Proportionate liability
29Insofar as the Bank wishes to rely upon the provisions of the CLA, the proposed amended defence pleads:
207. Each plaintiff claims damages for economic loss.
208. The economic loss claimed by each plaintiff was caused by
(a) the allegedly fraudulent conduct of Clarke
(b) in relation to the cheque proceeds credited to their accounts, the fraudulent conduct of the third, fourth and fifth defendants
(c) the actions of the NAB in the collection of the cheque proceeds and their crediting to the respective defendants.
209. If, which is not admitted, NAB did not assume, or ought not reasonably have collected and credited the endorsed cheques without first satisfying itself, that each of the endorsed cheques had been duly endorsed on behalf of the payee named on the cheque as drawn, then NAB failed to act with reasonable care in collecting payment of the cheque and crediting its customer accounts.
210. If, which is not admitted, NAB did not assume, or it was not reasonable in all the circumstances for NAB to have assumed that the customer to which it credited the payment was the person intended by the drawer to be the cheque payee, then NAB failed to act with reasonable care in collecting payment of the cheque and crediting its customer accounts.
211. If, which NAB does not admit, NAB failed to act with reasonable care in relation to any cheque, then
(a) the loss claimed by the plaintiffs arose from that failure by NAB to take reasonable care, and
(b) in those circumstances, NAB, the first, third, fourth and the fifth defendants, are all persons whose acts or omissions caused the plaintiffs economic loss, and
(c) in those circumstances alleged, NAB's liability in relation to the claims of each plaintiff is limited to the amount the court considers just having regard to the extent of NAB's responsibility for the damage or loss.
212. In the event NAB is found liable for any or all of the amount claimed NAB says that the alleged loss or damage suffered by any one or more of the plaintiffs is an apportionable claim within the meaning of Part 4 of the Civil Liability Act 2002 and the NAB's liability is limited to an amount reflecting that proportion of the damages or loss claim which the court considers just having regard to the extent of NAB's responsibility for the loss or damage (if any).
30The argument between the parties commenced with three points of agreement:
(1)Proof of negligence or acting without reasonable care was no part of the causes of action alleged by ASF against the Bank in conversion or for monies had and received;
(2)Section 95(1) of the CA made a defence available to the Bank which would require the Bank to prove it had acted without negligence in the sense of "carelessness" or "without want of reasonable care"; and
(3)Assuming the Bank were to be permitted (as will be the case) to rely on s 95(1) of the CA, the resolution of the Bank's liability would almost certainly involve a finding as to whether or not the Bank acted without reasonable care.
31Against that background, the debate centred on whether ASF's claims against the Bank were "apportionable claims" (and therefore subject to the proportionate liability provisions set out in Part 4 of the CLA) as defined in s 34(1)(a) of the CLA:
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
32Again, with no disrespect to the careful and detailed submissions of the parties, the essence of their respective submissions was:
(1)ASF submitted that whether or not a claim was an "apportionable claim" was determined by looking at the claim brought by the plaintiff. If, to make out its claims, a plaintiff did not have to prove that the defendant had failed to take reasonable care, then the plaintiff's claims were not "apportionable claims" for the purposes of Part 4 of the CLA.
(2)The Bank submitted that the inquiry as to whether something was an "apportionable claim" was not confined by the matters which the plaintiff had to prove to make out whatever cause or causes of action were sued upon. Rather, whether the plaintiff's claim was an "apportionable claim" depended not only on the elements of the plaintiff's cause of action but also what findings the court was required to make in determining the proceedings. If some other feature of the litigation (such as a defence raised) made it necessary for the court to consider whether or not a defendant had acted with or without reasonable care it would be sufficient to make the claim one "arising from a failure to take reasonable care".
33Invoking Barwick CJ's observation in General Steel as to the permissibility of "extensive argument" where necessary, ASF submitted that I should determine definitively the proper construction of s 34(1)(a) of the CLA in the way for which ASF contended, such that the Bank's intended reliance on the CLA would be demonstrated to be untenable and the relevant part of its pleading would either be struck out or not allowed (as the case may be).
34The Bank submitted that on its proper construction s 34(1)(a) of the CLA raised four threshold issues for there to be an "apportionable claim":
(1)It is a claim for economic loss or damage to property;
(2)It is a claim in an action;
(3)The action is for damages (whether in contract, tort or otherwise); and
(4)The claim (or action for damages) is one "arising from" a failure "to take reasonable care".
35The Bank submitted that, so understood, an "apportionable claim" was not limited to causes of action where the failure to take reasonable care was one of the constituent elements. The Bank submitted (correctly) that the first three of its so-called threshold issues were satisfied. The real question was whether ASF's claim was one "arising from" a failure "to take reasonable care". It was on this last point that the parties joined issue.
36Neither party was able to identify a decision (whether binding upon me or not) which definitively determined the question of construction which their argument posed. However, each pointed to a series of cases commencing with what they both accepted were obiter dicta by Middleton J in Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd [2007] FCA 1216; (2007) 164 FCR 450 (reproduced in the next paragraph). Because I have come to the view on discretionary grounds that the Court should not prevent the Bank from seeking to rely upon the CLA, it is not necessary for me to consider all the cases referred to by the parties in detail. It is sufficient to refer to what, with the utmost respect, seems to be a fundamental difference of opinion between two judges of the Court of Appeal of this Court.
37In Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187; (2008) 82 NSWLR 762, Barrett J (as his Honour then was) said:
27 The case was thus one in which each relevant "claim", as determined by the court and according to the findings actually made, was a claim in an action for damages "arising from" the failure to take reasonable care that was also at the centre of the tortious claim in negligence. This is so of both the claims in tort and the claims in contract. That, in my view, is sufficient to bring the contract claims, as well as the tort claims, within s 34(1)(a) and it makes no difference that the breaches of contract, as alleged, were not framed in terms of failure to take reasonable care.
28 It is pertinent to note that the words in s 34(1)(a) ("an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care") do not follow the pattern found in the modified Part 3 of the Law Reform (Miscellaneous Provisions) Act 1965 adopted in 2000 and dealing with contributory negligence. Following Astley v Austrust Ltd (above), that Part 3 made a plaintiff's contributory negligence relevant to the assessment of damages for "a breach of a contractual duty of care that is concurrent or co-extensive with a duty of care in tort": s 8, definition of "wrong". The description in s 34(1)(a) of the Civil Liability Act, by contrast, shows a legislative intention going beyond contractual duties existing, as it were, in parallel with duties of care in tort.
29 Again, support for the approach I consider to be correct is found in the observations of Middleton J in Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd (above). His Honour said (at [30]):
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.
30 I respectfully agree that a claim may properly be regarded as one "arising from a failure to take reasonable care" if, "at the end of the trial", the evidence warrants a finding to that effect and regardless of the absence of "any plea of negligence or a 'failure to take reasonable care'". The nature of the claim, for the purposes of Part 4, is to be judged in the light of the findings made and is not determined by the words in which it is framed.
31 There is good reason in policy to take this approach. The clear objective of Part 3 is to abolish "solidary liability" under which all defendants found guilty of relevant breach are jointly and severally required to meet an undissected verdict. The provisions reflect legislative views about allocation of risk as between plaintiffs and defendants. The New South Wales Attorney-General in office at the time of the enactment of Part 3 made this clear when he said of the new provisions:
[I]n cases of negligence not involving personal injury, considerations of prejudice to plaintiffs weigh less strongly than the value of limiting liability of defendants according to their share of responsibility, and as a consequence the CLA(PR) Bill proposes in Part 4 the introduction of proportionate liability in the context of economic loss and property damage.
(The Honourable Robert Debus MP, "Tort Law Reform in New South Wales: State and Federal Interactions" (2002) 8 UNSW L Rev 13).
32 The provisions of Part 4 are compulsory. They change substantive rights, so that a plaintiff's ability to obtain an adjudication of joint and several liability is removed where the circumstances are of the type to which the alternative regime of proportionate liability is applied. A case no doubt needs to be pleaded and proved by one or more defendants so as to engage the statutory provisions. But it will be the findings ultimately made that determine whether the statutory conditions compelling the court to adopt the proportionate approach are satisfied.
38After joining the Court of Appeal, Barrett JA had occasion to revisit the construction of s 34(1)(a) of the CLA in Perpetual Trustee Co Ltd v CTC Group Pty Ltd (No 2) [2013] NSWCA 58. That case concerned a defendant's attempt to rely upon the apportionment provisions of the CLA notwithstanding the provisions of a strict contractual indemnity. The Court of Appeal held that the indemnity precluded the apportionment provisions from applying. Nevertheless, and therefore by way of obiter dicta, both Barrett JA and Macfarlan JA expressed their views on the proper interpretation of s 34 of the CLA. The third member of the Court, Meagher JA, expressly declined to express any view on the matter.
39Macfarlan JA said:
22 For a successful action for damages to have arisen from a failure to take reasonable care, it is in my view necessary that the absence of reasonable care was an element of the, or a, cause of action upon which the plaintiff succeeded. As observed by Professors McDonald and Carter in "The Lottery of Contractual Risk Allocation and Proportionate Liability" (2009) 26 Journal of Contract Law 1 at 18, the contrary view would produce the absurd result that a party to a contract who failed to perform a strict contractual obligation would benefit from being found to have acted negligently rather than "innocently". If claims could be apportioned where negligence is not an element of the successful cause of action, but merely arises from the facts, a plaintiff could lose his or her contractual right to full damages from a party whose breach of a contractual provision of strict liability happened to stem from a failure to take reasonable care.
23 My view accords with that which I reached in relation to the similarly worded, and in my view relevantly indistinguishable, provision in s 5A of the Act which renders Part 1A applicable only to a "claim for damages for harm resulting from negligence" (Perpetual Trustee v Milanex at [87]; see also Monaghan Surveyors Pty Ltd v Stratford Glen-Avon Pty Ltd [2012] NSWCA 94 at [76] and [77]). It appears to differ from that expressed by Barrett J (as his Honour then was) in Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 at [20] - [30] and in other first instance decisions to which his Honour referred. Unless his Honour was simply saying that it is necessary to examine the court's findings to identify the cause, or causes, of action upon which the plaintiff succeeded, I cannot, with respect, agree with his Honour that the "nature of the claim, for the purposes of Pt 4, is to be judged in the light of the findings made and is not determined by the words in which it is framed" (at [30]). In my view the application of Part 4 turns not on the facts that happen to be found but on the essential character of the plaintiff's successful cause of action. Subject to cases that are conducted without regard to the pleadings, if negligence is an essential element of that cause of action, it will have been pleaded in the Statement of Claim. If it is not, it will not have been pleaded. It would be curious indeed if, to attract Part 4 of the Act, the defendant pleaded and proved his or her own negligence when that was not alleged by the plaintiff. The text of s 34(1) does not, in my view, contemplate that occurring. The natural meaning of the words used indicates that a failure to take reasonable care must be part of, and therefore an element of, the plaintiff's successful cause of action.
40Barrett JA restated the points he had made in his previous decision, supplemented by reference to an intervening decision of the Victorian Court of Appeal:
37 Whether a particular "claim" is an "apportionable claim" within s 34(1)(a) of the Civil Liability Act 2002 depends on whether the "claim" is 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.
38 The point made in Reinhold v NSW Lotteries Corporation (No 2) [2008] NSWSC 187 at [19] - [30] is that the nature or quality of a "claim" for these purposes cannot be determined without taking into account the court's decision on the claim. First and foremost, of course, regard will be had to the words in which the claim is framed but, as Ashley JA said (with the concurrence of Nettle and Neave JJA) in Godfrey Spowers (Victoria) Pty Ltd v Lincoln Scott Australia Pty Ltd [2008] VSCA 208; (2008) 21 VR 84 at [105], the equivalent Victorian statutory provisions:
" . . do not mean that, once something that looks like an apportionable claim is pleaded, a defendant forthwith becomes a 'concurrent wrongdoer'."
39 His Honour continued:
"Section 24AH(1) [NSW s 34(1)] emphasises that whether a wrongdoer is of that character depends upon the person having been one of two or more persons whose acts or omissions caused the plaintiff's loss and damage. At least absent highly unusual pleadings, determination of the critical circumstances will depend upon findings having been made. Section 24AI(1) [NSW s 35(1)] is consistent with such an analysis. It limits the liability of a concurrent wrongdoer to an amount reflecting the proportion of the plaintiff's loss or damage claimed which the Court considers just in all the circumstances, the Court being obliged to take into account the responsibility of other concurrent wrongdoers who are parties to the proceeding, but ordinarily not others. The importance of the Court's adjudication is emphasised by this provision, as it is by s 24AJ [NSW s 36], which naturally flows from it. The same may be said of s 24AK(1) [NSW s 37], which takes as its starting point judgment against a concurrent wrongdoer."
40 After noting that this analysis corresponded with that in Reinhold v NSW Lotteries Corporation (No 2) and setting out paragraphs [19] - [22], [30] and [32] of the judgment in that case, Ashley JA said (at [108]:
"Those observations emphasised the importance of trial to the determination of the application of the relevant legislation."
41 At [109], Ashley JA expressed agreement with the analysis in the quoted paragraphs of the judgment in Reinhold v NSW Lotteries Corporation (No 2).
42 It cannot be suggested (nor do I think it has been suggested in any decided case) that the nature or quality of a "claim" is, for relevant purposes, to be determined solely by looking at the court's decision in relation to it. Nor is the nature or quality of a "claim" to be determined solely by looking at the terms in which it is framed. Rather, it is a combination of the terms in which the claim is framed (or pleaded) and relevant findings of the court in relation to it that must be assessed in order to decide whether it is a claim "in an action for damages . . . arising from a failure to take reasonable care" and has the other attributes of an "apportionable claim" under s 34(1)(a).
43 I agree with the conclusions reached by Macfarlan JA and, subject to the foregoing, with his Honour's reasons. I also agree that the orders proposed by Macfarlan JA should be made.
41The parties before me, with some ingenuity, sought to harmonise the views of Macfarlan and Barrett JJA either completely or at least as to the essentials, or suggested that it was unnecessary in this case for me to resolve the difference between their Honours. However, it is plain from their respective reasons that there is a difference of approach as to the operation of s 34(1)(a). In my respectful opinion Barrett JA correctly recognised that in making the express reservation set out in paragraph [43] of his reasons where he otherwise agrees with the reasons of Macfarlan JA.
42I do not propose to attempt to resolve the difference between their Honours. Rather, for present purposes and in the absence of any authority binding upon me, I take from their Honours' reasons the point that there is much to be said for both sides of the argument on what is a serious and difficult question of construction. As I will now explain, that conclusion has a significant impact on how the Court is to exercise its discretion in the present applications.
43In the exercise of its relevant discretions, the Court will allow the proposed amended defence in relation to the CLA and dismiss ASF's motion in so far as it seeks to strike out so much of the Bank's case. There are three reasons for this conclusion.
44First, given that the Bank's defence under s 95(1) of the CA will form part of the ultimate hearing of these proceedings, to allow the proportionate liability defence to go forward will add only to the legal argument in the case rather than expand it in terms of the evidence sought to be adduced. Insofar as I assume the Bank will contend at the final hearing that the factual findings can attract the operation of the CLA, those factual findings will be made by reference to the issues raised by the Bank's defence under s 95(1) of the CA. If such findings are made, then the way will be open for the Bank to argue that, on the proper construction of s 34(1)(a) of the CLA, ASF's claim was an apportionable claim. Similarly, ASF's response to this will be legal rather than requiring ASF to adduce any evidence over and above that which it deploys in answer to the Bank's defence under s 95(1) of the CA.
45Although he was in the minority on this particular issue, I respectfully adopt what was said by Kirby P in Wickstead v Browne (1992) 30 NSWLR 1 at 5:
But as the trial must now proceed, there is merit (as it seems to me) in permitting the appellant to present his case in various ways. The marginal utility to the respondent of preventing the appellant from proceeding upon the alternative cause of action in negligence is minimal. But the marginal cost of doing so would be very great if, subsequently, the trial was concluded, limited by the orders proposed, and it was then held, either by this Court or by the High Court of Australia, that the appellant's cause of action in negligence was viable...
46Adopting the learned President's dictum to the circumstances of this case, as the defence under s 95(1) of the CA will proceed, there is merit in permitting the Bank to present its case in various ways, particularly where the additional way in question will only involve additional legal argument. The marginal utility to ASF in preventing the Bank from raising the question of proportionate liability is minimal but the marginal cost of doing so would be very great if, subsequently, the trial is concluded without that issue being able to be raised, and it was then held, either by the Court of Appeal or High Court of Australia, that the Bank should have been allowed to invoke the CLA.
47Second, where in a case such as the present, a party invites the resolution of a strike out application by reference to the Court construing a statute (or, for that matter, any other document) then the Court must be able to reach that construction with a high degree of certainty. That is because, to quote the High Court in Agar v Hyde (see paragraph [13] above) the test, howsoever expressed, to decide issues in a summary way requires "a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way". Based upon my own consideration of the language of s 34(1)(a) of the CLA, the parties' respective submissions as to the proper construction of that section, and taking into account the differences within the Court of Appeal referred to in paragraphs [37] to [40] above, I am well satisfied that there is much to be said for both sides of the argument. In those circumstances, I am unable to reach a view as to the proper construction of s 34(1)(a) of the CLA with what I consider to be the requisite high degree of certainty so as to warrant determining the issue now summarily against the Bank.
48Third, as a matter of policy I consider it to be undesirable, unless absolutely necessary, for a piece of legislation like the CLA to be construed outside a factual context determined after a full hearing. The CLA is a significant and groundbreaking piece of law reform. Substantial policy considerations attend its interpretation and application. The proper interpretation of the legislation has already produced a diversity of views across three levels of the judicial hierarchy of this State (see the account of the litigation culminating in the decision of the High Court in Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (No 2) [2013] HCA 23; (2013) 247 CLR 656 in L Warnick, "Proportionate Liability in the High Court" (2013) 87 ALJ 864).
49Again, I respectfully adopt another observation made by Kirby P in Wickstead v Browne (1992) 30 NSWLR 1 at 5:
Common experience teaches that it is usually more efficient and just to consider the viability of a cause of action when the facts said to support it are adduced and the suggested action can be judged with a full understanding of all relevant evidence. Testimony gives colour and content to the application and development of legal principle.
50In my respectful opinion, the same considerations apply where the Court is required to consider whether a particular set of circumstances falls within a statutory provision. Statutory interpretation in a factual vacuum lacks the salutary and, in difficult cases, essential benefit of being able to be undertaken in the context of a set of actual facts as found after a contested hearing.