FEDERAL COURT OF AUSTRALIA Transport Accident Commission v Lease Auto Pty Ltd [2002] FCAFC 430 MOTOR VEHICLES – whether statutory right of indemnity against "any liability" in respect of injury caused by use of motor vehicle extends to liability under contractual term of fitness for purpose implied by s 71(2) of Trade Practices Act 1974 (Cth) JUDGMENTS – interest on judgments – power to order entry of judgment and accrual of interest from an earlier date WORDS AND PHRASES – "any liability" Trade Practices Act 1974 (Cth) s 71(2) Transport Accident Act 1986 (Vic) s 94(1), 93 Federal Court of Australia Act 1976 (Cth) s 52 Federal Court Rules O 35 r 3 Lavrick v Lease Auto Pty Ltd [2002] FCA 599 affirmed Arturi v Zupps Motors Pty Ltd (1980) 33 ALR 243 cited Wallis v Downard-Pickford (North Queensland) Pty Ltd (1994) 179 CLR 388 cited Thompson v Goold & Co [1910] AC 409 at 420 applied Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 321 applied TRANSPORT ACCIDENT COMMISSION v LEASE AUTO PTY LTD (ACN 007 163 975) S154 OF 2002 HEEREY, MOORE AND KIEFEL JJ 18 DECEMBER 2002 MELBOURNE (HEARD IN ADELAIDE) IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY S154 OF 2002 BETWEEN: TRANSPORT ACCIDENT COMMISSION APPELLANT AND: LEASE AUTO PTY LTD (ACN 007 163 975) RESPONDENT JUDGE: HEEREY, MOORE AND KIEFEL JJ DATE OF ORDER: 18 DECEMBER 2002 WHERE MADE: MELBOURNE (HEARD IN ADELAIDE) THE COURT ORDERS THAT: 1. The appeal is dismissed. 2. The appellant pay the respondent's costs to be taxed, including reserved costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY S154 OF 2002 BETWEEN: TRANSPORT ACCIDENT COMMISSION APPELLANT AND: LEASE AUTO PTY LTD (ACN 007 163 975) RESPONDENT JUDGE: HEEREY, MOORE AND KIEFEL JJ DATE: 18 DECEMBER 2002 PLACE: MELBOURNE (HEARD IN ADELAIDE) REASONS FOR JUDGMENT THE COURT: 1 The appellant Transport Accident Commission (TAC) is a Victorian statutory corporation which administers a legislative scheme under the Transport Accident Act 1986 (Vic) (the Act) for compensation for death and injury arising out of "transport accidents". 2 In the judgment under appeal, Lavrick v Lease Auto Pty Ltd [2002] FCA 599, Mansfield J held that the respondent Lease Auto Pty Ltd (Lease Auto) was entitled to indemnity by the TAC under s 94(1)(a) of the Act which relevantly provides: "(1) The Commission is liable to indemnify - (a) the owner or driver of a registered motor vehicle in respect of any liability in respect of an injury or death of a person caused by or arising out of the use of the motor vehicle in Victoria or in another state or in a Territory; and (b) … other than liability to pay compensation under the Accident Compensation Act 1985 or an Act or law referred to in section 37." Neither the Accident Compensation Act 1985 (Vic), a statute dealing with workers compensation, nor any law referred to in s 37 are relevant for the present case. 3 The liability in respect of which his Honour found the TAC liable to indemnify Lease Auto arose out of a claim by Mr Robert Lavrick, a resident of South Australia. Mr Lavrick ordered from Lease Auto a rental car for collection from Melbourne Airport. On 23 February 1996 he picked up the vehicle, a two week old Ford Falcon with 700 kilometers on the odometer, and set off for Bendigo. At about 9.00 pm that evening a wheel came off. The vehicle veered off the road and Mr Lavrick was injured. 4 Mr Lavrick would have been entitled to limited compensation under the no fault scheme provided under Pt 3 of the Act. But his rights to sue for common law damages were restricted by s 93(1) which provides: "A person shall not recover any damages in any proceedings in respect of the injury or death of a person as the result of a transport accident occurring on or after the commencement of section 34 except in accordance with the section." The remainder of s 93 goes on to prescribe a number of pre-conditions, the most important of which is that the prospective litigant must satisfy the TAC that his or her injury is a "serious injury" as defined in s 93(17). 5 But Mr Lavrick sued Lease Auto in the South Australian District Registry of the Federal Court on a number of causes of action based, in whole or in part, on the Trade Practices Act 1974 (Cth) (the TP Act). The cause of action on which he succeeded was the contention that his contract with Lease Auto contained by virtue of s 71(2) of the TP Act an implied term that the car would be fit for the purpose of travel to Bendigo. His Honour upheld that claim with the consequence that Mr Lavrick was entitled to damages, not under s 82 of the TP Act but for damages for breach of contract: Arturi v Zupps Motors Pty Ltd (1980) 33 ALR 243. Before his Honour Lease Auto did not contend that s 93 of the Act operated to preclude Mr Lavrick's claim: see Wallis v Downard-Pickford (North Queensland) Pty Ltd (1994) 179 CLR 388. Lease Auto also accepted that s 71 of the TP Act implied the alleged term into its contract with Mr Lavrick and that the term had been breached. The quantum of damages was agreed. 6 The issue then before his Honour was whether Lease Auto was entitled under s 94 to indemnity from the TAC, which had been joined as a cross-respondent. It was accepted before his Honour, and before us, that the incident in which Mr Lavrick sustained injury was a "transport accident" as defined in s 3 of the Act, that the rental car was a "registered motor vehicle" and that at all relevant times Lease Auto was the owner of that vehicle. 7 It might be added that the fact that Mr Lavrick was a South Australian resident is quite fortuitous. If his Honour's conclusion is correct, the same reasoning would apply to a claim in similar circumstances brought by a Victorian resident. 8 His Honour noted the TAC's prime contention that the extent of its obligation to indemnify under s 94(1) is co-terminous with the extent of the permitted entitlement under s 93 to recover damages for death or injury arising out of a transport accident, at least in respect of transport accidents occurring in Victoria. 9 As his Honour noted, the objectives of the TAC, as identified in s 11 of the Act, include managing the transport accident compensation scheme as effectively, efficiently and economically as possible. The TAC is required to establish and maintain a fund called the Transport Accident Fund (the Fund): s 27(1). The monies received into the Fund include "transport accident charges": s 27(2)(a). These are amounts payable each year by owners of registered motor vehicles: s 109(1). From the point of view of the owner, they serve the same purpose as insurance premiums paid under the former compulsory third party insurance schemes. The functions of the TAC include administering the Fund and determining and collecting transport accident charges. The TAC is authorised to pay out of the Fund payments of compensation under Pt 3 and damages for which it is liable: s 27(3)(a) and (b). 10 Speaking of s 93, his Honour said (at [40]): "It has been decided that s 93 of the (Act) contingently extinguished the common law right to recover damages for injuries sustained under transport accident through negligence: Wilson v Natrass (1995) 21 MVR 41, Swanell v Farmer [1991] 1 VR 299. But it can do so only to the extent of the legislative competence of the Victorian Parliament. Significantly, in my judgment, the legislative restriction upon the exercise of any rights to recover damages at common law cannot apply in all circumstances. In this matter, the TAC acknowledges that s 93 cannot operate so as to prevent Mr Lavrick from recovering damages at common law for breach of contract, where the relevant clause of the contract is implied by s 71 of the (TP Act), even though the contract was made in Victoria and the transport accident occurred in Victoria. The TAC also acknowledges that the restriction imposed by s 93 cannot operate generally outside Victoria." 11 His Honour then went on to identify the issue before him in these terms (at [41]): "Once it is accepted that the persons owing or driving motor vehicles in Victoria may incur common law liability to persons injured in transport accidents in circumstances beyond those provided by s 93 of the (Act), the issue in the present proceedings becomes more stark. Is it intended that the use of the words "any liability" in s 94 should entitle such persons to indemnity against such liability from the TAC? Or is it intended that such persons should not be entitled to indemnity from the TAC on the basis that the words "any liability" should be read down to include only a liability arising under s 93 of the (Act) and the liability incurred, or arising from a judgment given, outside Victoria?" 12 His Honour concluded (at [53]): "The Victorian Parliament, by enacting s 94(1) in its terms, has recognised the desirability of providing to such persons indemnity in respect of liabilities arising outside Victoria. It has recognised that its statutory powers extent only so far in restricting the entitlement of persons to recover against the owners or drivers of motor vehicles registered in Victoria damages for injuries sustained in a transport accident. This matter exposes another respect in which, it is accepted, its powers do not reach to achieve the restrictions intended by the (Act) to apply generally in Victoria upon such claims. In my judgment, however, s 94(1) is nevertheless intended to provide indemnity to Lease Auto in the particular circumstances. In National Mutual Fire Insurance Co Ltd v Insurance Commission [1985] VR 811, Brooking J said at 818: 'once one has observed the plain ordinary meaning of the words used, it is no reason for withholding from the words their full and ordinary ambit that Parliament may not have adverted to some of the consequences, provided of course they are not consequences so absurd that they could not have been intended.' In my judgment, neither the subject matter of the (Act) nor the context of s 94 in the (Act) provide a reason to restrict the wide words 'any liability' from applying to the liability of Lease Auto to Mr Lavrick in this matter. I do not consider that the consequences of it so applying are so absurd that they could not have been intended. Indeed, it is sensible that in the particular circumstances of this matter s 94 should respond to provide indemnity to Lease Auto, rather than leave it (and others in similar circumstances) exposed to the detriment of being personally liable despite having paid the appropriate transport accident charge, unless other insurance against such liability has been privately procured." 13 Senior counsel for the TAC advanced a number of arguments against the conclusion reached by his Honour. First, he said that since 1939, when compulsory third party insurance was introduced in Victoria, the statute has required owners of motor vehicles to insure against liability but the legislation up until the introduction of the Act in 1986 always provided that a contract of insurance should be sufficient compliance notwithstanding that it did not indemnify the owner or driver against liability under an agreement, unless the liability was one which would have arisen in the absence of such agreement (that is to say in negligence): see Motor Car (Third Party Insurance) Act 1939 (Vic) s 10(2)(c), Motor Car Act 1951 (Vic) s 44(2)(c), Motor Car Act 1958 (Vic) s 46(2)(c). Thus, the argument went, it should not be concluded that the indemnity provided by s 94 was intended to be wider in scope than that required by the Act's predecessors. 14 Secondly, he argued that s 90(4) was found in Pt 6 of the Act headed "Legal rights outside this Act". The restriction imposed by s 93 looked to "traditional common law rights of action for injuries caused by or arising out of the use of motor vehicles", which he identified as: "(a) actions in reliance on the tort of negligence; (b) traditional Lord Campbell's Act actions; and (c) claims in contract for breach of an implied term of a duty to take care, identical in scope to the equivalent obligation in tort." So it followed, he said, that s 93 was not concerned with contractual liabilities in those circumstances in which, absent a contract, no other liability would arise. 15 Thirdly, he noted the "Statement of Government Intent" referred to by the Minister in his Second Reading speech which said: "Accidents occurring outside Victoria The driver of a Victorian registered vehicle who has an accident interstate is presently liable, and will continue to be liable, to be sued at common law in that State by interstate or Victorian residents. This is beyond Victorian legislative control. The present third party insurance indemnifies the driver for that liability. The new scheme will continue that indemnity. Both Victorian residents and non-Victorian residents driving Victorian vehicles interstate will be covered." 16 Thus, senior counsel argued, the purposes of s 94 was to provide indemnity in respect of liabilities contingently extinguished under s 93 and liabilities of the kind with which s 93 is concerned but which arise consequent upon the use of a Victorian registered vehicle outside Victoria. 17 Fourthly, senior counsel pointed out that since 1986 the Act has been progressively amended so as to narrow the definition of "transport accident". In its original form that definition was "an incident caused by, or arising out of, the use of a motor car, a railway train or a tram". In 1988 it was amended to read "an incident directly caused by or directly arising out of the driving of a motor car, a railway train or a tram" (emphasis added). A further definition in 1994 was "an incident directly caused by the driving of a motor car or motor vehicle, a railway train or a tram". Thus construing s 94(1) in the manner suggested would give effect to the intention underlining this progressive narrowing. 18 Fifthly, his Honour's construction would expose the Fund to liabilities arising out of voluntarily assumed obligations. These could be monitored and actuarially estimated only with difficulty and imprecision. Nor, as would be the case with a private insurer, could the obligation to indemnify be declined. Thus the Fund would be exposed to voluntary obligations, different in scope to the standard of care in tort, unlimited in number and presumably unrestricted as to quantum. 19 Sixthly, it was said that liabilities arising only under contract are excluded from the indemnity provisions in other States. Examples were said to be Motor Accident Compensation Act 1999 (NSW) s 15, Motor Accidents (Liabilities and Compensation) Act 1973 (Tas) s 14(1), Motor Vehicle (Third Party Insurance) Act 1943 (WA) (schedule) and Motor Accident Insurance Act 1994 (Qld) (policy of insurance). 20 The arguments on behalf of the TAC, either singly or cumulatively, do not persuade us that his Honour erred in his construction of s 94(1). A number of the arguments advanced by the TAC appear on examination to be double-edged. For example, if previous compulsory third party legislation in Victoria, and the equivalent of the Act in some other States, excluded obligation to indemnify against a claim based only on contract, presumably the Victorian Parliament was well aware of such matters but nevertheless chose to enact s 94(1) in unqualified terms. By the same token, we do not see why the Victorian Parliament should be deemed to be unaware of Commonwealth legislation applying in Victoria, and in particular Pt V Div 2 of the TP Act, and the implications of that legislation for owners of Victorian motor vehicles. And the progressive narrowing of the definition of "transport accident" is equally consistent with a view that the more stringent the definition, and thus the lesser the demands on the Fund, the fairer it is that vehicle owners should be indemnified when there is liability arising out of a transport accident, in the narrowed meaning of that term. 21 The natural meaning of the words "any liability" is any liability, not "any liability other than a liability which arises only by contract". Still less is the natural meaning the complicated collocation required by TAC's argument, namely "any liability of a kind contingently extinguished under s 93 or any liability under traditional common law causes of action (and statutory Lord Campell's Act causes of action) where the cause of action arises outside Victoria consequent upon the use of a Victorian registered motor vehicle, regardless of whether the claimant suffered a 'serious injury'". The textual problem for the TAC is that it is impossible to read s 94(1) as limited to a back to back indemnity confined to claims under s 93. The TAC's argument accepts that it cannot be so confined. But once claims outside s 93 are included, there is no reason in logic or, as will be seen, in policy, for reading down the clear words of s 94(1). As the famous dictum has it, "It is a strong thing to read into an Act of Parliament words which are not there, and in the absence of clear necessity it is a wrong thing to do." Thompson v Goold & Co [1910] AC 409 at 420 per Lord Mersey 22 Nor is the floodgates argument particularly persuasive. The Act has been in operation for some sixteen years. As far as we are aware, there is no evidence of the Fund being plundered by vehicle owners seeking indemnity against liability for contract-based claims. Nor is it obvious to us why vehicle owners would go out of their way to voluntarily incur onerous contractual liabilities so as to place indemnity obligations on the TAC. 23 Considerations of fairness and equity also argue against the TAC's construction. It would be anomalous if an owner is entitled to indemnity where he or she drives a vehicle with negligence, perhaps gross negligence, yet an owner in the position of Lease Auto which in good faith takes a brand new car, pays the transport accident charge and rents the vehicle out to a customer, does not get indemnity. Unlike the first vehicle owner, who at least had the choice of not driving negligently, Lease Auto could not contract out of its implied contractual liability to Mr Lavrick: TP Act s 68. So far from being incongruous, capricious, absurd or irrational (see Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 321) the ordinary natural meaning of the words here produces a result which is consistent with the policy of the Act and the legitimate expectations of vehicle owners. One of the objects of the Act is to provide value for the transport accident charges levied on vehicle owners by protecting them from liabilities arising out of transport accidents in which their vehicles are involved. 24 The TAC also complained about his Honour's order that interest on the judgment sum run from 1 February 2002. Counsel for Mr Lavrick appeared to oppose any variation of that order. 25 His Honour's order as to interest arose in the following circumstances. The hearing took place on 10, 13 and 14 December 2001. Shortly prior to the hearing agreement had been reached between Mr Lavrick and Lease Auto that the quantum of Mr Lavrick's claim, if successful, was to be $370,000 including interest. His Honour was told that that agreement was reached on 6 December 2001. At the completion of the hearing his Honour was told that on one basis at least Lease Auto did not resist Mr Lavrick's claim; thus liability as between Mr Lavrick and Lease Auto did not need to be determined by his Honour and the only issue remaining was the indemnity claim as between Lease Auto and TAC. His Honour did not formally enter judgment in favour of Mr Lavrick against Lease Auto at that stage although, as he remarked later, there was no reason why he could not have done so. 26 His Honour delivered his reserved judgment on 10 May 2002 and made orders on that date that Lease Auto pay Mr Lavrick damages in the agreed sum of $370,000 including interest and that Lease Auto was entitled to indemnity from TAC in respect of its liability to Mr Lavrick. Further argument took place on 24 May in which counsel for Lease Auto sought an order under O 35 r 3 of the Federal Court Rules that judgment in favour of Mr Lavrick should take effect on 1 February 2002. Such an order was opposed before his Honour, not on the basis that it would be unfair or that there were general reasons why such an order should not be made, but because of the terms of the agreement between Mr Lavrick and Lease Auto as recorded in a letter of 6 December 2001. His Honour, however, did not construe the letter as meaning that $370,000 including interest was to include interest to whatever date the Court might resolve issues between Lease Auto and TAC. The agreement, in his Honour's view, must have meant interest to the date upon which liability as between Lease Auto and Mr Lavrick was resolved either by agreement (as occurred) or by judgment. 27 On the appeal senior counsel for the TAC did not challenge that reasoning of his Honour but rather suggested that the order was made without power. He said the only power to award interest was s 52 of the Federal Court of Australia Act 1976 (Cth) which provides that a judgment debt carries interest from "the date as of which the judgment is entered" and the only power of variation given to the Court is confined to the rate of interest: s 52(2)(b). However O 35 r 3 of the Federal Court Rules provides that the judgment order shall take effect on the date on which it is pronounced or made, unless the Court orders that it take effect at an earlier or later date. There was clear authority in our opinion for his Honour to take the course which he did. The appropriateness of that course was not challenged. 28 The appeal will be dismissed with costs. I certify that the preceding twenty eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Heerey, Moore and Kiefel JJ. Associate: Dated: 18 December 2002 Counsel for the Appellant: R C White QC and P Solomon Solicitors for the Appellant: Hunt & Hunt Counsel for the Respondent Lease Auto Pty Ltd: S T Lane Solicitors for the Respondent Lease Auto Pty Ltd O'Loughlins Counsel for the Respondent Lavrick R Harms Solicitors for the Respondent Lavrick Johnston Withers Date of Hearing: 25 November 2002 Date of Judgment: 18 December 2002