UK: Section 54 Is In For The Long Haul

Matthew Maxwell v Highway Hauliers Pty Ltd [2013] WASCA 115 is an appeal from a decision by the Supreme Court of Western Australia which held that relief under section 54 of the Insurance Contracts Act 1984 (Cth) was available to the Insured and that the Insurers were not entitled to refuse indemnity in circumstances where the Insurers had argued that the scope of cover meant the claim was excluded rather than any policy exclusion.

The appeal is significant for its discussion on the interpretation of s 54 and its support for a broad interpretation of s 54, in contrast to the decision by the Queensland Court of Appeal in Johnson v Triple C Furniture & Electrical Pty Ltd (2010) 243 FLR 336.  Partner Chris Harris, Associate Isaac Gibbs and Law Graduate Yicheng Chen discuss this decision and its implications with respect to the interpretation of s 54.

What was the story?

Highway Hauliers Pty Ltd (Insured) operated a fleet of trucks and trailers to transport freight between the eastern states and Western Australia (the east-west run).  The Insured held a policy with Maxwell (as representative of various Lloyd's syndicates) (Insurers).  The policy covered, amongst other things, accidental damage to the Insured's trucks and trailers nominated in the schedule of cover.  Two trucks were damaged in separate accidents and the Insured claimed the cost of repairs.

The Insurers declined indemnity on the grounds that the drivers of the damaged vehicles:

  1. had not complied with the endorsement in the policy providing for drivers to have achieved a minimum score on a driver test know as the 'PAQS test'; and
  2. were non-declared (non-approved) drivers for the purpose of an exclusion in the policy.

At first instance Corboy J held that:

  1. the Insurers were obliged to indemnify the Insured for the cost of repairing the damage to the trucks and trailers by reason of the application of s 54(1) of the Insurance Contracts Act 1984 (Cth) (ICA); and
  2. by denying indemnity to the Insured, the Insurers had breached the policy and were liable for consequential loss of profits.

The Insurers appealed to the Supreme Court of Western Australia Court of Appeal (Court of Appeal) claiming that the trial judged erred in law on both findings.  On 6 May 2013, the Court of Appeal dismissed the Insurers' appeal.

Section 54 grounds

As to the first issue on appeal, the Insurers accepted that, the fact that the drivers were non-declared drivers and had not undertaken the PAQS test, could not reasonably be regarded as being capable of causing or contributing to any losses incurred by the Insured. That is, the Insurers did not rely on s 54(2) to avoid the operation of s 54(1).

As many of you will be aware, s 54 was designed to protect an insured whose acts or omissions would otherwise have given an insurer the right to refuse indemnity.

In their first issue on appeal, the Insurers contended that s 54(1) had no application because in their view, the policy did not extend to cover the damage suffered by the Insured while its trucks were driven by drivers who had not attained a driver profile score of 36 in PAQS. 

In particular, the Insurers argued that:

  1. if a matter defines the scope of the cover (that it, it is a necessary element or condition thereof) in the policy, it is not caught by s 54(1);
  2. the scope of the cover was the operation of road trains on the east-west runs by drivers who had satisfactorily completed a PAQS test.  In other words, non-satisfaction of the PAQS test had the result that the claims were outside the scope of the cover under the policy; and
  3. there was no 'act' as defined in s 54(6).  In this respect, the Insurers relied upon the decision of the Queensland Court of Appeal in Johnson v Triple C Furniture & Electrical Pty Ltd (2010) 243 FLR 336 (Johnson) to contend that the only relevant conduct was an omission by the drivers of the road trains to satisfactorily complete a PAQS test and that that conduct was not an omission.

McLure P (with whom Pullen JA and Murphy JA agreed) discussed the legislative history of s 54 and the relevant High Court cases which have considered its application.  After reviewing these cases, McLure P set out the following steps which, in her Honour's view, should be used when considering the application of s 54:

  1. identify the relevant s 54 act or omission;
  2. determine whether the act or omission is one to which s 54(2) applies. If yes, determine whether s 54(3) or s 54(4) applies.  If s 54(2) does not apply, determine whether s 54(1) applies;
  3. in assessing whether s 54(1) applies:
  • determine whether there are any restrictions or limitations inherent in the actual claim by reference to the type or kind of insurance in issue.  If facts of the claim are outside any inherent restrictions or limitations, it will not be a claim under the insurance contract, any relevant act or omission will not satisfy the causal requirements below and s 54(1) will not apply;
  • determine whether the effect of the insurance contract is that the insurer may refuse to pay the claim (in whole or in part) in question by reason of the act or omission; and
  • determine whether the insurer is refusing to pay the claim by reason only of that act or omission.  If yes, the insurer may not refuse to pay the claim (but the insurer's liability may be reduced to the extent its interests were prejudiced as a result of the act or omission).

In applying these steps, McLure P held that for the purposes of s 54(1) there was an omission.  McLure P held that the omission was the failure of the Insured's drivers to satisfactorily complete the PAQS test before driving the Insured's nominated vehicles on an east-west run.  McLure P distinguished Johnson on the basis that each case turned on its own facts. In Johnson, the insurer of a plane had refused to indemnify the insured following a plane crash due to the fact that the plane was being flown by a pilot who had not satisfactorily completed a flight review within the two years prior to the crash (a circumstance which was excluded under the policy).  The Court upheld the exclusion, finding that the insurers were entitled to deny indemnity and that the pilot's failure to have satisfactorily completed a flight review was characterised as something which did not constitute an act or omission for the purposes of s 54. 

McLure P also held that it was not an inherent restriction of the Insured's claim that drivers of the damaged vehicles on the specified routes must have satisfactorily completed the PAQS test.  In this respect, McLure P relied upon the decision of the High Court in FAI General Insurance Co Ltd v Australian Hospital Care Pty Ltd (2001) 204 CLR 641 to reason that the only restriction or limitation inherent in a claim under an occurrence or event based insurance policy (which was the applicable type of policy in this case) is that the event must have occurred within the period of insurance. In coming to this conclusion, McLure P reasoned that the correct focus was on the actual claim and its inherent restrictions or limitations by reference to the type or kind of policy, not the scope of the cover. 

In response to the Insurers' arguments, McClure P further held (agreeing with Corboy J at first instance) that the PAQS endorsement did not define the scope of the cover and that the scope of the cover was defined by reference to vehicles and not by reference to the attributes of the driver.

The Court of Appeal therefore dismissed the first ground of the Insurers' appeal and held that the omission was one to which s 54(1) applied with the consequence that the Insurers were not entitled to refuse to indemnify the Insured.

Loss of profits

The second issue on appeal concerned whether the Insurers were liable to the Insured for consequential loss of profits by reason of breach of contract.  In this respect, the Court of Appeal (agreeing with Corboy J at first instance) held that by denying indemnity to the Insured, the Insurers had breached the policy and were liable for consequential loss of profits following the Insured's loss of opportunity to service the Melbourne to Perth run as part of its business.  The Court of Appeal agreed with Corboy J at first instance, in holding that the Insured's claim for loss of profits was not too remote and was therefore recoverable.  The trial judge assessed the profit lost by the Insured at $145,000.

Consequences for your business

This case emphasises the difficulties associated with assessing whether the relevant act or omission is one which is outside cover, to which s 54(1) has no application, or is one which entitles the Insurer to refuse a claim and is therefore capable of remedy by s 54(1).  The contrasting decisions of Johnson and this case highlight that much will turn on the particular facts and circumstances of each case.

The case also serves as a reminder to insurers of the consequences of incorrectly denying indemnity to an insured given the award of consequential loss that was made to the Insured.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Yicheng Chen
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.