Arthur Young (a firm) & Anor v Brunswick NL & Ors [1998] VSCA 87

2. I have had the advantage of reading in draft the reasons for judgment of Brooking and Callaway, JJ.A. I agree with their Honours that, because of the sweeping changes which have been made to Part IV of the Wrongs Act 1958, the meaning of the words "a person liable in respect of any damage suffered by another person", where they appear in s.23B (1) of the Act, can no longer be construed in accordance with authorities such as Bitumen and Oil Refineries (Australia) Ltd. v. Commissioner for Government Transport [1955] HCA 1; (1955) 92 C.L.R. 200 and George Wimpey & Co. Ltd. v. British Overseas Aircraft Corporation [1955] A.C. 169. I also agree that the words of the section conferring the right to contribution no longer require that the liability referred to be ascertained by judgment or in some other manner. Hence the claim for contribution, enforceable either by writ or, preferably, third party notice, is complete before liability has been ascertained.

5. However, if the defendant wishes to assert its claim for contribution by writ, it must in accordance with the Rules of Court plead the necessary facts sufficient to disclose its cause of action. Although the appellant has, in the present proceedings claiming contribution by writ, held back from alleging that, for the purposes of the provisions of Part IV of the Wrongs Act, it is "a person liable" in respect of the damage claimed by Yeneb and others in the 1995 proceedings, I agree with Brooking, J.A. that it ought be given the opportunity to amend its pleadings, should it be so advised, in the manner suggested by his Honour. Accordingly, for the reasons given by Brooking, J.A., I would allow the appeal and dismiss the defendant's application upon the terms suggested by his Honour.

10. In 1989 there was a take-over of Bendigo Gold Ltd. by Brunswick NL. Arthur Young, a firm of accountants, made a report dated 10 April 1989 for the purposes of the take-over, which was included in the Part A Statement. Almost six years after that report was made three of the shareholders or beneficial owners of shares in Bendigo Gold Ltd. whose shares had been acquired as part of the take-over (a company named 27th Yeneb Pty. Ltd. and two persons named Wright) filed a writ claiming damages against the firm known as Arthur Young and Donald Ben Humphreys, one of the members of the firm at the time of the report and apparently the author of it. The basis of this action was the report made by the firm; the causes of action set up are presently immaterial. The writ in the action - No. 5777 of 1995 -was served on the defendants between 23 May 1995 and 2 June 1995.

13. The same three plaintiffs had some years earlier brought an action (No. 2130 of 1991) against Brunswick NL and three of its directors complaining of what was said in the Part A Statement.

16. A third action - No. 5617 of 1996 - was launched on 22 May 1996, the plaintiffs being Arthur Young and Mr Humphreys and the defendants being Brunswick NL and the three of its directors who had been sued along with it in the action brought in 1995 by Yeneb Pty. Ltd. and the Wrights. The date on which the third writ was filed, 22 May 1996, was just within twelve months of the earliest date on which the writ filed in 1995 was served. I shall call the action commenced in 1996 "the present action". The writ was generally endorsed. Since no argument has been directed to the terms of the general endorsement, I shall say no more about it. A statement of claim dated 30 June 1997 was filed and served. It is short and I shall set it out in full:

"1. The firstnamed defendant ('Brunswick') is and was at all material times a company incorporated pursuant to law. 2. Each of the second, third and fourthnamed defendants ('the directors') is and was at all relevant times a director of Brunswick. 3. In proceeding numbered 5777 of 1995 in the Supreme Court of Victoria ('the Arthur Young proceeding'), 27th Yeneb Pty Ltd (ACN 006 747 774), David Wright and Carolyn Wright ('Yeneb') seek, inter alia, damages, interest and costs against the plaintiffs in this proceeding ('Arthur Young') on the grounds set out in the amended statement of claim dated 2 May 1997. 4. In proceeding numbered 2130 of 1991 in the Supreme Court of Victoria ('the directors' proceeding'), Yeneb seek, inter alia, damages, interest and costs against Brunswick and the directors on the grounds set out in the amended statement of claim dated 21 April 1997. 5. In the Arthur Young proceeding and the directors' proceeding, Yeneb alleges that they have suffered loss and damage in reliance on certain statements: (a) Contained in a part A statement dated 13 April 1989, which was issued as part of an offer by Brunswick to acquire all or any of the ordinary shares held by Yeneb in Bendigo Gold Limited; (b) Contained in a report prepared by Arthur Young dated 10 April 1989, which was attached to and formed part of that part A statement; (c) Which were misleading and deceptive or made in breach of a common law or statutory duty by:

(i) Brunswick;

(ii) Further or alternatively, the directors;

(iii) Further or alternatively, Arthur Young.

6. Arthur Young deny liability to Yeneb in the Arthur Young proceeding.

7. In the event that Arthur Young are held liable to Yeneb in the Arthur Young proceeding, Arthur Young claim to be entitled to contribution from Brunswick and the directors pursuant to Part IV of the Wrongs Act 1958 to the extent of such sum as may be found by the Court to be just and equitable, having regard to the extent of the responsibility of Brunswick and the directors for such damages, by reason of the matters alleged against Brunswick and the directors in the directors' proceeding.

AND THE PLAINTIFFS CLAIM:

A. Contribution pursuant to Part IV of the Wrongs Act 1958.

B. Costs.

C. Such further or other relief as the Court thinks fit."

23. On 19 June 1997 the defendants to the present action filed a summons seeking judgment in their favour on the ground that the plaintiffs' claim failed to disclose a cause of action and on the ground that they had a good defence on the merits. The application was heard by a judge on 22 July 1997. The statement of claim had been filed and served during the pendency of the application and it was treated for the purposes of the application as setting forth the plaintiffs' claim. On 23 July 1997 the judge upheld the defendants' contention that the claim made by the plaintiffs failed to disclose a cause of action and gave judgment for the defendants in the action. It is against that decision that this appeal is brought. Leave to appeal was necessary (Little v. State of Victoria, unreported, Court of Appeal, 30 June 1998) and was granted by us shortly after the appeal was called on for hearing.

26. The claim made in the present action is one for contribution under Part IV of the Wrongs Act 1958. The effect of the limitation provision contained in s.24(4) of that Act is that proceedings to recover contribution from Brunswick NL and its directors in relation to the liability asserted in action No. 5777 of 1995 had to be taken within twelve months of the service of the writ in that action on Arthur Young and Mr Humphreys. As if to demonstrate empirically the Newtonian law of centrifugal force, which makes particles fly from the centre of rotation, originating proceedings seem often drawn by some inexorable force towards the extremity of the limitation period. So it was in this case: the writ was filed on or about the last available day. To do this leaves no margin for error. No reason has been suggested explaining why it was that proceedings were not taken until the last moment or why a writ was chosen instead of the obvious third party notice. It may be that, leave having become necessary to file a third party notice by the operation of r.11.05, those concerned had not left themselves enough time to obtain leave. But, whatever the reason for the delay and for the choice of writ instead of third party notice, the result is that it is now said on this appeal, as it was said to the judge who was asked to give summary judgment for the defendants, that the wrong process has been employed by the persons seeking contribution and that they are now out of court, since any attempt to take third party proceedings would inevitably fail because of the running of time. This is an unfortunate situation and, while I have no desire to encourage laggards who put their rights at hazard by suing at the last minute, I confess that I shall be sorry to find that the appellants have lost their rights because of what they have done - or not done - in this case. But a hard case must not make bad law.

29. The basis of the judge's decision can be stated in a series of propositions:

1. The right to recover contribution conferred by s.23B(1) of the Wrongs Act is given only to "a person liable in respect of any damage suffered by another person".

2. A person is not "liable" for this purpose unless there has been an ascertainment of liability by judgment or, possibly, arbitral award or agreement.

3. The statement of claim does not allege that the plaintiffs are "liable" in this sense.

4. Accordingly, it does not disclose a cause of action.

5. If a statement of claim does not disclose a cause of action, there should be summary judgment for the defendants. (This step is implicit in the judge's reasoning. His Honour would no doubt accept that summary judgment may be inappropriate where the defect is merely one of pleading, being curable by amendment.)

37. I shall find it necessary to say something about the second, fourth and fifth of these propositions.

40. As regards the second proposition, his Honour relied in particular on the decision of the High Court in Bitumen and Oil Refineries (Australia) Ltd. v. Commissioner for Government Transport [1955] HCA 1; (1955) 92 C.L.R. 200, and especially on what was said at p.212 in the judgment of the Court. It may be taken to be well established that the phrase "any tort-feasor liable in respect of that damage" in paragraph (c) of s.24(1) of the Wrongs Act prior to its repeal and in corresponding provisions required that the liability should have been in some way ascertained. But s.24(1) has disappeared as part of the sweeping changes made by the Wrongs (Contribution) Act 1985 and the question now is whether authorities on the meaning of "liable" in the provision that has been repealed and other similar provisions are of assistance when regard is had to the new regime introduced by the Act of 1985. The changes are most extensive and our first task is to consider the new provisions without preconceptions based on decisions given under materially different legislation.

43. To begin with - and this is a matter of great importance - the sections now constituting Part IV of the Wrongs Act contain for the first time (in s.23A(1)) a definition of "liable":

"For the purposes of this Part a person is liable in respect of any damage if the person who suffered that damage, or anyone representing the estate or dependants of that person, is entitled to recover compensation from the first-mentioned person in respect of that damage whatever the legal basis of liability, whether tort, breach of contract, breach of trust or otherwise."

47. It would be wrong, in the face of this definition, to say that the words in the section now conferring the right to contribution (s.23B(1)), "a person liable in respect of any damage suffered by another person", require that the liability has been in some way ascertained. It would be wrong to read down the definition by importing such a requirement. But the matter does not rest there.

50. The provision conferring the right to contribution is now in materially different terms. Section 24(1)(c) ran:

"(1) Where damage is suffered by any person as a result of a tort (whether a crime or not) - ... (c) 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) ... ".

By the new s.23B(1):

"(1) Subject to the following provisions of this section, a person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with the first-mentioned person or otherwise)."

The words "or would if sued have been" no longer appear in the description of the person from whom contribution may be recovered. It was the presence of those words which led the House of Lords to conclude that contribution could be recovered only from a person who had been held liable, and Viscount Simonds considered that "liable" had the same meaning where first used in the English provision corresponding to s.24(1)(c): George Wimpey & Co. Ltd. v. British Overseas Airways Corporation (1955) A.C. 169. This was a highly influential decision when the High Court came to give judgment in the Bitumen and Oil Refineries case: see [1955] HCA 1; 92 C.L.R. 200 at 207-9. The omission of the words "or would if sued have been", coupled with the insertion of a definition of "liable", are enough to require that the definition have effect given to it without regard to the view taken of the former legislation.

57. There are other indications in the new provisions, pointing in the same direction. These provisions include s.ss.(2), (3), (4) and (6) of s.23B:

"(2) A person shall be entitled to recover contribution by virtue of sub-section (1) notwithstanding that that person has ceased to be liable in respect of the damage in question since the time when the damage occurred provided that that person was so liable immediately before that person made or was ordered or agreed to make the payment in respect of which the contribution is sought." "(3) A person shall be liable to make contribution by virtue of sub-section (1) notwithstanding that that person has ceased to be liable in respect of the damage in question since the time when the damage occurred unless that person ceased to be liable by virtue of the expiry of a period of limitation or prescription which extinguished the right on which the claim against that person in respect of the damage was based." "(4) Subject to section 24 (2B), a person who in good faith has made or agreed to make any payment in settlement or compromise of a claim made against that person in respect of any damage (including a payment into court which has been accepted) shall be entitled to recover contribution in accordance with this section without regard to whether or not the person who has made or agreed to make the payment is or ever was liable in respect of the damage provided that that person would have been liable assuming that the factual basis of the claim against that person could be established." "(6) References in this section to a person's liability in respect of any damage are references to any such liability which has been or could be established in an action brought against that person in Victoria by or on behalf of the person who suffered the damage and it is immaterial whether any issue arising in any such action was or would be determined (in accordance with the rules of private international law) by reference to the law of a place outside Victoria."

For reasons too obvious to require statement, each of these sub-sections supports the view that the definition in s.23A(1) is not to be read down. The same may be said of three further new sections, ss.24AA, s.24AB and s.24AC:

"24AA Judgment recovered against any person liable in respect of any debt or damage shall not be a bar to an action, or to the continuance of an action, against any other person who is (apart from any such bar) jointly liable with the first-mentioned person in respect of the same debt or damage." "24AB If more than one action is brought in respect of any damage by or on behalf of the person by whom it was suffered against persons liable in respect of the damage (whether jointly or otherwise) the plaintiff shall not be entitled to costs in any of those actions, other than that in which judgment is first given, unless the court is of the opinion that there was reasonable ground for bringing the action." "24AC Where the Crown is subject to any liability by virtue of the Crown Proceedings Act 1958, this Part shall bind the Crown in respect of the liability to which it is so subject in the same manner and to the same extent as if the Crown were a subject."

63. The new s.24AA may be contrasted with the former s.24(1)(a), which, like s.24(1)(c), spoke of a person who would if sued have been liable:

"24.(1) Where damage is suffered by any person as a result of a tort (whether a crime or not) - (a) 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."

67. With all respect to his Honour, who reached the contrary conclusion, I have a clear view that in the provision now conferring the right to contribution, s.23B(1), the phrase "a person liable in respect of any damage suffered by another person" is to be understood in the sense required by the definition in s.23A(1).

70. So much for what I have called proposition 2. I turn now to propositions 4 and 5.

73. As regards the fourth proposition, there is a continuing difficulty with the statement of claim, in that it does not allege that the plaintiffs are in any sense liable in respect of damage suffered by the persons who have brought the 1995 action. For the pleading says that Arthur Young deny liability in the 1995 action and that they claim to be entitled to contribution in the event that they are held liable in that earlier action. As the contribution legislation stood in Victoria before the 1985 amendment, there was no cause of action for contribution until the liability of the party claiming contribution had been ascertained: Bitumen and Oil Refineries (Australia) Ltd. v. Commissioner for Government Transport [1955] HCA 1; (1955) 92 C.L.R. 200 at 209-11. Under the legislation as it presently stands, there is no cause of action for contribution until the person claiming contribution is liable within the meaning of the definition in s.23A(1). No allegation of that liability appears in the present statement of claim. In so far as that pleading seeks to obtain judgment requiring payment of money - and this is what is sought in paragraph A of the prayer for relief - the pleading is defective. But I have no doubt that the only reason why the drafter of the pleading did not assert that the plaintiffs were liable in respect of damage suffered by those who had brought the 1995 action was the fear that the assertion in the pleading might be relied on, for the purposes of the 1995 action, as an informal, or non-conclusive, admission. That fear, while understandable, was not in law well founded. For quite recently the High Court has adhered to the traditional view that assertions in pleadings are not informal admissions for the purposes of other proceedings: they are not admissions but merely a statement of the case of the party putting them forward: Laws v. Australian Broadcasting Tribunal [1990] HCA 31; (1990) 170 C.L.R. 70 at 85-86 per Mason, C.J. and Brennan, J. and at 98 per Gaudron and McHugh, JJ.

76. I come now to what I have called the fifth proposition. Litigation is not to be brought to a summary end on the ground that a pleading does not disclose a cause of action where a simple amendment of the kind required in the present case is all that is necessary. Having regard to Laws, I can see no reason why paragraph 7 of the statement of claim should not be amended so as to make it allege, in the terms of s.23B(1), that Arthur Young are liable to Yeneb in the Arthur Young proceeding, but if the legal advisers of Arthur Young were to shrink from that course I see no reason why the matter could not be dealt with by an amendment to paragraph 7 so as to make it state that for the purposes of the action in which the pleading is filed, and for the purposes of that action only, Arthur Young asserts that it is liable to Yeneb in the Arthur Young proceeding. I say this having regard to the role of pleadings as traditionally understood and as again explained in Laws. I do not think that such a pleading could be described as embarrassing or otherwise objectionable. But the formulation of an amendment is a matter for the advisers of Arthur Young; it is enough to say that the pleading can be made to disclose a cause of action for the recovery of money by virtue of the statutory right to contribution by an amendment which falls well within the limits of permissible amendments which should save an action from the fate of summary determination.

79. In so far as a money sum is claimed, the statement of claim must, as I have said, disclose a cause of action. But this rule has no application where only a declaration is sought; I forbear from citing authority for a proposition which has become so well established. The present prayer for relief does not in terms claim a declaration, but there is a claim for further or other relief. My present inclination is to say that, having regard to the prayer for further or other relief, and perhaps even in its absence, it would have been open to the Court, so far only as the matter of the state of the pleading is concerned, to grant a declaration that the plaintiffs were entitled to contribution in a particular sum without the making of any amendment to the prayer for relief so as to include a specific claim for a declaration. I refer to r.59.01; Hulton v. Hulton [1916] 2 K.B. 642 at 656-7; Wicks v. Bennett [1921] HCA 57; (1921) 30 C.L.R. 80 at 100 per Higgins, J.; Rawson v. Hobbs [1961] HCA 72; (1961) 107 C.L.R. 466 at 485 per Dixon, C.J.; Harrison-Broadly v. Smith [1964] 1 W.L.R. 456 at 466 per Harman, L.J. and at 469 per Pearson, L.J.; Biss v. Smallburgh Rural District Council [1965] Ch. 335 at 361 per Harman, L.J. and at 369 per Davies, L.J.; T.M. Burke Estates Pty. Ltd. v. P.J. Constructions (Vic.) Pty. Ltd. [1991] VicRp 33; [1991] 1 V.R. 610 at 617 per Kaye, J. But the answer to these questions does not matter, since, even assuming that it will not be open to the Court to make a declaration without an amendment to the prayer, the need for such an amendment will not be a good reason for the summary determination of the action in favour of the defendants.

82. Nevertheless the fact that, either with or without an amendment to the prayer, it would, so far as the matter of the sufficiency of the pleading is concerned, be competent to the Court to grant a declaration that the plaintiff was entitled to contribution in a certain sum would not be enough to make the action a satisfactory vehicle for the making of the claim for contribution. For such a declaration would not give rise to an enforceable right to payment: an order for payment would be necessary, and so, to obtain such an order, it would be necessary for the statement of claim to allege the existence of the cause of action created by Part IV of the Wrongs Act. It would accordingly be necessary for the statement of claim to be amended so as to introduce an appropriate allegation concerning the liability of the plaintiffs in respect to the claim made in the 1995 action.

85. Much emphasis was placed in the argument for the respondents on the following passage from the joint judgment in Port of Melbourne Authority v. Anshun Pty. Ltd. [1981] HCA 45; (1981) 147 C.L.R. 589 at 595-6:

"It has been repeatedly affirmed that one of the peculiarities of third party procedure is that it enables litigation on the indemnity to take place before there is any liability (Hordern-Richmond Ltd. v. Duncan [1947] 1 K.B. 545, at p.552; Bitumen and Oil Refineries (Australia) Ltd. v. Commissioner for Government Transport [1955] HCA 1; (1955) 92 C.L.R. 200). Consequently, the fact that liability under the indemnity had not arisen was no bar to the Authority asserting its claim to an indemnity in Soterales' action by means of a notice served on Anshun under O.16A, r.16."

89. It was said that this passage was against the maintenance of the present action, since the statement of claim did not assert that the liability in respect of which contribution was sought had arisen. It will be clear from what I have said that in my opinion this difficulty is met by the availability to the appellants on an amendment which alleges that liability.

92. I would allow the appeal and set aside the judgment below. It is a nice question whether the order that should be substituted for the judgment below is one simply dismissing the application or one which in some way makes provision for the amendment of the statement of claim. Since no amendments have been precisely formulated by the appellants, I am disposed to think that the better course is to substitute an order dismissing the defendants' application. Subject to anything that counsel may say, my present inclination is to suggest that the substituted order should require each side to abide its own costs of the application. I would as at present advised give the appellants the costs of the appeal.

95. I would make the dismissal of the application subject to any further application that may be made for the same relief as that sought in the summons in the event that the plaintiffs do not apply for and obtain leave to amend their statement of claim. This will serve as an intimation that in dismissing the application the Court has had regard to the fact that although the statement of claim is defective that defect can be cured by amendment.

98. Plainly the present action and action No. 5777 of 1995 should be heard together so as to eliminate the danger of inconsistent findings. But this is not a matter appropriate to be dealt with by any order of this Court.

103. I have had the advantage of reading the reasons for judgment prepared by Brooking, J.A., in which the background to this appeal and the statutory provisions are set out. At first sight the case appears to be of little importance except to the parties, but on closer inspection it goes to the heart of counsel's duty with respect to pleadings.

106. When ss.23A(1) and 23B(1) of the Wrongs Act 1958 are read together the meaning of the latter is clear. I shall refer, for convenience, to a defendant, a plaintiff and a third party. Subject to the succeeding provisions of s.23B, the defendant, against whom the plaintiff is entitled to recover compensation in respect of damage suffered by the plaintiff, may claim contribution from the third party, against whom the plaintiff is also entitled to recover compensation in respect of that damage. Liability is the correlative of either such entitlement. It need not be ascertained. I agree, for the reasons Brooking, J.A. gives, that the expression "a person liable" in s.23B(1) is not to be construed in accordance with the authorities of which George Wimpey & Co. Ltd. v. British Overseas Airways Corporation [1955] A.C. 169 and Bitumen and Oil Refineries (Australia) Ltd. v. Commissioner for Government Transport [1955] HCA 1; (1955) 92 C.L.R. 200 are among the most conspicuous examples.

109. Liability, in the sense explained in s.23A(1), may cease. A cesser of liability on the part of the defendant is dealt with in s.23B(2) and a cesser of liability on the part of the third party in s.23B(3). A settlement between plaintiff and defendant is dealt with in s.23B(4) on the footing that, if the defendant has acted in good faith, he or she is entitled to recover contribution from the third party whether or not the plaintiff was in truth entitled to recover compensation from the defendant in respect of the relevant damage.

112. Where a claim for a sum of money is made by writ the statement of claim must disclose, or be capable of being amended so as to disclose, a cause of action. The meaning of that expression is well settled: see the definition proposed by Brett, J. in Cooke v. Gill (1873) L.R. 8 C.P. 107 at p.116, which his Lordship restated with the concurrence of Fry and Lopes, L.JJ. in Read v. Brown (1888) 22 Q.B.D. 128. Accordingly, if the defendant desires to enforce his or her entitlement to contribution from the third party by writ, the defendant must plead every fact which it would be necessary to prove, if denied or not admitted, in order to enable the defendant to succeed.

115. The statement of claim in the present action does not allege that the appellants are liable to the plaintiffs in the Arthur Young proceeding and, as Brooking, J.A. explains, it is no answer that a declaration might be sought without such an averment.

118. It is true that the statement of claim could be amended, but I do not think that the appeal should be allowed on that account. In the first place, the appellants have at no stage said that they are willing to plead that they are liable to the plaintiffs in the Arthur Young proceeding. The only amendment they have foreshadowed is expressly to claim a declaration. Secondly, counsel could not sign such a pleading unless he or she were appropriately instructed. It is more than likely that counsel's instructions are to the contrary, i.e. counsel has been instructed that the facts are such that the appellants are not liable to the plaintiffs in the Arthur Young proceeding. The latter difficulty would not, in my respectful opinion, be overcome by pleading the necessary averment for the purposes of the present action only.

121. I agree with Brooking, J.A. that there is a sense in which the passage from Port of Melbourne Authority v. Anshun Pty. Ltd. [1981] HCA 45; (1981) 147 C.L.R. 589 at p.595-596 is not in point. Part IV of the Wrongs Act 1958, in its present form, enables a claim for contribution to be made before there is any ascertained liability on the part of the defendant. It is sufficient that the defendant is liable in the extended sense explained in s.23A(1). The passage is, however, in point in another way. It is only the third party procedure that enables the claim for contribution to be made on the basis of a conditional averment. It is a peculiarity of that procedure that the defendant may say to the third party, "If I am liable to the plaintiff, I am entitled to contribution from you."

124. I am reinforced in my view of the matter by the difficulty of formulating an appropriate order if the opposite view is correct. As the concluding paragraphs of Brooking, J.A.'s judgment show, the appellants would derive an advantage from the very fact that they have not offered to make the required averment and the unfairness of that consequence would have to be remedied by stipulating that the respondents may apply again for precisely the same relief as they have already obtained.

127. For these reasons I would dismiss the appeal.