[2009] TASSC 89

CITATION: Aquagenics Pty Ltd v Break O'Day Council (No 2) [2009] TASSC 89

Arbitration - The submission and reference - Construction of submission or reference - Generally - Relief available - Reduction of damages under proportionate liability legislation.

Government Insurance Office of New South Wales v Atkinson-Leighton Joint Venture [1981] HCA 9; (1981) 146 CLR 206; Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160, followed.

Arbitration - The submission and reference - Submission as a defence and as a ground for stay of proceedings - Stay of proceedings - Order or refusal to stay - Particular cases in which stay ordered - Questions of law under proportionate liability legislation.

Commercial Arbitration Act 1986 (Tas), s53(1).

Wrongs Act 1954 (Tas), ss43A, 43B.

Contracts - Building, engineering and related contracts - Performance of work - Remedies for breach of contract - Damages - Measure of - Proportionate liability legislation - Applicability.

Wrongs Act 1954 (Tas), ss3A(3), 43A(1), 43B, 43G(1)(a).

Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd [2007] FCA 1216; (2007) 164 FCR 450; Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187, referred to.

Judgment Number: [2009] TASSC 89

1 This is an application for an action to be stayed pursuant to the Commercial Arbitration Act 1986, s53(1). The action concerns a contract made between the plaintiff and the Break O'Day Council ("the council") in January 2006 for the design, construction and commissioning by the plaintiff of upgrading works to the council's waste water treatment plant at St Helens. The council's rights and liabilities in relation to that plant were transferred to the second defendant, Tasmanian Water & Sewerage Corporation (Northern Region) Pty Ltd ("the defendant company"), on 1 July 2009 pursuant to the Water and Sewerage Corporations Act 2008, s41.

2 By July 2007, the plaintiff's work was almost finished, but a dispute had arisen between the plaintiff and the council as to the quality of that work. The central question in this litigation is whether the plaintiff committed substantial breaches of contract. Clause 44.2 of the contract entitled the council, if the plaintiff committed a substantial breach and the council considered that damages might not be an adequate remedy, to give the plaintiff notice to show cause why it should not take out of the hands of the plaintiff the work remaining to be completed. The council gave the plaintiff notice and took over the work, relying on that clause. The plaintiff brought this action on the basis that the council thereby repudiated the contract, and that it was not in substantial breach of the contract. It sought a declaration that it had validly terminated the contract after its repudiation by the council, an order for the return of security held by the council under the contract (a bank guarantee and retention money), and damages for loss of profit. The council contended, and the defendant company now contends, that the plaintiff is not entitled to any such relief, and that the plaintiff is liable to pay substantial damages for breach of contract. The defendants have not pleaded their case in a counterclaim because the Commercial Arbitration Act, s53(2), contains a general prohibition on the making of a stay application after the delivery of a pleading.

3 The contract incorporated as general conditions the standard form Design and Construct Contract AS4300-1995, subject to certain modifications. The parties agreed that the law applicable was to be that of Tasmania.

4 The contract contains a dispute resolution clause. That clause provides for the giving of a notice of dispute. The council gave such a notice on 29 January 2009. The contract requires a dispute to be referred to arbitration if it has not been resolved within 28 days after the service of the notice of dispute. The council contended that the dispute should be determined by an arbitrator, and therefore made the stay application that is now before me.

5 Under the Commercial Arbitration Act, s53(1), the Court may make an order staying the action if satisfied "(a) that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the agreement; and (b) that the applicant was at the time when the proceedings were commenced and still remains ready and willing to do all things necessary for the proper conduct of the arbitration".

6 The plaintiff concedes that par(b) is satisfied. The question I have to determine, therefore, is whether or not there is a sufficient reason why the matter should not be referred to arbitration in accordance with the contract.

7 In deciding that question "great weight is to be given to the consideration that the parties by their contract have agreed that arbitration should be their forum for settling any disputes which may arise": Tasmanian Pulp and Forest Holdings Ltd v Woodhall Ltd [1971] Tas SR 330 per Neasey J at 344.

8 The plaintiff contends that there are strong reasons why the matter should not be referred to arbitration. Its principal arguments are as follows:

•

Novel and difficult questions of law are likely to arise concerning the proportionate liability provisions of the Civil Liability Act 2002. It would be more appropriate for such questions to be determined by a judge, rather than an arbitrator.

•

The claims against it will be "apportionable claims" for the purposes of the Civil Liability Act. Apart from the plaintiff, ten other corporations provided specialist advice and services in relation to the project. If the defendant company is successful, findings will probably have to be made as to whether some or all of those ten corporations are "concurrent wrongdoers" for the purposes of the Civil Liability Act and, if so, what proportion of the relevant damage or loss should be attributed to each of them.

•

Alternatively, if it is held that the proportionate liability provisions of the Civil Liability Act do not apply, and the defendant company succeeds in an arbitration, the plaintiff will wish to pursue claims for contribution or indemnity against some or all of the ten other corporations.

•

There is no power under the Commercial Arbitration Act to join additional parties to an arbitration proceeding for the purpose of resolving questions of apportionment or contribution.

•

It would be cheaper and more convenient for all questions of liability, apportionment, contribution and indemnity to be determined in an action, with all appropriate parties joined and represented. The alternative is for there to be two or more separate proceedings - an arbitration between the present parties, and one or more additional proceedings against some or all of the ten corporations. In that situation the consequences would be an increase in legal costs, a duplication of work, and a risk of inconsistent findings or results in the different proceedings. Inconsistent outcomes tend to bring the law into disrepute.

9 The defendant company contends that the matter should go to arbitration. Its principal arguments are as follows:

•

The contract requires the dispute to go to arbitration.

•

The proportionate liability provisions of the Civil Liability Act do not apply.

•

Separate proceedings involving multiple parties are quite usual in engineering and construction litigation.

•

It is significant that the contract contains provisions complementing the arbitration clause that were plainly intended to give the council a simple and effective remedy in relation to claims against the plaintiff. By cl 9.3, except where the contract otherwise provides, the plaintiff was made liable to the council for the acts and omissions of subcontractors and their employees and agents as if they were acts or omissions of the plaintiff. Under cl 21, the plaintiff was required to maintain professional indemnity insurance cover for at least $5 million. Under cl 42.2, the plaintiff was required to provide a bank guarantee. Provision was made for retention monies under cls 5.5 and 42.1.

10 Because this application was said to raise important questions concerning the interpretation of the proportionate liability provisions of the Civil Liability Act, both parties initially sought to have it referred to the Full Court, but Porter J refused their request for such a referral: Aquagenics Pty Ltd v Break O'Day Council [2009] TASSC 15.

The proportionate liability provisions of the Civil Liability Act 2002

11 The Civil Liability Act was amended in 2005 to include a new Pt9A, which relates to proportionate liability. The amendments took effect on 1 June 2005, some months before the making of the contract to which this application relates. Before those amendments, when a number of defendants or wrongdoers were liable in respect of the same damage or loss, a plaintiff was always entitled to recover the whole of its damage or loss from a single defendant. That was because all defendants were jointly and severally liable to the plaintiff for the whole of its damage or loss. When the proportionate liability provisions of the Civil Liability Act apply, each defendant is held liable to the plaintiff only for a proportion of the damage or loss that is attributed to that defendant, and not for the whole of the damage or loss suffered by the plaintiff.

12 Similar provisions were introduced in every Australian jurisdiction. The background to the amendments was summarised by Finkelstein J in BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2) [2008] FCA 1656 at pars 4 - 5, as follows:

"[4] Proportionate liability was introduced into state and federal legislation following an inquiry into the law of joint and several liability established by the Commonwealth and the New South Wales Attorneys-General in 1994. The impetus for the inquiry was the growing number of actions against professionals, particularly auditors, who were being singled out as targets for negligence actions not because of their culpability (which might be small) but because they were insured and had the capacity to pay large damages awards. One consequence was a sharp rise in insurance premiums payable by professionals. The inquiry was conducted by Professor Davis of the Australian National University. He published stage one of his report in July 1994 and stage two in January 1995. In his report Professor Davis recommended that joint and several liability for negligence which causes property damage or economic loss be replaced by liability which is proportionate to each defendant's degree of fault.

[5] Draft model provisions that reflected the recommendation of the enquiry were published in July 1996 in the form of a part that could be inserted in appropriate legislation. The Commonwealth, State and Territory governments agreed to amend relevant legislation, based on the draft model provisions, to facilitate the introduction of a nationally consistent proportionate liability regime in respect of claims for economic loss or property damage."

13 It was only after I reserved this decision that I became aware of the reports published by Professor Davis in July 1994 and January 1995. I enquired whether counsel for the parties were agreeable to me taking those reports into account for the purpose of interpreting the proportionate liability provisions of the Civil Liability Act 1954. I was informed that counsel for one party agreed, but that counsel for the other party did not agree. I have concluded that, whether I were to take those reports into account or to ignore them, the result of this application would be the same. I have therefore decided to ignore those reports, rather than to invite counsel to make further submissions as to their status and significance.

14 The central provision in the Civil Liability Act which replaces joint and several liability with proportionate liability is s43B(1). That subsection reads as follows:

"(1) In any proceedings involving an apportionable claim -

(a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just, having regard to the extent of the defendant's responsibility for the damage or loss; and

(b) the court is not to give judgment against the defendant for more than that amount."

15 Part 9A applies only to "apportionable claims". The meaning of those words appears in s43A(1), which reads as follows:

"(1) This Part applies to the following claims ('apportionable claims'):

(a) a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care (but not including any claim arising out of personal injury);

(b) a claim for economic loss or damage to property in an action for damages under the Fair Trading Act 1990 for a contravention of section 14 of that Act."

16 There are various sorts of claims to which the proportionate liability provisions of the Civil Liability Act do not apply. I need not list them all. They include the following:

•

Claims that are not for economic loss or damage to property: s43A(1).

•

Claims not arising from any failure to take reasonable care or any contravention of the Fair Trading Act 1990, s14 (which relates to misleading and deceptive conduct): s43A(1).

•

Claims based on vicarious liability: s43G(1)(a).

•

Claims based on express contractual provisions as to the rights, obligations and liabilities of the parties to a contract in relation to a matter to which the Civil Liability Act applies: s3A(3).

17 Both counsel submitted to me that it was doubtful whether the proportionate liability provisions of the Civil Liability Act are applicable to arbitration proceedings. Under s43B(1), the limit of the liability of a defendant who is a concurrent wrongdoer is the amount "that the court considers just". Under s43B(1)(b), "the court" is not to give judgment for more than that amount. Counsel submitted that it is uncertain whether an arbitrator is a "court" for the purposes of s43B(1). The types of "apportionable claims" listed in s43A(1) are all described as claims "in an action for damages". The question arises whether a claim for damages that is litigated in arbitration proceedings is a claim "in an action for damages" for the purposes of s43A(1).

18 The Civil Liability Act contains the following definitions in s3:

"'court' includes tribunal and, in relation to a claim for damages, means any court or tribunal by or before which the claim falls to be determined;

'damages' includes any form of monetary compensation".

19 The Act does not contain definitions of "tribunal" or "action".

20 The Acts Interpretation Act 1931, s8A(1), requires, in the interpretation of a provision of an Act, an interpretation that promotes the purpose or object of that Act to be preferred to one that does not. Interpretations that extend the operation of the proportionate liability provisions to arbitration proceedings would obviously promote the purpose or object of the relevant part of the Act. Such interpretations would also avoid a very undesirable, and perhaps absurd, situation whereby the law applied by arbitrators would be very different from the law applied by judges. It is arguable that the word "tribunal" in the definition of "court" in s3 should therefore be interpreted so as to include an arbitrator, and that the words "action for damages" in s43A(1) should therefore be interpreted as including arbitration proceedings in which monetary compensation is sought. On the other hand, it is also arguable that such interpretations stretch the language of the Act too far.

21 Regardless of the meanings of "tribunal" and "action for damages", I consider that the proportionate liability provisions of the Civil Liability Act are ordinarily applicable in arbitration proceedings because a contract that contains a provision for the resolution of disputes by arbitration will ordinarily contain an implied term that "the arbitrator is to have the authority to give the claimant such relief as would be available to him in a court of law having jurisdiction with respect to the subject matter": Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 per Gleeson CJ at 167.

22 In Government Insurance Office of New South Wales v Atkinson-Leighton Joint Venture [1981] HCA 9; (1981) 146 CLR 206, the High Court had to decide whether an arbitrator had the power to award interest on the amount of his award. The claimant had no common law entitlement to interest. The Arbitration Act 1902 (NSW) did not give the arbitrator a power to award interest, but a power to award interest was conferred by the Supreme Court Act 1970 (NSW) upon "the Court" by a provision, s94, which referred to "proceedings" and "judgment". The majority, Stephen, Mason and Murphy JJ, held that interest was recoverable. At 235, Stephen J said:

"Subject to certain exceptions, principally related to forms of equitable relief which are of no present relevance and which reflect the private and necessarily evanescent status of arbitrators, a claimant should be able to obtain from arbitrators just such rights and remedies as would have been available to him were he to sue in a court of law of appropriate jurisdiction."

"The parties' submission to arbitration of all their differences is to be construed in the light of the new principle of law regulating the payment of interest enshrined in s 94. There is to be implied in the submission an authority in the arbitrator to award interest conformably with s 94 because the Supreme Court is given by the Arbitration Act a supervisory function in relation to an arbitration and because an award of an arbitrator is enforced as if it were a judgment or order of the Court".

23 In Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (supra), the New South Wales Court of Appeal held that an arbitrator had jurisdiction to determine a claim for damages in respect of a contravention of the Trade Practices Act 1974 (Cth), s52. At 167 Gleeson CJ, with whom Meagher and Sheller JJA agreed, said:

"In Government Insurance Office of New South Wales v Atkinson-Leighton Joint Venture [1981] HCA 9; (1981) 146 CLR 206 at 246, Mason J identified as the central question, which was resolved affirmatively, whether there was to be implied in the parties' submission to arbitration a term that the arbitrator is to have the authority to give the claimant such relief as would be available to him in a court of law having jurisdiction with respect to the same subject matter. The same question is central to the present case, and is to be answered in the affirmative."

24 I think it must follow that, subject to any inconsistent express contractual terms, a contract by which a dispute is referred to arbitration contains an implied term that a claimant is entitled to such rights and remedies as would have been available in a court of appropriate jurisdiction. The effect of such an implied term must be that, when a claimant's damages would have been reduced by a court pursuant to proportionate liability legislation, they must be similarly reduced by an arbitrator. I think it must also follow that, when there is such an implied term, and a claimant would have had its damages reduced by a court because of its contributory negligence, an arbitrator must similarly reduce that claimant's damages, even though the legislation concerning contributory negligence requires a reduction to such extent "as the court thinks just and equitable": Wrongs Act 1954, s4(1).

25 In this case, there is no reason not to hold that the contract contains an implied term whereby the rights and remedies available in arbitration proceedings would be those available in a court of appropriate jurisdiction. I therefore hold that the proportionate liability legislation would apply in arbitration proceedings between these parties if it were applicable in court proceedings between them, and to the same extent that it would apply in court proceedings between them.

26 Counsel for the defendant company emphasised that proportionate liability legislation was introduced for the benefit of professionals in order to avoid situations where professional indemnity insurance was unduly expensive, unaffordable or unobtainable. He submitted that the legislation was not intended to cover a contract like the parties' design and construction contract, and claims under such contracts when contractors had not done what they promised to do.

27 It may be that the changes to the law effected by the proportionate liability legislation in Tasmania and other jurisdictions have had a far wider impact than the problem that led to their introduction. However there is nothing in the legislation itself, nor in the extrinsic material available to me, to suggest that it was the intention of Parliament that the scope of the legislation was to be limited, by some sort of unstated restriction, to claims against professionals. In my view the comparatively narrow scope of the problem that gave rise to the legislation provides no reason to depart from the rule that the words of the statute should usually be given their ordinary literal meaning.

28 The defendant company contends that the plaintiff did not properly perform its obligations under the contract; that it is therefore entitled to damages for breach of contract; and that the appropriate measure of damages is the cost of such rectification works as are reasonably necessary to put the waste water treatment plant into the condition that the contract required. A question is likely to arise as to whether a claim for damages on that basis is a claim for "economic loss" within the meaning of s43A(1)(a).

29 The defendant company contends that the words "economic loss" should be given a narrow interpretation, but the plaintiff contends otherwise. On one view, those words could be interpreted to refer to all types of loss or damage other than damage to person, property or reputation. On the other hand, they could be interpreted narrowly, so as to refer only to financial harm, or the sort of "pure economic loss" discussed in tort cases such as Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180.

30 To the best of my knowledge, no Australian court has yet had to decide whether a claim for damages like that foreshadowed by the defendant company constitutes a claim for damages for economic loss for the purposes of proportionate liability legislation. The decided cases generally seem to relate to claims that were unarguably for economic loss, as the following examples illustrate:

•

In Nemeth v Prynew Pty Ltd [2005] NSWSC 1296, the plaintiff claimed damages arising from the subsidence of his house, but such a claim should be characterised as one for economic loss, relating to the diminution in value of the property, in accordance with Bryan v Maloney (1995) 182 CLR 609.

•

Woods v De Gabrielle [2007] VSC 177 concerned monies lost as the result of an unsuccessful investment.

•

Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 related to the wrongful cancellation of a lottery ticket which would have won a $2 million prize.

•

Chandra v Perpetual Trustees Victoria Ltd [2007] NSWSC 694 and Solak v Bank of Western Australia Ltd [2009] VSC 82 both concerned financial liabilities arising as a result of the registration of forged mortgages.

31 Three learned commentators, including two judges of Supreme Courts of other States, have published articles about the proportionate liability legislation in the Building and Construction Law Journal without suggesting that contractual claims in construction litigation might sometimes not be claims for damages for economic loss: Hayford, Owen, Proportionate liability - its impacts on risk allocation in construction contracts (2006) 22 BCL 322; McDougall J, Proportionate liability in construction litigation (2006) 22 BCL 394; Byrne J, Proportionate liability in construction claims (2007) 23 BCL 10.

32 No point as to the meaning of "economic loss" appears to have been taken in a construction case that went to the Victorian Court of Appeal: Godfrey Spowers (Vic) Pty Ltd v Lincolne Scott Australia Pty Ltd [2008] VSCA 208. In that case the plaintiffs sued a contractor for breach of contract, and an architect for breach of contract and negligence; an engineer and two surveyors were joined as third parties; the plaintiffs settled their claim against the architect; and questions arose as to the architect's claims for contribution against the other parties. The Court of Appeal proceeded on the basis that the plaintiff's original claim had been one for economic loss.

33 I do not think it is appropriate for me to determine, when ruling on this stay application, whether the foreshadowed claim is one for "economic loss" within the meaning of s43A(1)(a). Ordinarily, if there were any controversy about such a point, it would not be determined until the claim were pleaded and proved. The claim has not been pleaded. It might fail. If it succeeds, and it is held that the claim did not arise from a failure to take reasonable care, or that it is based on vicarious liability, or that the proportionate liability provisions do not apply because of s3A(3), then it might be unnecessary to determine whether the claim was one for "economic loss". In those circumstances, I think it inappropriate for me to determine whether the foreshadowed claim is one of "economic loss".

34 However it is appropriate that I take into account the possibility that that question of law might have to be determined by an arbitrator if I order a stay of the action.

35 Because of the wording of s43A(1), a claim is not an "apportionable claim" unless it arises "from a failure to take reasonable care". Counsel for the defendant company submitted that the basis of its foreshadowed claim against the plaintiff is that the plant designed and constructed by the plaintiff did not fulfil the requirements of the contract; that its claim is not based on any failure to take reasonable care; and that the proportionate liability legislation therefore does not apply to its claim.

36 Obviously it is in the interests of plaintiffs to plead their claims as if they do not arise from failures to take reasonable care. In his article in the Building and Construction Law Journal (supra), Byrne J said at 13:

"Take a typical construction claim brought by a proprietor where the building is defective. This claim may be put in any of the following ways:

1 For a sum of money representing the cost to the proprietor of rectifying the work payable under the contract where the contractor fails to do so after a direction by the superintendent.

2 For damages for a breach of an express or implied term of the contract that the building will be free of defect.

3 For damages for a breach of an express or implied term in the contract that the building will be fit for a disclosed purposes[sic].

4 For damages for breach of collateral warranty as to fitness or freedom from defect.

5 For damages for breach of a term express or implied of the contract that the contractor will perform the work in a proper and careful manner.

6 For damages for breach of a tortious duty owed by the contractor to the proprietor to carry out the work in a careful manner.

7 If applicable, for damages for breach of the warranties implied by Pt 5, Div 2 of the Trade Practices Act 1974 (Cth).

8 For damages for misleading and deceptive conduct constituted by a statement express or implied by the contractor that it is competent to carry out the work:

(x) contrary to the Fair Trading Act 1999 (Vic) where the statement is attributed to a person; or

(y) contrary to the Trade Practices Act 1974 (Cth) where the statement is attributed to a corporation or where the statement is made by post or telegraph.

It would seem that claims 5, 6 and 8(x) would be apportionable claims under the Wrongs Act [Vic] and that claim 8(y) would be an apportionable claim under the Trade Practices Act. Claims 1, 2, 3, 4 and 8 are claims for which joint and severable liability at common law remains."

There is no material difference between the Tasmanian and Victorian legislation as to what claims the legislation applies to.

37 In Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd [2007] FCA 1216; (2007) 164 FCR 450, Middleton J held that a claim that is not based on a breach of a duty to take reasonable care can still be held to arise from a failure to take reasonable care, for the purposes of the Victorian equivalent of our s43A(1)(a). At 458, his Honour said the following:

"Where a claim brought by an applicant does not have as one of its necessary elements any allegation of failing to take reasonable care, an additional enquiry into the failure to take reasonable care may become relevant in the course of a trial to determine the application of Pt IVAA. Even though the claims in this proceeding themselves do not rely upon any plea of negligence or a 'failure to take reasonable care' in a strict sense, a failure to take reasonable care may form part of the allegations or the evidence that is tendered in the proceedings. At the end of the trial, after hearing all the evidence, it may be found that Pt IVAA applies.

In these circumstances, where a respondent desires to rely upon Pt IVAA of the Wrongs Act, it will need to plead and prove each of the statutory elements, including the failure to take reasonable care. ... If a respondent calls in aid the benefit of the limitation on liability provided for in Pt IVAA of the Wrongs Act, then the respondent has the onus of pleading and proving the required elements. The court, after hearing all the evidence, will then need to determine, as a matter of fact, whether the relevant claim brought by the applicant is a claim arising from a failure to take reasonable care."

38 In my view the same approach should be taken in relation to the Tasmanian legislation. Otherwise plaintiffs or claimants could circumvent the legislation simply by choosing to rely upon causes of action whose elements do not include failing to take reasonable care. On a narrow interpretation of s43A(1)(a), a claim based on a failure to perform a contract according to its terms might not be regarded as a claim arising from a failure to take reasonable care. But such an interpretation would not promote the purpose or object of the Act, as required by the Acts Interpretation Act, s8A. However, on a wide interpretation of that provision, if such a breach of contract occurred because of a failure to take reasonable care, the claim in contract would amount to a claim arising from a failure to take reasonable care within the meaning of s43A(1)(a). Such an interpretation would promote the purpose or object of the Act, and would be consistent with the reasoning of Middleton J in Dartberg. I therefore think that a wide interpretation is to be preferred.

39 In order to determine whether a claim arose from a failure to take reasonable care, it is necessary to have regard to the facts as found by the court or tribunal. In Reinhold v New South Wales Lotteries Corporation (No 2) (supra), Barrett J, referring to provisions in New South Wales legislation that are virtually identical to those in the Tasmanian legislation, said the following:

"19 It seems to me clear that a person will be a 'concurrent wrongdoer' only if the court makes findings about the existence of 'loss or damage' and about which acts or omissions 'caused' the loss or damage. It is only when those findings are made that it is possible to identify, as contemplated by s 34(2), each person whose acts or omissions, as found, 'caused' the 'loss or damage', as found. At that point, and not before, a person can be seen to be a 'concurrent wrongdoer'.

20 The relevant 'claim' - that is, the claim in relation to which the identified person is a 'concurrent wrongdoer' - can only be the claim in respect of which the findings concerning loss or damage and causation are made. That claim is, of necessity, a claim already litigated, not a pending or foreshadowed claim. Its nature and content (and, therefore, its status under s 34(1)) will be discoverable by looking at the findings that cause it to be determined as it is determined. If, on those findings, it is seen that the loss or damage (as established in 'an action for damages') arose from a failure to take reasonable care and did not arise out of personal injury, the case will be within s 34(1)(a); and if it is seen that there was a contravention of s 42 of the Fair Trading Act, the case will be within s 34(1)(b). In either such case, the already litigated 'claim' will be an 'apportionable claim' because of s 34(1) and, if, on the findings made, the acts or omissions of several persons 'caused' the 'damage or loss' as found, the persons will be 'concurrent wrongdoers'."

40 The defendant company might well plead quite a number of different causes of action. Without it yet having pleaded anything, I am not in a position to predict what questions might have to be determined as to whether successful claims by it arose from failures to take reasonable care. It is certainly possible that the defendant might establish breaches of provisions of the contract that say nothing about anything like reasonable care, and that the plaintiff will establish that some such breaches arose from failures to take reasonable care. If I do not order a stay of the action, it is possible that an arbitrator will have to determine whether one or more successful claims by the defendant company arose as a result of a failure to take reasonable care.

41 The Civil Liability Act, s3A(3) and (4), provide as follows:

"(3) This Act, other than Part 7, does not prevent the parties to a contract from making express provision for their rights, obligations and liabilities under the contract in relation to any matter to which this Act applies and does not limit or otherwise affect the operation of such an express provision.

(4) Subsection (3) extends to any provision of this Act even if the provision applies to liability in contract."

42 Clause 9.3 of the contract between the plaintiff and the council reads as follows:

"9.3 Contractor's Responsibility

Approval to subcontract shall not relieve the Contractor from any liability or obligation under the Contract. Except where the Contract otherwise provides, the Contractor shall be liable to the Principal for the acts and omissions of subcontractors and employees and agents of subcontractors as if they were acts or omissions of the Contractor."

43 Counsel for the defendant company submitted that the parties thereby "contracted out", and that the proportionate liability provisions of the Civil Liability Act therefore do not apply. Counsel for the plaintiff submitted that, in those jurisdictions where the proportionate liability legislation permits contracting out, it is conventional for the parties to refer specifically to the relevant part of the relevant Act in a clause providing for its exclusion. He suggested that the wording of the clause in question in this case was therefore not sufficient to exclude the proportionate liability provisions of Pt9A pursuant to s3A(3).

44 I disagree. Section 3A(3) permits the operation of the legislation to be superseded by an express contractual provision without imposing any requirement that specific legislative provisions be mentioned. For the subsection to operate, the following are required:

•

There must be an express contractual provision.

•

That provision must create rights, obligations and/or liabilities of the parties to the contract.

•

That provision must relate to a "matter" to which the Civil Liability Act applies.

45 Clause 9.3 is an express contractual provision. It added to the rights of the council and the liabilities of the plaintiff, and thus affected their rights and liabilities. One of the matters to which the Civil Liability Act applies is the liability of concurrent wrongdoers for apportionable claims. If, in relation to a particular claim, the plaintiff is a concurrent wrongdoer, and there are one or more concurrent wrongdoers amongst its subcontractors and their employees and agents, then there is an inconsistency between the clause and s43B(1). It follows that, in accordance with s3A(3), the plaintiff is liable to the defendant company for the whole of any damage suffered as the result of the acts or omissions of its subcontractors and their employees and agents, and that s43B(1) does not apply in respect of any damage caused by their acts and omissions.

46 On the evidence before me, it is not completely clear how many of the ten corporations that have been identified as possible concurrent wrongdoers were subcontractors of the plaintiff or agents of such subcontractors, and how many were not. "Subcontractor" is defined in cl 2 to include "Consultant". There is also a definition of "Consultant", but there is no definition of "agent" or "employee". It is possible that the defendant company will pursue apportionable claims for damage that was contributed to by concurrent wrongdoers other than the plaintiff's subcontractors (including consultants) and their employees and agents. It is therefore not possible for me to reach a conclusion as to whether cl 9.3 has resulted in a complete "contracting out". If an arbitration proceeds, the proportionate liability legislation may still apply in respect of some wrongdoers.

47 If it does, questions may arise as to the scope of the definition of "concurrent wrongdoer" in s43A(2). That definition reads as follows:

"'concurrent wrongdoer' in relation to a claim, means a person who is one of two or more persons whose act or omission caused, independently of each other or jointly, the damage or loss that is the subject of the claim".

It is possible that one or more of the ten corporations is an entity against which the defendant company has no remedy in contract, in tort, or otherwise. If any acts or omissions of such an entity contributed to the causation of any damage or loss that is the subject of the defendant company's claim, then a question may arise as to whether such an entity constitutes a "concurrent wrongdoer". On a literal interpretation of the definition, each such entity would be a concurrent wrongdoer. However Parliament might not have intended the legislation to operate so as to make a proportion of a claimant's loss or damage irrecoverable. If I do not order a stay, this is a question that an arbitrator might have to decide.

48 The Civil Liability Act, s43G(1)(a), provides as follows:

(a) prevents a person from being held vicariously liable for a proportion of any apportionable claim for which another person is liable ...".

49 The defendant company contends that cl 9.3 makes the plaintiff vicariously liable for the acts and omissions of its subcontractors and their employees and agents. It contends that s43G(1)(a) operates in relation to the vicarious liability created by cl 9.3, and not just in relation to vicarious liability that would exist by operation of law independently of the provisions of the contract. I was not referred to any cases as to the scope of s43G(1)(a) and it equivalents in other jurisdictions. It may be that cases on the point have been decided in the Republic of Ireland, which has proportionate liability legislation with a vicarious liability exclusion: Civil Liability Act 1961 (Ireland), s38(3). The scope of the subsection need only be considered if I am wrong about the application of s3A(3) to this contract. It might need to be considered by an arbitrator if I stay the action.

50 The likelihood that questions of law might arise in arbitration proceedings is not necessarily a sufficient reason to refuse a stay since, by their agreement, the parties to the contract committed questions of both fact and law to the decision of an arbitrator: John Churcher Pty Ltd v Mitsui & Co (Australia) Limited [1974] 2 NSWLR 179; Dillingham Constructions Pty Ltd v Downs (1969) 90 WN (NSW) (Pt1) 258; Qantas Airways Ltd v Dillingham Corporation (1985) 4 NSWLR 113; Allied Constructions Pty Ltd v Novacoal Australia Pty Ltd (1991) 25 NSWLR 54 at 66. However I think courts should more readily refuse stays if the questions of law likely to arise in an arbitration are particularly difficult, or of particular public importance.

51 If the dispute between these parties goes to arbitration it is likely that, by the time the arbitrator conducts a hearing, the case law in relation to proportionate liability legislation might have developed significantly. Unanswered questions are likely to have been answered by judges, and ambiguities in the legislation are likely to have been resolved, at least to some extent.

52 In my view it would be undesirable for the introduction of proportionate liability legislation to result in courts more readily refusing stay applications under the Commercial Arbitration Act, s53(1), and thereby redistributing work from arbitrators to the courts. If the new legislation leads parties to choose arbitration as a dispute resolution mechanism less frequently, that is another matter. But courts have limited resources, and arbitrations have advantages including privacy, efficiency, finality and the expertise of specialist decision-makers. It would be regrettable if courts were to take on new burdens, and if courts were to move work away too readily from a dispute resolution system that has worked well for many years.

53 One consequence of the proportionate liability legislation is that claimants are tending to proceed against larger numbers of defendants in order to avoid the risk of recovering incomplete damages from an incomplete collection of concurrent wrongdoers. However this is not such a case. Although the plaintiff was the first to commence proceedings, the principal claimant is the defendant company, and the plaintiff is the only entity against whom it wishes to pursue a claim. Stronger grounds for the refusal of a stay exist when there might otherwise be two or more sets of parallel proceedings. For example, in Tasmanian Pulp and Forest Holdings Ltd v Woodhall Ltd (supra) there was a possibility of three parallel proceedings - an arbitration between the appellant and the respondent, a building company; a second arbitration between the appellant and the partners in an engineering firm; and an action between the appellant and the supplier and installer of some machinery.

54 If an arbitration proceeds, and the defendant company fails in all its claims, there need be no further proceedings. If an arbitration proceeds, the defendant company succeeds, and the plaintiff persuades the arbitrator (as it has sought to persuade me) that the proportionate liability legislation applies, there will be no basis for the plaintiff to pursue contribution proceedings against any concurrent wrongdoer. If the defendant company succeeds, and the proportionate liability legislation is held to be wholly or partly inapplicable, then there are likely to be contribution proceedings between the plaintiff and other corporations. It is only in that situation that the plaintiff could suffer as the result of being involved in more than one set of proceedings. There is no evidence before me as to whether any of the plaintiff's subcontracts contain arbitration clauses. There is therefore no evidence that the plaintiff is at risk of being involved in more than two sets of proceedings.

55 If the plaintiff were to pursue contribution proceedings after an arbitration, there would be a risk of inconsistent findings. Similarly, if the defendant company were to succeed against the plaintiff but have its damages reduced under the proportionate liability legislation, it might want to start new proceedings against concurrent wrongdoers, and such proceedings could also result in inconsistent findings.

56 All things considered, I think the more appropriate course is to order a stay. In my view the major factors weighing in favour of a stay are that the parties to the contract agreed that questions of both fact and law should go to an arbitrator; that that was agreed upon even though claims involving multiple parties are the norm when disputes arise concerning engineering and construction projects; that the institution of one or more other proceedings is a possibility rather than a certainty; and that it would be undesirable for the introduction of proportionate liability legislation to result in a significant shift away from arbitration as a means of dispute resolution.

57 Taking all of these matters into account, I am satisfied that there is no sufficient reason why the matter should not be referred to arbitration. I therefore order that the action be stayed.