Charles Delius Somerville Alexander and Ors (t/as Minter Ellison) v Perpetual Trustees WA Limited and Anor

LOWER COURT JURISDICTION : Supreme Court LOWER COURT SC 50230/97 FILE NUMBER(S) : LOWER COURT Rolfe J JUDICIAL OFFICER :

COUNSEL : M A Pembroke SC/I M Jackman/T M Faulkner (Appellants) S Robb QC/J Simpkins SC (Respondents) SOLICITORS : Mallesons Stephen Jaques (Appellants) Phillips Fox (Respondents) CATCHWORDS : NOTICE OF MOTION - Wrongs Act 1958 (Vic), s 23B - whether court should provide supplementary reasons for judgment - EQUITY - trust - breach of trust - whether beneficiaries have a right of action to recover compensation against a third party - ND LEGISLATION CITED : Law Reform (Miscellaneous Provisions) Act 1946, s 5(1)(c), s 5(2) Wrongs Act 1958 (Vic), s 23A, s 23B, s 24 BP Petroleum Development Ltd v Esso Petroleum Co Ltd [1987] SLT 345 BT Australia Ltd v Raine & Horne Pty Ltd [1983] 3 NSWLR 221 Caledonian Railway Co v Colt (1860) 3 Macq 833 Cockburn v GIO Finance Ltd [2001] NSWCA 177 CASES CITED: Charles Delius Somerville Alexander and Ors (t/as Minter Ellison) v Perpetual Trustees WA Limited (ACN 008 666 886) and Perpetual Trustee Company Limited (ACN 000 001 007) [2001] NSWCA 240 Hayim v Citibank NA [1987] AC 730 Rolls Royce Industrial Power (Pacific) Limited v James Hardie & Co Pty Ltd [2001] NSWCA 461 Royal Brunei Airlines SDN v Ming [1995] 2 AC 378 Scholefield Goodman & Sons Ltd v Zyngier [1986] AC 562 Street v Retravision (NSW) Pty Ltd (1995) 56 FCR 588 DECISION : Order that appeal dismissed with costs confirmed

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40067/00 SC 50230/97

STEIN JA DAVIES AJA IPP AJA

Monday, 15 April 2002 Charles Delius Somerville ALEXANDER and ORS (t/as MINTER ELLISON) v PERPETUAL TRUSTEES WA LIMITED and Anor (No. 2) Supplementary Reasons for Judgment

1 STEIN JA: This is a Notice of Motion filed by the respondent corporations seeking orders for the purpose of considering whether the court has omitted to deal with the appellants' submission based on s 23B of the Wrongs Act 1958 (Vic). If this be the case, the motion asks the court to consider whether it should provide supplementary reasons for its judgment delivered on 30 July 2001. 2 The appellants consent to the court determining the application notwithstanding that they have filed a special leave application in the High Court. The principal basis for the special leave application is that the Court of Appeal failed to consider and give reasons in relation to the appellants' claim against the respondents pursuant to s 23B. Both parties agree to the motion to this court being determined in the absence of the parties and on the basis of written submissions filed. 3 The reasons contained in my judgment of 30 July 2001 make no specific reference to s 23B, except in a global way, see para 11. The judgment dealt, at some length, with the appellants' claim for equitable contribution, which claim was dismissed. Davies AJA made specific reference to the Victorian provision in para 137. Ipp AJA agreed with my judgment. 4 There is substance in the appellants' contention that I did not squarely deal with their claim for contribution under the Victorian Wrongs Act. There was a reason for this omission. At the very end of Mr Pembroke SC's comprehensive and lengthy address on behalf of the appellants he said: I'd like to finish here. I must just add there is reliance also on s 23B of the Victorian Wrongs Act, which provides for a statutory form of contribution. The criterion for the application of that statute is that there be the same damage. The substantive issue seems to be the same issue as that which arises in relation to the application of equitable contribution. 5 This statement by counsel lulled me into the understanding that the s 23B point turned on the same issue as equitable contribution. Upon recently reading the transcript of the appeal I see that Mr Pembroke sought to correct his submission in reply and make the point that the statutory provision in the Wrongs Act was not the same issue as equitable contribution, see T 99. 6 In these circumstances I think that the parties are entitled to supplementary reasons dealing with the appellants' argument based on s 23B. However, these reasons should be read in the light of the judgment given on 30 July 2001. 7 Section 23B(1) provides: 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). 8 It is also necessary to set forth s 23A(1): 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 dependents 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. 9 On a proper construction of these provisions I do not see that the appellants are entitled to an order for contribution under the Victorian statute. 10 Section 23B(1) has to be understood in the light of the definitional provision in s 23A(1). The latter provision says that 'a person is liable in respect of any damage' (the same words as in s 23B(1)) 'if the person who suffered that damage … is entitled to recover compensation from the first mentioned person in respect of that damage …'. 11 Substituting the parties to this litigation into the provision means that the appellant solicitors may recover contribution from any other person liable in respect of the same damage if the beneficiaries (who suffered the damage) are entitled to recover compensation from the appellants with respect of that damage. 12 For s 23B to apply it is therefore essential that the beneficiaries are entitled to recover compensation from the appellants. 13 This requirement cannot be here satisfied because, as a general proposition, beneficiaries of a trust do not have a right of action for compensation against a third party who wrongly breached an obligation owed to the trustee of the beneficiaries. See, for example, Hayim v Citibank NA [1987] AC 730 at 748. See also the discussion and citations at para 121 of my reasons for judgment of 23 July 2001. 14 There are some circumstances where beneficiaries may be entitled to join their trustee in proceedings against a third party, but the rationale is to enforce the trustee's rights as against the third party. It is only in an exceptional case, such as BT Australia Ltd v Raine & Horne Pty Ltd [1983] 3 NSWLR 221, where beneficiaries, on particular facts, have a direct right of action against a third party. Such a situation does not arise in the present case. 15 In the instant case the appellants' liability was solely to the respondents and the respondents alone had a liability to the beneficiaries, see my reasons of 23 July 2001, paras 116 - 121 and Davies AJA at paras 140 - 142. 16 Further, Rolfe J found against the appellants on s 23B on the basis that the 'same damage' was not involved. 17 In my view, his Honour was correct, as are the respondents' submission to this court on the point. The parties (the appellants and the respondents) were not liable with respect to the same debt or to make good the same loss sustained by the beneficiaries. The respondents owned the property which was lost notwithstanding that they held it on trust for the beneficiaries. The respondents appointed the appellants as their agents and trustees and the solicitors breached duties which they owed personally to the respondents. The respondents had their own rights of action against the appellants under which the appellants were liable to make good the loss suffered by the respondents. This loss may include, in an appropriate case, the loss suffered by the trustees in being exposed to claims for breach of trust, (Royal Brunei Airlines SDN v Ming [1995] 2 AC 378). 18 Since writing these reasons I have had the benefit of reading the draft supplementary reasons for judgment of Davies AJA. I agree with his Honour and, in particular, paragraph 26. 19 It follows, in my view, that no alteration is required to the orders made by the court on 30 July 2001 dismissing the appeal with costs. 20 DAVIES AJA: Judgment in this appeal was handed down on 30 July 2001 (Charles Delius Somerville Alexander and Ors (t/as Minter Ellison) v Perpetual Trustees WA Limited (ACN 008 666 886) and Perpetual Trustee Company Limited (ACN 000 001 007) [2001] NSWCA 240). Subsequently, the parties requested the members of the Court, Stein JA, Ipp AJA and myself, to provide further reasons dealing with the submissions made on behalf of the appellants, Charles Delius Somerville Alexander and Others, solicitors, who traded as Minter Ellison, which relied upon s23B of the Wrongs Act 1958 (Vic). 21 In the appeal, it had been submitted on behalf of the appellants both in writing and orally that the appellants were entitled to contribution from the respondents, Perpetual Trustees WA Limited and Perpetual Trustee Company Limited, under equitable principles, under s5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 and under ss 23A, 23B and 24 of the Wrongs Act 1958 (Vic). One distinction between the Victorian provision and the New South Wales provision is that s23A of the Wrongs Act provides that the entitlement to recover compensation lies in respect of damage, "whatever the legal basis of liability, whether tort, breach of contract, breach of trust or otherwise".

Section 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act refers to the liability of tort-feasors. 22 As the appellants are not entitled to contribution under the Victorian statutory provisions, it is not necessary or desirable to discuss the issue, which was adverted to by counsel during the trial, although not fully debated, as to whether the Victorian provision constitutes substantive law, which is applicable by reason of the terms of the agreement between the parties, or procedural law, which has no application to legal proceedings in New South Wales. 23 In his reasons for judgment, Stein JA, with whom Ipp AJA and I expressed agreement, said (at [116]), "the question comes down to whether there is a common liability to be sued or a common risk to bear part of the same loss."

His Honour held that (at [120]), "It cannot be said that the solicitors [the appellants] and Perpetual [the respondents] are liable to perform substantially the same obligation. Indeed, they are liable with respect to different obligations and the liability is not a common one. The solicitors had no liability which was capable of being co-ordinate with Perpetual's liability to its beneficiaries." 24 Expressing some additional reasons, I specifically referred to the three bases on which the claim for contribution was based and said that (at [138]), "Perpetual WA and Perpetual, on the one hand, and the solicitors, on the other, were not under coordinate liabilities in respect of the damages awarded . The damages which the solicitors were ordered to pay to Perpetual WA and Perpetual, were awarded because they flowed from the solicitors' breach of their duty to those parties. One party who has been ordered to pay monies to another party, by way of compensation for breach of trust, may not rely upon principles of contribution to recover back some of the damages which it has been ordered to pay. Negligence on the part of a beneficiary may not be relied upon by way of a claim for contribution or a claim of contributory negligence."

I went on to say (at [140]), "Perpetual WA and Perpetual, on the one hand, and the solicitors, on the other, were not persons whose liability was "of the same nature and the same extent" . These words were used by Lord Chelmsford in Caledonian Railway Co v Colt (1860) 3 Macq 833 at 844 and by Lord Ross in BP Petroleum Development Ltd v Esso Petroleum Co Ltd [1987] SLT 345 at 347. They were adopted by Gummow J in Street v Retravision (NSW) Pty Ltd (1995) 56 FCR 588 and by Mason P in Cockburn v GIO Finance Ltd [2001] NSWCA 177 at [28]. Mason P said that this requirement "emphasises the need for the two parties to be liable to perform substantially the same obligation" . Another aspect of the same point is that the parties must be liable "on the same level of liability" . See Scholefield Goodman & Sons Ltd v Zyngier [1986] AC 562 at 575; and Street v Retravision (NSW) Pty Ltd at pp 598-599." 25 Accordingly, I am of the view that there was no liability to contribute under s23B of the Wrongs Act because there was no coordinate liability in respect of the damages awarded. The damages which the solicitors were ordered to pay were awarded because they flowed from the solicitors' breach of their duty to the respondents. 26 As the issue has been raised for the further consideration of the Court, I would add that s5(2) of the Law Reform (Miscellaneous Provisions) Act and s24(2) of the Wrongs Act both provide that the contribution recoverable shall be such as shall be found by the court to be just and equitable. Section 24(2) of the Wrongs Act provides that the court shall have the power to exempt any person from liability to make a contribution or to direct that the contribution to be recovered from any person shall amount to a complete indemnity. Section 5(2) of the Law Reform (Miscellaneous Provisions) Act makes similar provision. The application of that provision was discussed by Stein JA, with whom I agreed, in Rolls Royce Industrial Power (Pacific) Limited v James Hardie & Co Pty Ltd [2001] NSWCA 461 at [129] - [143]. 27 In the circumstances of this case, for the reasons which the members of the Court explained in their reasons for judgment, it was not just and equitable that an order for contribution be made against the respondents. The respondents were entitled to be fully indemnified by the appellants in respect of any damages which might otherwise fall within the application of the statutory provisions. The reasons for this were made clear in the reasons for judgment given on 30 July 2001. It is not necessary to expand on them. 28 In the circumstances, it is unnecessary to consider whether and in what manner, in other cases, the application of the sections of the Wrongs Act may lead to a different result from that of the equitable principles. 29 IPP AJA: I agree with the Supplementary Reasons for Judgment of Stein JA and Davies AJA.

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