Australian Guarantee Co Ltd v Ryhill Pty Ltd & Anor [1999] QSC 93

3S7C4 IN THE SUPREME COURT OF QUEENSLAND Writ No. 9283 of 1996 Brisbane Before the Hon. Mr Justice Derrington [Australian Guarantee Corporation Limited v Ryhill Pty Ltd & Anor] BETWEEN: AND: AND: AUSTRALIAN GUARANTEE CORPORATION LIMITED ACN 000 015 485 R YHILL PTY LTD ACN 060 394 345 RUSSELL BERTRAM Plaintiff First Defendant Second Defendant REASONS FOR JUDGMENT - DERRINGTON J Judgment delivered on 23 April 1999 CATCHWORDS: NEGLIGENCE - Contributory negligence - insurance - defendant's negligence causing loss to finance company by defeating one source of security for a loan - whether lender's failure to require borrower to take out insurance cover of secured chattel as required by lending agreement leading to loss of that security is relevant to contributory negligence - whether reference to insurance available in assessment of duty of care. Bristol and West Building Society v May May & Merriman (1998) 1 WLR336 Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR529 Hunt v Severs [1994] 2 AC 350 Lister v Romford Ice v Storage Co Ltd [1957] AC 555 Mayfair v Pears (1987) 1 NZLR 459 Morgan Crucible Co Pic v Hill Samuel & Co Ltd [1991] Ch 295 Pyrnees Shire Council v Day (1998) 192 CLR 330 -- 1 of 6 -- Counsel: Solicitors: Hearing Date: Stovin v Wise [1996] AC 923, 944 W D & H 0 Wills (Australia) Ltd v State Rail Authority of NSW (1998) 43 NSWLR338 C. A. Wilkins (solicitor) for the plaintiff M. J. Liddy for the defendant Clayton Utz for the plaintiff Melville McGregor for the defendant 30 March 1999 -- 2 of 6 -- 2 ., IN THE SUPREME COURT OF QUEENSLAND Writ No. 9283 of 1996 Brisbane Before the Hon. Mr Justice Derrington [Australian Guarantee Corporation Limited v Ryhill Pty Ltd & Anor] BETWEEN: AND: AND: AUSTRALIAN GUARANTEE CORPORAnON LIMITED ACN 000015485 RYHILL PTY LTD ACN 060 394 345 RUSSELL BERTRAM Plaintiff First Defendant Second Defendant REASONS FORJUDGMENT-DERRiNGTONJ Judgment delivered on 23 April 1999 The plaintiff is a fmance company which provided finance to a hire-purchaser of a motor car. The first defendant is a broker who acted as an intermediary in the application for finance and whose agent the second defendant allegedly signed as a witness of certain signatures purporting to be those of guarantors of the borrower's liability. In fact the signatures were forgeries and the guarantees were worthless. The motor vehicle was damage in a collision and the borrower has defaulted in repayment of the debt. The plaintiff repossessed and sold the wreck, but unsurprisingly the sum recovered was insufficient to meet the borrower's liability. -- 3 of 6 -- 3 4 5 6 -- -'- - - --- - ---------_._------.....!I .. 2 Having failed to recover from that party, and being unable to enforce the guarantees, the plaintiff has brought this action against the defendants claiming, among other things, damages for negligence in respect of the witnessing of the forged signatures. Among other defences, the defendants have pleaded that the plaintiff was guilty of contributory negligence in that it neglected to ensure the borrower's compliance with a requirement of the hire-purchase agreement to obtain insurance cover for both parties in respect of damage to the vehicle. They claim that this was a breach of prudent lending practice in such cases since such cover would have protected the primary security, to which the plaintiff could C~ have had recourse, and so would have avoided any loss. The plaintiff now brings this application to strike out that defence on the basis that it cannot succeed in any circumstances. It relies upon the general principle behind the rule that a party's insurance cover does not operate to reduce his or her damages. l However, this principle relating to damages cannot be simply translated to one relating to the nature and extent of the duty to take reasonable precautions to protect one-self or others against foreseeable harm or loss. The general trend has been to treat it as being outside permitted relevance, 2 but there has been some recognition of the influence on principle of the general availability of insurance, though not the existence of a specific policy, in considering whether a 2 For example, Hunt v Severs [1994] 2 AC 350, 358; Bristol and West Building Society v May May & Merriman (1998) 1 WLR 336. Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529, 580-581 per Stephen J; W D & H 0 Wills (Australia) Ltd v State Rail Authority ofNSW (1998) 43 NSWLR 338,352 per Mason P; Lister v Romford Ice v Storage Co Ltd [1957] AC 555 at 576-577 per Viscount Simonds who referred to the long standing principle that in determining the rights inter se between two parties, the fact that one has insurance is to be disregarded. There was, however only a small majority for this result. \ ~I -- 4 of 6 -- 7 8 3 duty of case arises. 3 If it were a simple case of insurances, like Mason P in W D & H 0 WillS,4 I should feel constrained by the force of authority to resist any temptation to have regard to the plaintiffs capacity to insure itself. This however is not a simple question of a plaintiffs taking out of insurance against its loss. It is not an issue as to the plaintiffs insuring itself at all. It goes to the requirement of adequate security from the borrower. In that context, the provision of insurance is no more than part of that security, to be provided, it is repeated, by the borrower and not by the plaintiff. In this, it has a different character, which takes it outside the reasoning that excludes reference to the availability of self-protection by self-insurance in determining the existence of negligence and, equally, contributory negligence. In this it may be compared in principle with the negligence of an insurance broker, as distinct from breach of its contractual duty, in failing to obtain proper insurance cover for a client, and with the question of the client's contributory negligence in that respect. In the present case, it is claimed that as a matter of prudential lending policy common commercial practice required that suitable insurance be required of the borrower. Indeed, the hire purchase agreement in the present case provided for it, and it is alleged that this was a standard requirement in the plaintiffs contracts and those of other similar institutions, as the defendant knew. In those circumstances, it is arguable that a failure to ensure compliance with the term amounted to contributory negligence in failing to obtain adequate security, leading to the loss, so that it is operable against the plaintiff with the appropriate results. 3 4 Slovin v Wise [1996] AC 923, 944; Pyrnees Shire Council v Day (1998) 192 CLR 330 per Reily J at 425; Morgan Crucible Co Pic v Hill Samuel & Co LId [1991] Ch 295; Mayfair v Pears (1987) 1 NZLR 459 per Cooks P at 462. At 353. -- 5 of 6 -- 4 9 The foregoing conclusions are not affected by any subrogated rights in the plaintiffs name which the insurer may have had against the defendants if a policy had been required of the borrower. It cannot be assumed that in such a case the insurer would have pursued a claim. More significantly, the rights to which the insurer would have been subrogated would have been the rights of the insured relating to the insured loss, that is, the harm to the vehicle. They would not have extended to a loss not connected with the peril or the cover, such as the loss associated with insufficient cover against the borrower's default or the escape of guarantors. 5 10 The application is dismissed with costs/;:6~ ~b ~ ~ C~[~~G. 5 Bristol and West Building Society v May May & Merriman (1998) 1 WLR 336, 345. 1-'_. ___________ _ -- 6 of 6 --