Nominal Defendant v Chaffey & Ors [2011] QSC 88

Issues: The Nominal Defendant brought a claim pursuant to s 60 of the Motor Accident Insurance Act 1994 (Qld) (the MAIA) for recovery of a statutory debt and costs of $394,893.60 involved in an uninsured motor vehicle accident causing personal injury. The first defendant was the driver and agent of the second and third defendants, the fourth defendant was the seller of the vehicle; the second and third defendants were the purchasers. There was some dispute as to ownership at the time of the accident, i.e. whether the sale had been concluded before the “test drive” or not.

The decision helpfully recites the authorities as to the reasonableness of the compromise by the Nominal Defendant, together with the reasonable grounds for belief that the vehicle was insured and in the instance, not.

Philippides J

Authorities

[32] As to the approach to be taken in determining whether the plaintiff made a reasonable compromise of Mr Buckholz’s claim, the plaintiff relied upon Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 193 CLR 603 (per Hayne J at 653, McHugh J at 618) and The Nominal Defendant (Qld) v Langman [1988] 2 Qd R 569 (at 572, 573).

[33] In Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 193 CLR 603 Hayne J said at 653:

“Whether the compromise of a claim was reasonable must be judged objectively, not subjectively. Thus whether a party to litigation has received advice to settle may be important in deciding whether that person’s conduct in settling the case was reasonable but, standing alone, the fact that a litigant was advised to settle at a particular figure reveals little or nothing about whether the settlement reached was reasonable. This is not to say that evidence may not be led that such advice was given and adopted; it may. But evidence of that kind does not conclude the issue. What will usually be much more important is the reasoning that supported the advice that was given for that will ordinarily reveal why it was thought reasonable to compromise the claim as it was.

Next, the question whether the settlement was reasonable must be judged by reference to the material the parties had available to them at the time the compromise was reached. It is not to be judged according to whether material which was obtained later shows that the opposite party could or could not have prosecuted or defended the claim successfully but according to the assessment which could properly be made at the time of settlement of the chances of success or failure.

Often that will require consideration of whether the party that later seeks to say that the settlement was reasonable had made sufficient inquiries and had sufficient information available to it to warrant reaching a compromise. In turn that may invite attention to whether the cost of seeking further information would outweigh the benefit that it was reasonable to expect may be obtained from doing so, but it does not assume knowledge of the opposite party’s brief to counsel.

All of these, and no doubt other, considerations may bear upon the question whether the settlement arrived at was reasonable. And it is inevitable that there will be no single answer to the question ‘for what amount was it reasonable to compromise this claim’ – there will be a range of answers. What is a reasonable compromise of the claim will almost always require consideration of the chances of the parties succeeding in their respective claims or defences and that prediction of likely outcomes must always be imperfect and imprecise. To state the obvious, that is why the compromise of a claim, which is a monetary claim that will succeed entirely or fail entirely, will usually fasten upon a figure that is less than would be recovered if the claim were to succeed and why it is that there will be a range of figures within which the reasonable observer may conclude that settlement of the claim would be reasonable.” (emphasis added)

[34] In The Nominal Defendant (Qld) v Langman [1988] 2 Qd R 569 Thomas J observed at 572:

“Frequently the expectations of the investigators are dashed, or the evidence in the brief of one or other of the parties comes out in court in a different way. The wise practitioner does not often pretend to be able to make accurate forecasts of factual findings, although he may make an astute assessment of the range of possible results, and perceive one of these to be more likely than the others. I do not think that this Court should be too astute to make microscopic examinations of compromise arrangements which save costs and which avoid the perils of litigation and which prima facie seem sensible. Of course a question of degree is involved. There will come a time when slipshod, inadequate preparation leads to an unnecessary surrender of rights, where the settlement could not be described as ‘proper’. In such an event the evidence may show that the Nominal Defendant has not properly paid the money, and it would be unable to recover such money from the owner or driver of the uninsured vehicle.”

[40] It is submitted that, against that knowledge, the settlement was undoubtedly reasonable. I accept the submissions made by the plaintiff’s counsel. It is not to the point that another view may also have been reasonably held on the evidence available at the time of the settlement. That offered by senior counsel and adopted by the plaintiff in settling the claim on the advice of Mr Lanyon-Owen represented a position that was reasonable in the circumstances and reached after an appropriately thorough consideration of the issues.

Liability of the first defendant as driver

[41] As mentioned, there is no dispute that the first defendant was the driver of the uninsured Ford. Section 60(2) MAIA provides for a statutory defence in certain circumstances. The driver must prove that he believed on reasonable grounds that he had the owner’s consent to drive the motor vehicle and that the motor vehicle was insured. No issue arises in this case that the vehicle was driven other than with the permission of the owner (irrespective of who that was). The critical issue in relation to the first defendant’s liability concerned whether he had discharged the onus on him to establish that he believed on reasonable grounds that the vehicle was insured. In relation to the meaning of the phrase “believed on reasonable grounds”, counsel for the plaintiff referred to George v Rocket [1990] HCA 26; (1990) 170 CLR 104 at 112, 116. In that case, it was observed that when a statute prescribes that there must be “reasonable grounds” for a state of mind – including suspicion and belief – it requires the existence of facts which are sufficient to induce that state of mind in a reasonable person.

[51] In my view, the plaintiff’s submission is clearly correct. The first defendant gave evidence that he spent some time inspecting the vehicle. His evidence was that his attention was directed to inspecting the mechanics of the vehicle. However, as a result of his inspection, he was aware of the registration label. He admitted that he was not told by the fourth defendant that the vehicle was registered. The effect of his evidence was that he quite simply did not direct his mind to whether the vehicle was registered. Proceeding on the basis of the first defendant’s evidence that the fourth defendant did not say anything on the matter of the vehicle being registered, and given that he did not examine the registration label that he was aware was displayed on the vehicle, and which indicated that the registration had expired, I do not consider that the first defendant has proved that he had reasonable grounds to believe that the vehicle was insured at the relevant time. Accordingly, I find that the first defendant is liable to the plaintiff in the sum of $394,893.60 pursuant to s 60(1) MAIA.

[77] In the present case, the fourth defendant’s liability to the plaintiff is a statutory one which arises because the vehicle was uninsured and permitted to be driven while it was to the fourth defendant’s knowledge uninsured. Ordinarily, the fourth defendant as bailor would not be liable for injury caused to another by the bailee’s negligent use of the bailed chattel for the bailee is not the agent of the bailor in this connection (Smith v Bailey [1891] 2 QB 403, Everett’s Blinds Ltd v Thomas Ballinger Ltd [1965] NZLR 266, Halsbury’s Laws of England, 4th ed, at [1588], Palmer on Bailment, 3rd ed, 2009, at [36-003]). In respect of the authorities relied on and the approach urged by the fourth defendant, I note the following observations of Tompkins J in Everett’s Blinds Ltd at 271-272:

“The next question is whether any other authorities justify the Court in implying in the contract of bailment an indemnity of the kind sought. Mr White quotes Mazengarb’s Negligence on the Highway, 4th ed. 247, where the learned author says:

The bailor may also recover from the bailee the amount of damages he has been obliged to pay to a third party.

But the two cases he quotes for that statement do not, in my opinion, provide any basis for the statement. In Hughes v. McCutcheon (1952) 4 D.L.R. 375 the owner of the car was held responsible to a third party for the negligence of the driver because he allowed the driver, while intoxicated, to drive the car. No question of a bailment arose. The other case quoted, Lister v. Romford Ice and Cold Storage Co. Ltd. (supra) is a case of a master suing an employee for an indemnity against damages he had to pay arising from the employee’s negligence. It was held in that case that there must be implied in the contract of employment an obligation to his employers to exercise reasonable care in the performance of his duty as a driver. Mr White contended that if such a term could be implied in a contract of employment there was no reason why it should not be implied in a contract of bailment, because the employee was really a bailee of the employer’s vehicle. I do not think that follows at all and there is certainly no authority for such a submission. The implied term in the contract of employment is that the employee would perform his duties with proper care; but this is a duty which is necessary to give efficacy to the contract of employment. The contract of bailment is a completely different one where the obligation is merely to take reasonable care to preserve and return the chattel entrusted to the bailee. A bailment is always defined as a delivery of goods to another otherwise than as a servant, see 2 Chitty on Contracts, 21st ed., 63, and Paton on Bailments, 4. 2 Halsbury’s Laws of England, 3rd ed., 114, says:

A custodian for reward is bound to use due care and diligence in keeping and preserving the article entrusted to him on behalf of the bailor.

I think the duty of a bailee for reward who contracts to do work on a chattel is as stated above, and does not extend to indemnifying the bailor against claims of third parties for damage done by the negligence use of the chattel. I do not think that there is any implied duty on the part of a bailee to indemnify a bailor in respect of third parties’ claims for damages.”

[78] I agree with the analysis of Tompkins J. Moreover, there is a further difficulty in the fourth defendant’s submissions which is insurmountable. The purpose of the bailment was to allow the first defendant to test drive a vehicle, which was unregistered and uninsured, on a public road. Indeed, the fourth defendant was convicted on 30 May 2005 of permitting the Ford to be used on a road when unregistered and uninsured. Counsel for the first, second and third defendants contended that no bailment could be enforced in circumstances where its purpose was unlawful. In my view, that submission is correct and is fatal to the case put forward by the fourth defendant for indemnification. In the circumstances of the present case, the fourth defendant is not entitled to be indemnified, whether on the basis of a bailment or contract, which was for an unlawful purpose (Ashmore, Benson, Pease & Co Ltd v AV Dawson Ltd [1973] 1 WLR 828, Archbolds (Freightage) Ltd v S Spanglett Ltd [1961] 1 QB 374).

[79] The first, second and third defendants contend that the fourth defendant knowingly made the false representation that the Ford was registered and that the first defendant relied upon it, and that in doing so they have suffered a loss and may suffer further losses. Alternatively, they argue that a failure to warn of the fact that the Ford was unregistered and uninsured was negligent on the part of the plaintiff. Additionally, the fourth defendant, through offering the Ford for sale, was engaging in commerce. Her conduct in failing to advise the first defendant about the registration status of the Ford was in breach of s 36 of the Fair Trading Act 1989 (Qld) as it was misleading and deceptive, or likely to mislead or deceive. In my view, all of the allegations made against the fourth defendant by the first, second and third defendants are without substance. Given the evidence of the first defendant that the fourth defendant did not say that the Ford was unregistered and uninsured, and bearing in mind that the expired label was clearly displayed for inspection, I fail to see how it can be said that there was any false or misleading representation by the fourth defendant on the matter. Nor do I accept that there was, in those circumstances, a breach of any duty as alleged.

Orders

[80] I order that there be judgment against the first defendant and fourth defendant in favour of the plaintiff pursuant to s 60(1) MAIA in the sum of $394, 893.60. I shall hear the parties as to the issue of interest pursuant to s 47 of the Supreme Court Act and costs.

Brisbane Barrister – David Cormack

 

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