Contribution
2 Tressider and Jagar were each held liable under s 82 of the Trade Practices Act 1974 (Cth) ("the TPA") for loss suffered by Hanave by reason of the conduct of Jagar. Judgment was entered against them in the amount of the assessed loss. By cross-claim Tressider and Jagar claimed a right to recover contribution from Burke in respect of their liability to pay the judgment sum, the right said to be an equitable right arising out of Burke's liability in negligence to Hanave. The statutory power to order contribution between "tortfeasors" provided in s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) was not relied upon. It was assumed that a person liable under s 82 of the TPA is not a "tortfeasor" within the meaning of that section: Bialkower v Acohs Pty Ltd (1998) 83 FCR 1 at 11. His Honour determined that "equitable contribution" could be ordered and directed that Burke contribute one-half of the judgment sum entered against Jagar and Tressider.
3 It has been long recognised that co-sureties, co-trustees, co-tenants, partners, co-contractors and insurers of the same risk under separate contracts of insurance have rights of contribution inter se to maintain equal distribution of the burden shared by them: Goff & Jones, The Law of Restitution 5th ed 1998 at 394. Further, where several parties are bound by a single judgment, each party is obliged to make equal contribution to the discharge of the judgment, the obligation being based on the liability of each judgment debtor to the judgment creditor to discharge the whole of the judgment. The fact that prior to the entry of judgment the respective liabilities of the parties may have been based on separate and disparate causes of action becomes irrelevant after the parties are bound by the one judgment. A right of contribution at law or in equity may also arise out of statutory provisions which impose joint and several liabilities on parties, for example, the liability imposed on directors and others involved in the management of a corporation to pay the debts of a corporation: Spika Trading Pty Ltd v Harrison (1990) 19 NSWLR 211.
4 The doctrine of contribution, now said to be governed by equitable principles, was, equally, a product of the common law and, indeed, the same principle based on the ancient rule for general average contribution between parties to a common maritime adventure governed the development of the doctrine at law and in equity, namely the application of reason and natural justice: Goff & Jones at 427-428; Albion Insurance Co Ltd v GIO (1969) 121 CLR 342 per Kitto J at 349-351. The principal difference between law and equity was that equity would make a declaration quia timet and not require prior payment by the party seeking contribution before an order would be made: McLean v Discount and Finance Limited (1939) 64 CLR 312 per Starke J at 341.
5 In equity, equality of contribution will be required although in respect of insurers and co-trustees particular circumstances may arise that may cause differential contributions to be ordered: Goff & Jones at 409-413, 422.
6 Tressider and Jagar submitted that the order for contribution his Honour made was supported by cases such as Cockburn v GIO Finance Ltd Supreme Court of NSW, Foster AJ, 19 May 2000; and BP Petroleum Development Ltd v Esso Petroleum Ltd [1987] SLT 345 in which, it was said, "equitable compensation" was ordered.
7 In Cockburn,by reason of orders made in equity, GIO lost the right to enforce a mortgagor's covenant to repay monies advanced by GIO and was directed to discharge a mortgage granted by the mortgagor to secure performance of the covenant. The orders made in equity were based on GIO's knowledge, actual or imputed, that the mortgagor's father, by undue influence, had caused the mortgagor to execute a loan agreement and grant a mortgage to GIO and allow the monies borrowed to be applied to use of the mortgagor's father. Solicitors retained to advise the mortgagor, who also had knowledge of the father's conduct, were held liable to the mortgagor for breach of their contract of retainer. Although not raised in argument in that case, it would seem to follow from the order setting aside GIO's right to recover from the mortgagor the monies advanced, that GIO had a right at law, or in equity, to recover from the mortgagor's father any loss suffered by GIO by reason of that person's conduct.
8 At first blush, it may appear that Colemans and GIO did not share a common burden to pay a sum to the mortgagor or that the liability of the solicitors to the mortgagor may not have been coincident with GIO's obligations to the mortgagor. The obligation of the solicitors was to indemnify the mortgagor against loss whilst GIO was bound not to enforce its contract. A particular example of that difference may have arisen if the solicitors had been required to pay to the mortgagor costs incurred by the mortgagor in obtaining the order that the mortgage be set aside, being costs not recoverable from GIO, to wit solicitor and client costs. In respect of the burden of that obligation, there would be no mutuality between GIO and the solicitors, and the solicitors could not claim a right of contribution from GIO in respect of the payment of that sum. Similarly, if GIO had taken third party proceedings against the mortgagor's father for an order that GIO be indemnified against loss, it could not be said that GIO had a right to have the solicitors contribute to any shortfall in the worth of that indemnity.
9 The foundation for the decision in Cockburn, however, was that, in effect, by the judgment entered against them, GIO and the solicitors had been made liable to the mortgagor to the same extent, namely to restore the mortgagor to his former position: Capita Financial Group Ltd v Rothwells Ltd (1993) 30 NSWLR 619. It was determined, therefore, that GIO had a right to recover contribution from the solicitors in respect of the sum GIO had lost by reason of that judgment. Whether, if the orders had not been made, GIO would have been able to recover from the mortgagor the whole of the sum advanced or would have suffered some loss in any event, was not an issue in the proceedings.
10 Perhaps there is an unanswered question that remains in Cockburn, namely would the order for contribution continue to be just if GIO, after obtaining from the solicitors one-half of the loss GIO claimed to have suffered - a loss for which the solicitors had no liability - took proceedings against the mortgagor's father to recover the remainder of that loss? If GIO recovered that sum from the mortgagor's father, or part of it, then, as between GIO and the solicitors, the latter would have been the sole or principal contributor to the restitution of the loss suffered by GIO. That would not seem to be a result in accordance with natural justice when the loss suffered by GIO occurred by reason of an order in equity that GIO not enforce a contract that GIO knew, or ought to have known, had been obtained by unconscionable conduct.
11 In BP v Esso, BP, as operator of an oil terminal under a contract made between BP and the port authority, agreed to indemnify the port authority in respect of any damage caused to the terminal. Pursuant to statutory provisions, Esso, as owner of a vessel that damaged the terminal, was liable to the port authority for the cost of repairing that damage. In neither case did the liability of BP or Esso to the port authority depend upon demonstration of fault. It was held that the right of relief pursued by BP against Esso in the Scottish court was governed by laws equivalent to that applied in English courts, namely rights based in equity. Thus, BP had to show that the parties were liable for the same debt or were bound by a common obligation to the port authority.
12 BP and Esso shared a common obligation - albeit created from distinct sources - to pay the port authority the sum required to compensate the authority for damage to the terminal and, therefore, BP, upon payment of that sum, was entitled to equal contribution from Esso.
13 For the principle of equality of contribution to apply in equity there must be mutuality between the parties in respect of the burden to be discharged. That is, the parties must share a common burden in respect of obligations owed to a third party and as a result must have mutual rights and obligations inter se. For example, if A and B are sureties for C - albeit by distinct and separate instruments - for the payment of a debt to D, A and B are obliged to make equal contribution as co-sureties in the event that D calls upon either to pay. But if A is a surety for B for the liability of B as surety for C, then A and B are not co-sureties and a claim by D against B will not provide B with a right of contribution from A, notwithstanding that it may be said that both A and B have undertaken a burden to D to ensure that the sum payable to D is paid. Although the burden relates to the same sum owing to D, it is not a "common" burden or a coordinate liability of A and B: Craythorne v Swinburne (1807) 14 Ves Jun 160; 33 ER 482; Re Denton's Estate, Licenses Insurance Corporation and Guarantee Fund Ltd v Denton [1904] 2 Ch 178.
14 If parties are not on the same level of liability, there is no common interest and no common burden with joinder in a common end and purpose by the several obligations: Scholefield Goodman & Sons Ltd v Zyngier [1986] AC 562 at 575; Spicer v Spicer (1931) 47 CLR 151 per Dixon J at 181; Street v Retravision (1995) 56 FCR 588 per Gummow J at 600. In Zyngier the guarantor of an indorser of a bill of exchange was not on the same level of liability to the holder or payee of the bill as the drawer, and the latter could not recover contribution from the guarantor when the drawer was called upon to meet the bill after it had been dishonoured by the indorser upon presentation by the holder or payee. The sum for which liability had been undertaken by the drawer, and the guarantor of the indorser, was the same and the liability was owed by each to the same party but it was not a coordinate liability for which equity provided contribution.
15 By parity of reasoning it must follow that in equity no obligation to contribute will arise where the party seeking contribution is liable to indemnify the party from whom contribution is sought in respect of a sum a third party may recover from either of them.
16 Thus if BP had a right to be indemnified by Esso, in respect of any sum BP was required to pay to the port authority, the common burden Esso shared with BP to indemnify the port authority would not have given Esso a right in equity to obtain equal contribution from BP in respect of a payment made to the port authority by Esso. Similarly, in Cockburn, if the mortgagor's father had met a claim made against him by GIO, payment of that sum would not have given the mortgagor's father a right of contribution from the solicitors merely because he, GIO and the solicitors "shared" an obligation to restore the mortgagor.
17 In Jones v Mortgage Acceptance Nominees Limited (1996) 63 FCR 418 at 421-422, Davies J opined that the general law of contribution may order contribution between concurrent tortfeasors if a gap has been left by statute and if justice requires it. However, his Honour was not required to determine if law or equity did so provide being satisfied in that case that contribution could be ordered under s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW). Accordingly, his Honour made such an order and that order was upheld on appeal: ABCOS v Jones (1997) 150 ALR 488 at 548-549.
18 It was suggested that Bialkower provided authority for the order made by his Honour in this matter but examination of the decision shows that is not so. At first instance, judgment was entered against three respondents for loss sustained by the applicant by reason of the conduct of two of the respondents that had contravened s 52 of the TPA, the liability of the third respondent flowing from his participation in that conduct. The two respondents whose conduct contravened the TPA, brought a cross-claim against the third respondent which alleged that they had suffered loss by misleading or deceptive conduct engaged in by the third respondent in contravention of the Fair Trading Act 1985 (Vic) and negligence, and sought an order that they be indemnified by the third respondent in respect of their liability to the applicant and in respect of their costs. The trial judge did not make findings on the cross-claim for indemnity but treated the cross-claim as an application for an order for contribution and ordered that the third respondent contribute 75 per cent of the judgment sum payable by the three respondents.
19 As noted earlier, in equity, pursuant to the doctrine of contribution, the three respondents, as judgment debtors, became obliged to each other upon pronouncement of the judgment to contribute equally to the common burden imposed on each of them by the judgment. Therefore, in equity, the third respondent could not be ordered to contribute more than one-third of that sum if one or other of the first or second respondents discharged the judgment, assuming, of course, that all remaining respondents were solvent when contribution was sought: Mahoney v McManus (1991) 180 CLR 370 at 376.
20 On appeal, therefore, the order made by the trial judge was not upheld as an order made in equity, and the order for contribution made against the third respondent was grounded on the statutory power provided in s 23B of the Wrongs Act 1958 (Vic), which states that 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. It may be noted that that provision was of wider ambit than s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW). Bialkower, therefore, did not provide authority for the order made in this matter.
21 His Honour referred to Street and the comment made by Gummow J therein that different "causes of action" will not prevent co-obligors having a common obligation out of which rights of contribution may arise. However, the essence of the decision in Street, was that a surety for a debtor could not recover contribution from parties made liable as principals by statute for the debts of the debtor. The liabilities of the guarantor and of the statutory debtors related to the same sum and the liability was owed to the same party, but the "level of liability" of each was conceptually distinct: Street per Gummow J at 600. Street, therefore, does not provide support for a contention that equity will order contribution between concurrent, as opposed to joint, tortfeasors.
22 Whether persons made liable by s 82 of the TPA for loss caused by conduct in contravention of s 52 of the TPA, or joint tortfeasors, each being parties who have engaged in concerted action towards a common end (see: Eyre v NZ Press Association Limited [1968] NZLR 736) may be regarded in equity as co-obligors for the purpose of the doctrine of contribution is unnecessary to decide. Historically, prior to intervention by law reform statutes, joint tortfeasors were liable under a single and indivisible cause of action. That joint liability, which involved common issues and defences between the joint tortfeasors and the injured party, provided a foundation in equity for an order for contribution, but if one, or some, of the joint tortfeasors suffered judgment to be entered or compromised the action, that event released the remainder of the joint tortfeasors from liability and from any obligation to contribute: Deanplan Ltd v Mahmoud [1992] 3 All ER 945; Allison v Uatar Management Services Limited NZCA, 17 December 1999 CA146/98. In principle, although the liability is imposed by statute and is not a joint liability arising at law, persons made liable under s 82 of the TPA, being persons whose conduct has contravened s 52 of the TPA and persons who have been involved in that contravention are liable in the same degree in respect of the loss caused by that conduct and the relationship between those parties as created by statute may sustain an order in equity for contribution.
23 Statutory provisions providing a right to recover contribution from other persons liable for the same damage have made it unnecessary to consider whether similar rights exist in equity. The doctrine of contribution has not been relied upon in this case because of the limitations of s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) which restricts the right to recover contribution to joint and concurrent tortfeasors: James Hardie & Coy Pty Limited v Seltsam Pty Limited (1998) 196 CLR 53 per Gaudron and Gummow JJ at 58-61. But, any attempt to apply the doctrine of contribution to either concurrent tortfeasors, or persons with concurrent liabilities in respect of a loss suffered by a third party, would be beyond the principles of the equitable doctrine and such circumstances may only be addressed by statutory provisions which create the appropriate rights and remedies: James Hardie per Gaudron and Gummow JJ at 59-61.
24 A proceeding by one person against another under a concurrent liability to a third party is one between independent and unrelated parties requiring determination of rights arising at law or under statute. An application for an order in equity for contribution is a proceeding between parties who share a common burden that arises out of a pre-existing relationship, the character of which demands an order that there be equality of contribution to the discharge of that burden to give effect to reason and natural justice.
25 A proceeding seeking an order for contribution between persons related only by concurrent liabilities does not satisfy that test. The grounds of liability and the acts or omissions of the respective parties will differ and different relationships will exist between those parties and the party affected by the separate conduct. Defences that may be raised to the respective acts or omissions will differ markedly and may include cross-claims which raise further issues. In the absence of a single judgment against persons under concurrent liabilities to compensate an injured party, one of those persons cannot apply by cross-claim for an order in equity that the other make contribution to any sum the former has paid in discharge of a judgment or in compromise of litigation. Any order for indemnity or contribution against a person under a concurrent liability must be grounded on rights arising out of contract or tort, or be provided by statute.
26 If the foregoing analysis is not accepted, the circumstances in the instant case prevent Jagar and Tressider obtaining contribution in equity in any event.
27 In the present case, Jagar's conduct, and Tressider's participation therein, caused Hanave to act to its detriment and suffer loss. The actions of Hanave were carried out by Burke as the natural person who constituted the organic form of a non-corporeal entity. Burke may claim that in respect of his act or omissions as the solicitor acting for Hanave - instructed by himself so to act - he was misled by the misleading or deceptive conduct of Jagar, participated in by Tressider, to the same extent that he was misled whilst acting on behalf of Hanave. Asking whether Burke, in the performance of his duties as solicitor for Hanave, should have been more diligent or astute, would not answer the question whether Burke was entitled to recover from Jagar and Tressider any loss he had suffered as a result of the conduct of Jagar. The essential question of fact would be whether Burke relied upon Jagar's conduct and did so to his detriment, namely by incurring liability to Hanave.
28 It would be reasonable to conclude that conduct which misled Burke when he decided on Hanave's behalf to enter an agreement to purchase the property, also constituted conduct likely to mislead Burke in his concurrent capacity as solicitor for Hanave. Conduct that would be in contravention of the TPA is not conduct that meets the requirements of the TPA by reason only of lack of diligence of a party to whom the conduct is directed. Where that party has professional skills which, if duly applied, may expose and thereby negate the misleading nature of the conduct, liability for that conduct will still attach under s 82 of the TPA if, in fact, the party is induced by the conduct to act contrary to that party's interests or professional obligations: Argy v Blunts & Lane Cove Real Estate Pty Limited (1990) 26 FCR 112 at 138.
29 In cases such as this where the circumstances provide the inference that the conduct of Jagar was intended to mislead the parties with whom Jagar dealt in trade or commerce, the conclusion that those parties were misled becomes more compelling, notwithstanding that one of those parties had professional skill and commercial experience. The TPA provides a remedy for the broad spectrum of people likely to be affected by conduct of a corporation that contravenes the TPA. The TPA does not restrict the relief it provides to the astute and intelligent and to those who have taken appropriate steps to protect themselves against such conduct. A right of remedy is extended to the careless and inattentive and those less than diligent in protecting their own interests. Failure by a party to make enquiries that may have exposed misleading or deceptive conduct will not absolve the breach of the TPA constituted by that conduct: Neilsen v Hempston Holdings Pty Ltd (1986) 65 ALR 302; Sutton v Thompson Pty Ltd (1987) 73 ALR 233.
30 It is more likely that it will be careless, inattentive and less diligent persons who succumb more readily to conduct the TPA seeks to extirpate. It is to be noted that the TPA does not control conduct that contravenes s 52 by the imposition of a penalty but by providing a statutory right for a person affected by that conduct to recover from the offending corporation, and from persons involved in the conduct of the corporation, the loss suffered by that conduct. That is, enforcement of the standard of corporate conduct that is set out in s 52 of the TPA relies upon private litigation of actions for compensation against persons who contravene or participate in contravention of s 52 of the TPA.
31 The foregoing circumstances show that no right of contribution was available in equity to Jagar and Tressider. Although Burke made no cross-claim against Jagar and Tressider to recover loss suffered by Burke by conduct of Jagar that contravened s 52 of the TPA, the question whether Burke has such a right would be a relevant issue in determining whether it is appropriate, in equity, that an order for contribution be made in favour of Jagar and Tressider. The relevant analogy in Cockburn would have been a claim by the mortgagor's father against the solicitors retained by the mortgagor for contribution to the sum the mortgagor's father was ordered to pay to GIO or to the mortgagor. It would have been inequitable, being neither reasonable nor just, to order that contribution be made by the solicitors to the mortgagor's father whose unconscionable conduct had caused the loss, and who had received an improper benefit in that amount. There must be equality of liability on which a right to obtain contribution is grounded and no bar in equity to the order being made. In the instant case either the liability of Jagar and Tressider is on a different level from that of Burke, in that Burke may be entitled to be indemnified by Jagar and Tressider, or the deceptive nature of the conduct from which the liability of Jagar and Tressider has arisen bars the making of an order in equity: Street per Gummow J at 599-600. In effect, the order made against Jagar and Tressider was to disgorge a benefit improperly received. That judgment provided no basis in equity for an order that Burke contribute to that restitution.
32 Furthermore, although no argument was addressed to the issue, it is not obvious that the measure of damages for the breach of contract by Burke is coincident with the loss Hanave may recover from Jagar and Tressider under s 82 of the Act. If the measure under each cause of action does not correspond there can be no order for contribution: Albion per Kitto J at 352.
33 If, despite the foregoing, it were determined that an order for contribution could be made against Burke in respect of discharge by Jagar and Tressider of the judgment entered against them, that order must reflect equal division of the common burden to make payment of the judgment sum. Burke, therefore, could not be ordered to pay more than one-third of that sum. Although it was the conduct of Jagar that contravened the TPA, liability for the consequence of that conduct was imposed severally on Jagar and Tressider by s 82 of the Act and the liability imposed on Tressider was that of a principal. Jagar and Tressider, severally, were liable to discharge the whole of the judgment. As judgment debtors, each was obliged to make equal contribution. In equity no order could be made that Burke contribute 50 per cent of that judgment sum, thereby fixing the contributions of Jagar and Tressider respectively at 25 per cent each.