[1999] QSC 70

IN THE SUPREME COURT

OF Writ No.56 of 1991

CAIRNS

BETWEEN: GREG NEWELL

Plaintiff

AND: INVESTMENTS PTY.LTD.

Defendant

AND: MMI WORKERS' COMPENSATION (NSW)LTD.

Third Party

REASONS FOR JUDGMENT

BEFORE THE HONOURABLE JUSTICE J°OIJ!::;

DELIVERED THE THIRTIETH DAY OF MARCH 1999

1 In this matter I am asked to determine the third party proceedings commenced by

the defendant against the third party on 24 October, 1995 following the close of

pleadings in the original action.

2 The plaintiff was injured when the tourist coach he was employed to drive

overturned after it left the Kennedy Highway in North Queensland. The cause of the

incident which occurred on 18th May, 1988 was a failure of the coach's brakes.

3 The defendantwas at the material time the plaintiffs employer.

4 The defendant has compromised the plaintiffs claim by agreeing with him to pay

the sum of $226,000.00 (including costs) by way of damages for his injuries and 2

associated loss. No judgment has been entered.

The Issue

5 In these third party proceedings the defendant seeks indemnity and/or contribution

from the third party. These third party proceedings are effectively being pursued by the

Government Insurance Office (NSW) (hereinafter "GIO") which has agreed to

indemnify the defendant against its liability to pay the agreed damages. GIO's

obligation to indemnify arises from its being the insurer of the coach. The third party

however accepts that the level of damages and the circumstances of the compromise

were appropriate.

6 The third party is sued in its capacity as the insurer of the defendant pursuant to

the provisions of The Workers' Compensation Act (NSW) (hereinafter "the Act").

Its obligation to indemnify at the relevant time arises from the policy it issued to satisfy

the requirement of the employer set out in the terms ofs.155 as follows:-

"155(1) An employer (other than a self-insurer) shall obtain from a licensed insurer, and maintain in force, a policy of insurance that complies with this Division for the full amount of the employer's liability under this Act in respect of all workers employed by the employer and for an unlimited amount in respect of the employer's liability independently of this Act (being a liability under a law of New South Wales) for any injury to any such worker."

The subsection is expressed in these terms pursuant to the Workers' Compensation

(Benefits) Amendment Act 1989 which had the effect of restoring common Law

rights to injured workers which had been modified by previous legislation in New

South Wales. By virtue of s.151X of this Act the policy of insurance which was

current at the time of this incident was deemed to have provided indemnity for the 3

employer in accordance with the terms as set out above.

7 The policy of insurance pursuant to the Act held by the defe~dant with the third

party had been renewed for the year ending 1 July, 1988. Accompanying the renewal

proposal was a wages declaration by the defendant (exA). That form contained a

notation as follows:-

"Situation for covers shown below ANYWHERE IN NEW SOUTH WALES."

8 Mr. Cranitch, Senior Counsel for the third party argued that these words on that

document restricted the scope of the insurer's liability under the statutory policy.

Having regard to the purpose of the policy and the requirement that it cover a statutorily

determined liability, strong evidence of an intention to limit the scope would be

required.

9 Putting that contention to one side, the words which attract the conflict in these -. third party proceedings is the requirement for the indemnity of the employer's liability

independently of the Act being a liability under a law o/New South Wales.

10 The scope of these words has been considered by Demack J of this Court in an

unreported decision Doherty and Anor -v- Howie Herring and Forsyth Pty.Ltd.

And Anor 1 and by Miles CJ of the Supreme Court of A.C.T. in Susie -v- Sunset

Pty.Limited and Ors 2.

11 In the former of these cases Demack J said (at p.6)-

"The purpose ofs.155 of The Workers' Compensation Act 1987 (NSW) is to ensure that any judgment obtained by a worker against an employer is met. There are elaborate provisions in division 3 and 4 of

1 Writ No.611992 Rockhampton - 10 September 1993

2No. SC(ACT) 75011993 - 11 June 1998 4

Part 7 to deal with this. Similarly in Queensland there is a statutory scheme to achieve the same result under the Workers' Compensation Act. So, if the subject clause is construed to mean that the employer is to be indemnified in respect of a liability asserted in the courts which apply the law of New South Wales the purpose of the legislation is met."

12 In Susie Miles CJ considered the applicability of the section to the situation where

a worker had been injured in the Australian Capital Territory, (A.C.T.) had sued there

and had obtained judgment in the A.C.T. The plaintiffs employer was the holder of a

policy in compliance with the NSW Workers' Compensation Act and the plaintiff who

ordinarily worked in NSW was covered by that policy. In deciding that the indemnity

did not arise Miles CJ said (at p.10) as follows:-

"On this approach, which I think is correct, Sunset's [the employer's] liability in tort, arising at the time of the plaintiffs injury, was not.a liability arising under a law of New South Wales. It is true that the plaintiff might have sued for damages in New South Wales for his injury, relying on the act or omission in the A.C.T., and that in accordance with thy New South Wales law relating to tortious liability and conflict of laws, which I take to have been the same as those of the A.C.T. at the time of the injury, he could have received damages "under a law of New South Wales" in that sense. Indeed, he could have sued in any "law area of the Commonwealth" and, in accordance with the law of the jurisdiction chosen, he would have obtained judgment relying on the act or omission of Sunset which occurred in the A.C.T. However, the liabi~ity in respect of indemnity sought in the present case is indemnity in respect of the liability to pay damages which has resulted in and merged in a judgment of this Court. In my view, that liability doesnot arise under a law of New South Wales."

13 In both of the cases referred to above, as well as in the case of Turf Club

-v- Crowley 3 to which I was referred, the question of the right to be indemnified arose

after judgment had been obtained by the injured worker. As a consequence the nature

of the liability changed from a liability for tortious conduct to liability in respect of a

3 (1972) 46 ALJR 336 5

judgment. This point was considered by Demack J in Doherty at p.3. He said:-

"So the commission of a tort raises for the tortfeasor a liability in the form of cause of action. During the course of the action the liability is in respect of the court procedures. After the action is heard, the liability is in respect of the judgment. These different shades of meaning in the word "liability" are well recognised in the judgment of Napier C.J. and Abbott J in Hall -v- Bonnett (1956) S.A.S.R. 10, at p.15, where their Honours discuss "liable":-

"In this sense it seems to us that "liable" comprehends the state of a wrongdoer from the time of the fault committed to the point at which his liability is established and quantified by the judgment, and, beyond that, to the point at which it is discharged whether by release or payment or otherwise, as by lapse of time. The context may show that some other meaning is intended, but this is, we think, the natural meaning." "

14 In Susie, Miles CJ made the same point both in the passage cited above and also

in his consideration of any liability based on the employer's breach of contractual duty.

He said (at p.ll):-

"In any event, wh~~her the liability which arose at the time of injury was in tort or in contract, it has now merged in the judgment and hence the liability of Sunset to pay the damages awarded to the plaintiff by the judgment of the Court does not arise under a law of New South Wales."

15 In McKain -v- R.W. Miller & Co. Pty.Ltd. 4 The majority (Brennan, Dawson,

Toohey and McHugh J1) said (at p.39):-

"Once any of the causes of action merges in a judgment, the original civil liability must be taken to be merged in the judgment and to have been extinguished."

16 Mr. Myers, counsel for the defendant, argues the fact that the tortious or

contractual liability had emerged in the judgments of courts outside New South Wales

distinguishes those cases from the issue to be determined here.

4 (1991) 174 CLR 1 6

17 I t was conceded by the defendant during argument that, at best, it was entitled

only to a 50 per cent contribution from the third party and that this is so only if it can

establish a liability in the defendant under the law of New South Wales. The defendant

argues that such an outcome would give rise to a situation of double insurance entitling

it to a one half contribution in accordance with the principles enumerated in Albion

Insurance Co.Ltd. -v- Government Insurance Office (NSW) 5.

18 To this end, the defendant sought to establish that its liability to the plaintiff arose

on either of two grounds, namely:-

i. that the causative negligent act or omission occurred in New

South Wales notwithstanding that the damage occurred III

Que~nsland; or

ii. that there was a breach by the defendant of an implied term of

the plaintiff.s contract of employment, the proper law governing

which was that of New South Wales.

19 The plaintiff in his pleading made allegations of negligence and breach of the

implied term of the contract of employment but their respective duties arising in either

event are coextensive and so no distinction was necessarily made in reaching the

compromise of his claim against the defendant.

20 The circumstances upon which there was a breach of either duty must be found on

the evidence led in these third party proceedings.

The Evidence

21 The plaintiff s coach was one of a convoy of 3 coaches which were undertaking

5 See (1969) 121 CLR 342 7

an extensive tour through New South Wales, , Northern Territory and

Queensland. One of the other coaches was driven by Mr. Terry Clark who held the

position of Operations Manager for the defendant and who was the senior driver on this

excurSIOn.

22 The plaintiff alleged that the brake failure stemmed from the ineffective repair of

the brakes before the coach left Sydney on its fateful journey. He had returned from a

prior trip on 4 May, 1988 and thereupon reported to Mr. Steven Heather, head mechanic

for the defendant, that there were problems with the coach's brakes. The plaintiffs

belief, when he set out on the relevant journey, was that the front and rear brakes had

been re-lined 6. After leaving Sydney the plaintiff next inspected the brakes as part of a

routine service check at Alice Springs. There. he formed the view that the brakes had

not been re-lined as he had believed. The linings themselves could not be seen on such

an inspection but the plaintlff apparently reached this view because of the amount of

adjustment that had to be made. He claims to have reported his belief to Terry Clark.

23 Following the incident an inspection of the braking system was carried out by Mr.

Conway, Queensland Transport Inspector. He found the linings on all brakes to be

satisfactory .

24 After servicing the vehicle at Alice Springs the plaintiff drove it without apparent

concern to a point approximately 30 km south west of The Oasis in North Queensland.

At this point the brakes on the front left-hand side failed because the circlip which holds

a mechanical rod in place had become detached, causing the rod to move the s-cam out

of position and thereby destroying any braking capacity on that wheel. After effecting

6 See exhibit 1 - Record of Interview - Q37 8

temporary repairs the coach was driven to The Oasis where further repairs were carried

out. The result of these repairs was to leave the vehicle without any braking capacity in

either of the front wheels. Notwithstanding this, a decision was made to continue on the

journey. The responsibility for this decision must clearly be with Mr. Terry Clark, the

Operations Manager. By reducing speed and using the gearbox more extensively the

plaintiff continued to drive the coach in a safe and acceptable manner for a further 300

kilometres to the area where the incident occurred. The plaintiff first realised that there

was something further wrong with the brakes when they failed to slow him sufficiently

to make a right-hand turn to follow the intended course. He was able to continue along

his line of travel to an uphill grade which brought the coach to a stop but he then found

that the vehicle did not have sufficient braking capacity to prevent its rolllng backwards.

Because of this lack of control the vehicle rolled backwards over an embankment and

overturned.

25 The subsequent examination by Mr. Conway which established that the linings on

the braking system were satisfactory, also revealed that the adjustment to the brakes was

unsatisfactory to a very significant degree. The coach was fitted with brakes on the rear

drive axles, which had dual wheels on each side, and on the tag axles behind the drive

axles, which had a single wheel on each side. Mr. Conway's examination found that the

brakes on the left drive axle had not been working for a number of days and rust was

present in the brake drum. The right drive axle required significant adjustment - two

full turns. The tag axle on both sides required even more adjustment - three full turns.

26 With respect to the left drive axle Mr. Conway was of the view that the condition

of the brake-drum indicated that its period of inoperation was more than 3 days but less 9

than a week 7. He noted also that the slack adjuster on that brake had seized and was

not able to be moved. Had this been the condition of the left drive brake at Alice

Springs then the plaintiff would have discovered it had he attempted there to make the

adjustment. Being unable to move the slack adjuster would indicate to a person

experienced in these matters that the s-cam was seized.

Findings

27 I accept the plaintiffs evidence that he did adjust the brakes at Alice Springs on

12 May 1988. Given his prior concern about the braking system, it is natural that he

would pay close attention to this part of his servicing routine. His assumption that there

was some defect in the brake linings is clearly wrong given what was subsequently

found by Mr. Conway. This appears to be a conclusion he reached because of the

amount of adjustment that he had to make whilst carrying out the servicing at Alice

Springs. I accept that he w~s genuine in holding the belief that the fault stemmed from

inadequate repair in Sydney, but he was in error in so doing.

28 The incident occurred some 6 days after the Alice Springs inspection during

which time the vehicle had travelled in excess of 1000 km. Some of this travel was

over rough road surfaces.

29 In the end result I am not satisfied on the evidence that there was any defect in the

braking system when the coach left Sydney or that the defendant has shown any other

act or omission which would constitute negligent conduct by it in NSW.

30 The plaintiff could readily establish negligent acts in respect of the conduct of the

defendant's servants in Queensland to found his cause of action - e.g., the failure to

7 Transcript 23/40 , ' ,

10

check, or to instruct the plaintiff to check, the adjustment in the rear brakes when the

front brakes were disconnected and the instruction to the plaintiff to drive in those

circumstances.

31 Consequently, in terms of tortious liability, the plaintiffs cause of action arises

wholly within Queensland and the defendant's liability to the plaintiff falls to be

determined accordingly to the law of Queensland. The liability is thus one not arising

under a law ofNSW.

32 The fact that the plaintiff may have sued in NSW and, having regard to the law of

NSW and the conflict of law rules, been able to recover damages in NSW is not to the

point. The plaintiff having chosen to sue in Queensland in respect of acts or omissions

occurring in Quyensland makes unnecessary any consideration of the indemnity in

respect of tortious liability under New South Wales law.

33 As to the claim bas~.d on a breach of any implied term of the contract of

employment, the defendant contends that there is a clear New South Wales connection.

It contends that the contract of employment was formed in NSW, its operation was

directed from NSW, the performance of duties outside NSW were contemplated by the

contract but were at all times controlled from NSW. The defendant argued that the

breach of contract was allowing the coach to leave Sydney with the inadequate braking

system. In view of my findings above the only breach of contract proven on the

evidence before me are the acts or omissions which occurred in Queensland. This

creates a liability under the law of Queensland to recover damages for that breach. The

law of Queensland recognises and awards damages for the breach of a contract made

outside Queensland notwithstanding that the proper law is that of a place outside 11

Queensland. That is not to deny, in the circumstances of this case, the presence of a co-

existing liability in accordance with the law of New South Wales which must on the

facts be the proper law of the contract of employment.

34 The consequence of the existence of a dual liability did not have to be considered

in either Doherty or Susie because the respective liabilities had merged into judgments

of the court. However Miles CJ did express the view that in Susie "a similar result

[would follow if the employer's liability] were characterised as a liability in contract

rather than a liability in tort". 8 But his close consideration of the point was not

necessary for the reasons I have mentioned. With respect, I do not share this view.

35 The relationship between employer and employee has always been contractual.

The law of tort additionally identifies ob~igations which in relation to the employer's

duty of care is co-extensive with the employer's contractual obligation. An injured

worker is entitled to seek a .~emedy in either contract or tort. In Matthew -v- Kuwait

Beelitel Corp. 9 Sellars LJ said at p.348 -

"From such experience as I have had in this branch of the law, quite apart from recent high authority, I should have held the view that the plaintiff s claim could be made either in tort or in contract. It has surely been frequently so pleaded without exception being taken. Counsel for the defendants has referred, however, to many authorities and has argued with persistence that this type of claim can arise only in tort and cannot be framed in contract.

The matter was considered recently in the House of Lords in Davie v New Merton Board Mills, Ltd. (2) ([1959]) 1 All E.R. 346). The question was whether the employers were liable for defects in a tool which they had bought in the open market for the use of their workman who was injured by reason of such a defect. VISCOUNT SIMONDS said (ibid., at p.350):

8 See para 35 of Reasons

9 [1959] 2 QB 57 I ! I 1"

12

"The same act or omission by an employer may support an action in tort or for breach of an implied term of the contract of employment but it can only lead to confusion, if, when the action is in tort, the court embarks on the controversial subject of implied contractual terms."

The difference between a claim in tort and a claim in contract, at any rate in its more conventional form, without alleging any special implied term or any special obligation, rarely calls for consideration, and in most cases does not matter, and perhaps on that account the majority of the cases have not dealt with it in the way one might have expected. The distinction matters in two cases - there may be others - one, where there is a desire to serve out of the jurisdiction, which is the very case we have now under consideration; another in the county court jurisdiction where the basis of costs may be different according to whether the action was framed in contract or in tort."

36 The concept was considered in Wright -v- TNT Management Pty Ltd 10 where

the Court of Appeal of NSW dealt with a claim for breach of Trade Practice Act

warrantees in the employer/employee relationship. The right of the employee to sue

either in contract or in tort was acknowledged. II

-, 37 Since my hearing of this matter, counsel for the third party have brought to my

attention the decision of the High Court in Astley & Ors -v- Austrust Ltd. 12 wherein

the Court considered the effect of concurrent liability in tort and contract. Relevant to

the question before me the majority (Gleeson CJ, McHugh, Gummow and Hayne JJ)

cited the judgment of Lord Gough of Chievely in Henderson -v- Merrett Syndicates

Ltd 13 as follows:-

"It is however my understanding that by the law In this country

10 (1988-9) 85 ALR 442

11 Per Mahoney JA @ p.446; McHugh JA @ pp 449-450; and Clarke JA @ pp 459-460,

12 (1999) HCA 6

13 (1995) 2 AC 145 at 193-4 13

contracts for services do contain an implied promise to exercise reasonable care (and skill) in the performance of the relevant services; ... My own belief is that, in the present context, the common law is not antipathetic to concurrent liability, and that there is no sound basis for a rule which automatically restricts the claimant to either a tortious or a contractual remedy. The result may be untidy; but, given that the tortious duty is imposed by the general law, and the contractual duty is attributable to the will of the parties, I do not find it objectionable that the claimant may be entitled to take advantage of the remedy which is most advantageous to him, subject only to ascertaining whether the tortious duty id so inconsistent with the applicable contract that, in accordance with ordinary principle, the parties must be taken to have agreed that the tortious remedy is to be limited or excluded."

There Honours then went on 14 -

"The theoretical foundations for actions in tort and contract are quite separate. Long before the imperial march of modern negligence law began, contracts of service carried an implied term that they would be performed with reasonable care and skill. Persons who give consideration for the provision of services expect that those services will be provided with due care and skill. Reliance on an implied term giving effect to that expectation should not be defeated by the recognition of a parallel and concurrent obligation under the law of negligence. The eyolution of the law of negligence has broadened the responsibility of professional persons and requires them to take reasonable care and skill even in situations where a contractual relationship cannot be established. But given the differing requirements and advantages of each cause of action, there is· no justification in recognising the tortious duty to the exclusion of the contractual duty."

38 The contractual liability here arose when the plaintiff received his injury. That

liability was actionable in New South Wales applying the substantive law of NSW.

There was no necessity to have regard to the principles of conflict of laws to permit the

bringing of such an action. Consequently, it is my view that a claim based on contract

of employment does give rise to a liability "under the law ofNSW'.

14 Astley at para 48 , <" "

14

39 At the commencement of the proceedings, I was informed that the plaintiffs

claim has been compromised. I have assumed that that step was taken with the

concurrence and support of the third party and that it is not necessary for me to consider

whether the primary liability of the defendant had now - similarly to a judgment -

merged in the compromise agreement. A decision on this point would give rise to

different considerations and most likely to a different result. Rather I have determined

the issues raised in the third party pleadings as they are presently framed.

39 Orders

40 1. I declare that the Third Party is liable to contribute 50 per cent of the amount of

the defendant's liability for the plaintiffs damages and costs in this action.

2. I or~er that-

(i) The third party pay to the defendant the sum of $113,000 in respect of

the said lia~.ility.

(ii) The third party pay the defendant's costs of an incidental to these

proceedings to be taxed.