Liability galvanized – but who carries the load? – Zhang v Popovic [2016] NSWSC 407
Originally Published by Layla Petherbridge on Wednesday, April 20, 2016 12:00:00 AM
Author: Layla Petherbridge
Judgment Date: 12th April, 2016
Citation: Zhang v Popovic [2016] NSWSC 407
Jurisdiction: Supreme Court of New South Wales[1]
Principles
- It is not a permissible method of reasoning to determine liability with hindsight by starting with the accident and determining how it could have been prevented.
- A plaintiff must discharge the onus of proof as to breach and causation.
- The maxim of contra proferentem remains good law when a term or clause is ambiguous. The commercial purpose of a policy and surrounding circumstances are relevant to the construction of exclusion clauses.
Background
On 16 September 2007, Cheng Nian Zhang (the plaintiff) was injured in an accident involving a trailer at a container terminal. The plaintiff sustained catastrophic injuries, including incomplete paraplegia, when he was pinned and crushed underneath the metal ramp of a trailer.
The plaintiff had attended the terminal to collect a container for his own truck, when he went to assist another nearby driver with his trailer (the trailer) to secure one of its ramps in position. The raising and lowering of the trailer's ramps were controlled by a hydraulic lifting device. The plaintiff manually pushed on the left metal ramp of the trailer whilst the driver operated the hydraulic lifting device so as to cause the ramp to move into a vertical position. The clevis mount which supported the hydraulic ram that supported the ramp snapped away from the trailer causing the ramp to fall onto the plaintiff (the accident).
Parties and proceedings
The plaintiff commenced proceedings in the Supreme Court of New South Wales (the Court) against various parties connected with the trailer, including:
- The first defendant, Vlado Popovic (Mr Popovic), the truck driver
- The second defendant, Calabro Real Estate Pty Limited (Calabro), the owner of the trailer
- The third defendant, Interfreight (Aust) Pty Ltd (Interfreight), Mr Popovic's employer
- The fourth defendant, Popovic Haulage Pty Ltd (Popovic Haulage), a company associated with Mr Popovic.
The plaintiff amended his statement of claim six times during the course of the proceedings, joining additional parties and some of their insurers directly. The additional parties were:
- The fifth defendant, NRMA Insurance Ltd (NRMA), the CTP insurer of the trailer
- The sixth defendant, National Transport Insurance (NTI), the insurer of the first four defendants
- The seventh defendant, ROC Services (NSW) Pty Ltd (ROC), a third party contractor who performed works on the trailer 13 months prior to the accident.
Five cross-claims were also issued between the various parties.
NRMA received judgment in their favour in 2011 and Interfreight and Popovic Haulage were deregistered in 2012. Both the plaintiff and, eventually, ROC applied for and were granted leave to respectively join and claim against NTI pursuant to s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW). In its defence, NTI admitted that a Motor Fleet Policy (the policy) covered the risk but denied indemnity on the basis of various exclusion clauses in the policy.
Decision
In order to determine issues of liability and indemnity Adamson J conducted a thorough analysis and assessment of the veracity of a raft of oral and written evidence.
Following a trial on liability only, her Honour found that the immediate cause of the left ramp dropping was that the weld that held a clevis mount failed, causing the mount and the left hydraulic ram to fall. The substantial issue for determination was the identity of the person or corporation who installed the clevis mounts attached to the rear of the trailer.
Her Honour examined three possibilities from the evidence, forming a conclusion that it was not ROC and was more probably than not Interfreight. Her Honour was satisfied that the clevis mounts were installed on the trailer prior to delivery to ROC, for the retained purpose of installation of a hydraulic system. Furthermore, her Honour properly found that ROC did not weld the clevis mounts to the trailer for a range of reasons, which were supported by both written and oral evidence gleaned from numerous sources.
The assessment of credit of two witnesses, John Tabuso (a former director of Interfreight) and Jose Sanchez (a director and secretary of Interfreight), including that they were unreliable, untruthful and had (in her Honour’s view) concocted a deliberately false story together after becoming aware of the indemnity denial, were fatal to the factual findings against Interfreight. The case also turned on factual evidence contained in investigations, business and subpoena records produced by various parties including WorkCover.
The case against Mr Popovic (the truck driver)
The Court found that at the time of the accident Mr Popovic knew that the left ramp could not be secured into position normally and required extra force, either through manual pushing or through additional force applied through the hydraulic system. Unsurprisingly, her Honour held that in the circumstances Mr Popovic (and through him, Interfreight) breached their duty of care to the plaintiff by enlisting his help in the task of raising the ramp and permitting him to stand under the ramp, which Mr Popovic knew was not operating normally, thereby exposing the plaintiff to the foreseeable risk that the ramp would fall and injure him (being the relevant risk of harm). It was appropriate that liability extended to the harm caused to the plaintiff as Mr Popovic was in a superior position of knowledge and relevantly controlled the vehicle prior to the accident.
The case against Calabro (the owner of the trailer)
Her Honour was satisfied that Calabro was negligent in the maintenance and repair of its trailer and that its negligence was a relevant cause of the failure of the weld which resulted in the injuries to the plaintiff. Calabro failed to establish that it had discharged its duty of care by engaging a competent sub-contractor to keep the trailer in good repair, or that it had divested itself of its right to possession.
The case against Interfreight (Mr Popovic's employer)
Interfreight was held vicariously liable for the negligence of its employee, Mr Popovic. Interfreight was also held liable on its own account due to its failure to instruct Mr Popovic as to how he should conduct himself so as to protect his own safety and the safety of others who might be in the vicinity of the trailer (such as the plaintiff). Her Honour was satisfied that had such instruction been given, Mr Popovic would have advised the plaintiff to stay away, the incident would not have occurred and the risk of harm would not have ensued.
The case against ROC (third party contractor)
ROC was joined on the basis that it had negligently installed the left clevis mount. ROC denied that it installed the clevis mount, following which time the plaintiff advanced an alternative case that, in the event that ROC did not install or weld the left clevis mount, it breached its duty of care by failing to ensure that the clevis mount that was already welded to the trailer was adequate to support the load.
Her Honour found that ROC performed the job it was retained to do, namely, to install the hydraulic cylinders and a motor to lift and lower the trailer's ramps. The primary case against ROC failed as her Honour was not satisfied that ROC installed the left clevis mount which failed.
On the plaintiff's alternative case, her Honour concluded that ROC did not owe any contractual duty to perform work that it had not been retained to do, and did not owe any duty of care to Interfreight to redesign and redo work to ensure the clevis mounts were able to support the hydraulic system for the life of the trailer. Her Honour resolved that ROC had discharged its duty of care by testing the system 15-20 times when it performed the work. Witness evidence persuaded her Honour that ROC had inspected the clevis mounts with a view to determining whether each was an appropriate mount for the hydraulic system, as part of its usual practice and the work it was retained to perform. Furthermore, her Honour was not persuaded that ROC had any obligation to seek an engineer’s opinion as to the structural soundness of the clevis mounts or to undertake any testing beyond that which was already done.
In rejecting the plaintiff’s contention that ROC breached its duty of care by failing to notice deficiencies in the welding of the left clevis mount, her Honour noted there was no reliable evidence in support and three factors which went against the drawing of an inference that there was no material change to the appearance or strength of the weld, being:
Following a trial on liability only, her Honour found that the immediate cause of the left ramp dropping was that the weld that held a clevis mount failed, causing the mount and the left hydraulic ram to fall. The substantial issue for determination was the identity of the person or corporation who installed the clevis mounts attached to the rear of the trailer.
Her Honour examined three possibilities from the evidence, forming a conclusion that it was not ROC and was more probably than not Interfreight. Her Honour was satisfied that the clevis mounts were installed on the trailer prior to delivery to ROC, for the retained purpose of installation of a hydraulic system. Furthermore, her Honour properly found that ROC did not weld the clevis mounts to the trailer for a range of reasons, which were supported by both written and oral evidence gleaned from numerous sources.
The assessment of credit of two witnesses, John Tabuso (a former director of Interfreight) and Jose Sanchez (a director and secretary of Interfreight), including that they were unreliable, untruthful and had (in her Honour’s view) concocted a deliberately false story together after becoming aware of the indemnity denial, were fatal to the factual findings against Interfreight. The case also turned on factual evidence contained in investigations, business and subpoena records produced by various parties including WorkCover.
The case against Mr Popovic (the truck driver)
The Court found that at the time of the accident Mr Popovic knew that the left ramp could not be secured into position normally and required extra force, either through manual pushing or through additional force applied through the hydraulic system. Unsurprisingly, her Honour held that in the circumstances Mr Popovic (and through him, Interfreight) breached their duty of care to the plaintiff by enlisting his help in the task of raising the ramp and permitting him to stand under the ramp, which Mr Popovic knew was not operating normally, thereby exposing the plaintiff to the foreseeable risk that the ramp would fall and injure him (being the relevant risk of harm). It was appropriate that liability extended to the harm caused to the plaintiff as Mr Popovic was in a superior position of knowledge and relevantly controlled the vehicle prior to the accident.
The case against Calabro (the owner of the trailer)
Her Honour was satisfied that Calabro was negligent in the maintenance and repair of its trailer and that its negligence was a relevant cause of the failure of the weld which resulted in the injuries to the plaintiff. Calabro failed to establish that it had discharged its duty of care by engaging a competent sub-contractor to keep the trailer in good repair, or that it had divested itself of its right to possession.
The case against Interfreight (Mr Popovic's employer)
Interfreight was held vicariously liable for the negligence of its employee, Mr Popovic. Interfreight was also held liable on its own account due to its failure to instruct Mr Popovic as to how he should conduct himself so as to protect his own safety and the safety of others who might be in the vicinity of the trailer (such as the plaintiff). Her Honour was satisfied that had such instruction been given, Mr Popovic would have advised the plaintiff to stay away, the incident would not have occurred and the risk of harm would not have ensued.
The case against ROC (third party contractor)
ROC was joined on the basis that it had negligently installed the left clevis mount. ROC denied that it installed the clevis mount, following which time the plaintiff advanced an alternative case that, in the event that ROC did not install or weld the left clevis mount, it breached its duty of care by failing to ensure that the clevis mount that was already welded to the trailer was adequate to support the load.
Her Honour found that ROC performed the job it was retained to do, namely, to install the hydraulic cylinders and a motor to lift and lower the trailer's ramps. The primary case against ROC failed as her Honour was not satisfied that ROC installed the left clevis mount which failed.
On the plaintiff's alternative case, her Honour concluded that ROC did not owe any contractual duty to perform work that it had not been retained to do, and did not owe any duty of care to Interfreight to redesign and redo work to ensure the clevis mounts were able to support the hydraulic system for the life of the trailer. Her Honour resolved that ROC had discharged its duty of care by testing the system 15-20 times when it performed the work. Witness evidence persuaded her Honour that ROC had inspected the clevis mounts with a view to determining whether each was an appropriate mount for the hydraulic system, as part of its usual practice and the work it was retained to perform. Furthermore, her Honour was not persuaded that ROC had any obligation to seek an engineer’s opinion as to the structural soundness of the clevis mounts or to undertake any testing beyond that which was already done.
In rejecting the plaintiff’s contention that ROC breached its duty of care by failing to notice deficiencies in the welding of the left clevis mount, her Honour noted there was no reliable evidence in support and three factors which went against the drawing of an inference that there was no material change to the appearance or strength of the weld, being:
- The potential that the left clevis mount was damaged in a collision in August 2007
- The possibility that the left clevis mount had been removed for some reason and replaced by another
- That the defect in the left clevis mount was not discernible in August 2006.
The plaintiff failed to exclude such factors on the balance of probabilities. Critically, the plaintiff also failed to discharge the onus of proving that any act or omission by ROC caused the accident and accordingly the claim failed on both breach and causation.
Her Honour was also not satisfied that there was any breach of the Trade Practices Act 1974 (NSW), considering that ROC supplied the services of installing the hydraulic system with due care and skill and provided materials which were fit for purpose.
Accordingly, judgment was entered in ROC’s favour on the plaintiff’s claim and on all cross-claims to which it was a defendant.
The case against NTI (the insurer of the first four defendants) and the policy dispute
NTI sought to establish that it was not liable to cover Mr Popovic, Interfreight, Popovic Haulage or Calabro by reason of three exclusion clauses contained within the policy. Her Honour was relevantly required to identify the relevant policy (which was the subject of a significant factual dispute) and consider the exclusions and their respective meanings.
Her Honour considered clause 2(b)(8) (being a 10 line, 2 paragraph clause) of the policy to be the only arguably applicable exclusion clause. NTI submitted that liability was 'arising out of or in any way connected with a defect in' the trailer and was therefore covered by this exclusion. NTI's argument was based on the text of the clause itself, which they submitted contained no relevant ambiguity, and that the effect of a comma before words referring to trailers in Queensland was to make the succeeding words irrelevant to a vehicle in New South Wales. The opposing parties (all other active parties) contended that the clause was ambiguous due to the concluding words of the clause, 'whilst it is being driven', since it was not clear whether that qualification applied to the trailer or only to vehicles in Queensland where a defect caused a loss of control.
Her Honour had regard to the draftspersons use of commas (which were not included in a consistent or orthodox way) to determine that the exclusion clause contained the ambiguity submitted by NTI's opponents. Her Honour also construed the clause having regard to the commercial purpose (the purpose of reasonable persons in the position of NTI and the insureds) of the policy, which required attention to be paid to 'the genesis of the transaction, the background, the context, the market' in which the parties were operating, as known to both parties, per Codelfa Construction Pty Ltd v State Rail Authority of New South Wales2.
Her Honour held that the commercial purpose appeared to have been to provide insurance cover on various bases for the vehicles listed in the schedule (which was complementary to the cover provided by statutory third party insurance).
Her Honour considered it appropriate to use the contra proferentem maxim (where the preferred meaning works against the party who drafted the wording in cases of ambiguity) to construe the meaning against NTI. Her Honour was not persuaded that the words of the clause were intended to be confined to vehicles in Queensland only, preferring to interpret as if a comma preceded these words to indicate that the phrase limits the operation of the exclusion. This construction was stated as to advance the commercial purpose and take into account the statutory schemes for compulsory third party insurance, which formed part of the ‘surrounding circumstances’ that could be taken into account.
Accordingly, none of the exclusions were found to apply and judgment was entered for the plaintiff, Mr Popovic and Calabro against NTI (noting that Popovic Haulage and Interfreight Haulage were deregistered), effectively leaving NTI to carry the entire liability load.
Why this Case Note is important
This case highlights that the devil is in the detail with respect to policy wording, particularly exclusion clauses. Draftspersons should pay careful consideration to all aspects of a policy, including the seemingly minute grammatical and punctuation details, to ensure that the meaning is specific, clear and certain.
Case managers are reminded that critical attention should be taken during the evidence gathering process, from initial interviews and claim forms to gathering of subpoena records and eventual preparation of witness statements. Repeated inconsistencies and adverse credibility assessments can be fatal to a successful claim or defence, particularly when cases are heavily weighted by factual evidence.
Insurers should bear in mind that they can be joined directly to proceedings and that courts have demonstrated a perceivable reluctance to decide upon policy disputes at an interlocutory stage.
Case managers are reminded that critical attention should be taken during the evidence gathering process, from initial interviews and claim forms to gathering of subpoena records and eventual preparation of witness statements. Repeated inconsistencies and adverse credibility assessments can be fatal to a successful claim or defence, particularly when cases are heavily weighted by factual evidence.
Insurers should bear in mind that they can be joined directly to proceedings and that courts have demonstrated a perceivable reluctance to decide upon policy disputes at an interlocutory stage.
- Adamson J.
- (1982) CLR 337 at 350 per Mason J, quoting Reardon Smith Line v Hansen-Tangen [1976] 1 WLR 989 at 995-996 per Lord Wilberforce; [1976] 3 All ER 570 at 574.