(Re Jones-Mashman) Amaca PL v CSR Ltd

Amaca Pty Ltd v CSR Ltd [2001] NSWSC 324; CASES CITED: CSR Ltd v Amaca Pty Ltd [2007] NSWCA 107; (re Doughan) Amaca Pty Ltd v CSR Ltd [2006] NSWDDT 4

DATES OF HEARING: 7 August 2007, 8 August 2007

Mr G M Watson, SC instructed by DLA Phillips Fox appeared for the Cross-Claimant LEGAL REPRESENTATIVES: Mr F Corsaro, SC instructed by Leigh Virtue & Associates appeared for the Cross-Defendant

O'MEALLY P 1 Amaca Pty Ltd (Amaca) seeks from CSR Ltd (CSR) the sum of $135,000, together with interest from 16 May 2005. Its claim arises in this way: Graham Jones-Mashman contracted mesothelioma and sued Pacific Power and Delta Electricity in the Tribunal. Graham Jones-Mashman was the adopted son of Bruce Mashman and his wife. Bruce Mashman was employed by International Combustion Australia Ltd (ICAL) and worked at a number of power stations owned and operated by the Electricity Commission of New South Wales. The plaintiff, Graham Jones-Mashman, met his biological mother, Vera Jones, when he was 30 years old and changed his name by deed poll to Jones-Mashman.

2 The plaintiff's mesothelioma, as is now conceded, was the result of exposure to asbestos dust and fibre brought home on his adoptive father's work clothes. The dust and fibre were deposited there while Bruce Mashman was employed by ICAL. Relevant to this claim, asbestos dust and fibre settled upon the plaintiff's father's clothing while his farther was working at the Munmorah Power Station. His father's exposure was direct, from handling insulation material, and indirect from material being applied by laggers who were insulating steam pipes and boilers within the power station. Asbestos dust which settled on his father's clothes was inhaled by the plaintiff at their home. The plaintiff was also exposed to asbestos which was deposited in his car, from his father's work clothes, when he drove his father to and from work. The fact that his mesothelioma was caused by these exposures is not an issue in the case.

3 The plaintiff's claim was settled on 29 May 1997. Verdict and judgment were entered against Eraring Energy (Eraring) and Delta Electricity (Delta) in the sum of $770,000 and was inclusive of the plaintiff's costs. Subsequently Eraring and Delta issued cross-claims against ten cross-defendants, one of which was James Hardie & Coy Pty Ltd (JHC). JHC is now Amaca.

4 The cross-claim against Amaca alleged the plaintiff's adoptive father was exposed to asbestos in the course of his employment by ICAL for the consequences of the supply of which Amaca was liable. The claim was brought in negligence alleging that Amaca owed a duty of care to the plaintiff, which it breached, and under s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946. That cross-claim was settled on 16 May 2005. It was agreed that Amaca would consent to judgment for $270,000, which represented 30 per cent of the damages and costs payable to the plaintiff.

5 Amaca's cross-claim was brought on three bases. First, under a partnership deed entered into between JHC, the Colonial Sugar Refining Company Ltd, now CSR and Bradford Insulation Industries Pty Ltd (BI). That deed established a partnership known as the Hardie BI Company. Under the partnership agreement, BI was appointed the sole selling and distributing agent of asbestos insulation material produced by the partnership and JHC was appointed managing agent. I think it no secret that BI was at all relevant times a subsidiary of CSR. The partnership existed for approximately ten years, that is between 24 September 1964 and 26 June 1974.

6 Relevant to this cross-claim is cl 4 of div 6 of the Deed of Partnership of 24 September 1964. It was in these terms: Subject to the covenant and warranty given by James Hardie in Clause 5 of this Division the partners jointly hereby indemnify and agree to keep James Hardie indemnified from and against all actions suits proceedings claims and demands whatsoever made or brought against James Hardie by any third party in respect of or arising out of any act by James Hardie as managing agent. 7 The partnership was dissolved by a deed executred on 26 June 1974. CSR says it is not liable to Amaca because of cl 8 of the Deed of Dissolution.

8 Clause 8 of that deed provided: As and from the date of dissolution James Hardie, CSR and Bradford Insulation, by their execution hereof agree that the Partnership will be at an end, that all rights, duties and obligations of all the parties under the Principal Deed or any of them shall then cease and further that subject to Clause 9 hereof James Hardie, CSR and Bradford Insulation jointly and severally release the other parties and either of them from all such actions, causes of actions, demands or claims which any of them has had or but for this Deed might have had against the others or either of the others. By way of clarification to this clause and not otherwise, James Hardie, CSR and Bradford Insulation shall as from the date of dissolution not be bound by Clause 2 of Division 4 of the Principal Deed. 9 Clause 2 of div 4 of the principal deed is not relevant to any issue under consideration in this cross-claim.

10 Asbestos insulation material manufactured by the partnership was supplied by the partnership to the Munmorah Power Station during the course of the employment of the plaintiff's father by ICAL. The plaintiff's father was exposed to asbestos dust from a partnership product known as K-Lite. He was also exposed to asbestos from other insulation products and material. Before the partnership came into existence the plaintiff was exposed to asbestos manufactured and produced by JHC. The cross-claim brought against Amaca by Eraring and Delta alleged exposure before and during the course of the partnership agreement. I think it fair to conclude that the plaintiff's father was exposed to asbestos dust, which subsequently the plaintiff inhaled both before and during the existence of the partnership and exposure during both periods made a material contribution to his disease.

11 CCX2 is a schedule of invoices relating to the supply of asbestos insulation material to the Munmorah Power Station by the partnership. It is submitted for CSR that the evidence does not establish that the plaintiff's father was exposed to dust, inhaled by the plaintiff, which came from partnership products. In my view the contrary is the case. There is, first, the evidence in the plaintiff's affidavit, par 12, that his adoptive father told him that his father: …came into regular contact with asbestos insulation at the Power Stations and that in particular he recalled working with K-Lite insulation which he believed contained asbestos. K-Lite did contain asbestos. 12 Apart from K-Lite, as is demonstrated by CCX2, asbestos insulation products in excess of $170,000 in value were provided by the partnership to Munmorah Power Station. The types of products supplied were the types of asbestos insulation materials used in the power station at Munmorah and with which the plaintiff worked or near to which he was when others were working with them. Whilst it is that there is no direct evidence of exposure to asbestos material from other than K-Lite, the overwhelming inference is that the plaintiff's father, and hence the plaintiff, were both exposed to asbestos dust and fibre which came from partnership products.

13 Asbestos products in the 1960s and 1970s to a value of $170,000 would have been substantial. It would be fanciful to conclude the plaintiff was not exposed to asbestos from partnership products.

14 Though the cross-claim was brought on three bases, that is pursuant to the Partnership Deed, the Partnership Act and the Law Reform (Miscellaneous Provisions) Act 1946, the latter two have been abandoned and I have been addressed by counsel for the cross-claimant only on the basis that the partnership deed gives rise to its entitlement to contribution from the cross-defendant.

15 It is relevant to note that it is not in dispute that the settlement was reasonable, both as to amount and as to the decision to pay. What arises for consideration, first, is whether, because there was exposure to asbestos before the partnership came into existence, it is incumbent upon the cross-claimant to prove that the earlier exposure was irrelevant.

16 It is now plain beyond controversy that all asbestos exposure during an acceptable latency period makes a material contribution to mesothelioma. It is plain beyond controversy that mesothelioma is an indivisible injury. The fact that exposure before the partnership came into existence also made a material contribution is irrelevant to this issue.

17 I find that exposure to partnership products during the course of the partnership, and until the plaintiff's father ceased employment by ICAL in 1970, made a material contribution to the plaintiff's mesothelioma.

18 It was also put by Mr Corsaro SC, for the cross-defendant, that cl 4 of div 6 of the Partnership Deed of 24 September 1964 did not have the effect that the partners would be rendered liable for events occurring other than during the term of the partnership agreement. He says that reasonable commercial men would not have contemplated that liability to indemnify for pre-existing claims, or rather claims arising as a result of earlier exposure, would be covered by cl 4. Undoubtedly, that is correct; but because all exposure during the course of his father's employment by ICAL to products manufactured by the partnership was causative of the plaintiff's mesothelioma and made a material contribution to it, that is irrelevant. Moreover, the opinion of Professor Henderson, Professor of Pathology at Flinders University in South Australia, who was qualified by the plaintiff for the purposes of this case, is that the plaintiff's mesothelioma was attributable to the total cumulative inhaled dose of asbestos to which he was exposed, including the exposure derived from his adoptive father's work clothes.

19 Moreover, that cl 4 of div 6 of the partnership agreement gives rise to a liability to indemnify has been considered in the Supreme Court both in the Commercial Division and in the Court of Appeal Division (see Amaca Pty Ltd v CSR Ltd [2001] NSWSC 324 and CSR Ltd v Amaca Pty Ltd [2007] NSWCA 107). It has also been considered in the Tribunal by my colleague Curtis J in (re: Doughan) Amaca Pty Ltd v CSR Ltd [2006] NSWDDT 4.

20 The question now to be considered is whether cl 8 of the Deed of Dissolution executed on 26 June 1974 operates to release CSR from liability to indemnify JHC.

21 CSR argues that cl 8 operates to bar any claim for indemnity under cl 4 of div 6 of the Partnership Deed and submits that in Amaca Pty Ltd v CSR Ltd, decided by Bergin J in 2001, her Honour did not decide that cl 8 of the Dissolution Deed left open a claim for contribution. It is said that the case before Bergin J involved exposure only to partnership product and not, as here, exposure to partnership products and exposure to non partnership products. So far as the decision in the Court of Appeal is concerned, CSR submits that the Court was not required to deal with the defence which concerned the Deed of Dissolution. That is undoubtedly the case, but it was adverted to. The fact is that the matter has been considered in the Commercial Division of the Supreme Court. Speaking of the effect of cl 8 of the Deed of Dissolution Bergin J said in Amaca Pty Ltd v CSR Ltd [2001] NSWSC 324 at [89] - [90]: [89] There is nothing in the surrounding circumstances that suggests that the partners, or either of them, turned their minds to the possibility that one partner only could or might be sued by end users with a potential liability of millions of dollars. There is nothing to suggest that there was any contemplation of the likelihood that one or other of the partners was more likely to be chosen by such end user. [90] There is nothing to suggest that either partner considered giving up, let alone was willing, to give up its entitlement to contribution from the other partner for partnership liabilities to third parties. Her Honour said at 96: [96] The granting of the indemnity to Bradford in the Deed also suggests to me that the partners were intending that they would be jointly liable for partnership products rather than releasing each other from such liability, in particular releasing each other in contemplation of the chance that an end user might sue only one of the partners in respect of the liability. 22 The view of Bergin J must prevail over the submission of Mr Corsaro SC, not only for reasons of comity but also because, if I may say so, I believe it to be correct. The effect of the submissions made on behalf of the cross-defendant is that it was entitled to share in the profits of the partnership but not its losses.

23 In my view cl 8 of the Deed of Dissolution was not effective to prevent members of the partnership bringing claims against each other in cases such as this, and, if my memory serves me, I seem to recollect that CSR has brought such a claim against Amaca in other proceedings in the Tribunal.

24 In my view the cross-claimant is entitled to succeed.

25 There will be a verdict for the cross-claimant and judgment in the sum of $135,000 together with interest calculated from 16 May 2005.

26 I direct the parties to bring in short minutes to give effect to that finding.

27 The cross-defendant will pay the cross-claimants costs as agreed or assessed.

28 An offer of compromise was made. It was not accepted, accordingly the cross-claimant's costs should be on an indemnity basis from 16 July 2007.

Mr G M Watson, SC instructed by DLA Phillips Fox appeared for the Cross-Claimant.

Mr F Corsaro, SC instructed by Leigh Virtue & Associates appeared for the Cross-Defendant

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