Lord Reid's statement was applied by the High Court in Hamilton v Whitehead . (1989) 166 CLR 131, 137. Further, in Krakowski v Eurolynx Properties Ltd , (1995) 130 ACRT. Brennan, Deane, Gaudron, McHugh JJ said 130 ACRT, 16. that "[a] division of function among officers of a corporation … does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them".
38 These statements are also inconsistent with BP's submission in this Court that Geselle needed to do no more in order to comply with special condition 3 of the material portion of the insurance policy than delegate responsibility for the operation of its Moruya service station to a "competent employee". In any event, there is no evidence that Mr Pike met that description. On the contrary, he knowingly permitted dangerous petrol bowsers to remain in use, including use by "self-service" customers.
39 Nor is there any evidence that Mr Geselle did not know what was being done or reasonably believed that Mr Pike was competent. Mr Geselle did not give evidence, which justified an inference that his evidence would have not have assisted Geselle or BP against VACC. Nor did any other witness give evidence which might have assisted BP on this point.
40 In my opinion, the finding in paragraph 16 above lacks an evidentiary foundation, and was wrongly made.
41 In summary, BP's proceeding against VACC should have been decided on the basis of the finding set out in paragraph 6 above, and dismissed.
42 I would allow the appeal, set aside the order made below and dismiss BP's proceeding against VACC. BP should pay VACC's costs of that proceeding and this appeal. BP should have a certificate under the Suitors Fund Act, if qualified.
43 BROWNIE AJA: The appellant (VACC) insured Geselle Investments Pty Ltd (Geselle) under a public liability insurance policy. Geselle operated a service station in Moruya, as franchisee and sublessee of the respondent (BP). Mr Clark, a customer of the service station was burnt in a fire which occurred on 27 March 1991, after a petrol bowser malfunctioned.
44 Kirkham DCJ gave judgment for Mr Clark against BP and Geselle for compensatory damages, and judgment against Geselle for an additional sum for exemplary damages. Geselle went into liquidation. BP satisfied the whole of the judgment for compensatory damages, and then sued VACC pursuant to s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (the Act), claiming the benefit of the policy issued by VACC to Geselle. Bowden ADCJ gave judgment for BP, rejecting the proposition that Geselle was in breach of a condition of the policy which provided:
"The Insured shall take all reasonable precautions to prevent bodily injury ... and shall take reasonable measures to maintain all premises furnishings fittings appliances and plant in a sound condition ..."
45 The policy contained a promise by VACC to indemnify Geselle against its legal liability "to pay for compensation (which expression ... does not include punitive or exemplary damages)". The questions raised on appeal were whether BP was estopped from denying the breach of this condition, and if not, whether breach of the condition had been independently established.
46 The "principals" of Geselle were Mr and Mrs Geselle. Geselle conducted two service station businesses, one at Moruya, and the other at Batemans Bay. Mr and Mrs Geselle worked at the latter place, and Geselle employed Mr Pike to manage the Moruya service station. He had been so employed for a year, as at March 1991. Geselle contracted to sell the Moruya service station business to Rigdart Pty Ltd (Rigdart). The contract provided that Mr Liddle and Mrs Hyndes, representatives of Rigdart, might attend at the service station, to learn about the management and the day to day running of the service station business; and, in general terms, Mr Pike showed them this.
47 Mr Pike was aware that one bowser sometimes malfunctioned. It was not designed to be used by customers serving themselves, but customers occasionally did serve themselves, and it sometimes happened that a customer replaced the nozzle on the bowser, without turning off the pump motor, so that when the next person used the bowser, petrol might be pumped out of the nozzle without warning, and without the user intending this. This had happened at least twice earlier in March 1991. A service man from Gilbarco Australia Ltd (Gilbarco), a company which serviced the bowsers from time to time, attended and noted the defect, but was unable to repair the bowser immediately, for want of the necessary parts. There is a disputed question as to whether, as part of what Mr Pike told Mrs Hyndes, he told her about this defect.
48 The accident involving Mr Clark occurred when Mrs Hyndes was about to fill the petrol tank of Mr Clark's van. She removed the nozzle from the bowser, and it started to pump petrol as she started to point the nozzle towards the van. Petrol struck Mr Clark, and then ignited.
49 Mr Clark sued Mrs Hyndes, Rigdart, Mr Pike, Geselle, BP and Gilbarco. Geselle did not appear. On the hearing, BP entered into an agreement with Mr Clark to the general effect that if Mr Clark abandoned his claim against Mrs Hyndes, Rigdart, Mr Pike and Gilbarco, BP would admit liability, and Mr Clark would proceed against it and Geselle. This happened, and on 2 August 1996 Kirkham DCJ gave the judgment mentioned in para 44.
50 On some earlier occasion his Honour granted leave to BP to file a Third Party Notice as against Geselle, claiming contribution amongst tortfeasors, and made an order for substituted service of that Notice. That claim for contribution came on for hearing some time later, after the date of Kirkham DCJ's first judgment. On this occasion Mr Geselle attended at court on behalf of Geselle. His Honour apportioned responsibility for Mr Clark's compensatory damages on the basis that Geselle pay 75% of those damages, and BP 25%. The record does not include the reasons for this decision.
51 VACC asserts that BP is estopped from denying that Geselle was in breach of the policy condition quoted above. It says that Geselle and VACC are privies, and that as between BP and Geselle, and therefore also as between BP and VACC, the judgments of Kirkham DCJ create the estoppel mentioned. BP says that there was neither a sufficient identity of issues, nor a sufficient identity of parties, to found an estoppel.
52 Kirkham DCJ made two relevant decisions. In the first, he found for Mr Clark against BP and Geselle, and awarded compensatory damages, and at the same time found for Mr Clark against Geselle, and awarded exemplary damages. In relation to that decision BP and Geselle were co-defendants, but there was no issue between them, so that no issue estoppel arose, as between them. In the second decision, his Honour dealt with BP's claim against Geselle for contribution between tortfeasors, under section 5 of the Act, and found that it was just and equitable that Geselle pay 75% of Mr Clark's compensatory damages, having regard to the extent of Geselle's responsibility for the damage. The record before us is sadly deficient, but it seems right to infer that, in coming to that conclusion, his Honour's reasoning was influenced by the same considerations that led him to decide earlier that exemplary damages should be awarded as against Geselle.
53 On that earlier occasion, his Honour said that Geselle was "on notice of the malfunctioning petrol bowser", but that in spite of that knowledge, which amounted to knowledge that the bowser would sometimes spontaneously discharge petrol, Geselle permitted the bowser to continue to be used; and he regarded this conduct, given the nature of petrol and its dangerousness, "as displaying recklessness in the extreme which ... attracts exemplary damages".
54 Earlier, his Honour had said that there was no evidence that Mr Pike or any other employee of Geselle had brought to the notice of Mrs Hyndes the difficulties, problems and dangers of which he, Mr Pike, knew; and that there was no evidence that Mrs Hyndes had been trained in the use of the equipment. I should add that all that we have before us, as to this first hearing, is a copy of the reasons for judgment, and that those reasons include references to evidence that is not before us.
55 There is even less before us as to the second hearing before Kirkham DCJ. All that we have is a series of notes of orders made, and of who appeared from time to time; and the dates of some of these notes may be inaccurate.
56 On the trial of BP's claim against VACC, BP tendered a copy of the reasons for the first judgment of Kirkham DCJ, the notes just mentioned, and a series of reports from an investigator retained on behalf of VACC. The investigator's reports included statements from Mr Pike, Mrs Hyndes and Mr Liddle, but none of them gave oral evidence. Indeed, the documents mentioned constituted the whole of the evidence adduced, going to the present issues.
57 In his statement to the investigator, Mr Pike said that he had told both Mr Liddle and Mrs Hyndes to look out for problem with the bowser, and told them how to cope with it. In their statements, neither Mr Liddle nor Mrs Hyndes denied this, or, indeed, responded at all to Mr Pike's statement, although they both said in general terms that they were unaware of any particular problem with the bowsers. The statement of Mrs Hyndes suggests indirectly that she had received some training, in that when the fire broke out, she knew what to do, and ran and did it immediately. That is, for what it is worth, and so far as one can tell from the record, the evidence before Kirkham DCJ was different to the evidence before Bowden ADCJ as to whether Mr Pike had told Mrs Hyndes anything relevant, and as to whether he had given her any training in the use of the equipment.
58 The (relevant) issue before Bowden ADCJ was whether Geselle was in breach of the condition of the policy, quoted in para 44. The proper construction of that condition was not in issue, either at the trial or on appeal. It must be construed having regard to the commercial purpose of the insurance contract: an insured may be held to be negligent, in not foreseeing some risk, or in not taking appropriate steps to avert that risk, but he insures in respect of his liability arising from that finding, and what is "reasonable" as between himself and his insurer is different to what is "reasonable" as between himself and someone injured in consequence of his negligence. To constitute a breach of the condition, he must have recognised the danger, and deliberately courted it, by taking measures he knew to be inadequate to avert it; or his conduct must have been "at least reckless, that is to say, made with actual recognition by [him] that a danger exists, and not caring whether or not it is averted": Fraser v B N Furman (Productions) Ltd [1967] 1 WLR 898 at 905-906; Albion Insurance Company Ltd v Body Corporate Strata Plan Number 4303 [1983] 2 VR 339 at 344-345; and Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390. The test is a subjective one, personal to the insured.
59 Kirkham DCJ found Geselle guilty of reckless conduct attracting exemplary damages, on the basis that Mr Pike knew of the danger, but failed to tell Mrs Hyndes of it, or to give her any training in the use of the equipment. However, BP says that this is not the same thing as saying that Geselle itself acted in breach of the condition of the insurance policy, properly construed.
60 It is of course true that as between Geselle and Mr Clark, and so far as concerns the award of compensatory damages, the negligence of Mr Pike was the negligence of Geselle's servant, but, as is common ground, this is not relevant to the present issues.
61 It is also true that in his first judgment Kirkham DCJ held that Geselle acted with the degree of recklessness apt to lead to the award of exemplary damages. That is, his Honour must be taken to have found that Geselle itself acted with this degree of recklessness: Canterbury Bankstown Rugby League Football Club Ltd v Rogers (1993) ATR 81-246. The reasoning that led to this conclusion is not, perhaps, entirely clear, but his Honour seems to have treated the knowledge of Mr Pike of the existing defects in the bowser as having been the knowledge of Geselle, and the decision of Mr Pike to continue to use the bowser notwithstanding these defects as the decision of Geselle. VACC now submits that this must have been either on the basis that Geselle had wholly entrusted the management of the Moruya service station to Mr Pike, so that his state of mind became the state of mind of Geselle, or that Mr Pike can be expected to have reported matters to Mr Geselle. Again, the record before us is silent; but these seem to be the only possible bases for the finding that Geselle was liable to pay exemplary damages.
62 That is, the first judgment of Kirkham DCJ established an issue estoppel between Mr Clark and Geselle that, in one of these ways, Geselle had acted recklessly; and his Honour's second judgment established an issue estoppel as between Geselle and BP that Geselle should bear 75% of the responsibility for the compensatory damages; and the likelihood is that his Honour's reasoning in arriving at the figure of 75% was influenced by the same factors as led to his conclusion that Geselle had acted recklessly. However, the issue before Bowden ADCJ was whether Geselle had breached the policy condition, and BP contends that this is a different issue.
63 In Blair v Curran (1939) 62 CLR 464 at 531 - 533, Dixon J (as he then was) said:
"A judicial determination directly involving an issue of fact or of law disposes once and for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification or its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared. The distinction between res judicata and issue estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it has merged and has no longer an independent existence, whilst in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order.
Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue estoppel is confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established. Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived. But in neither case is the estoppel confined to the final legal conclusion expressed in the judgment, decree or order. In the phraseology of Coleridge J ... the judicial determination concludes, not merely as the point actually decided, but as to a matter which it was necessary to decide and which was actually decided as the groundwork of the decision itself, though not then directly the point at issue. Matters cardinal to the latter claim or contention cannot be raised if to raise them is necessarily to assert that the former decision was erroneous.