S & Y Investments (No.2) Pty Ltd v Commercial Union Assurance Co of Australia Ltd [1986] NTSC 15; 82 FLR 130; 21 A Crim R 204 (27 March 1986)

COURT
IN THE SUPREME COURT OF THE NORTHERN TERRITORY OF AUSTRALIA
Maurice J.(1)
CWDS
Insurance - public liability policy - meaning
of "accident" - doctrine of
proximate cause - hotel manager firing shot to frighten intruder - electrician
working on premises killed
- claim covered by policy.
Insurance - public policy - public liability - policy issued to company -
hotel manager firing shot to
frighten intruder - electrician working on
premises killed - circumstances amounting to manslaughter - organic theory of
corporate
personality - special statutory position of nominated manager of
licensed premises - claim unenforceable - s.69 Licensing Ordinance
1923 (see
now Liquor Act s.25).
Insurance - condition of policy - public liability - reasonable precautions
by insured - test to be applied - recklessness - subjective
- onus of proving
compliance on insured - hotel manager firing shot to frighten intruder -
person killed - onus not discharged.

Insurance - condition of policy - public liability - insured not to make
admissions - claim rejected - insured allowing default judgment
to be entered
- whether amounting to admission - circumstances in which insurer can rely on
condition.
Criminal law - manslaughter
- unlawful and dangerous act - hotel manager
firing shot to frighten intruder - person killed - Pemble's Case distinguished
- manager
guilty of manslaughter.
Criminal law - companies - offences involving mens rea - manslaughter -
organic theory - whether company
can be guilty of crime of violence - company
manager firing shot to frighten intruder - person killed - whether company
criminally
responsible.
Liquor Licensing - company licensee - nominated manager - identity with
company - organic theory of corporate personality
- hotel manager firing shot
to frighten intruder - person killed - circumstances amounting to manslaughter
- whether company criminally
responsible - public policy - company's claim
under public liability insurance unenforceable - manager's failure to take
reasonable
precautions under policy attributed to company.
Evidence - estoppel - acquittal in criminal proceedings - no relevance in
subsequent
civil proceedings involving similar issues.
Evidence - condition precedent - contract of insurance - alleged breach of
condition
- insured required to take reasonable precautions - onus of proving
compliance on insured.
Evidence - statutory exceptions to hearsay
rule - double hearsay - whether
statement made in contemplation of legal proceedings - onus of proof - claim
facing sheet filled
in by insurance company clerk - whether onus discharged -
Evidence (Business Records) Interim Arrangements Act 1984.
Precedent -
common law doctrine - State appellate court - conflicting
decision of English Court of Appeal - single judge in Northern Territory
free
to choose which to follow.
Cases applied:
Beresford v Royal Insurance Co. Ltd (1938) AC 586
Vines v Djordjevitch (1955) CLR 512
Cases approved:
Marcel Beller Ltd v Hayden (1978) 1 QB 694
Stats v Mutual of Omaha Insurance Co. (1976) 73 DLR
(3d) 324
Cases distinguished:
Pemble v R [1971] HCA 20; (1971) 124 CLR 107
Public Transport Commission (NSW) v J Murray-More NSW
Pty Ltd [1975] HCA 28; (1975) 132 CLR 336
Cases considered:
Distillers Co. Biochemicals (Australia) Pty Ltd v Ajax
Insurance Company Ltd [1974] HCA 3; (1974) 130 CLR 1
General Omnibus Company Ltd v London General Insurance
Company Ltd (1936) IR 596
Fraser v B.N. Furman (Productions) Ltd (1967) 3 All ER 57
R v Larkin (1949) 29 CAR 18
Viro v R [1978] HCA 9; (1978) 141 CLR 88
Wayne Tank and Pump Co. Ltd v The Employers' Liability
Assurance Corporation Ltd (1973) 3 All ER 825
Cases followed:
Body Corporate Strata Plan No. 4303 v Albion Insurance
Company Ltd [1982] VicRp 70; (1982) VR 699
Fenton v J Thorley and Co. Ltd (1903) AC 443
Goody v Odhams Press Ltd (1967) 1 QB 333
Gray v Barr (1971) 2 QB 554
Hollington v F. Hewthorn and Company Ltd (1943) 1 KB 887
Kodak (Australasia) Pty Ltd v Retail Traders Mutual
Indemnity Insurance Association [1942] NSWStRp 19; (1942) 42 SR (NSW) 231
Universal Telecasters (QLD) Ltd v Guthrie (1978) 32 FLR 360
Cases not followed:
R v Cory Brothers and Company Ltd (1927) 1 KB 810
R v Murray Wright Ltd (1970) NZLR 476
Cases questioned:
A.F. and G. Robinson v Evans Bros. Pty Ltd [1969] VicRp 110; (1969) VR 885
Balfour Williamson (Aust.) Pty Ltd v Douterluingne
(1979) 2 NSWLR 884
Barisic v Topic (1981) 37 ACTR 1
Cases referred to:
Board of Management of Trim Joint District School v
Kelly (1914) AC 667
Cleaver v Mutual Reserve Fund Life Association (1892)
1 QB 147
Cooper Park Apartments Pty Ltd v The Prudential
Insurance Co. Ltd (NSW Supreme Court, 19 December
1979, unreported) Director
of Public Prosecutions v
Newbury [1976] UKHL 3; (1976) 2 All ER 365
Edwards v Insurance Office of Australia [1933] NSWStRp 61; (1933) 34 SR
(NSW) 88
Hardy v Motor Insurers' Bureau (1964) 2 QB 745
James v British General Insurance Co. Ltd (1927) 2 KB 311
Keighly v Northumberland Insurance Co. Ltd (1974) WAR 156
Lennard's Carrying Company Ltd v Asiatic Petroleum
Company Ltd (1915) AC 705
Lombard Australia Ltd v NRMA Insurance Ltd (1968) 72
SR (NSW) 45
Mason v Century Insurance Co. Ltd (1973) 2 NZLR 216
Norwich Union Insurance Co. Ltd v R and W Products Pty
Ltd (1969) 90 WN (NSW) 554
R v Crabbe [1985] HCA 22; (1985) 58 ALR 417
R v Holzer [1968] VicRp 61; (1968) VR 481
Roberts v State Insurance General Manager (1974) 2
NZLR 312
Smorgon v Australia and New Zealand Banking Group Ltd
(1976) 134 CLR 472
Tesco Supermarket Ltd v Nattrass [1971] UKHL 1; (1972) AC 153
Tinline v White Cross Insurance Association Ltd (1921)
3 KB 327
Trade Practices Commission v Tubemaker [1983] FCA 93; (1983) 47 ALR 719
W and J Lane v Spratt (1970) 1 All ER 162
Cases mentioned in argument but not cited in Judgment:
A.N.I. Australia Pty Ltd v Hannay (1981) Qd R 598
Allen v Snyder (1977) 2 NSWLR 685
Andrews v Director of Public Prosecutions [1937] UKHL 1; (1937) AC 576
Bond Air Service v Hill (1955) 2 QB 417
Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336
Day and Dent v North Australian Properties [1981] FCA 12; 34 ALR 595
Deatons v Flew [1949] HCA 60; (1949) 79 CLR 370
Director of Public Prosecutions v Kent and Sussex
Contractors Ltd (1944) 1 KB 146
Grant v Southern Cross Assurance Co. Ltd [2005] WASCA 83; (1927) 30 WAR 65
Green v Windman [1964] VicRp 42; (1964) VR 297
H.L. Bolton (Engineering) Co. Ltd v T.J. Graham and Sons
Ltd (1957) 1 QB 159
Hamilton Fraser and Co. v Pandorf and Co. (1887) 12 App
Cas. 518
Helton v Allen [1940] HCA 20; (1940) 63 CLR 691
The Lady Gwendolen (1965) P. Div 294
Maye v The Colonial Mutual Life Assurance Society Ltd
[1924] HCA 26; (1924) 35 CLR 14
Midland Insurance Co. v Smith (1881) 6 QBD 561
Peter Dumenil and Co. Ltd v James Ruddin Ltd (1953) 2 All
ER 294
Pugh v London Brighton and South Coast Railway Co. (1896)
2 QB 248
R v Australasian Films Ltd [1921] HCA 11; (1921) 29 CLR 195
R v Bugg [1978] VicRp 25; (1978) VR 251
R v Church [1965] EWCA Crim 1; (1966) 1 QB 59
R v East Crest Oil Co. Ltd (1944) 3 DLR 535
R v I.R.C. Haulage Ltd (1944) 1 KB 146
R v Turner [1962] VicRp 2; (1962) VR 30
Rejfek v McElroy [1965] HCA 46; (1965) 112 CLR 517
Steinke v Australian Provincial Assurance Assocn Ltd
(1944) St R Qd 7
Stebbing v Liverpool London and Globe Insurance (1917) 2
KB 433
Tannous v Mercantile Mutual Insurance Company Ltd (1978)
2 NSWLR 331
HRNG
DARWIN
#DATE 27:3:1986
Counsel for the Plaintiff: Mr Dean Mildren QC
Solicitor for the Plaintiff: Mildren Silvester and

Partners
Counsel for the Defendant: Mr D.N. Angel QC and Mr
P.G. Alderman
Solicitor for the Defendant: Ward Keller
ORDER
Judgment for the defendant. Plaintiff to pay the defendant's costs of and
incidental
to the action.
JUDGE1
In this action the plaintiff seeks to recover by way of indemnity from the
defendant insurer compensation
which the plaintiff is liable to pay under a
judgment of this Court in a previous action (No. 444 of 1977) brought against
it at
the suit of Jillian Logan. The indemnity is said to be payable under
the terms of a public liability insurance policy issued by
the defendant to
the plaintiff in respect of a hotel business carried on at premises situated
on Casuarina Drive, Nightcliff: the
Seabreeze Hotel.
2. Mrs Logan is the widow of an electrician who was fatally wounded at the
hotel by a shot fired from a .22 calibre
rifle by the manager, Robert Victor
Holmes on 20 January 1975. By a writ of summons (No. 444 of 1977) dated 13
July 1977 she commenced
an action under the Compensation (Fatal Injuries) Act
against both S and Y Investments (Number Two) Pty Ltd and Holmes. That
company entered an appearance to the action, but did not
file a defence. As
a result, interlocutory judgment was entered against it on 5 April 1978 and
the action set down for assessment
of damages. On 9 June 1982 Sir William
Forster assessed the compensation due the widow and her two sons at
$188,245-32 and entered
judgment against both defendants accordingly. He also
ordered them to pay the widow's costs. These were subsequently taxed and
allowed by the taxing master at $3,532-36. In this action the plaintiff
seeks to recover the sum of this judgment and the costs
awarded against it
from its public liability insurer.
3. It is not in dispute that at the time of the shooting there was in force
between the parties a public liability policy issued in respect of the hotel
business, although the original policy document was
not produced and
Commercial Union's policy record sheet has been lost or destroyed. One issue
raised in the defence is the question
of the monetary limit on the insurer's
liability to indemnify under the policy; it being contended on the one hand
that it was set
at $100,000 and, on the other, that there is no evidence in
admissible form to that effect.
4. The insurer originally resisted the
claim on two grounds: firstly, the
shooting was no accident and therefore not within the terms of the policy;
and, secondly, it
would be against public policy to allow the insured to
recover in a case such as this. However, since then, additional grounds
have
been raised, two involving alleged breaches of express conditions of the
policy and a third alleging that by not defending the
widow's action against
it, the plaintiff showed a lack of good faith entitling the defendant to
refuse to meet the claim.
The Facts
5. It is appropriate to begin by a consideration of the circumstances of the
shooting. The Seabreeze Hotel consisted of two main
single storey buildings
more or less rectangular in shape and sited parallel to one another. The
building closest to Casuarina Drive
had a public bar in its eastern half and a
lounge bar on the western side. Internally the two bar areas were separated
by a large
coolroom with steel-framed glass doors behind which drinks were
stored. The coolroom did not extend the full width of the building;
it
appears to have stood in about the centre of it. Patrons could gain access
to the public bar through a series of glass doors
facing the road. In about
roughly the middle of the southern side of the front building there was an
external wooden door used
to enable staff to gain direct access from the rear
of the building to the working area behind the counter in the public bar.
Just
to the east of this door was a servery opening onto a grassed beer-garden
area on the southern side of the building. The servery
had a counter and,
when not in use, the opening was secured by drawing wooden concertina-type
shutters across it. Further to the
east of the servery was a set of glass
doors located in a position that enabled patrons to move from the public bar
out into the
beer-garden.
6. The second main building was divided into several accommodation units.
One was occupied by the hotel manager.
It was separated from the front
building by the open grassed area used as a beer-garden. The two buildings
were about 73 feet apart.
7. At the time of the shooting there was a temporary structure on the eastern
end of the front building housing a generating plant.
At the western end of
the open area between the two main buildings was a swimming pool, the
surrounds of which were also used as
a beer-garden.
8. The hotel premises were badly damaged during Cyclone Tracy which
devastated much of the city and suburbs on 25
December 1974. Temporary
repairs had been made to enable trading to recommence as it had done some time
before the shooting, but
it was still not possible to completely secure the
bar areas. The hotel was staffed by only two persons: the manager and a
barman.
The practice at the time was for the manager or the barman to sleep
in the bar at night armed with a loaded rifle or shotgun.
9.
There were three directors of the defendant company at the time: Maisie
Young and her daughter and son-in-law, Sue and Paul Smith.
The publican's
licence required in respect of the premises was held by the company, but in
accordance with s.69 of the Licensing
Ordinance 1939-1974 (since repealed) it
had nominated Mr Holmes as its manager. In consequence, for the purposes of
the Ordinance
he was "deemed to be the person licensed in respect of the
premises or the holder of the licence thereof; and the premise (were)
deemed
to be his licensed premises or the premises in respect of which he (was)
licensed or (held) a licence" (s.69(5)). This meant,
of course, that the
various obligations and duties imposed upon holders of publican's licences by
the Ordinance devolved upon Mr
Holmes personally. I will have more to say
about this important statutory provision later.
10. Mr Holmes had held the position
of manager since 1973. He lived on the
premises and had the day-to-day control of the hotel; as he put it "running
the hotel ...
ordering the stock, putting it into the bars, hiring the staff;
just the general duties of running a hotel, making the decisions".
With the
exception of Mr Paul Smith, the directors did not interfere much with Mr
Holmes' management of the hotel business. Mr
Smith concerned himself mainly
with financial matters, checking the takings, the banking, paying the accounts
and consulting with
Mr Holmes on items of major expenditure.
11. At the time of the shooting the deceased was the manager of an electrical
contracting
business, Kennedy and Middletons, and had done work at the hotel
before. A decision had been made by Mr Holmes in consultation with
Mr Smith to
get the swimming pool filters and lights operational again by connecting them
to the hotel generating plant, there being
still no town power supply
available at the time. At about 12.30 p.m. on the day of the shooting Mr
Holmes sought the deceased
out at his home in suburban Jingili and asked him
to do the necessary work. He evidently agreed.
12. The deceased arrived at the
hotel at about 2.30 pm with another
electrician, Stephen Ronald Feltus. The manager was not there at the time.
The barman, being
the only other person employed on the premises by the
defendant, was in charge and was just closing up the public bar for the
afternoon.
He allowed the two electricians to help themselves to a can of
beer which they took with them over to the pool area and drank.
They then
ran power cables from the generator shed to the pool equipment. At about this
time Mr Holmes returned to the hotel and
the three men had a conversation near
the pool.
13. As to the events leading up to the shooting, I had evidence from both Mr
Feltus
and Mr Holmes. Their accounts vary, but not in respects that I
consider important. The elapse of over 10 years since these
events occurred
has understandably diminished their abilities to recall points of detail,
although I would expect Mr Holmes' recollection
of his role in the matter to
have been substantially reinforced by his involvement in the criminal
proceedings launched against him
afterwards.
14. When the conversation with the manager concluded, Mr Feltus recalls that
he and the deceased headed back towards
the generator shed to connect the
cables at that end. On the way they decided to help themselves to another
can of beer from the
now closed public bar. They found the wooden staff door
leading from the beer garden to the area behind the counter in the public
bar
was unlocked. They entered through it, got themselves another drink each
from the refrigerator and then sat on the servery
counter facing the road.
Immediately behind their backs were the concertina-type wooden shutters in the
closed position. They had
not long been sitting there drinking their drinks
when the deceased, who was immediately to Mr Feltus' left, fell sideways along
the server counter saying that he had been shot. There was a wound in the
middle of his back from which he was bleeding profusely.
Three weeks later
he died at a hospital in Sydney; the death certificate records the cause of
death as: "Haemorrhage due to bullet
wound to the chest".
15. Mr Holmes recalls talking to the two electricians around the pool area
for about half an hour, during which
time he got them a can of drink each from
the bar. He says, in effect, that he left them at the generator shed. Not
long after
that he went to the room he occupied in the accommodation section.
The entrance to his room looked out across the beer garden to
the public bar.
It seems to have been roughly in line with the eastern edge of the building
closest to the road. (Whilst the parties
thought it important that I have no
less than five plans each showing the lay-out of roughly the same area, none
are to scale. One,
drawn by a policeman who investigated the shooting,
indicates the distance from Mr Holmes' door to the servery shutters was 100
feet.)
Shortly after he returned to his room Mr Holmes looked out the door and
"glimpsed someone behind the bar ... the public bar". He
could see the
person through one of the glass doors. Later, he explained, he saw that
person behind the counter in the public bar,
and he saw him go around the
corner of the coolroom on the side closest to the road. Once around the
corner, his view of the intruder
was totally obscured by the coolroom. He
did not recognise the person. It did not occur to him that it might be one
of the electricians.
He picked up a loaded .22 calibre rifle that he kept in
his room, put it to his shoulder, aimed it at the servery shutters and
fired.
He did not shout any warning before he pulled the trigger and, when he did so,
the person who he had seen inside the bar was
not in view. After discharging
the rifle, Holmes entered the public bar where he found the deceased "by those
doors I had shot
through".
16. Asked by the plaintiff's counsel why he had fired at the servery doors,
Mr Holmes replied:
"Because I knew there
was a fridge behind it, and it
couldn't really hurt anyone; because the person I saw
was round the other side, and I didn't
think it would go
through the door anyway; I thought it would just make a
noise."
17. He claimed that he had little experience
with firearms and said that his
intention had been to scare the person inside. Asked how he thought that
person would have been
scared, Mr Holmes said:
"Well, I presumed it would have made a noise when the
bullet hit the wood, or even if it had gone through
the
wood, there was the big cold room behind it. It would
have made a noise".
18. The view I formed about Mr Holmes' veracity
is best illustrated by the
following exchange in the evidence before me:
"You do know (the rifle) was loaded at the time? ---
Well, I found out it was loaded when I pulled the
trigger, didn't I?
His Honour: Would you just answer the question.

Did you know if it was loaded at the time? --- No, I
didn't."
19. In the light of the other evidence I have quoted, not to
mention evidence
which Mr Holmes gave about sleeping with the rifle in the bar, other loaded
weapons being kept on the premises,
having been assaulted and having had to
confront intruders previously, this answer is not believable.
20. Mr Holmes was charged
with the manslaughter of the deceased, but a jury
of twelve returned a verdict of not guilty on 8 August 1975. Almost two
years
later Mrs Logan issued her writ claiming compensation from S and Y
Investments (Number Two) Pty Ltd on the basis that her husband's
death was the
result of Holmes' negligence for which the company as his employer was
vicariously liable.
21. A form of of public
liability policy was submitted in evidence and the
defendant admitted that it was a copy of the terms and conditions which formed
part of the contract of insurance between the parties at the time of the
shooting. The general indemnity provision is in these
terms:
"Now this Policy witnesseth that in consideration of
the payment of the Premium and subject to the terms and
conditions
exceptions and memoranda contained herein
endorsed hereon or attached hereto the Company will pay
to or on behalf of the Insured
all sums which the insured
shall become legally liable to pay for compensation in
respect of
(a) bodily injury (which
expression includes
death and illness)
(b) damage to property (which expression includes
loss of property) occurring
during the period of
Insurance as a result of an accident and happening in
connection with the Business carried on at and from
any
Situation specified in the Schedule."
22. The manager of the defendant's Darwin office at the time of the events
with which
we are concerned, Mr R.J.W. Bottrell, gave evidence that when a
policy issued, his company's practice was to retain only a document
called a
policy record sheet. The company had searched for that sheet, but was not
able to find it. What was available, however,
was a document called a claim
facing sheet which was, in fact, attached to a claim file opened on 28 January
1975. Mr Bottrell
testified that when a claim was notified, the practice of
his office was for a clerk to take a blank claim facing sheet and transpose
on
to it from the policy record sheet details of the insurance, including the
type of policy, its number, the name of the insured,
the due date of the
policy and the sum insured. Then it would be attached to the inside of a new
file. Not surprisingly, Mr Bottrell
was unable to identify the handwriting
on the claim facing sheet in this instance; there were, as he said, the
handwritings of various
clerks, who had worked on the file, to be found in it.
Nonetheless, on the basis of his evidence and the appearance of the document,
I am satisfied that it is what it purports to be: a claim facing sheet made
up by one of the defendant's clerks in the course of
his duty. I am also
satisfied that it was entered up by that clerk using information he derived by
inspecting the now missing policy
record sheet. But its tender is object to,
and I will deal with that in these reasons. If admitted, it would constitute
evidence
that the limit on the defendant's liability was stipulated to be
$100,000 (plus costs).
23. I shall defer setting out the facts
relating to the defences involving
alleged breaches of the conditions of the policy until I have dealt with what
I see as the two
main issues: (1) was the liability incurred by the
plaintiff to pay compensation in respect of Mr Logan's death the result of an
accident; and (2) do public policy considerations preclude the plaintiff
from recovering under the policy.
Significance of the
acquittal
24. At the outset I ought to point out that the defendant is not precluded by
Mr Holmes' acquittal by the jury from raising
these defences. The outcome of
a criminal prosecution has no evidentiary value in civil proceedings involving
similar issues:
see Hollington v F Hewthorn and Company Ltd (1943) 1 KB 887;
Goody v Odhams Press Ltd (1967) 1 QB 333; and Gray v Barr (1971) 2 QB 554.
Was the shooting "an accident"?
25. I was referred to several cases dealing with the meaning of the word
"accident" in insurance
law. I have looked at many others. In none were
the words defining the cover phrased precisely as here: injury etc "occurring
... as a result of an accident". These I take to mean that the injury, death
or damage must be caused by an event that may be described
as an accident;
hardly surprising, perhaps, in a policy which has as its object the provision
of an indemnity for legal liability
to persons who are virtual strangers to
the insured. In a common-form policy such as this, no strained or artificial
meaning should
be given to words which are in everyday use in the community at
large. In any event, "accident" is not a technical legal term with
a clearly
defined meaning. Its popular and ordinary meaning has long been treated as
comprehending any unlooked for mishap or untoward
event which is not expected
or designed: Fenton v J. Thorley and Co. (1903) AC 443, 448 and 453; and see
the useful discussion of earlier decisions and writings by Starke J. in A.F.
and G. Robinson v Evans Bros.
Pty Ltd [1969] VicRp 110; (1969) VR 885; by Blair J.A. in Stats v
Mutual of Omaha Insurance Co. (1976) 73 DLR (3d) 324; and by Judge Edgar Fay
in Marcel Beller Ltd v Hayden (1978) 1 QB 694. Here there was an event that
may fairly be described as an accident in the popular sense: the bullet
striking the deceased. In
the circumstances of this case, I would also
regard that occurrence as the proximate cause of the plaintiff's liability to
the deceased's
widow (as to which see Ivamy, General Principles of Insurance
Law, 4 ed 404 to 407; MacGillivray and Parkington on Insurance Law
6 ed 720 to
722; and Wayne Tank and Pump Co. Ltd v The Empoyer's Liability Assurance
Corporation Ltd (1973) 3 All ER 825).
26. In its application to public liability policies, the doctrine of
proximate cause requires that the liability in respect of which
indemnity is
claimed have been proximately caused by injury or damage occurring as a result
of an accident, not that the proximate
cause of the event claimed to be an
accident be itself some fortuitous happening. Indeed, it would run counter
to the notion that
the word "accident" is to be understood in its popular
sense if, in deciding whether some event was properly so to be described,
one
were confined to identifying a single cause let alone a lawyer's view of what
was the "proximate" cause of that event. A failure
to keep this distinction
clear has, I think, over-complicated some of the arguments in this case.
27. It follows that in deciding
whether the bullet striking the deceased was
an accident, one is entitled to take into account all of the circumstances
surrounding
that event and is not required to isolate one single cause; for
example, in this case, the discharge of the firearm. Here there were
in fact
two causes of the bullet coming into contact with Logan. Obviously Holmes
pointing the rifle and pulling the trigger is
the one that springs quickest to
mind. But it must not be forgotten that he could not see the deceased nor,
in the view I have
formed, did he actually believe him to be in the line of
fire. The other circumstance necessary to bring about the unfortunate
event
which was followed was for Logan to unwittingly place himself in the line of
fire by sitting on the counter behind the servery
shutter. What gives the
fact that the bullet struck him its accidental quality is that these two
causes more or less independently
combined to produce that result - neither
was sufficient on its own.
28. I have said the wounding of Logan was unintended: it was
neither designed
or looked for. In my view it was unexpected in the sense that not only do I
believe Holmes was shocked by its
occurring but also a reasonable man in
Holmes' position, whilst he would not have acted as Holmes did, would still
have considered
it not likely that the bullet would have struck anyone.
There was a large area of public bar obscured from Holmes' view, much of
it
behind the cool room through which the bullet could not pass and behind which
Holmes had seen the intruder disappear shortly before
he fired. As foolish
as Holmes' actions were, I cannot get away from the view that it was, in the
circumstances, unlucky that Logan
was actually hit, let alone killed as a
result. In other words, if it be a relevant test, the wounding was not,
without more, a
probable consequence of Holmes' action.
29. Despite suggestions to the contrary by Starke J. in A.F. and G. Robinson
v Evans Bros.
Pty Ltd (cited above, 892 and 896) senior counsel for the
defendant urged me to accept that in deciding whether what occurred was
an
accident or not, the question of what were the expected consequences of
Holmes' actions was to be determined subjectively. Mr
Mildren QC for the
plaintiff supported this view, citing Judge Edgar Fay in Marcel Beller Ltd v
Hayden (cited above, 694, 701 and
705); Stats v Mutual of Omaha Insurance Co
(cited above, 328: "The test of whether (a) mishap is an accident is the
actual mental
state of the actor at the time the act leading to it is
performed"); and Prof. Sutton's Insurance Law in Australia and New Zealand
par. 10.101. More so than an objective test, this view, it seems to me, sits
more comfortably with the well-settled principle that
whether an occurrence is
to be regarded as an accident must be determined from the point of view of the
insured: Board of Management
of Trim Joint District School v Kelly (1914) AC
667; Lombard Australia Ltd v NRMA Insurance Ltd (1968) 72 SR(NSW) 45; and
Gray v Barr (cited above) per Phillmore J at 585.
30. Much reliance was placed by counsel for the defendant upon the decision
of the Court of Appeal in Gray v Barr (cited above). The defendant in that
case sought an indemnity from an insurance company which
had been joined as a
third party. The claim was made under a "hearth and home" policy
indemnifying the insured against all sums
which he "shall become legally
liable to pay as damages in respect of ... bodily injury to any person ...
caused by accidents ...".
The principal action was brought by the widow of a
man who had been killed when a shotgun held by the defendant was
unintentionally
discharged. The defendant had gone to the deceased's house
with the gun to look for his wife whom he suspected of having an affair
with
the deceased. Confronted by the deceased whilst ascending a stairway inside
his house, the defendant fired a warning shot into
the ceiling. A struggle
ensued during which the defendant fell backwards down the stairs. In his
fall the shotgun accidentally
discharged thereby killing the deceased. The
trial judge, Geoffrey Lane J., held that the fatal shot was accidental, but
disallowed
the claim under the insurance contract on the grounds of public
policy. His conclusion that recovery should be denied on public
policy
grounds was unanimously upheld by the Court of Appeal. It was therefore
unnecessary for its members to consider the alternative
defence, i.e. death
was not caused by accident. However, all did and gave varying reasons for
their different conclusions. Lord
Denning M.R. took the view that he was
obliged by "settled ... insurance law" to identify a single dominant cause of
death (567).
In his opinion, that was the act of the defendant in going up
the stairs in the deceased's house carrying a loaded gun. Hence,
death was no
accident. Salmon L.J. appears to have eschewed such a narrow approach, saying
that the trial judge had rightly considered
the second shot, not "in vacuo",
but in the light of all that led up to it - including the contrast of the
first shot having been
accidental (579, but compare 580). He held "the
accident in question was of the genus 'accident' referred to in the policy",
but
went on to find an implied term excluding "injuries caused by an accident
occurring in the course of threatening unlawful violence
with a loaded gun"
(580). Phillmore L.J. said that in deciding this issue the incident should
be regarded as a whole: "I think
that the true question is whether people
would commonly agree with Barr, if after describing all the circumstances as
they occurred,
he went on to say 'It was an accident'". So far as he was
concerned: "I confess that I would not". (585).
31. With such a diversity
of approach and, dare I say, possible confusion
between the application of the doctrine of proximate cause and the question of
how
one determines whether an event can be described as "an accident" in the
popular sense, I have difficulty in extracting much of value
from Gray v Barr
on this point. I note that in Marcel Beller Ltd v Hayden (cited above) Judge
Edgar Fay did not find any of the three
different analyses binding upon him
(703).
32. In my judgment, the plaintiff's liability to Mrs Logan did arise as a
result of a
risk insured against - namely death occurring as a result of an
accident. For reasons I will give later, I have formed the opinion
that in
this episode Holmes and the company that employed him are legally
indistinguishable. If I am wrong in that conclusion then,
of course, my
judgment about the occurrence having been an accident would be reinforced,
because then the matter would have to be
looked at from the plaintiff's point
of view as distinct from Holmes' (see the authorities cited above for this
proposition). From
the company's perspective, if it can be totally dissociated
from Holmes', then the shooting was an accident.
Public policy
33. "No
system of jurisprudence can with reason include amongst the rights
which it enforces rights directly resulting to the person asserting
them from
the crime of that person" said Fry L.J. in Cleaver v Mutual Reserve Fund Life
Association (1892) 1 QB 147, 159. This statement was adopted by Lord Atkin
in Beresford v Royal Insurance Co. Ltd(1938) AC 586, 596. In his words:
"(A)
man is not to be allowed to have recourse to a
Court of Justice to claim a benefit from his crime
whether under a contract
or a gift. No doubt the rule
pays regard to the fact that to hold otherwise would in
some cases offer an inducement to crime
or remove a
restraint to crime, and that its effect is to act as a
deterrent to crime. But apart from these considerations
the absolute rule is that the Courts will not recognise a
benefit accruing to a criminal from his crime." (598 to
599).
Applying this rule, all members of the Court of Appeal in Gray v Barr (cited
above) held the claim under the "home and hearth" policy
unenforceable; Barr,
in their view, had been guilty of wilful and culpable manslaughter - the
jury's "merciful" verdict notwithstanding.
34. In the present case the defendant contends that Holmes was guilty of
manslaughter, and that for this reason the claim must be
refused. It
recognises, of course, that the claim is not made by Holmes but by the company
that employed him. He is not insured
under the policy: he cannot personally
benefit from the claim. A similar point was recognised in Cleaver v Mutual
Reserve Fund
Life Association (cited above), the ratio of the case being
succinctly put by Fry L.J.: "(T)he rule of public policy should be applied
so
as to exclude from benefit the criminal and all claiming under her, but not so
as to exclude alternative or independent rights"
(159 - italics mine). See
also Hardy v Motor Insurers' Bureau (1964) 2 QB 745, 765 and 768. What
Commercial Union argues in this case is that by applying the so-called
"organic theory" of corporate structure
to the circumstances of this case,
Holmes' contribution to Logan's death should be treated as if his actions were
those of his employer.
35. It was submitted that Holmes' conduct amounted to manslaughter under the
rule that the offence is committed by anyone who kills
another in the course
of carrying out a dangerous and unlawful act, regardless of the fact that no
harm was intended to the person
killed. The leading Australian authority on
this head of manslaughter has the dubious distinction of originating outside
another
Darwin hotel - also blown away by Cyclone Tracy: Pemble v The
Queen(1971) [1971] HCA 20; 124 CLR 107. Pemble shot a former girlfriend in the head and
killed her near the old Fannie Bay Hotel. He was tried by a jury of 12
before
the Supreme Court in Darwin and convicted of murder. On appeal
directly to the High Court the conviction was set aside; however,
a verdict
of guilty of manslaughter was entered in its place. Pemble's defence was the
rifle discharged accidentally; but through
his counsel he accepted, in
effect, that this occurred whilst he had been performing a dangerous and
unlawful act, virtually inviting
the jury to find him guilty of manslaughter.
The rifle had discharged whilst he was approaching the deceased from behind
with it
cocked, loaded and pointing upwards. His admitted intention was to
frighten her. He claimed to have stumbled and the rifle discharged.
The
evidence suggested the deceased was not conscious of Pemble's approach or of
having been hit by the bullet. Whilst all five members
of the High Court were
of the opinion that the conviction for murder could not stand, only three
supported the order substituting
a verdict of guilty of manslaughter. Barwick
C.J. was among this majority. He said:
"The killing of a human being in the course
of
committing certain unlawful acts is manslaughter. What
unlawful acts are sufficient for this purpose are perhaps
not
yet precisely and fully defined or stated in
decisions or in texts: but it may be taken that so far
the view is held that
to be relevantly unlawful the act
must be in breach of the criminal law." (122)
He found the following statement of Humphreys
J. in R v Larkin (1949) 29 CAR
18, acceptable and appropriate to the case at hand:
"Where the act which a person is engaged in
performing is unlawful, then if at the same time it is a
dangerous act, that is, an act which is likely to injure
another
person and quite inadvertently the doer of the
act causes the death of that other person by that act,
then he is guilty of
manslaughter." (122) Because there
was no evidence that the deceased was ever conscious of
the impending assault upon her,
there was doubt about
whether an assault had actually been committed. But the
Chief Justice was of the opinion that the act
of the
appellant in brandishing the rifle in the way he had done
was an unlawful act of the kind which would make the
subsequent
killing manslaughter. At the least, he said,
it constituted an attempt to assault her and was
obviously dangerous to the
deceased (123). McTiernan J.
agreed that the killing "resulted from an act which was
both unlawful and dangerous" (127 to
128), but in so
doing he relied upon the appellant having committed an
offence against s.75(1A) of the Police and Police

Offences Ordinance 1923 prohibiting the discharge of
firearms in public places without lawful excuse. The
other member of
the majority was Windeyer J. He
concluded that the homicide was not excusable, saying:
"A homicide is excusable as accidental,
by
misadventure or misfortune, when the act causing death
was not done whilst carrying out an unlawful and
dangerous undertaking
nor was it the result of culpable
negligence". (138)
36. Both members of the minority accepted accidental homicide by dangerous
and unlawful act as a form of manslaughter, they thought it should go back to
a jury for determination. Apart from McTiernan J,
no member of the Court
appears to have considered the unlawful discharge of a firearm a criminal act
of the order required. Perhaps
it may be deduced from this that an offence
against the person must be involved before the unlawful act is "relevantly
criminal".
(I note that Pemble was considered recently by the High Court in
R Crabbe [1985] HCA 22; (1985) 58 ALR 417, but the discussion was confined to mens rea in
murder by reckless act.)
37. The present case does not present the same difficulty
as did Pemble;
here the rifle was deliberately discharged at the public bar with the
intention of frightening the person inside.
In this respect, Holmes achieved
his admitted objective only too well. And, unlike the girlfriend in Pemble,
Holmes' victim was
aware he had been shot; indeed, as Mr Feltus told us, the
deceased announced he had been shot as he fell sideways. It was suggested
that
this assault, at least as far as Holmes intended it to go, was justified in
defence of property. I do not accept this; no
reasonable person would claim
to be entitled to stand outside his home and fire bullets into it because he
saw an intruder inside.
Law enforcement agencies do not behave in that way,
nor may a householder or business proprietor. There was no warning here, no
attempt to discover the identity of the intruder, to ascertain his purpose or
to have him leave the premises without recourse to
violence. Darwin was not
the Wild West and, despite Holmes' experiences of lawlessness in the aftermath
of Cyclone Tracy, no basis
existed for following a policy of "shoot first, ask
questions later".
38. Nor can it be seriously argued that Holmes' actions were
not obviously
dangerous in the sense that they involved appreciable risk of really serious
injury. He could not say that in the
minute or so before he fired after his
last glimpse of the intruder that he had not moved into a position behind the
shutters; Holmes
did not know where the intruder was. Nor could Holmes
predict that the bullet would not go through the shutters and be deflected
off
in a different direction or ricochet off some hard surface inside the bar.
How far he appreciated these risks I cannot say, but
I do not believe his
statement that he did not think the bullet would go through the servery door;
after all, he began the answer
in which he made this assertion by saying he
fired at the "slats" because he knew there was a fridge behind it. To find
that the
risk was appreciable does not, I think, conflict with the view that
Logan was unlucky to have been caught in the line of fire; that
means no more
than, objectively judged, it was less than probable he would actually be hit.
39. On these facts it is my opinion
that Holmes was guilty of manslaughter.
I do not think it was necessary to prove that he himself appreciated the
degree of danger
created by the discharge of the firearm, had he done so then
it would have been manslaughter by criminal negligence: see per Smith
J. in R
v Holzer [1968] VicRp 61; (1968) VR 481 at 482 (cited with approval by Menzies J in Pemble
(cited above, 134); and DPP v Newbury [1976] UKHL 3; (1976) 2 All ER 365 (HL).
40. Not every insurance claim arising out of a manslaughter will be precluded
on the grounds of public policy. Thus, in the category
of homicide called
"motor manslaughter", it is settled that the insured is entitled to recover:
see Tinline v White Cross Insurance
Association Ltd (1921) 3 KB 327; and
James v British General Insurance Co. Ltd (1927) 2 KB 311. In Gray v Barr
(cited above) the Court of Appeal was careful not to lay down any general
rule. Phillmore L.J. said it would be
foolish to do so: manslaughter varies
from conduct which is almost murder to conduct which is only criminal in the
technical sense
(587) (see also Salmon L.J. at 581). Confining his decision
to the facts of that case he said:
"In an age of violence - an age
where the use of
firearms is all too frequent - it would I think be very
odd if a man who had had in his hands a loaded shotgun
from which a shot had been fired and had killed another
at a time when he had just assaulted that other with the
gun could
recover on an insurance policy which protected
him from liability if he was not negligent in the use of
the shotgun. This
was in fact a grave case of
manslaughter and in my judgment the judge was right in
saying that the defendant could not recover
against the
Prudential on the grounds of public policy." (587 to
588).
Salmon L.J. expressed his view this way:
"I am confident
that public policy undoubtedly
requires that no one who threatens unlawful violence with
a loaded gun should be allowed to
enforce a claim for
indemnity against any liability he may incur as a result
of having so acted." (581)
Lord Denning M.R. adopted
the test suggested by Geoffrey Lane J.:
"The logical test, in my judgment, is whether the
person seeking the indemnity was
guilty of deliberate
intentional and unlawful violence, or threats of
violence. If he was, and death resulted therefrom,
then, however unintended the final death of the victim
may have been, the court should not entertain the claim
for indemnity."
(569)
41. Counsel for the plaintiff was at pains to draw distinctions between that
case and this, some finer than others. Each
case had/has its mitigating
circumstances: indeed, of Barr it was said by Salmon L.J.; "(E)veryone must
have the greatest sympathy
with (him). He was pushed almost beyond the
limits of human endurance." (582) It cannot be simply those circumstances
which are
to be taken into account in drawing the line. So the fact that
Holmes believed the person he saw was an intruder, had a duty to
protect his
employer's property, had previously had trouble with intruders, did not think
the bullet would hit anyone, only used
a .22 calibre rifle - and so on, none
of these are enough to take the case out of the class which the Court of
Appeal thought should
fail. In my opinion, it is the broad similarities that
are important: the deliberate and legally unjustified recourse to loaded
arms, the inherent danger of the conduct, and the assault that went wrong with
its fatal consequences. At least Barr could say
the gun discharged by
accident.
42. In my view it is not really satisfactory that the application of public
policy should rest upon
the making of fine comparisons; if Gray v Barr is
good law in Australia - and I ought to treat it so - then the principle I
would
prefer to extract from it is that public policy precludes the
enforcement of contracts of indemnity against liability arising out
of
manslaughter where death occurred as the result of a dangerous and unlawful
assault on the victim. This case, in my judgment,
falls into that class.
43. All this is only of significance if Holmes' actions are to be treated as
those of the company which employed
him, because this head of public policy
has been held to be limited to claims by the person who committed the crime
out of which
the claims arise and those claiming under him: Cleaver v Mutual
Reserve Fund Life Association (cited above, especially 153 and 159);
Hardy v
Motor Insurers Bureau (cited above, 745, 765 and 767); and Stats v Mutual of
Omaha Insurance Co. (cited above, 332 to 335).
The only basis for making
this identification between employer and employee suggested to me was the
application of the so-called
organic theory of corporate structure. In
particular, it was not suggested that anybody other than Holmes specifically
authorised
him to act as he did, or that he was merely acting out some policy
decided on by officers of the company at a higher level than his.
Something
was sought to be made of the fact that one of the directors, Mr Paul Smith,
knew of the practice of keeping loaded arms
at hand - may himself have carried
them - but that by itself establishes nothing more than that the company may
have authorised the
keeping of firearms for the purposes of self-defence or
the defence of property as a last resort. If that is all the company had
done, then it was in no different a position from any of thousands of property
owners around Australia who then and today who contract
the services of armed
security guards to protect their properties. Indeed, if Holmes had been
employed solely as an armed security
guard, could it seriously be suggested
that what occurred was not an accident from the company's point of view, or
that his actions
were to be treated as if those of the company itself?
44. Turning now to the position of S and Y Investments (Number 2) Pty Ltd
as
a result of all this, I think it apposite to being by quoting the well-known
passage from Viscount Haldane LC's speech in Lennard's
Carrying Company Ltd v
Asiatic Petroleum Company Ltd (1915) AC 705:
"My Lords, a corporation is an abstraction. It has
no mind of its own any more than it has a body of its
own; its active
and directing will must consequently be
sought in the person of somebody who for some purposes
may be called an agent, but
who is really the directing
mind and will of the corporation, the very ego and centre
of the personality of the corporation.
That person may
be under the direction of the shareholders in general
meeting; that person may be the board of directors
itself, or it may be, in some companies it is so, that
that person has an authority co-ordinate with the board
of directors
given to him under the articles of
association, and is appointed by the general meeting of
the company, and can only be removed
by the general
meeting of the company." (713)
45. This theory about the nature of corporate personality was considered at
length
by the House of Lords in Tesco Supermarket Ltd v Nattrass (1927) AC
153. In Smorgon v Australia and New Zealand Banking Group Ltd [1976] HCA 53; (1976) 134 CLR
475, Sir Ninian Stephen described it as a legal fiction but noted,
approvingly, that it has been applied in areas in which the ends of
justice
have been thought to require the attribution of mental states to corporations,
most notably where personal fault or a guilty
mind must be sought for
(482-483).
46. In my opinion, with one qualification I will mention later, there can be
no justification
for extending public policy so as to preclude recovery by the
plaintiff under its contract of insurance unless it could itself have
been
convicted of the manslaughter of which Holmes was guilty. That a company may
be guilty of crimes involving mens rea through
the application of the organic
theory is now widely accepted: Gower's Principles of Modern Company Law 4 ed.
206 to 210 and the
cases cited by the learned authors; Prof. Howard's,
Criminal Law 4 ed. 379 to 382; Trade Practices Commission v Tubemakers of
Australia
Ltd(1983) [1983] FCA 93; 47 ALR 719 per Toohey J. at 737 to 738; and Smorgon's
case (op. cit.); R.N. Purvis, QC Corporate Crime Chapt. 13; and L.H. Leigh
The Criminal
Liability of Corporations in English Law, Chapt. 4. In his
book, Principles of Company Law 3 ed. Professor H.A.J. Ford says:

"A form of primary corporate liability now exists.
The acts and mental state of those persons who act as the
company may be
attributed to the company itself. Thus a
person may in doing particular things be regarded as the
company itself or merely
as the company's servant or
agent. If he is regarded as being merely a servant or
agent the company cannot be liable unless
the statute
creating the offence creates absolute or vicarious
liability ..." (135).
47. It could only be by attributing
Holmes' state of mind (i.e. his intention
to frighten the intruder) to the plaintiff that the conclusion could be
arrived at that
the company itself was criminally liable for Holmes' actions.
The question is: where did Holmes fit within the structure of this
company?
48. Managers of licensed premises where the licence is held in the name of a
company occupied a special position under
the Licensing Ordinance 1939 (since
repealed). (Indeed, by virtue of the provisions of s.25 of the Liquor Act they
still do.) Section 69(5) of the repealed Ordinance stipulated:
"For the purposes of this Ordinance the manager of
the licensed premises shall be deemed
to be the person
licensed in respect of the premises or the holder of the
licence thereof; and the premises shall be deemed
to be
his licensed premises or the premises in respect of which
he is licensed or holds a licence."
49. In reality this provision
appears to have been a statutory embodiment of
the organic theory because it said, in effect, that for the purposes of
performing
the functions and discharging the obligations imposed on licensees
by the Ordinance, no distinction was to be made between the nominated
manager
and the company licensee. Various sections of the Ordinance imposed specific
duties on licensees; those sections may be
summarised by saying they required
close personal supervision of the premises and the liquor-orientated business
by the manager,
imposing duties to control the presence (eg. ss.145, 155, 155A
and 175) and conduct (eg. ss.177, 118, 124, 143, 143A and 192) of
persons on
the premises and to ensure they were kept secure (s.155).
50. Indeed, s.58 obliged the manager to continuously reside
on the premises
unless he obtained permission to temporarily absent himself from the licensing
magistrate (see also s.126). It
was the nominated manager's name that was
required to be conspicuously displayed in the front of the premises as being
the "Licensed
Dealer in Liquor" under s.107, not the company's.
51. The evidence which Holmes gave about the involvement or rather the lack
of
involvement of the directors in the non-financial aspects of the management
of the plaintiff's affairs so far as the hotel was concerned
reflected the
authority he enjoyed as the manager of licensed premises under the Ordinance.
Quite simply, there were significant
limits on the extent to which even the
directors could interfere with his management.
52. In my judgment it must follow according
to prevailing theories about
corporate personality that so far as the management of the hotel premises was
concerned, including the
expulsion of persons from the public bar, Holmes'
actions must be treated as those of the company's and his intentions in
performing
those actions the company's intentions.
53. It was submitted that a corporation can never be guilty of crimes of
personal violence.
The old case of The King v Cory Brothers and Company Ltd
(1927) 1 KB 810 was cited. There Finlay J., relying upon authorities which
ante-date modern theories about corporate criminality, held that a company
could not be indicted for manslaughter: cf The Queen v Murray Wright Ltd
(1970) NZLR 476. For my part, the point being an open one, I prefer
Professor Howard's view:
"It may be thought that the natural limitations
on
the power to punish a corporation imply that there are
some crimes, notably offences against the person, that a
corporation
cannot commit. There seems to be no warrant
for this. No theoretical reason suggest itself why, if
it can be within the
scope of a managing director's
employment to commit fraud in what he supposes are the
company's financial interests, it should
not be equally
well be within the scope of his employment to commit
murder, or any other offence against the person, with the
same object. It is highly improbable that any good
would come of prosecuting the company, as opposed to the
managing director,
and it is clear that the usual
punishment for murder could not be imposed. These
considerations, however, have no logical
bearing on the
company's criminal responsibility." (op. cit. 382)
In any event, if the question of the plaintiff's culpability
for the crime of
manslaughter turns solely on technical considerations such as those Professor
Howard mentions, it could strongly
be argued that they ought not be allowed to
interfere with the application of public policy considerations which otherwise
would
apply.
54. I must say that the view I have reached about the plaintiff's primary
responsibility for manslaughter is founded upon
the statutory provisions to
which I have referred rather than the evidence adduced about the internal
management of the company.
From that point of view, attempts to prove Holmes
was the company was desultory. There was no evidence from any of the
directors
or the company secretary, the articles of association were not
tendered, there were no minutes of directors' meetings put before
me. I
respectfully adopt what was said by Bowen C.J. in Universal Telecasters (Qld)
Ltd v Guthrie (1978) 32 FLR 360 about what comes out of the decision of the
House of Lords in Tesco Supermarkets Ltd v Nattrass (cited above):
"The view was taken
that what natural persons were to
be treated in law as being the corporation were to be
found by identifying those natural
persons who, by the
memorandum and articles of association or as a result of
action taken by the directors or by the corporation
in
general meeting pursuant to its articles, were entrusted
with the exercise of the powers of the corporation."
(364)
55.
In this case, the defendant can hardly claim to have proved a case
identifying Holmes with the company in accordance with this view.
The mere
fact that the directors of a company interfere little with the performance by
a manager of his duties may signify no more
than that he is a good manager,
not that they have yielded up to him control of the affairs he manages. But a
company licensee's
position is somewhat different: the licensing legislation
provides a source additional to the corporation's constitution wherein
authority may be found to act as the directing mind and will of the company.
56. Accordingly, I have reached the view that the plaintiff
is precluded by
reason of public policy from enforcing its claim to indemnity under the
policy.
Other defences
57. This conclusion
makes it strictly unnecessary to deal with the other
defences, but because they were fully debated - at least by the plaintiff -
and my judgment on other points may be appealed, it is right that I give my
opinion of them as well.
Reasonable precautions by insured
The policy contained the following condition:
"4. The insured shall exercise reasonable care that
only competent employees
are employed and shall take all
reasonable precaution to prevent bodily injury or damage
to property and shall take reasonable
measures to
maintain all premises furnishings fittings appliances and
plant in sound condition and to comply with all statutory
obligations and by-laws or regulations imposed by any
Public Authority for the safety of persons or property."
58. It is alleged
that the plaintiff breached this condition in a number of
ways but, when analysed, they come down to raising the same matter of fact:
Holmes' deliberate use of the rifle in the manner and circumstances in which
he did.
59. In Fraser v B.N. Furman (Productions) Ltd
(1967) 3 All ER 57 the Court of
Appeal considered the meaning of a condition in an employer's liability
indemnity policy in these terms: "The insured
shall take reasonable
precautions to prevent accidents and disease." Diplock L.J., delivering a
judgment with which Wilmer and
Winn L.JJ. agreed, identified the appropriate
rule of construction to apply as being that the Court should avoid giving a
condition
a meaning repugnant to the commercial purpose of the contract.
"Reasonable" did not mean reasonable as between the insured and the
injured
party, it meant reasonable as between the insured and the insurer having
regard to the commercial purpose of the contract,
which in that case included
indemnifying the insured against liability for his own personal negligence.
What the hypothetical reasonably
careful employer might foresee as dangerous
was irrelevant, because failure to foresee dangers is one of the commonest
grounds of
liability in negligence (60 to 61). He went on to say:
"What in my view is 'reasonable' as between the
insured and the insurer,
without being repugnant to the
commercial object of the contract, is that the insured
should not deliberately court a danger,
the existence of
which he recognised, by refraining from taking any
measures to avert it ... (W)here he does recognise a

danger, (the insured) should not deliberately court it by
taking measures which he himself knows are inadequate to
avert it.
In other words, it is not enough that the
employer's omission to take any particular precautions to
avoid accidents should
be negligent; it must be at least
reckless, i.e. made with actual recognition by the
insured himself that a danger exists,
not caring whether
or not it is averted." (61)
60. Lord Diplock's approach has been followed in other cases involving the
construction
of similarly worded conditions by Roskill J in W and J L Lane v
Spratt (1970) 1 All ER 162; Macfarlan J in Norwich Union Insurance Co. Ltd v
R and W Products Pty Ltd (1969) 90 WN (NSW) 554; Yeldham J in Cooper Park
Apartments Pty Ltd v The Prudential Insurance Co Ltd (NSW Supreme Court 19
December 1979, unreported);
Kaye J in Body Corporate Strata Plan No. 4303 v
Albion Insurance Company Ltd [1982] VicRp 70; (1982) VR 699; and Mahon J in Mason v Century
Insurance Co Ltd (1973) 2 NZLR 216. It was raised before the Full Court of
the Supreme Court of Western Australia in Keighley Northumberland Insurance Co
Ltd (1974) WAR 156, but on my reading of the report the Court refrained from
expressing any opinion on its correctness (158). In Roberts v State
Insurance
General Manager (1974) 2 NZLR 312, McMullin J rejected Diplock
L.J.'s test in favour of an objective one. There is nothing about the
wording of Condition 4 that
would cause me to depart from the mainstream of
authority; I approach it accordingly.
61. This leads to a second problem to which
Condition 4 gives rise in the
present case: upon whom lies the burden of proving compliance or
non-compliance as the case may be?
On this point there is the high authority
of Sir Frederick Jordan delivering the judgment of the Full Court in Kodak
(Australasia)
Pty Ltd v Retail Traders Mutual Indemnity Insurance Association
[1942] NSWStRp 19; (1942) 42 SR (NSW) 231. Having distinguished between various types of
conditions in insurance policies, his Honour said:
"I think that as a general
rule, and subject to any
special provisions in the policy, the burden of proving
breaches of conditions going to the existence
or the
continued existence of the policy as a whole, as a
binding document, rests on the insurer: Williston on
Contracts
(1936), III, pp 1910-1920, whilst as to any
provisions which are merely conditions precedent to the
accrual of liability of
the insurer according to the
terms of the policy treated as a binding document, the
ordinary rule applies that the insured
must allege, and
if the matter is put in issue prove, the performance by
him of all conditions precedent". (237)
62. Plainly
Condition 4 falls into the latter category. The policy itself
says that "the due observance and fulfilment by the Insured of ...
conditions
... contained herein ... insofar as they relate to anything to be done or
complied with by the Insured ... shall be conditions
precedent to any
liability of the Company to make any payment under the Policy". There is no
provision in the document that indicates
the onus should lie elsewhere;
indeed, the policy lists one set of clauses subsumed under the heading
"Exceptions" and another "Conditions",
a dichotomy that to my mind reinforces
the idea that proof of compliance with the latter lies upon the insured if
specifically denied
by the insurer. Unfortunately, however, the Court of
Appeal did not make this distinction in Fraser v B.N. Furman (Productions)
Ltd
(cited above), Diplock L.J. simply asserting, in effect, that the onus lay on
the insurer. Thus I am faced with the dilemma
of which Court to follow. So
too was Kaye J in Body Corporate Strata Plan No. 4303 v Albion Insurance
Company Ltd (cited above).
He pointed out that the Kodak Case had been
followed three times at first instance in New South Wales and once in Victoria
(703).
The English and Australian authorities being irreconcilable, Kaye
decided to follow the Kodak Case saying "there are sound reasons
for seeking
uniformity of the common law throughout the Commonwealth of Australia by
following a decision of an appellate Court of
another State unless it is
manifestly wrong". (705)
63. But counsel for the plaintiff submitted I am bound to follow the Court
of
Appeal, citing decisions of Shepherd J in Balfour Williamson (Aust.) Pty Ltd v
Douterluingne (1979) 2 NSWLR 884 and Kelly J in Barisic v Topic (1981) 37 ACTR
1 to this effect. These decisions in turn are founded upon remarks made
obiter by two members of the High Court in Public Transport
Commission (NSW) v
J Murray-More (NSW) Pty Ltd [1975] HCA 28; (1975) 132 CLR 336. Speaking of New South Wales,
Barwick C.J. said: "(T)he Supreme Court at first instance, where there is no
relevant decision of
this Court, should as a general rule follow the decisions
of the English Court of Appeal" (341 - italics mine). Gibbs J's remark
was:
"In my judgment, the learned judges in the Supreme Court should have treated
Cory and Son Ltd v France, Fenwick and Co Ltd
(1911) 1 KB 114 as an authority
binding upon them" (349). He gave no explicit reasons for this view,
although it is quite possible to interpret
his remark in the context in which
it appears as being founded not upon any ascendant position of the English
Court of Appeal over
Australian intermediate courts of appeal, but rather the
degree to which the English Court's decision in the instant case had become
entrenched in English and Australian law. However that may be, much water
has flowed under the bridge since then.
64. In Viro
v R [1978] HCA 9; (1978) 141 CLR 88 where the High Court held it was no longer
bound by decisions of the Privy Council, naturally enough, it considered the
common law
doctrine of precedent. Gibbs J acknowledged that the modern
English rule is usually said to be that "every court is bound to follow
any
case decided above it in the hierarchy", although he did not explicitly adopt
it as the basis for his decision (119 to 122).
Mason J agreed with Gibbs J
on this point (135 to 137). The other five members of the Court were
unequivocal. Barwick C.J.:
"The essential basis for the observance of a decision of
a tribunal by way of binding precedent is that that
tribunal can
correct the decisions of the court which is
said so to be bound" (93). Stephen J: "(T)he existence
of an appeal is inherent
in and essential to the
doctrine" (129). Jacobs J: "The law of precedent
depends upon the existence of a hierarchy of courts
..."
(151). Murphy J: "(N)o court in Australia is bound by
the decisions of the House of Lords or the courts below
it
in the English system" (166). Aickin J: "Now that
the Privy Council is no longer the apex of a judicial
hierarchy of which
the High Court forms part the basis
for adherence to the views of the Privy Council has
disappeared" (174). I should add
that with the
commencement of the Australia Act 1986, all remaining
ties with the English hierarchy have been finally
severed. In my opinion, a single judge of this Court is
free to choose which of the English Court of Appeal and
the Australian appellate courts - State, Territory or
Federal -
he will follow when there is no relevant
decision of the High Court or the Court of Appeal of the
Northern Territory binding
upon him.
65. For the reasons adumbrated by Kaye J in his judgment referred to above, I
prefer to follow the Kodak Case.
66. The
area that I need consider in deciding whether the plaintiff has
discharged the burden of proof lying on it has been considerably
narrowed by
virtue of the fact that the defendant in its defence pleaded the breaches of
Condition 4 upon which it relied with considerable
specificity. As I have
pointed out, these relate solely to Holmes' conduct in discharging the rifle.
I am thus relieved of having
to consider what precautions the plaintiff, by
which I mean its shareholders, directors and officers other than Holmes, might
have
taken antecedent to the shooting to prevent such an occurrence. For
example, although I had some evidence suggesting that the director,
Paul
Smith, was aware that loaded firearms were kept on the premises, may have had
one himself, it would be unfair to the plaintiff
to treat that as raising any
question about compliance with Condition 4, because I do not know what
evidence it might have led to
deal with the matter, it having come to the
trial entitled to treat compliance in a broader respect as a non-issue.
67. For the
purposes of a condition requiring reasonable precautions I am in
no doubt that the organic theory outlined in Tesco Supermarkets
v Nattrass
(cited above) should be applied. In the case of a company the need for those
precautions against damages can only be
recognised by human beings and it is
only they who can implement them. This was the view taken by Kaye J in Body
Corporate Strata
Plan No. 4303 v Albion Insurance Company Ltd (cited above,
707 to 709). It is also consistent with observations made in the Kodak
Case
(at 236), although, perhaps, not made with the theory as it has since
developed specifically in mind.
68. This means I have
to deal with the alleged breach of Condition 4 solely
on the basis of whether the plaintiff has satisfied me that Holmes was not
reckless in discharging the rifle, that is that he did not actually recognise
a danger to exist or, if he did, that when he fired
he did so caring whether
that danger was averted. The answer depends entirely upon Holmes' evidence.
As I think I have already indicated,
I found him to be an unsatisfactory
witness. I do not think I got from him an honest account of what went
through his mind at the
time. Add to that the fact that I have difficulty in
seeing how anyone could have acted as he did without being conscious that
he
was taking a calculated risk with the safety of the person inside and I must
conclude that the plaintiff has not discharged the
onus on it. Whilst I have
not been able to find that Holmes was reckless, on the evidence I am not able
to say he was not either.
Admissions by insured
69. A further condition relied upon by the defendant was as follows:
"2(a) The insured shall not without
the consent in
writing of the Company make any admission offer promise
or payment in connection with any occurrence or claim
and
the Company if it so desires shall be entitled to take
over and conduct in the name of the insured the defence
or settlement
of any claim."
70. The defence alleged a breach of the condition in these terms: "(T)he
plaintiff without the consent of the defendant
permitted Gillian Logan to
obtain a default judgment against it in Action Number 444 of 1977". Counsel
for the defendant declined
to address any submissions to me in support of this
defence; in these circumstances it should have been formally withdrawn.
Instead,
I was left to deal with it without knowing how the defendant's case
was put in the light of all the other evidence before me and
the relevant
authorities.
71. It will be recalled that Mrs Logan issued her writ on 13 July 1977. On
8 August 1977, solicitors
acting for S and Y Investments (Number 2) Pty Ltd
wrote to the manager of the defendant's branch office in Darwin confirming
that
Mr Bottrell had collected a photocopy of the writ, and seeking
information about what action the defendant proposed taking in relation
to the
claim. There followed correspondence between the plaintiff insured's
solicitors on the one side and Commercial Union and
its solicitors on the
other, culminating in letter from Alderman Lee Wilson and Mansfield on behalf
of the defendant dated 12 January
1978 stating that "our client is not
prepared to grant your client indemnity under the public liability policy".
Two reasons were
given: public policy and that the circumstances giving rise
to liability were not "accidental and fortuitous". In the result, I
have
held the first of these reasons to be sound. If I am wrong and the defendant
was obliged to indemnify the plaintiff, then
this letter amounted to a clear
and unequivocal repudiation of the policy by the company.
72. In my opinion, failing to deliver
a defence involved a breach of
Condition 2(a) because, in effect, it constituted an admission of the
allegations in the statement
of claim (Order 23 Rules 13, 14, 15, 17 and 19)
entitling the plaintiff to enter interlocutory judgment where the claim is one
for
unliquidated damages (Order 31 Rule 4). In Distillers Co. Biochemicals
(Australia) Pty Ltd v Ajax Insurance Company Ltd [1974] HCA 3; (1974) 130 CLR 1 the High
Court by a majority of two to one held that an insurer who elected not to take
over or conduct the defence of an action
under a condition in terms
indistinguishable from Condition 2(a) did not merely thereby forgo the right
to have the insured comply
with the first part of the condition, as for
example by settling the action (although Stephen J did not consider the
insurer without
obligation to the insured if it so elected (29 to 32)).
73. Counsel for the plaintiff distinguished this decision, pointing out
in
that case there had been no repudiation of the policy by the insurer. He
referred me to General Omnibus Company Ltd v London
General Insurance Company
Ltd (1936) IR 596 where the policy in question involved a condition in terms
similar to Condition 2(a). The Supreme Court of the Irish Free State
upheld a
decision of Hanna J holding that where an insurer wrongly refused to indemnify
the insured by erroneously asserting the
claim fell within an exclusion clause
thereby repudiating the policy, it could not afterwards rely upon a breach of
a condition prohibiting
admissions, settlements and the like. This case was
referred to by all members of the Bench in the Biochemicals Case: Menzies J
approved it on this point (9 to 10); Gibbs J approved another aspect of the
decision, he did not disapprove it on this point (13
to 14); Stephen J
appears to have approved it on this point (28). I was also referred to
Edwards v Insurance Office of Australia
[1933] NSWStRp 61; (1933) 34 SR (NSW) 88, but find it of
little assistance because in that case no express provision such as Condition
2(a) was involved.
74. It could not
be alleged that by suffering judgment to be signed in
default of a defence, the plaintiff in any way compromised the defendant's
interests. The defendant did not suggest the plaintiff had any defence to
the widow's action, plainly there was none. No question
of the plaintiff
having acted otherwise than in good faith so far as the defendant was
concerned can therefore arise.
75. My conclusion
may be stated thus: if I am wrong in holding that the
defendant is not obliged to indemnify the plaintiff on grounds of public
policy
and because of failure to prove compliance with Condition 4, the
defendant would not be entitled to avail itself of Condition 2(a),
it having
repudiated the policy before the default judgment was signed.
76. What I have said is enough to dispose of one other defence
left standing
but not supported by any submissions from the defendant, namely breach of an
alleged implied condition to act in good
faith, the breach being constituted,
so it was asserted, by the plaintiff failing to defend Mrs Logan's action.
Limit of liability
77. I come now to the last defence raised in this action: the claim the
defendant's obligation to indemnify the plaintiff was expressly
limited to
$100,000. The original policy was not produced. The defendant's only
original record of it - the policy record sheet
- has been lost or destroyed.
The only evidence offered to support this particular limit was the claim
facing sheet which came into
existence in circumstances I have already
outlined. Everyone knows that public liability policies are subject to
limits, the premiums
vary accordingly. The copy of the defendant's standard
form of public liability policy, tendered by consent, expressly contemplates
a
limit of indemnity. Why the issue comes before me the way it does when it
was for the plaintiff to prove the relevant terms and
conditions of the
contract of insurance upon which it relies I cannot fathom.
78. To support the tender of the claim facing sheet
the defendant relies upon
s.5 of the Evidence (Business Records) Interim Arrangements Act 1984:
"5. Admissibility Generally

(1) Subject to this Act, where in a legal proceeding
evidence of a fact or of an opinion is admissible, a
statement of the
fact or opinion in a document is
admissible as evidence of the fact or opinion if -
(a) the document forms part of a record
of a
business, whether or not the business existed at
the time when the question of admissibility arises;
(b) the statement
was made in the course of or for
the purposes of the business; and
(c) the statement was -
(i) made by a qualified
person; or
(ii) reproduced or derived from information -
(A) in one or more statements, each made by a
qualified
person in the course of or for the purposes of
the business; or
(B) from one or more devices designed for, and
used
for the purposes of the business in or for,
recording, measuring, counting or identifying
information, not being information
based on information
supplied by a person, or both.
(2) This section makes a statement admissible
notwithstanding -
(a) the rules against hearsay;
(b) the rules against secondary evidence of the
contents of a document;
(c) that
a person concerned in the making of the
statement is a witness in the legal proceeding, whether
or not he gives testimony consistent
or inconsistent with
the statement; or
(d) that the statement is in such a form that it
would not be admissible if given
as oral testimony,
but does not make admissible a statement which is
otherwise inadmissible."
79. "Qualified person" is defined
in s.4 as including, amongst others, a
servant or agent employed or engaged in the business who had, or may
reasonably be supposed
to have had, personal knowledge of the facts stated.
It was argued that it had not been shown that the claim facing sheet was made
up by a qualified person, but for reasons given earlier in this judgment I
think it may be inferred from the evidence given by Mr
Bottrell about the
practice of his office and the file from whence the record came that the
entries were probably made in the handwriting
of a clerk employed in the
defendant's Darwin office from information taken directly by him from the
original policy record sheet
when the claim file was first opened on 28
January 1985. I am assisted in reaching this conclusion by reference to the
form and
content of the document, something which s.8 permits me to do (i.e.
for the purposes of drawing inferences to decide the question
of
admissibility). The person who filled the sheet out, it being Commercial
Union's printed form for the purpose, appears to have
had access to the policy
details. In other words, it appears authentic.
80. More problematical is the submission that the claim
facing sheet is
inadmissible by reason of s.6(1) which provides:
"6(1) Notwithstanding section 5, a statement made or
obtained
for the purpose of, or in contemplation of, a
legal proceeding or other legal proceeding arising out of
the same or substantially
the same facts is not
admissible."
81. I have no difficulty in ruling that the clerk's representations of the
policy details
in the facing sheet were not made for the purpose of this or
any other legal proceeding, by which I understand the sub-section to
mean
brought into existence with a view to being used in evidence. I am satisfied
that this document was a purely internal record
entered up without thought of
its having any evidentiary value in such proceedings.
82. But what of the words "in contemplation
of". They ought to be construed
as adding something to the words "for the purposes of", though what they add
is far from obvious.
It is not, I think, sufficient to exclude a statement
that it was made at a time when legal proceedings were contemplated; the
words "made in contemplation of" express more than a temporal connection.
They suggest that the prospect of legal proceedings must
at least be the
occasion for the statement being made. The document in question presupposes
a claim under the policy having been
made, but it does not follow that legal
proceedings were in contemplation. The truth is that the state of the
evidence does not
enable me to say one way or the other.
83. The party seeking to tender a statement under s.5 must prove that it
meets the requirements
of that section. Section 6(1) constitutes, in effect,
an exception to the right to have a statement received in evidence under s.5.
The normal rule to apply is that where an enactment "expresses an ...
exclusion which assumes the existence of the general or primary
grounds from
which the ... right arises but denies the right ... in a particular case by
reason of additional or special fact, then
... such an enactment supplies
considerations of substance for placing the burden of proof on the party
seeking to rely upon the
additional or special matter" per Dixon C.J.,
McTiernan, Webb Fullagher and Kitto JJ. in Vines v Djordjevitch [1955] HCA 19; (1955) 91 CLR
512, 519 to 520. Often the fact that a statement was made for the purposes
of or in contemplation of legal proceedings will be obvious
from the statement
itself - it is no so here. If the evidence on the point is peculiarly within
the knowledge of the party seeking
to have the statement admitted, then not
much will be required from the party objecting to it to transfer the
evidentiary burden
to his opponent. Neither looking at the matter objectively
or subjectively can I say that when the then clerk filled out the facing
sheet
he contemplated legal proceedings arising out of the claim.
84. I do not believe that this interpretation is in any way unsatisfactory.
The Courts have reserved to them ample power to determine what weight should
be attached to hearsay material, be it single or double
(s.9), and a broad
discretion to reject evidence of this kind where its weight is slight or its
admission would be unfair. Happily,
I can say that there is not the slightest
reason to doubt the authenticity and accuracy of the claim facing sheet or any
other than
a fanciful basis for supposing that the clerk concerned had the
slightest interest in recording the facts inaccurately. After all,
it was
not until nearly 10 years later that legislation making it admissible came
into force.
85. I was asked by counsel for the
plaintiffs to exercise my discretion under
s.6(2) to reject the claim facing sheet on the ground that the policy record
sheet had
not been produced. I decline to do so. I accept Mr Bottrell's
evidence that the defendant had tried but been unable to locate
it. On the
other hand, I heard no explanation from the plaintiff about why it did not
produce its copy of the policy or any other
evidence, documentary or oral,
about how much public liability cover it purchased when it paid its premium
for the period in question.
Given my views about the probable accuracy of
the claim facing sheet, the suggested basis for rejecting the document is
quite inadequate.
86. For these reasons, the claim facing sheet is admissible and shows the
limit of liability to have been $100,000. However, for
other reasons the
plaintiff's claim must fail altogether.
87. There will be judgment for the defendant. I order the plaintiff
to pay
the defendant's costs of an incidental to the action.

Authorities Cited0