Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: QBE Insurance (Australia) Limited v Suncorp Metway Insurance Limited [2013] NSWCA 290
• Hearing dates: 13 August 2013
• Decision date: 04 September 2013
• Before: Basten JA (at [1]); Barrett JA (at [2]); Emmett JA (at [41])

Decision

(1) Allow the appeal and set aside the orders made by Fullerton J on 26 July 2012.

(2) Declare that the provisions of clause 4 of the deed dated 27 November 1990 to which QBE Insurance (Australia) Limited, Suncorp Metway Insurance Limited and others are parties do not extend to any claim or loss in respect of liability to John Veigel arising from a collision that occurred near Bega on 11 February 2001.

(3) Order that the respondent pay the appellant's costs of the proceedings in this Court and in the Common Law Division.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: CONTRACTS - construction - agreement between third party motor insurers for sharing of claims - whether particular circumstances within sharing provision
• Legislation Cited: Motor Accidents Compensation Act 1999
• Cases Cited: Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337; Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45
• Category: Principal judgment
• Parties: QBE Insurance (Australia) Limited (Appellant); Suncorp Metway Insurance Limited (Respondent)
• Representation: Counsel: B W Walker SC/E G Romaniuk (Appellant); J E Sexton SC (Respondent); Solicitors: Moray & Agnew (Appellant); Curwoods (Respondent)
• File Number(s): CA 2012/255389

Decision under appeal

• Citation: QBE Insurance (Australia) Limited v Suncorp Metway Insurance Limited [2012] NSWSC 835
• Date of Decision: 2012-07-26 00:00:00
• Before: Fullerton J
• File Number(s): SC 2011/393966

Judgment

1 BASTEN JA: I agree with the orders proposed by Barrett JA and with his reasons.

2 BARRETT JA: This appeal arises from an agreement between third party motor vehicle insurers for the sharing of losses and the co-operative handling of claims. The agreement (which I shall call the "sharing agreement") is embodied in a deed dated 27 November 1990 the parties to which include the appellant ("QBE") and the respondent ("Suncorp"). For the purposes of the sharing agreement, QBE is a "NSW insurer" and Suncorp is a "Queensland insurer".

3 The general purpose of the sharing agreement is recorded in its Recital D:

"The Parties have agreed to enter into this Deed to provide for and regulate the sharing of claims involving motor vehicles insured under the laws of Queensland or New South Wales or in respect of which the Authority as Nominal Defendant in New South Wales is liable."

4 In proceedings heard by Fullerton J in the Common Law Division of the Supreme Court, QBE sued Suncorp on the premise that Suncorp was not entitled to resort to the provisions of the sharing agreement in respect of loss it had suffered in consequence of a particular motor vehicle collision.

5 The primary judge dismissed QBE's claims. QBE contends on appeal that her Honour misinterpreted the sharing agreement and that the relief it sought should be granted.

The circumstances in which the dispute arose

6 The background facts may be stated briefly. On 11 February 2001, two vehicles collided on the Princes Highway near Bega, one driven by Mr Veigel and the other by Mrs Broughton. I shall refer to the vehicles as "Mr Veigel's vehicle" and "Mrs Broughton's vehicle". Both drivers were injured, Mr Veigel very seriously. A third vehicle played a part because, by veering sharply into the right-hand lane where two lanes merged into one, it forced Mrs Broughton's vehicle across the centre line on to the wrong side of the road so that it came into head-on collision with Mr Veigel's vehicle which was travelling in the opposite direction. QBE was the third party insurer in respect of Mrs Broughton's vehicle.

7 It is convenient to repeat, with some amplifications and modifications, an account of the collision and subsequent events over a period of several years contained in the judgment of the primary judge.

1. Mr Veigel made a claim for damages under the Motor Accidents Compensation Act 1999 against Mrs Broughton and QBE as the relevant third party insurer. Mrs Broughton's defence to the claim was that she was forced on to the wrong side of the road by the third vehicle which was described as a "circus vehicle".

2. There was doubt about the identity of the circus vehicle. Mr Veigel and Mrs Broughton both brought proceedings separately against the nominal defendant on the basis that the identity of the circus vehicle could not be established. At a later stage, they joined Mr Dee and Mr Bell, who were respectively the driver and the owner of a particular vehicle alleged to be the circus vehicle.

3. The actions brought by Mr Veigel and Mrs Broughton were heard together. Quantum was agreed in the case of Mr Veigel at some $4.5 million. On the sixteenth day of the trial, Mr Bell's son gave evidence that he had seen Mr Davis, whom he knew, driving a circus vehicle on the relevant part of the road at the material time. The two actions were then adjourned to permit a claim under the Motor Accidents Compensation Act to be lodged against Mr Davis. Suncorp was the third party insurer of the vehicle driven by Mr Davis. The claim was lodged in August 2004. Mr Davis was joined as defendant in both District Court proceedings on 7 December 2004.

4. On 8 December 2004, Mr Davis, at the behest of Suncorp, filed a defence (denying liability of Mr Davis for Mr Veigel's claim) and a cross claim against Mrs Broughton (seeking indemnity or contribution from her under the Law Reform (Miscellaneous Provisions) Act 1946). This stance was taken by Suncorp on the basis that its insured (Mr Davis) denied having been near Bega at the time of the accident or, in the alternative (and if he was found to have been involved), that he was not at fault and Mrs Broughton was entirely responsible for the loss and damage suffered by Mr Veigel.

5. By letter dated 17 December 2004, Suncorp gave to QBE what it termed a "Sharing Application Notice". That notice was given by reference to the sharing agreement. The notice nominated Mr Veigel as the claimant and Mr Davis (Suncorp's insured) as the driver of one of the vehicles involved in the accident. No proportion or percentage of the claim was nominated. Suncorp sought QBE's confirmation that it was a sharing insurer to Mr Veigel's claim and that "sharing" applied on the basis outlined in the covering letter. The letter stated:

"Our insured denies that he was in the Bega area at the date and time of the accident which is the subject of these court proceedings. This is our insured's position and his defence to the Plaintiff's claim. However, and very much in the alternative, in the event that the Court finds our insured was in the area at the date and time of the accident, and caused or contributed to the accident, Suncorp will rely on the Sharing Agreement in place with QBE. We stress that our Application for sharing is effective only if the Court finds, for whatever reason, that Mr Davis was responsible or partly responsible for the accident."

6. By letter dated 14 January 2005, QBE rejected Suncorp's request for a number of reasons. Of particular relevance, for present purposes, is the contention of QBE that the claim for sharing ought to have been made before Suncorp (on behalf of Mr Davis) filed the cross claim against QBE's insured driver (Mrs Broughton) in the District Court proceedings; and that Suncorp, by electing to have the liability of Mrs Broughton determined in those proceedings (including by the filing of a cross claim), had effectively forfeited the right to the sharing otherwise available under the sharing agreement.

7. The District Court held in May 2005 that Mr Dee had caused the accident. This Court later set aside that finding and remitted the matter to the District Court for re-trial. The High Court refused an application for special leave to appeal.

8. The new trial took place in April and May 2009. By judgment of 19 June 2009, the District Court held that Mr Davis's negligence caused the accident and that he alone was liable to Mr Veigel. Mr Davis later challenged that decision in this Court but his appeal was unsuccessful.

9. On 1 July 2009 (after verdict was entered), Suncorp served a further "Sharing Application Notice" on QBE. The notice invited QBE's confirmation of 50/50 sharing between QBE and Suncorp

10. On 27 August 2009, QBE notified Suncorp that it rejected the application for sharing. QBE said that Suncorp's failure to attempt to have the matter referred to a referee for determination after QBE had signalled its rejection of the application for sharing in 2004 was inconsistent with the intended operation of the sharing agreement, as was Suncorp's subsequent election to litigate to determine the issue of liability. QBE also relied on the long and litigious course of proceedings in both the District Court and the Court of Appeal as providing further support for their contention that the sharing agreement had no application. The letter went on to say:

"...The purpose of the Sharing Agreement is to avoid litigation between the insurers and cannot be used as a last resort, if having exhausted the court process, your insured is still found liable. The dismissal of the cross claims against our insured has crystallised the legal rights between us by judgment.

Had you accepted at the outset that your insured caused or contributed to the accident, then it would have been appropriate for you to apply for sharing, because there would have been some accepted liability to which you would have been entitled to seek contribution. However, you have consistently maintained that your insured was either not present, or if present, was blameless in the scheme of the accident. Your intention to appeal Walmsley DCJ's finding that your insured was the sole cause of the accident is clearly inconsistent with reliance by you on the Sharing Agreement."

11. By letter dated 13 October 2009, Suncorp notified QBE that it remained of the view that the sharing agreement applied and that the decision to contest issues of liability in a fault-based curial process did not bind the parties in relation to the question whether the sharing agreement applied in a dispute between the parties' insurers. Suncorp advised that in the event that QBE did not confirm that their agreement to 50 per cent of the sharing of the claim costs as proposed in the Sharing Application Notice they proposed to refer the matter to the Panel for determination.

Provisions of the sharing agreement

8 Relevant provisions of the sharing agreement should now be noted. I begin with certain of the definitions in clauses 1.1 and 1.2, as follows:

"'claim' means a claim for damages in respect of which

(a) an insurer (other than the Authority) is liable to indemnify the person against whom the claim is made under a third party policy; or

(b) in the case of the Authority, the Authority is liable under Section 27 of the NSW Act;

and includes a claim for compensation under Section 6 of the Queensland Act."

"'claim cost' means the amount paid by an insurer to or on behalf of a claimant in relation to a claim or the legal costs (including disbursements) of the claimant relating to the claim or both as a result of the final settlement or verdict in relation to a claim".

"'collision' means the physical contact of:

(i) one motor vehicle with another or other motor vehicles;

(ii) a person or thing in or on one motor vehicle with another motor vehicle or other motor vehicles;

(iii) a person or thing in or on one motor vehicle with the passengers or goods in or on another motor vehicle or other motor vehicles;

(iv) one motor vehicle and another motor vehicle or other motor vehicles and a pedestrian; or

(v) a pedestrian with one motor vehicle or other motor vehicles notwithstanding that there has been no contact between the motor vehicles,

and includes consecutive contacts between the same where collisions, although not contemporaneous, are so closely related in time as to constitute one event or occurrence".

9 Of particular relevance are provisions in clauses 3 and 4, as follows;

"3. SCOPE OF THIS DEED

...

3.2 Claim by Driver

This Deed only applies to a claim by a driver of a motor vehicle if, after excluding the motor vehicle driven by that driver:

(a) the owner or driver of more than one motor vehicle has caused or contributed to the claim; and

(b) the insurer or one or more of those motor vehicles is a Queensland insurer and the insurer of one or more of those other motor vehicles is a NSW insurer.

4. SHARING AGREEMENT

4.1 Sharing

Subject to sub-clause 4.4, in respect of a claim to which this Deed applies under Clause 3 each insurer of any motor vehicle that has caused or contributed to the claim shall share the claim cost in accordance with this Clause.

4.2 Deemed Sharing if Motor Vehicle Involved in a Collision

A motor vehicle shall be deemed to have caused or contributed to a claim if that motor vehicle is involved in the collision out of which the claim arises.

4.3 Deemed Sharing if so Determined by Referee

If a motor vehicle is not involved in the collision out of which the claim arises, then that motor vehicle shall be deemed to have caused or contributed to the claim if the insurer of that motor vehicle agrees or on application by any other insurer the referee determines that the owner or driver of that motor vehicle caused or contributed to the claim.

...

4.5 Method of Sharing

An insurer who is liable to share the claim cost of a claim under this Clause shall share that claim cost in the proportion that the number of motor vehicles insured by that insurer which is liable to share the claim cost bears to the total number of motor vehicles insured by all insurers who are liable to share the claim cost.

...

4.7 Disputes

If there is any dispute or difference as to any matter arising under this Clause, that dispute or difference shall be referred to the referee and after considering the dispute or difference the referee may give a direction to the Parties to the dispute or difference and that direction shall be final and binding upon all Parties to the dispute or difference.

4.8 Referee

The referee under this Clause shall be a person or one of a panel of persons approved by the insurers for that purpose and in determining a dispute or difference under this Clause the referee shall act as the referee sees fit with a view to expeditiously and with as little formality as possible resolving the dispute or difference.

...

4.10 Insurer to Co-operate

Each of the insurers shall co-operate in the handling and settlement of all claims to which this Clause applies and shall provide to any other insurer who is or is likely to share the claim cost information in respect of the claim or to the referee all information required by the referee in relation to a matter referred to the referee.

4.11 Conduct of Claim

Unless otherwise agreed by the insurers sharing a claim the insurer of the motor vehicle sharing the claim cost of a claim which principally caused or contributed to the claim or series of claims shall handle that claim or series of claims for and on behalf of each other insurer and the insurer handling the claim shall be authorised to settle and compromise that claim or series of claims and otherwise deal with the claim or series of claims as it sees fit.

...

4.13 Determination of Principal Responsibility

As between the insurers liable to share a claim under this clause, the determination of which insurer is principally responsible shall be made as early as possible by reference to the police reports relating to the event giving rise to the claim and statements of witnesses which may be available but if there is any dispute or difference, that dispute or difference shall be resolved by the referee approved pursuant to sub-clause 4.8.

4.14 Notification to Other Insurers

Where an insurer becomes aware that a claim may be subject to sharing under this Deed it shall notify the other insurers who it believes are liable to share the claim cost as soon as it becomes aware of those facts and it shall provide to those insurers reasonable particulars of the claim.

4.15 Insurers to Establish a Claims Settlement Arrangement

The insurers shall establish a claims settlement arrangement whereby the insurer having the conduct of the claim shall, upon finalisation of the claim, submit such documentation relating to the claim and the claim costs as the Parties to this Deed agree and under which the other Parties sharing the claim shall make payment of their share of the claim cost within the time limits agreed by the Parties to the Deed."

Arguments and outcome before the primary judge

10 QBE contended at trial that, as a matter of construction, the sharing agreement is concerned only with claims between insurers' insureds that have not given rise to (or been overtaken by) judicial decisions as to liability. In a typical case, on QBE's view of matters, a person will allege liability on the part of several wrongdoers who are insured by different insurers, the deed will operate to fix the proportions in which those insurers are to bear any ultimate burden, one insurer alone will take on, for the benefit of all, any defence of the claims and the insurers will share the loss as ultimately established (by settlement or adjudication) in the proportions the sharing agreement dictates.

11 A feature conspicuously absent from QBE's view of a typical case is litigation among the insurers (or their insureds), whether by way of cross-claims in the proceedings brought by the principal claimant or otherwise. On QBE's view, litigation with a view to judicial determination of the liability of the respective insureds is foreign to the purpose for which the sharing agreement was created.

12 Suncorp accepted that a typical case will be dealt with as QBE suggests. Suncorp contended, however, that, as a matter of construction, there is nothing in the deed that confines its operation to cases in which there has been no curial determination of the respective degrees of liability of several insureds.

13 The primary judge accepted the contention of Suncorp. Her Honour found no basis in the terms of the deed for the restriction contended for by QBE, that is, a restriction which, as it were, denies access to contractual sharing where the question of the respective financial burdens has been determined by curial process.

Arguments on appeal

14 Essentially the same contentions were advanced on appeal.

15 QBE emphasised that, under clause 4.5, the thing that is to be shared is the "claim cost of a claim", that is, having regard to the clause 1.1 definition of that term (and leaving to one side the element concerning legal costs), the "amount paid" by an insurer, "as a result of the final settlement or verdict" to or on behalf of a person who makes or is entitled to make a claim for damages in respect of which an insurer is liable to indemnify the person against whom the claim is made. But this concept of "claim cost" is related to the concept of "claim" which is a forward looking concept that has in contemplation a future result by way of settlement or verdict that crystallises and quantifies liability.

16 QBE also points out that clauses 4.2 and 4.3 are forward looking and, it says, aim to pre-empt or forestall any ultimate determination and quantification of liability by a court. Clause 4.1 causes the obligation and right to share a "claim cost" to reside with the insurers of vehicles that have "caused or contributed to the claim" to which the "claim cost" relates. Clauses 4.2 and 4.3 then identify vehicles that are "deemed to have caused or contributed to" a particular claim; and they do so in ways that make it unnecessary to await any curial determination. Under clause 4.2, a vehicle is deemed to have caused or contributed to a claim if it was "involved in" the relevant "collision" (a concept defined in terms of simple "physical contact"); while under clause 4.3, a vehicle not so "involved" is deemed to have caused or contributed to the claim if its insurer agrees, or "the referee determines" that the owner or driver of the vehicle caused or contributed to the claim.

17 Identification of the vehicles that were "involved in" a collision (in the "physical contact" sense made relevant by the clause 1.2 definition of "collision") will generally not pose difficulty. The physical state of each vehicle immediately after the event will usually provide a ready and immediate answer.

18 When such "involvement" in the form of physical contact by or with a vehicle is absent, agreement or determination under clause 4.3 will also permit an early answer to the question posed by clause 4.1, with the agreement or determination under clause 4.3 going to the core clause 4.1 issue itself, that is, whether the vehicle in question "caused or contributed to the collision".

19 For these reasons, QBE says, the regime centred on the sharing agreement is one that entails early identification of all relevant vehicles without the need to await the outcome of litigation. To the extent that there may be doubt of a kind requiring third party resolution, the procedure under clause 4.3 involving "the referee" is at the parties' disposal.

20 QBE points out that the early identification of all relevant insurers is also consistent with clauses 4.11 and 4.13. Clause 4.11 assigns a particular role to the insurer of the motor vehicle that "principally caused or contributed to" the particular claim. It is that insurer that is to "handle" the relevant claims "for and on behalf of" all relevant insurers. Clause 4.13 deals with the manner of determining who is "principally responsible". The objective, clearly enough, is to place in the hands of one of the relevant insurers the task of "handling" all claims referable to a particular collision, no doubt by dealing with settlement possibilities, negotiating settlements (if possible) and, in the final analyses, defending court proceedings. Because of the equal sharing provided for in clause 4.5, each relevant insurer has the same incentive to minimise the financial impact of a particular claim, regardless of the extent to which its own insured might ultimately be found to be liable. There is therefore no occasion for cross-claims between the respective insureds.

21 Suncorp does not, up to a point, dispute the analysis put forward by QBE. It accepts that the sharing agreement facilitates the early identification of all relevant vehicles and all relevant insurers. It also accepts that the deed is intended to secure the advantages of claims handling by one relevant insurer for the benefit of all in a context where the equal sharing for which the deed provides makes irrelevant, as among the insurers, the question of the respective degrees of responsibility of the several insureds for a single loss.

22 Suncorp also says, however, that the sharing agreement, according to its terms, operates in circumstances where the early identification mechanisms have not operated and issues of who has "caused or contributed to a claim" are ultimately answered by the outcome of court proceedings in which the respective insureds are defendants and there are cross-claims by which those defendants claim indemnity or contribution against one another. In other words, Suncorp says that, while implementation of the deed's procedures can achieve the advantages of early identification and streamlined administration, the core purpose of equal sharing also prevails even if those advantages are neither sought nor obtained.

23 As has been seen, each of clauses 4.2 and 4.3 deems a particular vehicle to have "caused or contributed to" a claim and does so in a manner consistent with the efficient and timely operation of the system upon which QBE places emphasis. But, Suncorp stresses, while those deemings operate for the purposes of clause 4.1, they do not do so in a way that excludes other methods of determining which vehicles "caused or contributed to" a particular claim. The clause 4.1 criterion therefore has content over and above that provided by the deemings under clauses 4.2 and 4.3 so that if, as an objective matter, a particular vehicle can be seen to have "caused or contributed to" a claim, that objective conclusion is just as relevant to the operation of clause 4.1 as is any deeming effected by clause 4.2 or clause 4.3. It follows, Suncorp says, that there is no reason to disregard, for the purposes of clause 4.1, conclusions as to who "caused or contributed to" a claim which are established by fully fledged litigation to which the insureds were parties.

Construction of the sharing agreement

24 Neither QBE nor Suncorp seeks to rely on any implied term of the sharing agreement. Each accepts that the questions raised by the appeal are to be determined by construing the written contract without any such supplementation.

25 There is no need to dwell on the approach to be taken to the construction of written contracts. It is sufficient to quote the following extract from the principal judgment in Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45 in which Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ said (at [10]), referring to Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337:

"In Codelfa, Mason J (with whose judgment Stephen J and Wilson J agreed) referred to authorities which indicated that, even in respect of agreements under seal, it is appropriate to have regard to more than internal linguistic considerations and to consider the circumstances with reference to which the words in question were used and, from those circumstances, to discern the objective which the parties had in view. In particular, an appreciation of the commercial purpose of a contract:

'... presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating'.

Such statements exemplify the point made by Brennan J in his judgment in Codelfa:

'The meaning of a written contract may be illuminated by evidence of facts to which the writing refers, for the symbols of language convey meaning according to the circumstances in which they are used.'" (Citations omitted)

26 The central and immediate "objective which the parties had in view" when committing to the sharing agreement was, clearly enough, a sharing of losses on the clause 4.5 basis of equality, regardless of the extent to which each participating insurer ultimately came to bear the relevant liability by reason of a finding (or agreement) regarding fault of the several drivers and the proportions in which they were to bear liability. But the significance of that central and immediate objective cannot be appreciated without reference to the reason why the parties must be presumed to have wished to achieve it.

27 In the absence of the sharing agreement, each insurer would have borne only losses attributable to fault of the drivers of vehicles insured under policies issued by that insurer. On the footing that the drivers of one group of vehicles could not be presumed to be likely to generate claims productive of greater liabilities than the drivers of any like group of vehicles and that all insurers wrote insurance for vehicles across the whole range of vehicles, the common expectation must have been that, in the absence of the agreement, each insurer would, over time, come to bear losses at the same level and rate (although in proportion to numbers of policies on issue) as each other insurer. On that basis, there can have been no expectation by any insurer that participation in equal sharing under the agreement would, over any substantial period, result in any markedly better (or, for that matter, markedly worse) overall outcome, in terms of the quantum of the damages borne by that insurer, than that which would have resulted from adjudication of each and every claim through the full court process, including by way of cross-claims among indemnified persons (and therefore, effectively, among insurers).

28 For that reason, contractual re-allocation of ultimate burdens cannot have been, of itself, the substantive objective of the parties in committing themselves to the sharing agreement. Given that they must therefore have been motivated by some economic or financial consideration other than one related to the quantum of ultimate burdens, it is necessary to identify their reason elsewhere in the agreement.

29 Once that point is reached, it is a simple matter to identify the substantive objective as the economies arising from avoidance of cross-claims between insureds and avoidance of the need for all relevant insurers to be involved in litigation or other methods of claims resolution. Those economies can be derived only if the processes envisaged by the sharing agreement become operative at a point before the respective insureds become pitted against one another in legal proceedings.

30 In short, the process of construction which looks beyond internal linguistic considerations and seeks out the objective that the parties had in view supports the construction for which QBE contends rather than that favoured by Suncorp.

The operation of the sharing agreement in this case

31 In this case, the litigation initiated by Mr Veigel had reached an advanced stage before Mr Davis became a party to it. Once Mr Davis was joined as a defendant on 7 December 2004, it was open to Suncorp to contend that loss attributable to any liability of Mr Davis to Mr Veigel was to be shared pursuant to clause 4.5 of the sharing agreement because Mr Davis's vehicle had caused or contributed to the claim in respect of Mr Veigel's injuries.

32 Suncorp did not take that course. It did not seek to resort to the sharing agreement by means of its letter of 17 December 2004. The letter foreshadowed possible future reliance on the sharing agreement: "... Suncorp will rely on the Sharing Agreement in place with QBE" (emphasis added). The foreshadowed future reliance would, it was said, occur only if two conditions were satisfied: first, if the court found that Mr Davis was in the relevant area at the date and time of the accident; and, second, if the court found that Mr Davis caused or contributed to the accident. Unless and until those conditions were satisfied, it was Suncorp's position that it would, quite independently of the sharing agreement regime, defend the proceedings on behalf of Mr Davis.

33 It is then necessary to decide whether Suncorp made any meaningful election to resort to the sharing agreement by its subsequent notification of 1 July 2009. By that time, of course, the court proceedings had concluded and it had been established by a judgment by which all of Mr Veigel, Mrs Broughton and Mr Davis were bound as parties that Mr Davis was liable for the whole of Mr Veigel's loss to the entire exclusion of liability on the part of Mrs Broughton.

34 By the time Suncorp's notification of 1 July 2009 was given, therefore, there was no prospect of achieving the efficiencies and savings that represent the insurers' objective in being parties to the sharing agreement. It was by then impossible, first, for QBE and Suncorp to "co-operate in the handling and settlement" of Mr Veigel's claim (clause 4.10); second, for one of them to "handle that claim" for both of them (clause 4.11); and, third, for determination of principal responsibility to be made by reference to police reports and witness statements (clause 4.13). All those possibilities had been overtaken by the pursuit of the litigation to finality.

35 It follows, in my opinion, that the primary judge should have held that there was no occasion for any determination of any kind to be made under the sharing agreement and that QBE was entitled to relief reflective of that.

Relief

36 The appeal should be allowed and Suncorp should be ordered to pay the costs of the appeal.

37 The relief QBE sought at first instance was as follows:

"1. An order that the defendant be restrained from making or pursuing any application to the Sharing Disputes Panel ('the panel') set up pursuant to a deed entered into in 1990 between NSW and Queensland Compulsory Third Party insurers and the Motor Accidents Authority of NSW ('the Sharing Agreement'), seeking determination by the panel of a claimed sharing dispute between the plaintiff and the defendant relating to an accident occurring near Bega on 11 February 2001 in which one John Veigel recovered damages against the Defendant in the District Court of NSW.

2. A declaration that in the circumstances of the case the panel has no jurisdiction under the Sharing Agreement to hear the defendant's application that sharing applies between it and the plaintiff in relation to the subject accident."

38 The problem is that the deed of 27 November 1990 does not seem to refer to any "Sharing Disputes Panel", although there is a reference in clause 4.3 (and elsewhere) to "the referee"; and clause 4.8 says that the "referee" will be "a person or one of a panel of persons approved by the insurers for that purpose".

39 In these circumstances, it is necessary to reformulate the declaratory relief sought. If the declaration set out below is in some respect inappropriate, it can be varied by consent of the parties or, in the absence of agreement, by either (or both) parties filing a motion to vary the order within 14 days of the date of this judgment.

40 The Court should make the following orders:

(1) Allow the appeal and set aside the orders made by Fullerton J on 26 July 2012.

(2) Declare that the provisions of clause 4 of the deed dated 27 November 1990 to which QBE Insurance (Australia) Limited, Suncorp Metway Insurance Limited and others are parties do not extend to any claim or loss in respect of liability to John Veigel arising from a collision that occurred near Bega on 11 February 2001.

(3) Order that the respondent pay the appellant's costs of the proceedings in this Court and in the Common Law Division.

41 EMMETT JA: This appeal is concerned with the interpretation of a deed dated 27 November 1990 (the Sharing Agreement). The object of the Sharing Agreement is to provide for and regulate the sharing of claims involving motor vehicles insured under the laws of Queensland or New South Wales. The respondent, Suncorp Metway Insurance Limited (Suncorp), and the appellant, QBE Insurance (Australia) Limited (QBE), are both parties to the Sharing Agreement.

42 At relevant times, QBE was the compulsory third party insurer of a motor vehicle being driven by Mrs Christine Broughton (the QBE vehicle) and Suncorp was the compulsory third party insurer of a motor vehicle being driven by Mr Dean Davis (the Suncorp vehicle). Mr Davis drove the Suncorp vehicle in such a negligent manner that it caused the QBE vehicle to veer to the wrong side of the road and collide with a vehicle driven by Mr John Veigel. As a result, Mr Veigel suffered catastrophic injuries.

43 Suncorp has paid substantial amounts to Mr Veigel in its capacity as compulsory third party insurer of the Suncorp vehicle. Suncorp claims that QBE is liable, in its capacity as compulsory third party insurer of the QBE vehicle, to contribute, in the manner provided for in the Sharing Agreement, to the amounts paid by Suncorp to Mr Veigel. QBE contends that, on the proper construction of the Sharing Agreement, it is not liable to share in the liability of Suncorp for those amounts. A judge of the Common Law Division rejected QBE's contentions and QBE now appeals from that decision.

The Relevant Provisions of the Sharing Agreement

44 The Sharing Agreement is concerned with claims and claim costs. Claim means a claim for damages in respect of which an insurer is liable to indemnify the person against whom the claim is made under a compulsory third party policy. Claim cost means the amount paid by an insurer to or on behalf of a claimant in relation to a claim, or the legal costs of the claimant relating to the claim, or both, as a result of the final settlement or verdict in relation to a claim. That indicates that the Sharing Agreement looks forward to the ultimate result of a claim that has been made.

45 Section 3 of the Sharing Agreement deals with its scope. Under clause 3.1, the Sharing Agreement only applies to a claim where more than one motor vehicle has caused or contributed to the claim. Under clause 3.2, the Sharing Agreement only applies to a claim by a driver of a motor vehicle if, after excluding the motor vehicle driven by the claimant, the owner or driver of more than one motor vehicle has caused or contributed to the claim.

46 The pivotal provisions of the Sharing Agreement are in Section 4, which is headed "Sharing Agreement". Clause 4.1 describes the circumstances where sharing is to occur. Each insurer of any motor vehicle that has caused or contributed to a claim is to share the claim cost in accordance with Section 4. Clause 4.5 provides that an insurer who is liable to share the claim cost of a claim is to share that claim cost in the proportion that the number of vehicles insured by that insurer bears to the total number of motor vehicles insured by all insurers who are liable to share the claim cost.

47 Thus, sharing in respect of a claim arises where two or more vehicles cause or contribute to the claim. Clauses 4.2, 4.3 and 4.4 determine when a motor vehicle is to be taken to have caused or contributed to a claim. Clauses 4.2 and 4.3 are deeming provisions for determining when a vehicle is to be taken to have caused or contributed to a claim. Clause 4.4, which is not presently relevant, deals with a claim made by the driver of a motor vehicle and provides that that motor vehicle is to be excluded in the application of clause 4.5.

48 In effect, there are three ways in which a motor vehicle will be deemed to have caused or contributed to a claim as follows:

• Where the motor vehicle is involved in the collision out of which the claim arises.
• Where the insurer of the motor vehicles agrees that the owner or driver of the motor vehicle caused or contributed to the claim.
• Where the referee determines that the owner or driver of a motor vehicle caused or contributed to the claim.

49 Clauses 4.10, 4.11, 4.12 and 4.13 are important in relation to the working out of the operation of the sharing contemplated by Section 4. Those provisions indicate that the purpose of the Sharing Agreement is to deal with the management of each claim for the benefit of all insurers who are to share in relation to that claim.

50 Under clause 4.10, each of the insurers must cooperate in the handling and settlement of claims to which Section 4 applies, and must provide, to any other insurer who is or is likely to share the claim cost, information in respect of a claim. Under clause 4.11, the insurer of the motor vehicle that principally caused or contributed to the claim is to handle that claim for and on behalf of each other insurer. The insurer handling the claim is authorised to settle and compromise the claim and otherwise deal with the claim as it sees fit.

51 Under clause 4.12, if a claim is brought in either New South Wales or Queensland, then the insurers sharing that claim, at the request of any insurer sharing that claim, must not unreasonably refuse agreement to a New South Wales insurer handling the claim if it be brought in the State of New South Wales, or to a Queensland insurer handling the claim if it be brought in Queensland. That is a qualification of clause 4.11, insofar as clause 4.11 provides that the insurer of the motor vehicle that principally caused or contributed to the claim is to handle the claim.

52 Clause 4.13 deals with the determination of principal responsibility. It provides that the determination of which insurer is principally responsible is to be made as early as possible, by reference to the police reports relating to the event giving rise to the claim and statements of witnesses that may be available. Clearly, the determination of which insurer is to be principally responsible is to be based on a provisional assessment of the material available. Clauses 4.11 and 4.13 indicate than an assessment is to be made of which insured vehicle was most at fault. That determination, of course, has no bearing on the proportions in which the claim cost is to be shared. That is fixed by clause 4.5 on a quite arbitrary basis, namely, in proportion to the number of insured vehicles involved.

53 Clause 4.14 provides that, where an insurer becomes aware that a claim may be subject to sharing, that insurer is to notify the other insurers who it believes are liable to share the claim cost as soon as it becomes aware of those facts. The first insurer is to provide to those insurers reasonable particulars of the claim. That provision indicates the sharing is to be worked out prospectively, before any question of liability is determined.

54 Clauses 4.15 and 4.16 indicate that the identity of the insurer who is to handle a claim is to be determined as soon as possible after the claim is made. Thus, under clause 4.15, the insurers are to establish a claims settlement arrangement, whereby the insurer having the conduct of a claim will, upon finalisation of the claim, submit such documentation relating to the claim and the claim cost as the parties to the Sharing Agreement agree and under which the other parties sharing the claim are to make payment of their share of the claim cost within the time limits agreed. The insurer having the conduct of the claim for the purposes of clause 4.15 must be the insurer who is to handle the claim under clause 4.11.

55 Clause 4.16 provides a mechanism in respect of large claims by way of exception to clause 4.15. If an insurer incurs a claim cost in relation to any one claim of an amount greater than $500,000, it may immediately notify each of the other insurers sharing the claim of the amount payable by them and those insurers must immediately pay that amount to the insurer paying the claim cost. In addition, notwithstanding that a claim has not been settled or determined by a court, if an insurer has paid in respect of any one claim an amount greater than $50,000, then the insurer may include that amount in its claim cost notified under clause 4.15 in a particular period.

56 The general scheme of those provisions indicates that the purpose of the arrangements is that, whenever the possibility of sharing arises, the insurers who are believed to be liable to share under the Sharing Agreement are to be notified, so that the insurer who is to handle the claim can be determined. That insurer then conducts the claim with authority to settle or compromise the claim. The other insurers are then required to contribute their share.

The Proceedings at First Instance

57 On 6 December 2011, QBE commenced proceedings in the Common Law Division against Suncorp. Prayer 1 of the summons filed by QBE was for an order that Suncorp be restrained from making or pursuing any application to "the Sharing Disputes Panel", set up pursuant to the Sharing Agreement. Prayer 2 of the summons was for a declaration that "the Panel" has no jurisdiction under the Sharing Agreement to hear any application by Suncorp that sharing applies between Suncorp and QBE in relation to the collision in which Mr Veigel was injured. The primary judge ordered that the summons be dismissed with costs.

58 Section 13 of the Sharing Agreement provides that, if any dispute or difference is referred to the arbitrator under the Sharing Agreement, then, unless otherwise agreed by the parties to the referral, the arbitrator is to determine the dispute or difference in accordance with and subject to the Institute of Arbitrators of Australia Rules for the conduct of commercial arbitrations. Clause 1.1 of the Sharing Agreement contains a definition of arbitrator as a person agreed by the parties to a dispute or difference or, failing agreement, an independent arbitrator appointed by the president for the time being of the Institute of Arbitrators of Australia.

59 Notwithstanding the provisions of Section 13 of the Sharing Agreement, there is no provision that mentions the referral of a dispute or difference to an arbitrator. Rather, within Section 4, there are several references to "the referee". Clause 4.7 provides that, if there is any dispute or difference as to any matter arising under Section 4, that dispute or difference is to be referred to "the referee". After considering the dispute or difference, the referee may give a direction to the parties to the dispute or difference and that direction is to be final and binding upon all parties to the dispute or difference.

60 Clause 4.8 provides that the referee under Section 4 is to be a person, or one of a panel of persons, approved by the insurers for that purpose. In determining a dispute or difference, the referee is to act as the referee sees fit, with a view to resolving the dispute or difference expeditiously and with as little formality as possible. Thus, clause 4.8 contemplates a panel of persons approved by the insurers. The insurers are the parties to the Sharing Agreement. It is common ground that a panel of persons has been approved for the purposes of acting as referee, as contemplated by clause 4.8.

61 Clause 4.9 provides that the costs of the referee are to be borne by the parties to the dispute or difference, in such proportion as the referee determines. The decision of the referee is to be final and binding upon all parties to the dispute or difference. Under clause 4.10, each of the insurers is required to provide to the referee all information required by the referee in relation to a matter referred to the referee.

62 Several of the provisions of Section 4 refer to particular functions of the referee. Thus, under clause 4.3, the referee may determine that the owner or driver of a motor vehicle contributed to a claim where an application by one insurer is made to the referee. Under clause 4.13, where there is any dispute or difference as to which insurer is principally responsible, that dispute or difference is to be resolved by the referee approved under clause 4.8.

63 The references to arbitration in clause 13 and the definition of arbitrator in clause 1.1 thus appear to be otiose, since there is no provision of the Sharing Agreement that contemplates referral of a dispute or difference to "the arbitrator". On the other hand, at first sight, the references to "the referee" in Section 4 do not appear to be a reference to "the arbitrator". The arbitrator is defined as a person agreed by the parties to a dispute or difference or, failing agreement, an independent arbitrator appointed by the president for the time being of the Institute of Arbitrators of Australia.

64 On the other hand, clause 4.8 contemplates that the referee under Section 4 is to be a person, or one of a panel of persons, approved by the insurers for that purpose. It may be that the only sense that can be made of the apparent disparity is to treat the references to the arbitrator as being a reference to the referee on the basis that the mechanism referred to in the definition of arbitrator in clause 1.1 constitutes the approval by the insurers, as contemplated by clause 4.8.

65 There is no provision in the Sharing Agreement for either a referee or an arbitrator, or the panel approved by the insurers, to determine whether or not sharing applies between two parties to the Sharing Agreement. Rather, the only functions contemplated by the Sharing Agreement for a referee are those referred to in clauses 4.3 and 4.13. That is to say, the referee might be asked to determine whether or not Mr Davis, the driver of the Suncorp truck, caused or contributed to the claim by Mr Veigel. The only other function of the referee is under clause 4.13 in resolving a dispute as to which motor vehicle principally caused or contributed to Mr Veigel's claim. That function, however, could arise only after it has been determined that sharing under the Sharing Agreement applies. A dispute or difference under clause 4.13 could not have any present relevance.

66 The relief sought in the summons appears to be misconceived. The issue is whether QBE is liable to pay to Suncorp 50 per cent of the amount paid by Suncorp to or on behalf of Mr Veigel in relation to his claim and the legal costs relating to his claim. Suncorp has taken no steps to enforce any liability that QBE has under the Sharing Agreement. Rather, Suncorp asserts that sharing under the Sharing Agreement applies and threatens to refer the matter to the disputes panel for determination. However, there is no mechanism under the Sharing Agreement for referring to the disputes panel the question of whether QBE has any liability under the Sharing Agreement. That appears to be the question intended to be raised by the proceedings brought by QBE.

The Appeal

67 I have had the advantage of reading in draft form the reasons of Barrett JA for concluding that QBE has no liability to Suncorp under the Sharing Agreement. In the light of the above analysis of the Sharing Agreement, I agree with his Honour's conclusion and his Honour's reasons for that conclusion. The appeal should therefore be allowed. However, as Barrett JA indicates, there is a question as to the appropriate relief. Having regard to the matters I have outlined above concerning "the disputes panel", I agree with the orders proposed by his Honour.

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Decision last updated: 04 September 2013