Hodges v New South Wales [1988] HCA 9; (1988) 77 ALR 1; (1988) 62 ALJR 190 (9 March 1988)

HIGH COURT OF AUSTRALIA

HODGES AND ANOTHER v. STATE OF NEW SOUTH WALES AND ANOTHER
S. 88/18

High Court of Australia
Brennan J.(1)

CATCHWORDS

HEARING

Canberra
9:3:1988

DECISION

BRENNAN J. This is an application by the defendants to strike out a statement of claim in which a declaration is sought that a New South Wales statute, the Transport Accidents Compensation Act 40 1987 ("the Act"), is invalid. The defendant applicants are the State of New South Wales and the Government Insurance Office of New South Wales which has responsibility for implementing and administering the scheme for transport accidents compensation embodied in the Act. The scheme is known as Transcover.

2. The defendants have already demurred to the whole of the plaintiffs' statement of claim and the demurrer has been entered for argument before a Full Court. It is surprising that, after demurring to a statement of claim, an application should be made under O.26 r.18 to strike out the pleading demurred to on the ground that it does not disclose a reasonable cause of action. That is the question of law which the demurrer raises for decision and if it is demonstrable "that the case of the plaintiff is so clearly untenable that it cannot possibly succeed" - I take the phrase from the judgment of Barwick C.J. in General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) 40 [1964] HCA 69; (1964) 112 CLR 125, at p 130 - the summary intervention of the Court should be invoked before seeking a judgment in demurrer.

3. However, a pending demurrer does not preclude an application under O.26 r.18. It is therefore necessary to consider what is alleged and claimed in the statement of claim in order to determine whether it discloses a reasonable cause of action. The facts alleged in the plaintiffs' statement of claim, which was delivered with the writ of summons, include the following. The first plaintiff is the widow of a person whose death was caused by or arose out of a transport accident which occurred in New South Wales on 2 January 1988. The second plaintiff, who sues by his next friend, suffered bodily injury caused by or arising out of a transport accident which occurred in New South Wales on 19 July 1987. The facts relating to the respective accidents show that the negligence of another driver involved was a cause of the accident and of the resultant death or injury. Accordingly, it appears that, but for the provisions of s.40(1) of the Act, each of the plaintiffs would have had a cause of action enforceable in New South Wales. The first plaintiff would have had a cause of action upon the death of her husband by virtue of the Compensation to Relatives Act 1897 (N.S.W.); the second plaintiff would have had a cause of action enforceable directly against the Government Insurance Office pursuant to s.14 of the Motor Vehicles (Third Party Insurance) Act 1942 (N.S.W.). Section 40(1) of the Act provides:
" No right to or claim for damages or
compensation or any other benefit (pecuniary or
non-pecuniary) shall lie, otherwise than as
provided by this Act, against any person for or
in respect of the death of or bodily injury to a
person caused by or arising out of a transport
accident occurring on or after 1 July 1987."
plaintiffs might have enforced by an action at common law in New South Wales.

4. Part 4 Div.1 of the Act provides for benefits payable to the dependants of a deceased person or to an injured person who qualify under that division. The first requirement, specified by ss.31 and 32, is that another person is "in accordance with the civil law ... liable, in whole or in part" for the injury or death, as the case may be. Given the allegations in the statement of claim, each plaintiff would satisfy that requirement. Next, s.33(1) provides:

"A benefit under this Act is payable only in
respect of the death of or bodily injury to -
(a) a person resident in New South Wales whose
death or injury was caused by or arose out of
a transport accident in New South Wales;
(b) a person not resident in New South Wales
whose death or injury was caused by or arose
out of a transport accident in New South
Wales, being a transport accident caused by
or arising out of the use of a vehicle or
other form of transportation or conveyance to
which section 4(1)(a),(c),(d) or (e) applies;
(c) a person resident in New South Wales whose
death or injury was caused by or arose out of
a transport accident occurring in Australia,
but outside New South Wales, being a
transport accident caused by or arising out
of the use of a vehicle or other form of
transportation or conveyance to which section
4(1)(a) or (d) applies; or
(d) a person of a class of persons prescribed for
the purposes of this subsection."

5. The second plaintiff is a resident of New South Wales and qualifies for benefits under s.33. Indeed, the fact is that he has been paid Transcover benefits. The first plaintiff is not entitled to Transcover benefits. The first plaintiff and the deceased's dependent children for whose benefit the cause of action might have been enforced are subjects of the Queen resident in the State of Victoria. The statement of claim did not plead that the deceased husband was a resident of Victoria immediately before his death, but that fact has appeared in the plaintiffs' demurrer to the defendants' defence. It appears, though the fact is immaterial for the purposes of this application, that benefits have been paid to the first plaintiff under Victorian legislation which is similar to the Act.

6. Both plaintiffs seek a declaration that the Act is invalid on the ground that it offends s.117 of the Constitution. Section 117 reads:

"A subject of the Queen, resident in any State,
shall not be subject in any other State to any
disability or discrimination which would not be
equally applicable to him if he were a subject of
the Queen resident in such other State."

7. Counsel for the plaintiffs submit that s.33 of the Act is offensive to s.117 because it discriminates on the ground of residence in New South Wales, that s.33 is a key integer of the Transcover scheme, that s.33 is invalid, that the scheme therefore falls and in falling brings down s.40. If s.40 falls, the way is open for the plaintiffs to enforce the causes of action which s.40(1) purports to abolish. The steps in this argument do not depend on any finding of fact: each step consists of what is advanced as a proposition of law. When a statement of claim seeks a declaration of invalidity of a law by reason of an alleged infringement of the Constitution and the argument to establish invalidity does not depend on any finding of fact, the only facts which the statement of claim must plead are those which show the standing of the plaintiff to seek the declaration.

8. In the present case, the statement of claim shows that each of the plaintiffs would be able to sue on a cause of action if the Act is invalid but are not able to sue if the Act is valid. That is sufficient to give each of them a cause of action for a declaration by this Court of invalidity of the Act: Toowoomba Foundry Pty. Ltd. v. The Commonwealth [1945] HCA 15; (1945) 71 CLR 545, at p 570. It was unnecessary for the plaintiffs to plead any other facts in order to advance their argument, in the terms earlier stated, that the Act is invalid. In particular, it was unnecessary, for the purposes of that argument - which depends solely on the construction of the Act and the Constitution - to plead that the first plaintiff was subject in fact to a disability or discrimination which would not be applicable to her if she were a subject of the Crown resident in the State of New South Wales. Yet the statement of claim contained allegations that the first plaintiff was subject to such a disability or discrimination by reason of her residence in Victoria. The defendants rightly point out that s.33(1)(b), which speaks of "a person not resident in New South Wales" is speaking, in the context of a fatal accident, of the deceased, not of the dependants of a deceased. Be it so. The pleader's misreading of s.33(1)(b) of the Act is immaterial to the question whether s.33 infringes the requirements of s.117 of the Constitution. Unless the proposition that s.33 infringes the requirements of s.117 of the Constitution is clearly untenable or unless the proposition that any invalidity of s.33 leaves the validity of s.40 unaffected is clearly untenable, the statement of claim cannot be struck out as disclosing no reasonable cause of action. I am unable to hold that either of those propositions is clearly untenable. Each is a proposition which ought to be argued and decided on demurrer. I therefore dismiss the application so far as it is based on O.26 r.18.

9. Other bases for striking out are advanced. The second basis is O.20 r.29 which provides:

"The Court or a Justice may, at any stage of
the proceedings
(a) order to be struck out or amended any
matter in an endorsement or pleading
which is unnecessary or scandalous or
which may tend to prejudice, embarras or
delay the fair trial of the action; and
(b) if the Court or Justice thinks fit, order
the costs of the application to be paid
as between solicitor and client."

10. If any paragraphs of the statement of claim are unnecessary, prejudicial or embarrassing, they are pars.16,17 and 18. These are the paragraphs which suggest that the first plaintiff is disqualified from entitlement to benefits under s.33(1)(b) by reason of her residence in Victoria and not by reason of her deceased husband's residence in Victoria. Although these paragraphs, so far as they raise issues of fact, may be immaterial to the chief argument which the plaintiffs seek to advance to establish invalidity of the Act, they need not be struck out unless it would prejudice the fair trial of the action to allow them to stand. Counsel for the plaintiffs wish to submit an argument, which I confess I find somewhat elusive, drawing on these paragraphs to show that s.33 is invalid. If a pleader chooses to plead a reason why a law is invalid, the pleading of the reason is not necessarily to be struck out even if the reason does not appear to be sound: Tomkinson v. The South Eastern Railway Company (No.2) (1887) 57 LT 358. At this stage of the action, when it appears that the action will be determined on demurrer, it is unlikely that three brief paragraphs, even if they reveal a misreading of s.33 and even if they prove to be immaterial to the plaintiffs' argument, will be prejudicial to the fair trial of the action or embarrassing to the defendant in conducting its case on demurrer. The correct course is to allow these paragraphs to remain at least at this stage of the action. If the amendments which the plaintiffs seek leave to make are allowed, these paragraphs will allege that the first plaintiff's deceased husband, as well as his dependants, resided in Victoria and that removes one of the defendants' criticisms of these paragraphs. The second basis of the application to strike out therefore fails.

11. The final ground on which the striking out of the statement of claim is sought - and this ground invokes the Court's inherent jurisdiction - is that the commencement of the action was an abuse of the process of the Court. In part this ground rested on the defendants' understanding that the case raised by the statement of claim was that the first plaintiff was the subject of discrimination offensive to s.117 of the Constitution because she, desirous of Transcover benefits, was not qualified to receive them by reason of her Victorian place of residence. Whatever inducement may have been offered by the statement of claim to believe that that was the first plaintiff's complaint and whatever warrant there was for regarding such a complaint as misconceived, the true nature of the plaintiff's claim as a constitutional challenge to the validity of the Act quickly became manifest in argument. Although an unchallenged affidavit sworn by the plaintiffs' solicitor showed that each plaintiff intended, if successful in the action, to sue on the cause of action which s.40(1) of the Act purports to abolish and although the chief argument to invalidate s.40(1) was outlined in argument, the defendants persisted in this ground. The defendants pointed to another circumstance as a factor relevant to the characterization of the proceedings as an abuse of process. The defendants relied on a press statement made by the President of the Bar Association of New South Wales, a copy of which was exhibited to an affidavit, in order to show that the plaintiffs' predominant motive was to "lend the action" to a campaign by the Bar Association to have the Act repealed, a campaign in which, it was suggested, the plaintiffs were not professing a real interest. The press statement announced, inter alia, that the Association had "today moved to have the controversial Transcover legislation struck down". It was not disputed that the Council of the Bar Association had given assistance to the plaintiffs to prosecute this challenge to the validity of the Act, apparently by some indemnity as to costs. The President's staement set out the reasons for supporting the plaintiffs' challenge to the validity of the Act:

"Firstly, we believe that this is thoroughly bad
and unjust legislation which involves the
Government kicking people when they are down.
Secondly, we believe that the two accident
victims have a good case for having the
legislation declared invalid.
And thirdly because the constitutional challenge
could not be brought in the High Court by these
accident victims without our support."

12. If the defendants had claimed that the Bar Association was unlawfully maintaining the action, the submission that the proceedings were an abuse of process would have been comprehensible. Even had such an allegation been made, however, it would be wrong to stay proceedings pending a determination of the issue of unlawful maintenance: Martell v. Consett Iron Co. Ltd. (1955) Ch 363. But the Solicitor-General for New South Wales expressly disavowed any allegation of unlawful maintenance. What is left? The plaintiffs who have a legitimate interest in obtaining a declaration that the Act is invalid commence and prosecute an action claiming that relief and for that purpose they accept assistance given by the Bar Association openly and without any suggestion of unlawfulness. That is not an abuse of the Court's process. It follows that the summons must be dismissed.

13. During the argument of counsel for the plaintiffs on the hearing of the summons, they sought leave to amend the statement of claim. The amendments would raise allegations, inter alia, that the Act prevents the plaintiffs from prosecuting an action for damages and that the place of residence of the first plaintiff's deceased husband was in the State of Victoria. It is intended that the latter allegation should relate to the time immediately before his death and these words can be inserted conveniently in par.5A. These amendments are designed to remove some of the grounds on which criticism was made of the statement of claim. Had the time for amendment not expired, leave would not have been necessary (O.29 r.2) but the making of the amendment without leave would have required payment by the plaintiff of the costs of the demurrer (O.26 r.11). As leave to amend is necessary and will be given, the amendment is to be "on such terms, as is just" (O.29 r.1). Prima facie, an amendment which is designed to meet the grounds of the demurrer should be on terms that the plaintiff meet the cost of the demurrer. It was and, I trust, it still is a practice of the Queensland Bar that counsel intending to demur to an opponent's pleading on a ground that an essential element in a cause of action or defence has not been pleaded first give the opponent notice of the intention so that the omission, if made inadvertently, might be remedied by amendment at minimal cost. That practice has much to commend it. If, for want of such a notice, the omission is discovered and the pleading amended only after the demurrer is delivered, the costs of the demurrer might properly be refused to the demurring party. In this case, however, although the amendments are designed to meet objections made to the statement of claim by the defendants, the amendments do not plead an omitted essential element in the plaintiffs' respective causes of action to seek a declaration of invalidity of the Act. There is no reason to make a special order with respect to the costs thrown away by the amendment. The amendments are designed to meet specific grounds set out in the defendants' demurrer and it will be necessary for the defendants to plead anew to the amended statement of claim and, if they wish to do so, to demur anew. Costs will be thrown away at least to the extent that amendment is required to the defence and demurrer. The plaintiffs must bear any costs thrown away by the amendment. As it is likely that the action will be determined on demurrer and as the steps in the arguments of the parties are likely to attain greater precision by reduction to writing, I propose to order that comprehensive written submissions be filed.

ORDER

The defendants' summons to strike out the plaintiffs' statement of claim be dismissed with costs.

The plaintiffs have leave to amend their statement of claim in accordance with the amended draft initialled by me and further amended by adding to the end of par.5A "immediately prior to his death".

The plaintiffs file and deliver their amended statement of claim within 7 days from the date of the making of this order.

The defendants file and deliver their defence and demurrer within 14 days thereafter.

The plaintiffs file and deliver their reply and demurrer, if any, within 7 days after the delivery of the defence.

The plaintiffs pay the defendants' costs thrown away or incurred in consequence of the amendment of the statement of claim.

Within 7 days after entry of the defendants' demurrer for hearing the plaintiffs file ten copies of comprehensive written arguments in support of the declaration claimed in the statement of claim and deliver a copy thereof to the defendants' solicitor.

Within 14 days after the delivery of a copy of the plaintiffs' comprehensive written arguments the defendants file ten copies of comprehensive written arguments in support of their demurrer and deliver a copy thereof to the plaintiffs' solicitors.

Liberty to apply.