Bowcliff Pty Ltd v QBE Insurance

ORDERS Bowcliff Pty Ltd v QBE Insurance (Australia) Ltd (1) Appeal allowed with costs. (2) Judgment of Harrison J of 23 November 2010 set aside. (3) In lieu thereof substitute an order that the respondent QBE pay the applicant's costs of the hearing before Harrison J on 19 November 2010. (4) Application to join QBE as a cross defendant remitted to Harrison J. (5) Other costs of and incidental to that application to abide the order of Harrison J. John James Orcher v QBE Insurance (Australia) Ltd (1) Appeal allowed with costs. (2) Judgment of Harrison J of 23 November 2010 set aside. (3) In lieu thereof substitute an order that the respondent QBE pay the applicant's costs of the hearing before Harrison J on 19 November 2010. (4) Application to join QBE as a defendant remitted to Harrison J. (5) Other costs of and incidental to that application to abide the order of Harrison J.

Judgment 1ALLSOP P : I agree with Handley AJA. 2TOBIAS JA : I agree with Handley AJA. 3HANDLEY AJA : These are appeals pursuant to leave granted by this Court at the hearing of expedited leave applications listed for full argument. The appeals challenged orders of Harrison J. on 23 November 2010 dismissing applications by the plaintiff, Mr John Orcher, and the first defendant, Bowcliff Pty Ltd, to join QBE Insurance (Australia) Ltd (QBE) as a defendant and cross defendant. 4The plaintiff had sued Bowcliff to recover damages for personal injuries allegedly sustained in an assault outside the Bridge Hotel Rozelle in the early hours of 25 October 2007. The first defendant conducts the business of that hotel, and the second defendant was the alleged assailant. 5Bowcliff brought a cross claim against Australian Corporate Protection Pty Ltd (ACP) and the latter a cross-claim against DSSS Cousins Pty Ltd (DSSS). After DSSS went into liquidation ACP amended its cross-claim to substitute QBE as the cross defendant. QBE had allegedly insured DSSS against its liability to persons such as the plaintiff. 6On 24 September 2010, following a mediation, consent judgements were entered by Johnson J in both cross claims pursuant to a document described as a consent judgment. This provided, by consent and without admissions of liability, in para (1) that there should be verdict and judgment for ACP in the first cross-claim with no order as to costs and in para (2) that there should be verdict and judgment for QBE in the second cross-claim with no order as to costs. Bowcliff, ACP and QBE signed the consent judgment. The plaintiff did not. Johnson J made the orders on that basis (t 24/10/10 p 1). 7The trial commenced in November before Harrison J. On the third day evidence emerged which caused the plaintiff to apply to join QBE as a defendant and Bowcliff to apply to join it as a cross defendant to claim contribution or indemnity under s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (the 1946 Act). 8Harrison J. dismissed both applications because QBE had been sued by ACP and the consent judgment had determined that it was not liable for the plaintiff's damage. 9The appellants argued that the consent judgment did not attract the bar in s 5(1)(c) that protects parties sued as tortfeasors who have been found not liable. 10Mr SG Campbell SC, Senior Counsel for QBE, submitted that the appellants were bound by the operation of s 5(1)(c) on the consent judgment, or in the alternative by the effect of the judgment under s 22(3)(b)(ii) of the Civil Procedure Act or the general law . 11Section 5(1)(c) of the 1946 Act provides: (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 ..." 12Pursuant to s 6 of the 1946 Act QBE, as the relevant insurer of DSSS, had the same liability to the plaintiff and Bowcliff as its insured, and if its insured was a tortfeasor it is deemed, by the statutory fiction in s 6, to be a tortfeasor qua those parties. 13Harrison J found that QBE was a tortfeasor who had been sued in ACP's amended cross-claim and held not liable by the consent judgment. On this basis he felt bound to apply James Hardie and Co Pty Ltd v Seltsam Pty Ltd [1998] HCA 78, 196 CLR 53 and hold that it could no longer be sued either by the plaintiff for damages or by Bowcliff for contribution. 14This Court has had the benefit of fuller arguments than those with which Harrison J was favoured. 15The fundamental point about para (c) is that it only deals with claims for contribution. The text quoted above [11] is quite clear. 16The liability "in respect of that damage" in the first line of para (c) is liability to the plaintiff. This is the damage referred to in the opening words of s 5(1) which govern the whole section: "Where damage is suffered by any person as the result of a tort." 17The new right conferred on tortfeasors by para (c) was to recover contribution "from any other tort-feasor who is, or would if sued have been, liable in respect of the same damage." The liability of "any other tort-feasor" referred to is liability to the plaintiff, and the hypothetical suit ("who if sued") is one brought by the plaintiff. 18Although the phrase "in respect of" normally has a wide meaning, it can have a narrow meaning in an appropriate context: State Government Insurance Office v Rees [1979] HCA 52, 144 CLR 549 at 553-4 per Stephen J, and at 560-1 per Mason J. 19Section 5(1)(c) gives relevant judgments a wider operation than they have under the general law. As the James Hardie case established, the section makes a final judgment in favour of a defendant against the plaintiff binding on other tortfeasors liable for the same damage although they were not parties to the judgment. The principles were stated by Gaudron and Gummow JJ at paras [34]-[35]: "34 ... the relationship between the two limbs in par (c) is that identified by Barwick CJ in Brambles Constructions Pty Limited v Helmers [1966] HCA 3, 114 CLR 213, 218-9. The persons against whom there is an entitlement to recover contribution are (i) those who have come under an obligation to pay money in respect of the same damage and (ii) those who, not having been sued by the injured party , would, had they been sued, have been found to have caused or contributed to the same damage by a tortious act. 35 The first limb of s 5(1)(c) identifies those who ... have been sued by the injured party but fixes only upon those who have been made liable. The second limb identifies those who would, if sued at any time, have been liable, not those who were sued but obtained the entry of judgment in their favour, whether by consent or otherwise. There is no third category which identifies a person from whom contribution may be recovered by reference to the circumstance that this person has been sued and has been held not liable." (emphasis supplied). 20The consent judgment in favour of QBE in the cross-claim by ACP did not bring QBE within the category of persons who have relevantly been sued and held not liable. 21The identity of the person bringing the hypothetical suit ("would if sued"), was not in issue in the James Hardie case where the plaintiff had sued all other parties. Gaudron and Gummow JJ nevertheless said [19] that the hypothetical suit was brought by the plaintiff. 22In Amaca Pty Ltd v New South Wales [2003] HCA 44, 199 ALR 596 (which was not cited to Harrison J.) the plaintiff sued three defendants, the head contractor his employer, a subcontractor, and the principal. He obtained judgments by consent against his employer and the principal. They sought contribution from the supplier Amaca and it sought contribution from the State of New South Wales. 23The trial Judge dismissed Amaca's contribution claim without deciding whether the State was a tortfeasor who, if sued by the plaintiff, would have been liable for his damage. He held that Amaca was not entitled to contribution in any event. The High Court held that s 5 did not permit this approach. 24A single joint judgment was given which identified the question [18]: "...there has been no judicial determination (whether by consent or otherwise) that the person from whom contribution is sought (the State) is or would if sued, have been liable to the injured plaintiff. Nor did the State admit that liability. Accordingly, the premise for making any of the orders specified in s 5(2) was neither established nor admitted, whether in the contribution proceedings or in the principal proceedings instituted by the injured plaintiff" (emphasis supplied). 25The ratio of the judgment [24] determined the first question in these appeals. The Court said: " ... the question whether the State owed a duty of care to the injured plaintiff is logically anterior to any question of apportionment of responsibility. As these reasons have sought to demonstrate, deciding whether the State was a tortfeasor, which if sued would have been liable to the injured plaintiff , precedes any decision about the kind of order to be made under s 5(2) of the [1946] Act" (emphasis supplied). 26Even if the passages cited from James Hardie and Amaca were dicta they confirm the plain meaning of s 5(1)(c). 27Mr Campbell's alternative submission, really by way of contention, was that the plaintiff and Bowcliff were parties to the proceedings, and bound by the consent judgment in favour of QBE. He relied on Sandtara Pty Ltd v Abigroup Ltd (1997) 32 NSWLR 5 ( Sandtara ) (not cited to Harrison J) where this Court held that a cross-defendant in earlier proceedings could rely in later proceedings on an issue estoppel created by the judgment in the action against the defendant in the original proceedings. 28Sandtara had sued the guarantor of the lessee to recover unpaid rent. The guarantor joined the lessee as a cross-defendant to enforce its indemnity. Sandtara recovered against the guarantor who recovered against the lessee. When Sandtara later sued the lessee for additional rent, under escalation clauses for the same period, this Court held that the lessee could enforce the issue estoppel from the judgment against the guarantor as to the amount of rent. The joinder of the lessee as a cross-defendant, pursuant to s 78(4)(a) of the Supreme Court Act, had made it a party to the proceedings between Sandtara and the defendant. 29Section 78 was replaced by s 22 of the Civil Procedure Act (not cited to Harrison J) which relevantly provides: "(3) A person against whom a defendant makes a claim for relief under this section: '(a) ..., and (b) if not already a party to the first proceedings: (i) becomes a party to the first proceedings, and (ii) unless the Court otherwise orders, is bound by any judgment (including a judgment by consent or by default) or decision (including a decision by consent) on any claim for relief in the proceedings (including a claim for relief in any cross claim in the proceedings).' 30Subparagraph (ii), which had no counterpart in s 78, reflects the construction of that section adopted in Sandtara (above). 31Subsection (3) makes a judgment between the plaintiff and the defendant ("the first proceedings") binding on cross defendants. As this Court held in Sandtara , res judicata estoppels are mutual (ibid at 9). Accordingly issue estoppels based on such a judgment are binding not only between defendant and cross defendant, but also between plaintiff and cross defendant and between cross defendants. 32Subparagraph (ii) now makes issue estoppels based on a judgment in proceedings against a cross defendant binding on other cross defendants. 33Subparagraph (ii) does not make a judgment on a cross claim binding on the plaintiff. In colloquial terms it operates downwards for and against the plaintiff and cross defendants, and sideways between cross defendants, but not upwards against the plaintiff. 34The plaintiff was not a party to the cross claim by ACP against QBE and s 22 did not make him one. Since he was not bound by the consent judgment as between ACP and QBE, he is not affected by any issue estoppels it may have created. It could not create any cause of action estoppel against the plaintiff, and the contrary was not suggested. 35Statute apart, a consent judgment only affects the parties who consent: Spencer Bower & Handley "Res Judicata" 4 th ed 2009 para 2.19. The plaintiff, who had not consented to the judgment as between ACP and QBE, was not affected by it. Bowcliff signed as a consenting party, but its consent related to the judgment in its cross claim against ACP, and not the judgment in ACP's cross claim to which it was not a party. 36Section 22(3) did not make the second consent judgment binding on Bowcliff because, as a defendant, it was already a party to the first proceedings. As the first line of subs (3) makes clear, the subsection only applies to a cross defendant who is not already a party. 37The appeal should therefore be allowed and the following orders made: Bowcliff Pty Ltd v QBE Insurance (Australia) Ltd (1) Appeal allowed with costs. (2) Judgment of Harrison J of 23 November 2010 set aside. (3) In lieu thereof substitute an order that the respondent QBE pay the applicant's costs of the hearing before Harrison J on 19 November 2010. (4) Application to join QBE as a cross defendant remitted to Harrison J. (5) Other costs of and incidental to that application to abide the order of Harrison J. John James Orcher v QBE Insurance (Australia) Ltd (1) Appeal allowed with costs. (2) Judgment of Harrison J of 23 November 2010 set aside. (3) In lieu thereof substitute an order that the respondent QBE pay the applicant's costs of the hearing before Harrison J on 19 November 2010. (4) Application to join QBE as a defendant remitted to Harrison J. (5) Other costs of and incidental to that application to abide the order of Harrison J.

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