James Hardy and Coy Pty Ltd v. Seltam Pty Ltd
159 ALR 268[1998] HCA 78
(Decision by: Gaudron and Gummow JJ) Court:
Judges:
Gaudron and Gummow JJ McHugh J
Kirby J
Callinan J
Judgment date: 21 December 1998
Decision by:
Gaudron and Gummow JJ
[1] This appeal raises an issue of construction of s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (the Law Reform Act). This provision, as the court observed in its joint judgment in Bitumen and Oil Refineries (Australia) Ltd v Commissioner for Government Transport , [F1] was transcribed from the Law Reform (Married Women and Tortfeasors) Act 1935 (UK) (the UK Act), the foundation of which had been in the recommendations of the Third Interim Report of the Law Revision Committee, presented in July 1934 (the Report). [F2]
The statute
[2] Section 5(1) of the Law Reform Act applies "[w]here damage is suffered by any person as a result of a tort" and in those circumstances has two distinct operations. First, in para (a), it abolishes what had been a particular plea in bar. Secondly, in para (c), supplemented by s 5(2), a right and remedy of contribution is created where they did not exist at common law.
[3] In the Report, para (I) of the Summary of Suggested Recommendations had recommended alteration of the rule in Brinsmead v Harrison [F3] whereby the principle that the tort was merged in the entry of judgment had the result that a plaintiff who had sued one joint tortfeasor to judgment and recovered nothing could not afterwards proceed against another person otherwise jointly liable in respect of the same wrong. The local legislative response is found in para (a) of s 5(1) of the Law Reform Act. This provides that where damage is suffered by any person as a result of a tort (whether a crime or not):
"judgment recovered against any tort-feasor liable in respect of that damage shall not be a bar to an action against any other person who would, if sued, have been liable as a joint tort-feasor in respect of the same damage."
[4] Paragraph (a) of s 5(1) is not in issue in the present appeal. However, it will be noted that it contains the phrase "would, if sued, have been liable" and operates upon an action brought against a second tortfeasor where judgment already has been recovered against the first tortfeasor. The first judgment will not bar recovery by the tort victim of judgment in the second action if, rather than a multiplicity of actions, the tortfeasors had been sued jointly and, if so sued, the second tortfeasor would have been liable as a joint tortfeasor in respect of the same damage.
[5] This appeal turns largely upon the construction of the expression "who is, or would if sued have been, liable in respect of the same damage" as it appears in para (c) of s 5(1). Paragraph (c) applies where damage is suffered by any person as a result of a tort (whether a crime or not) and states:
"any tort-feasor liable in respect of that damage may recover contribution from any other tort-feasor who is, or would if sued have been, liable in respect of the same damage, whether as a joint tort-feasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by that person in respect of the liability in respect of which the contribution is sought."
This provision operates not only between joint tortfeasors but also where the same damage is caused to the plaintiff by the separate wrongful acts of several parties. The equivalent United Kingdom legislation followed upon paras (II) and (III) of the Summary of Suggested Recommendations in the Report. These stated:
- (II)
- Any person who is adjudged to be liable to make any payment or who suffers execution under a judgment recovered against him in respect of an actionable wrong may recover contribution, whether the wrong be a crime or not, from any other person who has been made liable in respect of the same wrong, or who, if sued separately, would have been so liable , unless the person against whom contribution is sought proves that he is by law entitled to be indemnified in respect of his liability by the person seeking contribution. It shall be for the Judge to decide what the amount of the contribution is to be, or whether complete indemnity is to be given.
- (III)
- Where two or more persons have committed independent wrongful acts which have been the cause of the same damage they shall have the same right to contribution among themselves but subject to the same exception as in the case of persons liable in respect of the same wrong [emphasis added].
[6] In Brambles Constructions Pty Ltd v Helmers , Barwick CJ said: [F4]
"The effect of s 5(1)(c), in my opinion, is that a tortfeasor who has come under an enforceable obligation to pay money for the damage caused by his tortious act may successfully recover contribution from another tortfeasor who has also come under an obligation to pay money in respect of the same damage and he may also recover contribution from any other tortfeasor who, not having been sued by the injured party, had he been sued, would have been found to have caused or contributed to the same damage by a tortious act."
Defective law reform
[7] The legislation has become notorious for the conceptual and practical difficulties it engenders. It is an example of the need to keep measures of law reform under legislative review for defects and inadequacies exposed from time to time by the actual operation of such measures. Further, judicial decisions calculated to remove one anomaly by an apparent beneficent construction of the legislation have given rise to other anomalies. In some jurisdictions, including that where it originated, the legislation in question has been substantially amended or replaced. [F5] Not so in New South Wales.
[8] In its report which preceded the enactment in the United Kingdom of the 1978 Act, [F6] the Law Commission identified, under the heading "Double jeopardy" (paras 60-67), four issues to which the UK Act gave rise. The first was an anomaly to which the interpretation given to the statute by the decisions in George Wimpey & Co Ltd v British Overseas Airways Corp [F7] and Harvey v RG O'Dell Ltd Galway (Third Party ) [F8] gave rise. If P sued D2 and was met by a good plea that the action against D2 was time barred, D1's claim for contribution against D2 would fail. However, if P sued D1 but not D2, D1 would have a good claim to contribution by D2 because at some time in the past P would have had a good action against D2.
[9] The second problem arose where D2 succeeded in having the action by P dismissed for want of prosecution and D2 relied upon this dismissal when sued by D1. The risk of prejudice to D2 which had supported the dismissal of P's claim might be reintroduced if D1 now were allowed to pursue the contribution claim. Nevertheless, in Hart v Hall & Pickles Ltd , [F9] the English Court of Appeal held that, in such circumstances, it remained open to D1 to pursue contribution from D2.
[10] The third situation arose where D2 had defeated P's claim "on the merits". The effect of George Wimpey & Co Ltd v British Overseas Airways Corp (which the Law Commission supported) was that D2 was not at risk of re-agitation of the merits by D1 on a contribution claim and that D2 was not obliged to defend itself twice. Finally, the Law Commission concluded that the rejection of P's claim in an arbitration between it and D2 should not bar the agitation of D2's liability by a court subsequently hearing an action by P against D1 and a claim by D1 for contribution by D2.
[11] We mention these matters not to urge or criticise any of the stances taken by the Law Commission. Rather, they serve to emphasise the need for renovation of the New South Wales legislation, not by judicial grafting to it of tissue which it lacks, but upon detailed reconsideration by the legislature. Judicial interpretative techniques may come close to leaching the existing statutory text and structure of their content and, while answering that apparently hard case then before the court, unwittingly lay the ground for other hard cases.
[12] The present statute represents an attempt to adjust the tripartite rights and interests of P, D1 and D2. Any regime of this nature is at greater risk of generating anomalies where all those liable to suit are not sued at the same time and in the one proceeding. Many of the difficulties discerned by the Law Commission in the operation of the UK Act arose where all the parties had not been joined in the one action. However, that was not the present case. All parties were joined in the one proceeding and it was the task of the court in question [F10] to control its procedure "so that, as far as possible, all matters in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of those matters avoided". [F11] It was the failure of the appellant effectively to utilise those procedures which precipitated the particular dispute now before this court.
The present appeal
[13] The issue of construction with which this appeal is concerned arises in circumstances where (a) a plaintiff sued three defendants, D1, D2 and D3, for damages for injuries and disabilities flowing from asbestos-related pleural disease; (b) D1 cross-claimed against D3 seeking indemnity or contribution from D3; (c) D3 cross-claimed for corresponding relief against D1 and D2; (d) the plaintiff and D1 and D2 reached a settlement and by consent judgment was entered for the plaintiff in the agreed amounts against D1 and D2; and (e) D3 and the plaintiff settled on terms adverse to the plaintiff and by consent judgment was entered in favour of D3.
[14] The trial of the plaintiff's action came on for hearing on 8 November 1995 and steps (b) and (c), the filing of the cross-claims, occurred on the second day of the trial. On that second day, steps (d) and (e) then were taken. The orders touching D1 and D2 were made with the consent of those parties and the plaintiff. The order touching D3 was made with the knowledge of D1 and D2, as well as with the consent of the plaintiff.
[15] That left on foot the cross-claim by D1 against D3 for contribution in respect of what was now the ascertained liability of D1 to the plaintiff. By application made on 21 May 1997, D3, which had the judgment in its favour against the plaintiff, sought to have struck out the cross-claim against it by D1. An order that the cross-claim be struck out was made on 27 June 1997. The New South Wales Court of Appeal (Mason P, Beazley and Stein JJA) dismissed an appeal by D1 against this order. [F12]
[16] The judgment of the Court of Appeal was delivered by Mason P. The reasoning which led the President to hold that the cross-claim by the appellant (D1) for contribution by the respondent (D3) had properly been struck out appears in the following passage: [F13]
"The plaintiff and the respondent were the parties to the judgment which, albeit by consent, determined conclusively as between those parties that the respondent was not liable. This event alone put an end to the appellant's right of contribution simply because it had the effect of taking the respondent out of the class of persons against whom an order for contribution under the statute could be made."
His Honour added: [F14]
"Unless and until the appellant can show that the respondent should have been found liable to the plaintiff then a vital step in its claim for contribution is missing. Since no attempt was made either below or here to challenge the judgment in the plaintiff's favour against the respondent, whether by appeal or otherwise, the fact that that judgment stands precludes the right of contribution."
In Oceanic [ Crest Shipping Co v Pilbara Harbour Services Pty Ltd ] [F15] Brennan J said with reference to the facts of that case:
"... So long as the judgment holding Pilbara not liable stands on the record, the shipping company is unable to assert that Pilbara is a tortfeasor who 'is or would if sued have been liable' to Hamersley ..."
[17] The outcome supported by the Court of Appeal in the present litigation had not been inevitable. Not all steps open to the appellant to protect and advance its position had been taken. The appellant had been "directly interested in the question whether [the respondent was] a tortfeasor who [was] liable to the plaintiff" [F16] upon the claim in respect of which judgment by consent was entered in favour of the respondent on 9 November 1995. The tribunal, as a court of record, had an overriding power to control its own proceedings and was not obliged to act upon the request by some of the parties before it that consent orders be entered. [F17] The appellant had the right to be heard before the tribunal entered the consent judgment in favour of the respondent against the plaintiff in the plaintiff's action. [F18]
[18] The matter was taken by counsel for the appellant no further than as appears from his statement to the tribunal:
"I do not want to be seen to be consenting to any judgment in favour of the [respondent]. In my submission, in any event even if I could be heard, it would not be relevant in any sense to impede my claim for contribution."
[19] The appellant might have sought deferral of the entry of judgment in favour of the respondent until determination of the issue of liability of the appellant to the plaintiff for the purposes of the appellant's contribution claim against the respondent. In the process of negotiation between the parties, various options might have been available. A release agreed between the plaintiff and one tortfeasor would not necessarily have released the others. [F19] Further, the respondent concedes that, if the plaintiff had released the respondent without a judgment, then the appellant could have maintained its action for contribution.
[20] Against any decision by the tribunal to enter consent judgment as sought by the respondent and the plaintiff but against the wishes of the appellant, the appellant would have had standing to appeal. [F20] By that means, the appellant would have kept in play the question whether it was entitled to recover contribution from the respondent. This would have been achieved without falling foul of the procedural difficulties which divided the New South Wales Full Court in Castellan v Electric Power Transmission Pty Ltd [F21] and were discussed by Brennan J in Oceanic Crest Shipping Co v Pilbara Harbour Services Pty Ltd . [F22]
[21] However, s 5(1)(c) of the Law Reform Act calls for application in the situation which in fact came to pass. In our view, the judgment of Mason P was correct. To explain why that is so, it is convenient first to return to examine further some general considerations going to the construction of s 5(1).
The statutory action for contribution
[22] Section 5(1), and the difficulties in construction to which it has given rise, are the product of the method of drafting identified by Dixon J in R v Commonwealth Court of Conciliation and Arbitration ; Ex parte Barrett . [F23] His Honour remarked [F24] that the legislation there in question: [F25]
"must be taken to perform a double function, namely, to deal with substantive liabilities or substantive legal relations and to give jurisdiction with reference to them. It is not unusual to find that statutes impose liabilities, create obligations or otherwise affect substantive rights, although they are expressed only to give jurisdiction or authority, whether of a judicial or administrative nature. Indeed, in his Legislative Methods and Forms , [F26] Sir Courtenay Ilbert[ [F27] ] appears expressly to advert to this trick of drafting, for the purpose of condemning it, when he says: 'The enactment should be so expressed as to give the right, not the remedy, to say that a person may do a particular thing, not that he may bring a particular action or obtain from the court a particular order.'"
[23] Paragraph (c) of s 5(1) is to be read with s 5(2). This states:
"In any proceedings for contribution under this section the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person's responsibility for the damage; and the court shall have power to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity."
[24] These provisions create both a right and a remedy where, under English common law, none had existed. Paragraph (c) provides the descriptions of those for whom and against whom there is conferred the statutory entitlement to recover contribution. It attempts to comply with Sir Courtenay Ilbert's injunction to those drafting statutes that it be "made clear on whom the rights are conferred and the duties are imposed". [F28] Thus, para (c) is concerned with the identification of parties by certain criteria, not the measure of liability to contribution. The content of the entitlement and the mechanism for its enforcement are found in s 5(2). The distinction has not always been fully appreciated. The appellant urges on this court the proposition that the justice and equity referred to in s 5(2) impose upon the respondent the obligation from which it wrongly seeks immunity. However, that seeks to turn the statute on its head. Entitlement in respect of the new remedy is conferred only between certain parties and they must answer the criteria specified in s 5(1)(c).
[25] The first step is to identify those upon whom the new statutory right is conferred and the time from which that conferral is operative. This is answered by the construction placed by authority upon the opening words of para (c) of s 5(1). The reference to the right of a tortfeasor who is "liable in respect of ... damage" to recover contribution is, as Windeyer J put it, "to a person whose liability as a tortfeasor has been ascertained, ordinarily by judgment, perhaps in some cases in some other way". [F29] The scheme of the legislation is that, as his Honour said, a "person thus found liable may seek relief from having to bear the whole burden". [F30]
[26] In Bitumen and Oil Refineries (Australia) Ltd v Commissioner for Government Transport , [F31] the court said in its joint judgment that it was unnecessary to "say definitively that the ascertainment of the liability must be by judgment to the exclusion, for example, of arbitral award or of agreement itself amounting to accord and satisfaction or of an agreement amounting to accord executory followed by satisfaction". Their Honours' doubts as to the exclusion of other methods of ascertainment of the liability of the party now claiming contribution have been diminished by the later course of authority which admits of the sufficiency of at least some of those methods. [F32]
[27] Their Honours in Bitumen and Oil Refineries (Australia) Ltd v Commissioner for Government Transport continued: [F33]
"A decision that the liability imposed by the previous judgment is a liability which para (c) of subs (1) contemplated does not necessarily mean that the tribunal which discharges the responsibility of fixing the amount of contribution under subs (2) of s 5 cannot consider whether owing to the fault of the now plaintiff it stands at an excessive figure. No doubt the court under subs (2) must accept the assessment as conclusive as to the existence and the amount of the liability of the plaintiff claiming contribution. The court, however, is required to find what is just and equitable as an amount of contribution having regard to the extent of the responsibility for the damage of the tortfeasor against whom the claim is made."
This passage reflects the distinction drawn earlier in these reasons between the operations of s 5(1)(c) and s 5(2).
[28] While the liability ascertained as between the plaintiff and the claimant tortfeasor is a condition precedent to the assertion by that tortfeasor of its statutory right to recover contribution, the amount of that liability so ascertained is not determinative of the amount recoverable on that statutory action from other tortfeasors. Further, the connection between the liability of the claimant tortfeasor to the tort victim and the standing of the claimant to bring the statutory action for contribution does not carry the consequence that the statutory action is subjected to the same limitation or other procedural regime imposed upon an action by the tort victim against the claimant tortfeasor. [F34]
[29] However, George Wimpey & Co Ltd v British Overseas Airways Corp established that the outcome of any action between the plaintiff and the claimant tortfeasor is determinative of satisfaction by the claimant tortfeasor of the condition precedent to a claim by it under the statute. This result under the Law Reform Act may be contrasted to that obtaining under the legislation in issue in Scala v Mammolitti . [F35] In that case, the plaintiff's action, given by s 4(1) of the Law Reform (Miscellaneous Provisions) Act 1944 (NSW), for nervous and mental shock caused by a negligent act of the defendant which injured the husband of the plaintiff was not defeated by the existence of a judgment against the husband in his action for damages against the tortfeasor.
[30] The condition precedent may not have been satisfied at the time when the claim for contribution was instituted. That step of claiming contribution may be taken in anticipation of resolution of the main action. However, in Bitumen and Oil Refineries (Australia) Ltd v Commissioner for Government Transport , this court set out with apparent approval a passage from the judgment of Denning LJ in Littlewood v George Wimpey & Co Ltd and British Overseas Airways Corp , [F36] which included the following: [F37]
"In cases where a writ is issued against the first tortfeasor and he serves a third-party notice against the second tortfeasor, the notice is convenient machinery, but it does not mean that he has then a cause of action. His cause of action only arises when judgment is given against him ascertaining his liability."
[31] The claimant tortfeasor who satisfies the condition precedent may recover contribution from those other tortfeasors who bear responsibility in respect of the same damage in a fashion which answers a description in the balance of para (c). The defendant tortfeasor must be one (i) "who is ... liable in respect of the same damage" or (ii) "would if sued have been, liable in respect of the same damage". Only those who satisfy (i) or (ii) are amenable to a claim for contribution under the statute. Further, those who have been sued to judgment, whatever its outcome, do not fall within (ii). That is the effect of settled authority in this court.
[32] In Brambles Constructions Pty Ltd v Helmers , [F38] Barwick CJ identified the House of Lords in George Wimpey & Co Ltd v British Overseas Airways Corp [F39] as having:
"decided that a tortfeasor who had been sued by the injured party and had successfully defended the action, no matter on what ground, could not be required to pay any contribution to any other tortfeasor who suffered judgment at the hands of the injured party in respect of the same damage. He was neither a tortfeasor liable to pay damages nor a tortfeasor who had not been sued."
The submissions
[33] The respondent's case is that its situation falls within the last sentence of the above quotation. It is a tortfeasor who was sued but recovered a final judgment in its favour whereby the action against it was dismissed. The result is said to be that thereafter, in the action for a contribution brought against it by the appellant, it was not open to the appellant to satisfy the criterion for the amenability of the respondent to the statutory claim by re-agitating the issue of the respondent's liability to the injured party.
[34] It should be accepted that the relationship between the two limbs in para (c) is that identified by Barwick CJ in Brambles Constructions Pty Ltd v Helmers . [F40] The persons against whom there is an entitlement to recover contribution are (i) those who have come under an obligation to pay money in respect of the same damage and (ii) those who, not having been sued by the injured party, would, had they been sued, have been found to have caused or contributed to the same damage by a tortious act.
[35] The first limb of s 5(1)(c) identifies those who, like the respondent, have been sued by the injured party but fixes only upon those who have been made liable. The second limb identifies those who would, if sued at any time, have been liable, not those who were sued but obtained the entry of judgment in their favour, whether by consent or otherwise. There is no third category which identifies a person from whom contribution may be recovered by reference to the circumstance that this person has been sued and has been held not liable. [F41] Unless the first or second limb is satisfied, there is, in the terms of s 5(1)(c) itself, no person "entitled to recover contribution under this section".
[36] In some circumstances, this may produce what appear to be unsatisfactory outcomes. However, as indicated earlier in these reasons, this legislation has long been notorious as "a piece of law reform which seems itself to call somewhat urgently for reform". [F42] Be that as it may, in the present case, as indicated earlier in these reasons, it was open to the appellant to take steps to avoid it being shut out from the decision to enter judgment in favour of the respondent and against the plaintiff.
[37] It is necessary to say something further with respect to the second limb. In Brambles Constructions Pty Ltd v Helmers , [F43] Windeyer J identified para (c) of s 5(1) as containing "the statutory description of the persons against whom such a claim [for contribution] can be made" and of the second limb said: [F44]
'I see no reason for limiting the denotation of the description by assuming that the words "if sued" refer to some particular point of time. It is enough that there was a time, before the liability of the defendant tortfeasor was actually ascertained, at which the plaintiff (the victim of the tort) could have successfully brought an action against some other person (the third party), either independently of or jointly with the defendant.'
[38] In Hart v Hall & Pickles Ltd , [F45] the English Court of Appeal held that, where the action by the victim of the tort against the defendant in the contribution proceeding has been dismissed for want of prosecution, that person answers the description of one who "would if sued have been, liable in respect of the same damage". This was because the phrase "if sued" was rendered inapplicable only if the tortfeasor in question had been sued to judgment and the dismissal for want of prosecution was but an interlocutory order.
Conclusions
[39] The appellant sought to bring the respondent within the second limb by submitting that the respondent had not been sued to judgment in the sense required to deny the respondent the character of a person not yet sued. Thereby the appellant would open the way to demonstrate in the contribution proceeding that, as between it and the respondent, the respondent was liable in respect of the same damage and that it should have the remedy specified in s 5(2).
[40] However, in the present litigation, the order dismissing the plaintiff's action against the respondent was a final order which brought that action to an end. It would be a distortion of the text and structure of para (c) of s 5(1) to hold in those circumstances that the respondent thereafter answered the description of one yet to be sued. The plaintiff's cause of action against the respondent merged in the judgment, thereby destroying its independent existence.
[41] The status of the tribunal as a court of record was such that the circumstance that the judgment in favour of the respondent was entered by consent renders it no less effective to absolve the respondent from liability to the plaintiff. [F46] It was for the appellant to have taken the necessary steps to oppose that entry of judgment and to have put itself in the procedural position whereby it was competent to appeal against that entry. In the meantime, while that judgment remained on the record of the tribunal, the respondent did not answer either of the statutory descriptions necessary to confer entitlement upon the appellant to proceed against it for contribution.
[42] With respect to the first limb, the respondent had not been adjudged liable to the plaintiff. Rather, it had succeeded in establishing the opposite. With respect to the second limb, the presence of the judgment in the respondent's favour denied it the character of a party still awaiting a final determination of a suit in respect of the damage sustained by the plaintiff.
[43] The appellant sought to weaken the determinative character of the consent judgment by reference to the decision of the House of Lords in Munster v Cox . [F47] The House of Lords dismissed an appeal against an order of the Court of Appeal setting aside an order of the Divisional Court for the trial of an issue whether one Cox was liable to have execution against him upon a judgment in an action against a partnership. Cox asserted he had dissolved the partnership before the issue of the writ. There was an issue as to the authority of one partner to bind an absent partner by consenting to judgment in an action against the partnership for damages for libel. The judgment itself was not impugned. The question was whether Cox was liable to have execution issued against him upon the judgment. The decision provides no support for the appellant.
[44] The appeal should be dismissed. Costs should be dealt with as proposed by Callinan J in his reasons for judgment.