dismissed. The matters which the appellant urged are all dealt with by the Chief Justice in his judgment, which I have had the advantage of reading. I agree in his Honour's conclusion and his reasons on each point. I do not wish to add anything to what he has said.

This appeal raises questions between the appellant (the insurance office) and the respondent (the stevedoring company) arising out of an action of negligence brought in the Supreme Court of Queensland by the plaintiff against the Stevedoring company and another company, Queensland Shipping Services Pty. Ltd. (the Queensland company) to recover damages for personal injuries. The plaintiff, an employee of the stevedoring company, was injured while working on a wharf in Brisbane, assisting to load a vessel berthed at the wharf. To assist in the loading operations the stevedoring company had hired a mobile crane from the Queensland company under an agreement which contained a clause providing that the Queensland company would not accept any liability for any loss, damage or injury whatsoever arising out of the use of the crane by the stevedoring company and that the stevedoring company would indemnify the Queensland company "from all or any claims or actions for such loss, damage or injury" arising out of the use of the crane.

In his action the plaintiff claimed that his injuries were caused by the negligence of one or other or both defendants. The stevedoring company held a policy of insurance issued to it by the insurance office which followed the terms of s. 8 (1) of The Workers' Compensation Act. That subsection provides that:

Every employer shall insure himself against all sums for which, in respect of injury to any worker employed by him, he may become legally liable by way of -

(b) in the case of injury as aforesaid (except such an injury in respect whereof the employer is required by some other Act to provide against such liability as prescribed by such other Act) damages arising under circumstances creating also, independently of this Act, a legal liability in the employer to pay damages in respect of that injury.

The stevedoring company gave a third party notice to the insurance office notifying it of the action brought by the plaintiff and claiming to be indemnified against the plaintiff's claim on the ground that it is insured with you against all sums for which, in respect of injury to the plaintiff, a worker employed by it, it may become legally liable by way of damages arising under circumstances creating a legal liability in it to pay damages in respect of that injury. Later in the proceedings it also claimed against the insurance office that if it, the stevedoring company, should be held liable to indemnify the Queensland company under the hiring agreement, the insurance office was under an obligation to indemnify it against such a claim.

The learned trial judge found in favour of the plaintiff against both the stevedoring company and the Queensland company, holding that the stevedoring company had failed to provide a safe system of work and that, in the case of the Queensland company, the driver of its mobile crane had been negligent. He awarded the plaintiff $36,777.84 by way of damages and no complaint is made of any of these findings.

His Honour then made orders which provided, (inter alia),

that the third party [the insurance office] completely indemnify the first defendant [the stevedoring company] in respect of all sums payable by the first defendant under this judgment in respect of damages including sums payable by the first defendant to the second defendant [the Queensland company] by way of indemnity against the second defendant's Liability under this judgment for damages or contribution. The case went on appeal to the Full Supreme Court which dismissed the appeal and the insurance office now appeals to this Court and puts forward three submissions. The first of these is that the stevedoring company, as the hirer of the mobile crane, was required by The Motor Vehicles Insurance Acts to insure against liability in respect of injury arising from the use of the crane and that the exception clause in the policy issued to it by the insurance office applied. For the reasons given by the Chief Justice I am of opinion that this contention fails.

The other submissions arise from the fact that the agreement for the hire of the crane made between the stevedoring company and the Queensland company contained the indemnity clause to which I have already referred. In the first place it was contended that so much of the order of the learned trial judge as I have italicized should not have been made because any amount which might be paid by the stevedoring company to the Queensland company under the indemnity contained in the hiring agreement would not fall within the terms of the policy issued by the insurance office. Such a payment would not, it was said, be the payment of a sum for which the stevedoring company had become legally liable by way of damages. I do not agree with this contention. The stevedoring company became liable to the plaintiff for the full amount of the damages awarded, as did the Queensland company. If the latter company satisfied the plaintiff's judgment and then claimed to be reimbursed by the stevedoring company under the indemnity provision in the hiring agreement, the latter's liability would, I think, fall within the terms of the policy. It is plain that if the Queensland company had called upon the stevedoring company to fulfil its obligation under the indemnity clause by directly satisfying the plaintiff's judgment, the stevedoring company would have been entitled to be indemnified under the policy and it does not seem to me that the position would be any different had the Queensland company first satisfied the plaintiff's judgment and then claimed to be recouped by the stevedoring company. In either event a payment made by the stevedoring company would be made in satisfaction of a liability for which, in respect of the injury to the plaintiff, it had become liable by way of damages.

Next it was said that, by entering into the hiring agreement containing the indemnity clause, the stevedoring company had defeated or diminished rights which the insurance office would otherwise have had by way of subrogation. But this contention cannot be supported. As the Chief Justice has pointed out, the stevedoring company had not, at any time, a right to contribution from the Queensland company. The hiring agreement did not bring any such right into existence. It prevented it from arising.

In the judgment of the Chief Justice the facts which led to the action from which this appeal arises have been stated and the course of the proceedings in the Supreme Court of Queensland has been described. Therefore I need not set out the facts or give details of the decisions made by the learned judge who tried the action and by the Full Court on appeal from him.

The respondent was one of two defendants in the action and the appellant was a third party joined in the action by the respondent. The decisions of the learned primary judge included decisions concerning the rights and obligations of other parties to the action, as well as those of the appellant and the respondent. Those other parties were the plaintiff in the action and the second defendant, Queensland Shipping Services Pty. Ltd., who have not taken part in this appeal. This Court is concerned only with certain questions arising out of claims against the appellant made by the respondent by its third party notice and by its statement of claim against the third party. Two claims were set out in the respondent's amended statement of claim. The first was a claim for indemnity against such sum as might be awarded to the plaintiff, whether by way of damages or costs, together with the respondent's costs of defending the action. The second was a claim for indemnity against such sum as the respondent might be ordered to pay by way of indemnity to the second defendant, whether by way of damages or costs. The second of these claims, which was added by amendment, was supported by allegations that the second defendant had served on the respondent a "Notice of Indemnity or Contribution", that the conditions of hire contained in the contract referred to in that notice provided that the respondent would indemnify the second defendant for all claims for loss, damage or injury arising out of the use of the crane referred to in the plaintiff's statement of claim and that the respondent disputed the claim for indemnity of the second defendant, but in the event of being held liable to indemnify the second defendant the respondent claimed that it was entitled to be indemnified by the appellant against the claim of the second defendant for indemnity.

Before there could be any adjudication in the action upon the questions raised by these third-party claims it was necessary, of course, that other issues in the action should first be determined. It was by reference to such liabilities as the respondent should be adjudged to have incurred that its right against the appellant to be indemnified had to be considered. Liabilities which the Court found to have been incurred by the respondent were a liability to the plaintiff for damages and costs, and a liability to the second defendant, established by the Court's decision that as between the respondent and second defendant the indemnity contained in the hiring agreement was operative and that the respondent was bound to indemnify the second defendant against its liability under the judgment recovered by the plaintiff, which was a judgment against both defendants which rendered each of them liable to the plaintiff for the full amount awarded. It is in reference to the liabilities of the respondent as thus determined that the questions which have been raised in this appeal as to the obligations of the appellant as insurer to the respondent are to be considered.

Three questions have been raised. The first is whether the policy issued by the appellant to the respondent pursuant to s. 8 (1) of The Workers' Compensation Acts, 1916 to 1966, of the State of Queensland, gave any indemnity to the respondent in the circumstances of the case. The appellant contended that it did not, for the reason that the injury for which the respondent became liable to pay damages was an injury in respect whereof the respondent was required by The Motor Vehicles Insurance Acts, 1936 to 1961 to provide against such liability and was, therefore, within the exception set out in par. (b) of s. 8 (1) of The Workers' Compensation Acts. On this question I agree with the conclusion of the Chief Justice that the exception did not apply and I agree with his reasons for that conclusion.

The second question is raised by a contention on behalf of the appellant that the indemnity under the policy did not extend to any liability of the respondent to the second defendant, arising out of the contract of indemnity contained in the hiring agreement. Section 8 of The Workers' Compensation Acts provides that an employer shall insure:

against all sums for which, in respect of injury to any worker employed by him, he may become legally liable by way of damages arising under circumstances creating a legal liability in the employer to pay damages in respect of that injury. This indemnity is expressed to attach to his liability to pay, and not to sums which have actually been paid. The judgment in the action made the respondent liable to the plaintiff to pay the damages awarded. It also declared that there was a liability in the respondent to indemnify the second defendant in respect of that defendant's liability to the plaintiff under the judgment. No doubt it was true, in a practical sense, that the occasion was not likely to arise when the respondent would be called upon to pay any sum to the second defendant, because the plaintiff's right to payment would be satisfied out of the State Accident Insurance Fund, in accordance with s. 9A of The Workers' Compensation Acts. In any event, if it became necessary for it to do so, the second defendant could insist as between it and the respondent that the latter should pay the full amount of the judgment, so as to secure the second defendant against recourse by the plaintiff to it for payment. Nevertheless, I do not think that these considerations render it unnecessary to consider the question whether or not a sum of money, assumed to be payable by the respondent to the second defendant in pursuance of the indemnity in the hiring agreement, would satisfy the description in s. 8 of The Workers' Compensation Acts, and also in the policy issued in pursuance of that section, of a sum for which the respondent was legally liable by way of damages arising under circumstances creating a legal liability in the employer to pay damages in respect of the injury to the plaintiff worker. This was a question raised by the respondent's third party claim against the appellant. It was litigated between those parties. The respondent obtained an order that the appellant should indemnify the respondent completely "in respect of all sums payable by the first defendant under this judgment in respect of damages including sums payable by the first defendant to the second defendant by way of indemnity against the second defendant's liability under this judgment for damages or contribution ". It is the contention of the appellant that that order, in so far as it includes the words I have italicized, is founded upon an erroneous construction of the policy defining its obligation to the respondent. If that contention is made out, I think that the appellant is entitled to claim that that order should not be allowed to stand in that form. Therefore, I think the question is one with which this Court should deal.

The appellant contends that any payment made by the respondent pursuant to an obligation derived from the hiring agreement with the second defendant would not be payment of a sum for which the respondent had become legally liable by way of damages arising under circumstances creating a legal liability in the respondent as employer to pay damages in respect of that injury. Accordingly, it is said, that although the appellant became liable to the plaintiff for the full amount of the verdict by way of damages in respect of his injury, yet to the extent that the burden of the respondent's ultimate liability was increased because of its contract with the second defendant, the respondent, as between itself and the appellant, must bear the burden itself and cannot obtain indemnity from the appellant, because to that extent the liability of the respondent is not a liability for damages in respect of the injury. As I understand the submissions made on its behalf, the appellant asserts that, but for the indemnity in the hiring agreement, the ultimate liability of the respondent for damages would be confined to one-half of the amount awarded to the plaintiff, since the other half would fall on the second defendant. Therefore, it is said, the liability of the respondent in respect of that other half of the amount due to the plaintiff does not fall within the policy; and this is so whether it happens that the respondent pays the full amount to the plaintiff and is precluded by the hiring agreement from obtaining recoupment from the second defendant, or the respondent is required to recoup the second defendant for a payment made by it.

In my opinion, these submissions should not be accepted. It is plain that the respondent has incurred a liability for the full amount and that this is a liability to pay damages in respect of injury to its employee and is, therefore, directly within the terms of the policy. Leaving aside, for later consideration, any question of a counterclaim or set-off which the appellant may be able to establish, it is not to the point, in relation to the submissions now being considered, to say that in other circumstances the ultimate liability of the respondent would have been a different liability, limited to one-half of the amount due to the plaintiff. If the respondent should pay the whole amount to the plaintiff, clearly, it would be discharging a liability which was wholly "by way of damages". If, however, it happened that the second defendant made payment to the plaintiff and obtained recoupment from the respondent, this would be only a different mode by which the legal liability of the respondent to pay the whole amount of the damages due to the plaintiff would be satisfied. The contract of indemnity in the hiring agreement is the reason why the respondent is unable to reduce its own loss by calling upon the other defendant for contribution. But this does not change the character of the loss which the respondent suffered and in respect of which it was insured. In my opinion, the Full Court was right when it answered in the affirmative the question posed by it in the following terms:

The whole of the damage to the plaintiff, the first defendant was legally liable to pay; but for the contract, the first defendant might have shed half of this liability; the contract says he must bear the whole liability for the damage; is not the liability for the whole damages, a liability by way of damages?

The third question to be considered is one which was not decided in the Supreme Court. It is now contended for the appellant that by entering into the hiring agreement, which contained a clause which prevented the respondent from being able to assert a right of contribution, which otherwise it would have had, the respondent was in breach of a duty which it owed to its insurer not to defeat or diminish the rights to which the insurer might become entitled by way of subrogation. Accordingly, it is submitted that the respondent can be made to account to the appellant for this derogation of the latter's rights and that the amount of the loss which was therefore suffered by the appellant has already been determined in the action, by means of the finding of the trial judge that responsibility for the injury to the plaintiff was to be apportioned equally between the respondent and the second defendant. This claim was not asserted in that form in the action. But in the reasons of the Full Court for its judgment, it was suggested that the real ground of the appellant's complaint was that the respondent had given up a right to contribution which, if available, would have reduced the liability of the appellant under its policy.

Assuming that it is open to the appellant to assert this claim against the respondent at this stage of the litigation, I am of opinion that it should not be held that the respondent, in hiring the crane upon the terms contained in the hiring agreement, was in breach of its obligations to the appellant as its insurer. I agree with the reasons which the Chief Justice has given for concluding that this was not a dealing by which any right possessed by the respondent, which it was obliged to preserve for the benefit of the appellant, was given away or diminished. It is true that in the events which happened the right of contribution which the respondent would otherwise have had and the corresponding right of the appellant by way of subrogation were unavailable, because the hiring agreement contained a clause by which the burden of any liability of the second defendant for damages was made to fall on the respondent, to the exoneration of the second defendant. But the principle upon which the appellant relies cannot be applied to every dealing of an insured person in the course of his business which is made upon terms which exempt the other party to the transaction from some liability in respect of loss or damage of the kind covered by the insurance, which might fall upon that other party if the dealing had been made upon different terms. The appellant cannot succeed upon the claim now under consideration unless the obligation of the respondent under the contract of insurance was so wide that the entering into any such transaction as I have described would constitute a breach of that obligation. It was not shown that the inclusion of the indemnity clause in the hiring agreement was an abnormal or unusual incident in that transaction. In my opinion, there is no warrant for holding that the respondent was in breach of the obligations arising under its contract of insurance when it entered into that transaction.