AUSTRALIAN SOCCER POOLS PTY LTD v GAIR SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL HOPE (1), CLARKE (2) AND MEAGHER (3) JJA 9 March 1989, 27 June 1989 [1989] NSWCA 14 NEGLIGENCE — DUTY — BREACH OF DUTY — PROXIMITY The appellant employed the father of the respondent upon terms, inter alia, that it would provide him with a motor vehicle for use by himself and his family and that it would indemnify the respondent's father and any authorised user of the vehicle from having to pay the cost of repairs resulting from an accident. The respondent was lent the vehicle by his father and while he was driving it he lost control and the vehicle rolled over and was damaged. It was accepted that the respondent had driven the vehicle carelessly. The appellant sued the respondent and his father claiming the cost of repairing the damage to the vehicle. The trial judge found against the appellant which appealed only against the verdict in favour of the respondent. Respondent could not rely on the contractual indemnity available to his father the relationship between the respondent, as an authorised user of the vehicle, and the appellant which had promised his father to indemnify himself and any authorised user against the cost of repairing the damage caused affected the content of the duty of care which the respondent owed to the appellant and that no breach of that duty had been shown in this case. ORDERS The appeal is dismissed with costs. Hope JA I agree with Clarke JA. Clarke JA On 29 May 1979 the appellant employed Robin Gair as its Assistant Sales Manager. The terms of his employment provided for the payment of a wage and a small incentive bonus. In addition he was informed that his telephone accounts would be paid and that he would be provided with "a fully subsidised company car'. In fact he was supplied with a company car which was used both by himself and members of his family. On 21 November 1981 Mr Gair allowed his son (whom I shall call Gair Jnr), the respondent in the present appeal, the use of the car to drive some friends home. While the respondent was driving the car in Novara Crescent, Como, he lost control of the car and it rolled over and was damaged. It is accepted that he was careless in his driving of the car. The appellant sued both Mr Gair and his son claiming the cost of the repair of the car upon the basis that each of them had breached a duty of care which they owed to the appellant. The action was duly heard by Judge Hosking who on 4 February 1988 decided in favour of both Mr Gair and his son and directed the entry of judgment for the defendants. The appellant has appealed challenging the verdict in favour of Gair Jnr. In short its submission is that he owed to it a duty to exercise reasonable care in the driving of the motor vehicle, failed to do so and thereby caused it damage. The claim is very simply put. 2 UNREPORTED JUDGMENTS The respondent's case, which was accepted in substance by the trial judge, is more complex. He submits that in the circumstances of this case his duty to the appellant was a limited one. That was, not to act in such a way as to deprive the plaintiff of the benefit of any policy of comprehensive insurance. His argument was developed in the following manner. His father was supplied with a fully subsidised motor vehicle as one of the terms of his employment. At the time the contract was entered into there were two universal and well known practices which operated as part of the matrix of facts surrounding the contract in question. They were: (a) That the provision of a vehicle as part of a remuneration package for a senior executive in the position which Mr Gair occupied carried with it a right in Mr Gair to use the vehicle as he saw fit and to allow members of his family to use it for ordinary domestic purposes; (b) That the vehicle provided would be insured by the employer who would indemnify the employee and his family against loss arising from accidental damage to the car whilst the car was being used for ordinary domestic purposes. The evidence of these two practices was given by Mr Carter and was accepted by his Honour. Mr Carter added that such insurance would be in terms of an ordinary comprehensive motor vehicle policy. Accordingly, so the argument runs, the court in construing the phrase "fully subsidised motor car", an expression the meaning of which does not immediately become clear, should have regard to the surrounding circumstances and the universal practices and conclude that Mr Gair was furnished with his motor vehicle upon terms, inter alia, that the appellant would take out an ordinary comprehensive motor vehicle insurance policy to indemnify itself its employee and/or members of his family against loss arising from accidental damage to the car whilst the car was being used for ordinary domestic purposes. In the light, therefore, of the fact that the appellant was under an obligation to ensure that there existed insurance which extended to indemnify Mr Gair and his son against loss arising from damage to the vehicle whilst it was being used for ordinary domestic purposes the duty of care to which the relationship between the appellant and Mr Gair Jnr gave rise should be limited so as to require Mr Gair Jnr not to act in such a manner as to deprive the appellant of the benefits of the insurance policy which both parties to the contract of employment contemplated would be in force at all relevant times. In my opinion the first step in the argument should be accepted. That is, that the expression "fully subsidised motor vehicle" should be construed as covering a motor vehicle owned by the employer and supplied to the employee for use by himself and his family for ordinary domestic purposes and in respect of which the employer would obtain and keep in force an ordinary comprehensive motor vehicle policy to indemnify both parties to the contract and members of the family of the employee against loss. It is not possible to discern the meaning of the phrase "fully subsidised" without recourse to evidence of surrounding circumstances. The only relevant evidence of those circumstances was provided by Mr Carter and there has been no challenge to the reception of his evidence. The thrust of that evidence was that a fully subsidised motor vehicle was a perquisites car provided for use by the employee and members of his family and covered by the policy of which I have spoken. If it is necessary to find support for the proposition that a fully subsidised motor vehicle was a perquisites car one has need to look no further than the advertisement published by the appellant seeking an assistant sales manager. URJ AUSTRALIAN SOCCER POOLS PTY LTD v GAIR (Clarke JA) 3 Under the heading "Conditions of Service" there appeared the sub-heading "Salary" against which were printed the words "$21,000 plus car". Clearly the provision of a car was regarded by the employer as a perquisite of office and no doubt the employee should be taken to have had the same understanding. The next question is more difficult. Did Gair Jnr owe to the appellant a duty of care and, if so, was that duty breached? It may be accepted that in general a person who borrows a motor vehicle from another person undertakes an obligation to take reasonable care to ensure that the vehicle is not damaged. But that is not to say that a duty will arise in every instance a vehicle is borrowed, nor that the content of the duty to take care will always be the same. It is a basic principle of the law of negligence that the relationship of the parties determines whether a duty arises in particular circumstances. Whatever may previously have been thought to be the law it must now be accepted in this country that the foundation of a duty of care is the relationship of proximity between the parties (Jaensch v Coffey, 155 CLR 459, at 555, 585; Sutherland Shire Council v Hayman, 157 CLR 424, at 440, 460-1, 470, 496, 499). Once it is determined that a duty of care arises in the particular circumstances attention is focused on the next inquiry which is directed to breach. The first step in this inquiry is to ascertain the content of the particular duty of care or, as it is sometimes put, to define the standard of care for which the duty calls. Although the proposition that the standard of care required in order to comply with the duty is objectively determined is established that does not deny the particular relationship between the parties of any relevance. What is required in each instance to meet the duty will depend upon the particular relationship between the parties. As the majority said in Cook v Cook, 162 CLR 376, at 382: "Tt is that the more detailed definition of the content of that objective standard will depend upon the relevant relationship of proximity from which it flows and into which the reasonable person of the law of negligence must be projected; it is because that relation may vary that the standard of duty or of care is not necessarily the same in every case. Per Dixon J in The Insurance Commissioner v Joyce, 77 CLR 39, at 56." In the ordinary case where a person borrows a chattel from another he will come under a duty to take reasonable care of that chattel. Likewise where a person undertakes the driving of a motor vehicle he will ordinarily owe a duty of care to pedestrians and to passengers who ride in the car with him. To make that statement is not to say that the content of the duty will be the same in every case nor to deny that the objective standard may vary according to the particular relationship between the parties. The point may be emphasised by reference to Joyce (supra). That case focused on the relationship between a driver whose ability to drive the vehicle was, to the knowledge of his passenger, impaired by alcohol. Dixon J, who pointed out (at 55) that if a driver takes a passenger in his vehicle a prima facie duty to exercise reasonable care in the management of the vehicle arose, went on to say (at 57): "For those who believe that negligence is not a general tort but depends on a duty arising from relations, juxtapositions, situations or conduct or activities, the duty of care thus arises. For those who take the contrary view, the standard of care is thus determined. But whatever be the theory, the principle applied to the case of the drunken driver's passenger is that the care he may expect corresponds with the relation he establishes. If he knowingly accepts the voluntary services of a driver affected by drink, he cannot complain of improper driving caused by his condition, because it involves no breach of duty." 4 UNREPORTED JUDGMENTS Two observations should be made about this statement. In the first place it should now be accepted that since Cook and the cases which preceded it the court will be concerned to determine whether a duty arises in respect of the category of case into which the particular facts under consideration fall. In the second it is unnecessary to decide the point debated in Joyce whether a plaintiff's voluntary acceptance of risk bore on the issue of duty or the standard of care required in the particular circumstances. The issue on either view, as Kitto J put it in Rootes v Shelton, 116 CLR 383, at 389: "is whether the defendant's act or omission was a breach of a duty of care which he owed to the plaintiff; and accordingly in a case such as the present it must always be a question of fact, what exoneration from a duty of care otherwise incumbent upon the defendant was implied by the act of the plaintiff in joining in the activity. Unless the activity partakes of the nature of a war or of something else in which all is notoriously fair, the conclusion to be reached must necessarily depend, according to the concepts of the common law, upon the reasonableness, in relation to the special circumstances, of the conduct which caused the plaintiff's injury. Whatever doubts about the correctness of Dixon J's exposition of the relevant principles in Joyce arose following the English Court of Appeal decision in Nettleship v Weston [1971] 2 QB 691, they have been put to rest by Cook. That case dealt with the relationship of learner driver and instructor which existed between the plaintiff and the defendant respectively. The majority recognised that a duty of care arose but concluded that the standard demanded by that duty was not the usual one requiring the driver to exercise the skill required of a reasonably skilful driver. They summed up their conclusion: "The standard of care remains an objective one. It is, however, adjusted to fit the special relationship under which it arises." The importance of Cook is that it rejects the proposition that a broad relationship, such as between a driver and passenger, is a completely standardised one or that the content of the duty of care which arises is necessarily immutable (at 383). In addition the decision makes it clear that the relationship which exists between the parties is both the circumstance from which the duty springs and the determinant of the content of that duty, albeit that it is broadly described as a duty to take care. In reaching that conclusion the court emphatically rejected the approach of the Court of Appeal in Nettleship. In this case the appellant was the owner and Gair Jnr the borrower, and driver, of the vehicle when the damage occurred. If nothing more was known of the relationship between them then it may be correct to say that a breach of duty occurred. But the particular facts of this case, in my opinion, cannot be disregarded in determining whether a duty of care arose and, if so, in ascertaining whether that duty was breached. The appellant made the vehicle available to Mr Gair for his use and for the use of his family upon terms that it would take out a comprehensive insurance policy and would indemnify him and members of his family in respect of any damage to the vehicle. The appellant could not be said to have simply lent the vehicle to Gair Jnr. It made it available to Mr Gair under a contract whereby it agreed to accept responsibility for damage occasioned to it whilst being used by Mr Gair or members of his family for ordinary domestic use. URJ AUSTRALIAN SOCCER POOLS PTY LTD v GAIR (Meagher JA) 5 In doing so it was accepting the risk that the vehicle may be damaged as a result of careless driving by Mr Gair or any member of his family. It was making the vehicle available on terms that if damage did occur it would be responsible, to the exclusion of Mr Gair, or the member of his family who was driving at the relevant time, for the repair of that damage. In these circumstances although I would accept that a duty of care arose between the appellant and Gair Jnr it was, in my opinion, of a limited nature. Proof that Gair Jnr carelessly damaged the car while driving it for the mutually contemplated purpose would not, in my opinion, establish a breach of that duty. To say this is not to suggest that Gair Jnr is entitled to enforce the terms of his father's contract with the appellant. It is simply to recognise that the terms upon which the appellant provided the car to Mr Gair operated to define the ambit of the duty of care owed by Gair Jnr (as a member of Mr Gair's family) to the appellant so as to deny that the facts established in this case gave rise to a breach of the duty. I would therefore dismiss the appeal with costs. Before concluding I would observe that Gair Jnr sought to tender an insurance policy and some other documents to show that the appellant had taken out comprehensive insurance cover in respect of the vehicle, that it had claimed the cost of repairing the damage from the insurer and been paid. He thus sought to show that in the light of the terms of the contract of employment the appellant had suffered no relevant loss. It seems clear that the proceeding were brought by an insurer exercising its right of subrogation. The statement of defence did not however challenge its right to do so. The pleading said nothing about insurance or subrogation. Nor did it raise any issue with which the documents bore any relevance. In these circumstances it seems to me that the trial judge was correct to reject the tendered documents. The appeal should be dismissed with costs. Meagher JA In this matter the appellant was a plaintiff who sought unsuccessfully to obtain a verdict in the District Court against the first defendant, a Mr Robin Gair, and his son, the second defendant Mr Christopher Gair. The plaintiffs action arose in respect of damages sustained to a motor vehicle owned by it following an accident which occurred when it was being driven, admittedly negligently, by the second defendant, Mr Christopher Gair. It was agreed between the parties that the plaintiff's verdict, if it should recover a verdict at all, was $7,500.00. The plaintiffs case against the first defendant, Mr Robin Gair, rested on two grounds: (a) that he should have been aware of circumstances which made his son's driving ability impaired. (b) that the vehicle was provided for his exclusive personal use and was a breach of duty as a bailee to allow his son to use it. On the facts his Honour found that the first alleged cause of action was not made out, and no appeal has been taken in that regard. His Honour also found that the second cause of action against Mr Robin Gair was not made out, and although no appeal has been brought in this respect either, it is nonetheless necessary to canvas certain aspects of the contract of employment between the plaintiff and Mr Robin Gair relating to the motor vehicle. 6 UNREPORTED JUDGMENTS Mr Robin Gair was employed by the plaintiff in 1979 as its assistant national sales manager, with a view to immediate elevation to the position of national sales manager. He was, therefore, being employed in a senior managerial capacity. He was told that he would receive a salary of a certain amount, togetber with use of telephone, membership of a bonus scheme and "a fully subsidised company car'. These additional benefits were clearly part of his "employment package". They were given to him in consideration for him making his services available to the plaintiff company. However, there was no discussion between him and the officers of his employer as to what precisely was meant by the expression "fully subsidised company car'. Nonetheless, in my view, his Honour was correct in finding of the facts that it encompassed the licence for the first defendant to permit the car to be driven by himself or any member of his family and indeed by anyone else he permitted to drive it. His company did not impose any restrictions on the use of the car. The company did not suggest that it could be used only for company business. It did not have to be garaged at the company's premises. Mr Gair was not directed that he could not authorise any other person to drive it. It was a well known commercial practice for companies to permit their senior Executives to have the use of a car for whatever purpose they wish. Indeed I accept what one of the witnesses said to the effect that the whole point of being given a car in lieu of additional salary would result in any restriction of its use being tantamount to a restriction that the cash component of the salary be used in a certain way only. His Honour was also justified, in my view, in finding that it was an implied term of the contract between the plaintiff and the first defendant, Mr Robin Gair, that the plaintiff would be responsible for all expenses involved in the use of the car. So much is suggested by the word "subsidised". Clearly such expenses would include the expenses required to keep the car in petrol, the expenses required to repair it when necessary (and in the latter case this would be so whether the necessity for the repairs resulted from accident or otherwise and if they resulted from accident whether that accident was due to negligent driving or to some other cause). It further means that the plaintiff contracted to indemnify Mr Gair and any authorised user of the car from having to pay any such expenses. As his Honour found: "It would be an implied condition of the contract that the plaintiff would indemnify Mr Gair and members of his family against loss arising from ordinary domestic use of the car". It follows that the verdict which his Honour directed to be entered on behalf of the first defendant was entirely correct. However, no appeal has been brought in respect of this verdict. The only appeal which the plaintiff has brought was against his Honour's finding in favour of the second defendant, Mr Christopher Gair. In this regard, his Honour's findings are brief indeed, and I shall set them out: "So far as the second defendant is concerned, it is admitted that the damage to the vehicle resulted from negligence on his part. However, that of itself doesn't entitle the plaintiff to a verdict against him. Mr Murr submits that his duty of care was limited to a duty not to act in such a way as to deprive the plaintiff of the benefit of any policy of insurance. It also submits that, clearly, he was not in breach of any such duty of care because none of his actions disentitled the plaintiff from recovering under its poiicy of insurance. I accept that submission. Likewise it follows that the action against the second defendant also fails." URJ AUSTRALIAN SOCCER POOLS PTY LTD v GAIR (Meagher JA) 7 With great regret, I am unable to agree with his Honour's conclusion that the second defendant should have succeeded in the plaintiff's action against him. I say "With great regret" because common justice would seem to require that a plaintiff ought not to succeed in claiming damages from one party when he has solemnly agreed with another party that he will bear the damages himself. There would seem to be three ways in which one might argue that the plaintiff should fail against the second defendant. One would be to argue that as the plaintiff had insurance it had suffered no damage. But to uphold such a contention would be both wrong in principle and contrary to authority: as long ago as 1874 it was decided that insurance moneys received by a plaintiff were a res inter alios acta and could not be taken into account in diminution by a plaintiff's loss: Bradburn v GW Railway (1874) LR 10 Ex 1. A second approach would be to argue that the second defendant should have the benefit of the first defendant's contract of indemnity. But, notwithstanding the decision of the High Court in Trident General Insurance Co Ltd v McNeice Bros Pty Ltd (1988) 62 ALJR 508, that approach falls foul of the doctrine of privity of contract, particularly where (as in the present case) it can hardly be said that the second defendant was a cestui que trust of the benefit of the promise to indemnify. The third approach would be that actually adopted by his Honour, to reformulate in diminished terms the duty of care owed by the second defendant to the plaintiff. In my view, the duty of care owed by the borrower of a motor vehicle to the owner of that vehicle must be the same in all cases, no matter what the owner's insurance arrangements may have been, viz, to take reasonable care of that vehicle. To hold otherwise would be to introduce a dangerous novelty into the law, requiring an over sophisticated re-evaluation of the relevant duty in every individual case. That would be a judicial hippogriff indeed. I can appreciate that the content of the standard of care might vary from case to case. If a defendant is an infant or an idiot or a learner or a drunk, the same content of that duty is not expected by him or her as is expected of a hypothetical reasonable man, particularly if that disability is known to the plaintiff: so much is proved by the authorities referred to in the judgment of Clarke JA, which I have had the advantage of reading in draft. But that is not the case here. The trial judge found Mr Christopher Gair was not subject to any disability, much less one known to the appellant; and I fail to see how the possession of an advantage by the plaintiff (in the form of an insurance policy) - whether known to the defendant or not (and in this regard, there is no evidence that Mr Christopher Gair did know of it) - can exuse a defendant from his normal tortious duty or lower the content of that duty. It is instructive to speculate on what the result would have been if the first defendant had cross-appealed against the plaintiff on the contract of indemnity which he had with the plaintiff. If that cross- appeal had been framed as an action for damages, it is difficult to see that it would have availed him much - any damage by the breach would have been suffered by the second defendant and not by him. On the other hand, if it had been framed as an action for specific performance of the contract of indemnity, I do not see why it should not succeed, on the analogy by Beswick v Beswick [1968] AC 58. Alternatively, the cross-appeal might have been framed in restitution, if the broad view of Gaudron J in Trident were adopted. But, unhappily, there was no cross-appeal. I shall not speculate as to whether such proceedings may now be commenced as an independent action. 8 UNREPORTED JUDGMENTS In the result, therefore, I am driven to the reluctant conclusion that the appeal should be allowed, a verdict for the plaintiff in the sum of $7,500 should be entered against the second defendant, an order should be made that the second defendant pay the appellant's costs of the appeal and of the plaintiff's action against the second defendant below, and that the second defendant have a certificate under the Suitors' Fund Act. I agree with Clarke JA that the cross-appeal should be dismissed. The appeal is dismissed with costs. Counsel for the Appellant: AS Martin Solicitors for the Appellant: Sly and Weigall Counsel for the Respondent: DH Murr Solicitors for the Respondent: Bryden, Doherty and Shead