MERCANTILE MUTUAL INSURANCE (AUSTRALIA) LTD v HOGAN and ORS SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL PRIESTLEY, HANDLEY and COLE JJA 9 May 1996, 10 May 1996 [1996] NSWCA 361 NEGLIGENCE — _ s151Z(2) Workers Compensation 1987-contributory negligence-reassessment of non-economic damages-indemnity. Priestley JA I agree with what has been said by Cole JA in all respects except one. That concerns the amount awarded by Judge Christie under s79 of the Motor Accidents Act. I agree with the submission of the appellant that Judge Christie should have given some reasons indicating how he arrived at the figure he awarded. However, on reading the evidence in chief of Mr Hogan I think I understand what led his Honour to make what the other judges in this appeal think was an appellably over-generous award. Since I am in the minority there is little point in elaborating my own reasons for disagreeing with the other judges. In short, they are that Mr Hogan at the age of thirty-one, father of young children, and whose work and life lay in a country district, lost the sight of an eye, leaving him in the following position. His ability to drive motor vehicles and farm machinery is significantly diminished. He has given up driving on public roads at night in the belief that it is dangerous for him to do so. He has greatly restricted any such driving in daylight. His father, for example, is no longer willing to be a passenger while he is driving. To a person in his position the ability to drive is a matter of considerable importance for his general way of life, quite apart from his economic life. His ability to play various sports and to enjoy even simple games involving throwing, catching and hitting with his children is impaired. His self confidence has suffered. His self esteem has fallen. The kind of work he can get is such that the danger of injury to his remaining eye is greater than that of people engaged in sedentary ways of life. What I have mentioned are some of the presently relevant matters which emerge from Mr Hogan's evidence in chief. In the appeal, his counsel told us from the Bar table, without dissent from other counsel, that the effect of the evidence he gave in chief was not diminished in cross-examination. It seems to me that it was matters of the kind I have mentioned which must have been in the mind of Judge Christie in arriving at the assessment which he did. He also had the benefit of seeing Mr Hogan when he was explaining the difficulties caused in his life by the loss of his eye. Because of the lack of reasons given by Judge Christie for his assessment it has become necessary for this court to attempt to form its own assessment of the appropriate award. For my part, on the basis of the materials I have mentioned, my opinion is that the severity of Mr Hogan's non economic loss as a proportion of the maximum amount which may be awarded in a most extreme case is at least 50%. That assessment would bring out a figure so close to that arrived at by Judge Christie that there would be no basis for interfering with Judge Christie's award. I would therefore not alter the figure that he assessed. 2 UNREPORTED JUDGMENTS My opinion therefore is that the appeal should be dismissed with costs. Handley JA I agree with Cole JA. Cole JA James Henry Hogan was injured on 19 April 1990 when he was struck in his right eye by a baling hook. Mr Hogan was employed by Canowindra Produce Co Pty Ltd (Canowindra Produce) and was engaged in loading a truck with hay. The truck was owned by Shane Mitchell who had a contract with Canowindra Produce to cart its hay. Mr Mitchell was assisting in the loading operation, and the baling hook was in his hand when it struck Mr Hogan. Mr Hogan sued Mr Mitchell in negligence. As Mr Mitchell's truck was insured in terms of the statutory Motor Accidents Act policy with Mercantile Mutual Insurance (Australia) Ltd (MMD), Mr Mitchell joined MMI as a third party. As Mr Mitchell also held a commercial motor vehicle insurance policy with Union Insurance Co Ltd (Union Insurance) which provided indemnity in respect of such an accident unless Mr Mitchell was entitled to indemnity under the Motor Accidents Act policy, he also joined Union Insurance Co Ltd as the second third party. Apart from those proceedings, Mr Hogan was paid worker's compensation by Canowindra Produce in the sum of $91,514.32. Accordingly Canowindra Produce sued Mr Mitchell to recover that sum. In defending those proceedings Mr Mitchell again joined MMI and Union Insurance as first and second third parties. These two pieces of litigation were consolidated. On 27 May 1994 Christie DCJ found a verdict for Mr Hogan in his proceedings against Mr Mitchell in the sum of $243,770, from which Mr Mitchell must repay $91,514.32. In the third party proceedings, obviously holding that the Motor Accidents Act policy gave cover, his Honour found a verdict for Mr Mitchell against MMI and in consequence for Union Insurance against Mr Mitchell. In addition, in the second aspect of the proceedings, his Honour found a verdict for Canowindra Produce against Mr Mitchell in the sum of $91,514.32 and again a verdict for Mr Mitchell against MMI with a verdict for Union Insurance against Mr Mitchell. MMI has appealed, arguing on appeal: 1. Christie DCJ erred in failing to find negligence as an employer against Canowindra Produce (grounds 6 and 7) and this resulted in misapplication of s151Z(2) Workers Compensation Act 1987 (ground 8). 2. Christie DCJ erred in failing to find contributory negligence on the part of Mr Hogan (ground 10), and in failing to give adequate reasons (ground 13). 3. The award of $111,560 for non-economic loss was excessive (ground 12). His Honour approached the determination of the allocation of non economic damages erroneously (ground 11). 4. His Honour's findings that MMI were obliged to indemnify Mr Mitchell as Mr Hogan's injuries arose out of the use or operation of a motor vehicle was in error (grounds | to 5). I shall deal each of these four aspects separately. Regarding the first matter argued, it is true that Christie DCJ said: "I make no finding against the employer." It is not at all clear how any question of a finding against the employer could arise for it was not raised on any pleadings. Mr Hogan did not sue Canowindra Produce in negligence as an employer. It seems that MMI sought to raise the WARRCANTILE MUTUAL INSURANCE (AUSTRALIA) LTD v HOGAN and ORS (Cole JAB alleged negligence of the employer as part of an argument in the following form. S151Z(1) Workers Compensation Act 1987 applies if the injury for which compensation has been paid was caused under circumstances creating a liability in some person, not being the employer, to pay damages in respect of the injury. Here circumstances created a liability in Mr Mitchell to pay such damages, those circumstances being the same as those giving rise to the liability of Canowindra Produce to pay worker's compensation. Mr Hogan had recovered the compensation and thus s151Z(1)(d) applied. Thus Canowindra Produce was entitled to be indemnified by Mr Mitchell in respect of those worker's compensation payments. That was the basis of Canowindra Produce's claim against Mr Mitchell. However it was said that if the employer, Canowindra Produce, was negligent as an employer, s151Z had no application and thus there could be no verdict for Canowindra Produce against Mr Mitchell in respect of the $91,514.32 compensation paid, and accordingly MMI should not have been obliged to suffer judgment in Mr Mitchell's favour in respect of that sum. Further it was argued that his Honour failed to correctly assess damages in accordance with s151Z(2). The structure of the argument is correct, it having been accepted by the High Court in Public Transport Commission of New South Wales v J Murray-More (NSW) Pty Ltd!. Further, in light of s151Z(1)(a) and s151Z(1)(b), once a verdict was obtained by Mr Hogan against Mr Mitchell, Mr Hogan was obliged by subs(b) to repay the $91,514.32 to Canowindra Produce, and thus there was, at that time, no right in Canowindra Produce to claim against Mr Mitchell pursuant to s151Z(1)(d) for an indemnity in respect of the worker's compensation payments. Further, if Mr Hogan was entitled to sue his employer, s151Z(2)(b) applied with the consequence that damages were to be assessed in accordance with that subsection. Thus it was important for the trial judge to determine whether the employer was negligent in light of the arguments addressed. Although the matter was not raised on the pleadings, it obviously was an issue at trial as it was addressed in his Honour's judgment. It those circumstances the issues are available to the appellant on appeal.2 Accordingly it was important to determine whether the worker's employer had a liability to Pay damages, if sued by Mr Hogan. In my opinion there was no such liability. The operation being undertaken was the loading of rectangular bales of hay onto the tray of a truck. The operation being performed was a time honoured standard operation being performed in the usual way. Two or three people loaded the hay onto an elevator which elevated the bales above the centre of the tray truck. Two persons, Mr Hogan and Mr Mitchell, were on the truck taking off the bales from the top of the elevator alternately. They laid the bales in a pattern across the truck on the first layer and then down and across the truck on the second layer. These layers alternated thus binding the bales together. The fourth layer was complete, and the fifth almost complete with the loading operation being conducted by Mr Mitchell at the front portion of the tray and Mr Hogan at the back portion. There remained only two or three slots in the centre of the fifth layer to be filled. The two operators removed the bales from the elevator with bale hooks and were slotting them into the remaining holes. As is 1. (1975) 132 CLR 336 at 340 Barwick CJ, at 349. McTiernan J, 350, Gibbs J 2. See Coulton v Holcombe (1986) 162 CLR | at 7-8; Water Board v Moustakis (1988) 180 CLR 491 at 497. 4 UNREPORTED JUDGMENTS not unusual, the slot was tight and Mr Mitchell was jumping on the bale to force it down into the slot. Whilst doing so he had the bale hooks in each hand. Mr Hogan turned to take a bale from the elevator and was struck in the eve by a bale hook. Mr Hogan and Mr Mitchell had worked together loading hay in this fashion on many occasions over the years without prior accident operating in precisely the same manner as on this occasion. The trial judge found that "the injury was caused by a momentary act of inadvertence". It is not explicit whether the inadvertence found was that of Mr Hogan or Mr Mitchell. Assuming it was the momentary inadvertence of Mr Mitchell in not realising the position of Mr Hogan, Mr Mitchell having his back to Mr Hogan, that nonetheless does not establish negligence on the part of Mr Hogan's employer. Nor is negligence established if the inadvertence be that of Mr Hogan. The appellant was correct in its contention that an employer has a duty to take account of the possibility of inadvertent and negligent conduct either on the part of its employee, or others3. It is also correct that the employer's duty is non-delegable+. The appellant is not correct, however, in its contention that the employer in this instance did not provide a safe system of work in the loading of hay onto trucks. The system in use, namely taking bales of hay from an elevator with bale hooks, had been used for many years without injury. In those circumstances it is not correct to say that merely because the two men were using sharp bale hooks common sense indicates both the existence of a real risk of injury, and further that "reasonable and appropriate precautions might be taken to avoid it."5 It is not at all clear what precautions, reasonable or otherwise, could or should have been taken to protect against any risk of injury, even assuming that it were found there existed a real risk of injury. In my opinion, absent such evidence, the trial judge was correct to hold that there was no evidence that the system of work was deficient. The system of work in use has been used in Australia ever since bales of hay have been loaded onto vehicles. If it is now to be suggested that the system creates a real risk of injury, and that there ware reasonable and appropriate precautions which might be taken to avoid that risk, clear evidence would be required. The first matter argued on appeal fails. It follows that s151Z(1)(d) applies but s151Z(2) does not because the worker was not "entitled to take proceedings independently of this Act to recover damages from that employer." MMI argued that Mr Hogan was guilty of contributory negligence. It contended that Mr Hogan knew where Mr Mitchell was, knew that he was experiencing difficulty in slotting in a bale, that he knew Mr Mitchell was close by and probably had a hook in each hand, but he did not hesitate to look or check that it was safe to take a bale off the elevator. Further, as he turned he did not, by shouting, indicate his presence to Mr Mitchell. In my opinion none of these maters alone or together constitute contributory negligence. The two men had worked together in this fashion on very many occasions. They each worked one end of the truck working back towards the centre as they had on innumerable McLean v Tedman and Anor (1984) 155 CLR 306 at 311-313. Kondis v State Transport Authority (1984) 154 CLR 672. . Neill v New South Wales Fresh Food and Ice Pty Ltd (1962-3) 108 CLR 362 at 368-369; Carlyle v Commissioner for Railways 54 SR (NSW) 238 at 243. 6. Grljak v Trivan Pty Ltd (In Liquidation) (1994) 35 NSWLR 82 at 87-88 per Mahoney JA wae WARRCANTILE MUTUAL INSURANCE (AUSTRALIA) LTD v HOGAN and ORS (Cole JAB occasions. Mr Hogan had never shouted to a co-worker whilst loading hay to make him aware of his presence, and there was no suggestion from Mr Mitchell that such shouting was either required or was common practice. Mr Hogan's evidence was that it was not. The trial judge said: "The plaintiff was turning from the position of the elevator. No contributory negligence was established and it was not pursued at any length by the defendant's Counsel."7 A reading of the transcript establishes that is so.8 Mr Hogan said he knew where Mr Mitchell was and he was simply performing the usual operation of filling in one of the last two or three remaining slots. As standard practice two men working on a truck worked towards the centre from each end of the tray and filled the slots. Apart from the suggestion that he should have shouted out to disclose his presence, the issue of contributory negligence was not pressed in the evidence. As the only evidence regarding shouting a warning was that it is never done, it is understandable that the trial judge briefly stated his conclusion that contributory negligence was not established and was not really pressed at the trial. In those circumstances the brief statement of the conclusion does not infringe the concepts enunciated in Soulemezis v Dudley (Holdings) Pty Ltd.9 It was argued that as Mr Mitchell and Mr Hogan were each doing the same job loading hay, if Mr Mitchell's conduct constituted negligence, Mr Hogan's should be characterised as constituting contributory negligence. However the evidence of each was different. Mr Mitchell conceded that he did not pay any attention to the position of Mr Hogan whilst he was "jumping up and down with your arms waving with the these hooks in your hands"!°. There was no similar concession by Mr Hogan. As the trial judge found: "The defendant conceded in evidence he was remiss". The challenge to the finding of absence of contributory negligence fails. NON-ECONOMIC LOSS The trial judge merely stated: "As to the calculation of damages I allow the sum of $111,560.00 plus, interest assessed at $2,000.00 for non-economic loss.''!! This brief statement is said to infringe the principles enunciated in Soulemezis,!2 and further, assuming the Motor Accidents Act is applicable, the trial judge did not fix a proportion of a most extreme case and apply that proportion to the maximum sum then able to be awarded of $212,000.!3 The amount awarded in fact equates to 52.6% of the amount which might be awarded for a most extreme case. Additionally it was contended that, having regard to the injuries, namely, the loss of an eye, the sum awarded for non-economic loss was appellably excessive as the injuries do not justify the awarding of a non-economic loss factor in excess of 50%. I agree with each of the submissions. This Court was invited to reassess damages. Having regard to the effects of the injury upon Mr Hogan' s lifestyle, his age, the particular circumstances of his capacities, the effects upon his self confidence and self esteem, the effects on his capacity to drive and having regard to the pain and suffering occasioned by loss of his eye, in my opinion the 7. Appeal Book, at 154F-154G. 8. Appeal Book, at 88-90. 9. (1987) 10 NSWLR 247 at 280. 10. Appeal Book, at 114P. 11. Appeal Book, at 155G. 12. (1987) 10 NSWLR 247. 13. See Southgate v Waterford (1990) 21 NSWLR 427 at 440. 6 UNREPORTED JUDGMENTS non-economic loss should be regarded as equating to 40% of a most extreme case resulting in damages under that head of $94,000!4. Mr Murray QC, for Mr Hogan, accepted that if this Court reassessed, s73(3) of the Motor Accidents Act, as amended by Act No 27 of 1994, resulted in no interest being payable upon the non-economic loss component. MMI was held liable because it provided the statutory policy required under the Motor Accidents Act 1988. The trial judge held that "the loading must be a use of a motor vehicle".15 The applicable policy under the Motor Accidents Act 1988 provided: "The insurer insures the owner of the motor vehicle and any other person who at any time drives the vehicle (whether or not with the consent of the owner) against liability in respect of the death of or injury to a person caused by the fault of the owner or driver of the vehicle in the use or operation of the vehicle in any part of the Commonwealth (whether or not on a public street)." The test is thus different to that which applied under the Motor Vehicles (Third Party Insurance Act which gave indemnity in respect of injuries which were "caused by or arose out of the use of the vehicle".!6 In NRMA v NSW Grain Corporation, Clarke JA held that indemnity is afforded on satisfactory answer to three questions: "(1) Whether it has been established that the owner or driver of the vehicle is at fault? (2) If the first question is answered "yes", whether the fault of the owner or driver caused the death of or injury to the person who has claimed? and (3) If the answer to the two preceding questions is "yes', whether the fault of the owner or driver was "in the use or operation of the vehicle" the subject of the policy?" Here the first two questions are answered in favour of Mr Hogan. It is established that loading a vehicle is to use the vehicle. In Government Insurance Office of NSW v RJ Green and Lloyd Pty Ltd!7 Barwick CJ said: "But the act of actually placing the load on the part of the vehicle designed to bear it during transport and for the purpose of its transportation, must, in my opinion, be a use of the motor vehicle in the sense relevant to the Act and to the terms of the policy." although on the following page his Honour said: "To say that the operation of loading and unloading a transport vehicle is part of its use is to state the matter too widely."!8 Windeyer J said: "But no sound reason was given for restricting the phrase the use of a motor vehicle" in this way. The only limitation upon its generality that I can see is that the injury must be in some way a consequence of a use of the vehicle as a motor vehicle. Any use that is not utterly foreign to its character as a motor vehicle is, I consider, covered by the words."!9 In my opinion to load a vehicle, for the 14. 40% of $235,000. 15. Appeal book, at 1540. 16. NRMA Insurance Ltd v NSW Grain Corporation (Unreported) Court of Appela (NSW), 15 November 1995, per Clarke JA at 3; Compare NSW Insurance Ministerial Corporation v Handford (1994) 35 NSLR 187 at 188. 17. (1965) 114 CLR 437 at 422. 18. (1965) 114 CLR 437 at 443, see also Menzies J at 445. 19. (1965) 114 CL 437 at 446. WARRCANTILE MUTUAL INSURANCE (AUSTRALIA) LTD v HOGAN and ORS (Cole JAY purpose of transporting the load, is to "use... the vehicle" within the meaning of the policy under the Motor Accidents Act 1988. However the question to be resolved is whether the fault of the owner in the use of the vehicle caused the injury. Because of this, the appellant argued that the negligent acts were omissions of Mr Mitchell which were "in no way dependent upon the use of the truck, it being merely the location at which the negligent act or omissions occurred". Reliance was placed upon the words of Windeyer J in Green, adopted with approval by the High Court in Dickinson v Motor Vehicle Insurance Trust2° where his Honour said: "The words "injury caused by or arising out of the use of the vehicle" postulate a causal relationship between the use of the vehicle and the injury. 'Caused by" connotes "a direct" or 'proximate" relationship of cause and effect. Arising out of extends to a result that is less immediate; but it still carries a sense of consequence. It excludes cases of bodily injury in which the use of a vehicle is a merely casual concomitant, not considered to be, in a relevant causal sense, a contributory factor". The appellant contended that the truck was merely a platform where the negligent acts or omissions occurred and there was no causal link between the use of the truck and the fault of the owner attracting indemnity. In my opinion those submissions should not be upheld. If, as is established, the operation of loading constitutes use of the vehicle, negligence in the conduct of that loading operation resulting in injury results in the injury being caused by the use of the vehicle. Thus the policy under the Motor Accidents Act 1988 is attracted. I would propose the following orders: 1. Appeal upheld. 2. Judgment of Christie J varied by substituting the sum $224,210 for the sum of $243,770. Otherwise orders of Christie DCJ confirmed. COSTS 3. MMI failed in its contentions that Canowindra Produce was guilty of negligence in failing to provide a safe system of work and failed in its contention against Mr Mitchell that the policy issued by it pursuant to the Motor Accidents Act 1988 did not give him cover in respect of his liability to Mr Hogan. Accordingly MMI should pay the costs of the second and third respondents of the this appeal. The first respondent, Mr Hogan should pay one third of the appellant's cost of this appeal, excluding those costs payable by MMI to Canowindra Produce and Mr Mitchell, but is to have, if qualified, a certificate under the Suitor's Fund Act. Counsel for the appellant: JD Hislop QC and G Parker Solicitors for the appellant: PV McCulloch and Buggy Counsel for the first respondent: BF Murray QC and C Twomey Solicitors for the first respondent: Garden and Montgomerie Counsel for the second respondent: J Poulos QC and D Mclllwaine 20. (1987) 163 CLR 500 at 504. 8 UNREPORTED JUDGMENTS Solicitors for the second respondent: Hickson Lakeman Holcombe Counsel for the third respondent: D Andrews Solicitors for the third respondent: Golsby Whitely and Co