Consideration - construction of the proportionate liability legislation
46 In Hunt & Hunt 247 CLR at 626 [16], French CJ, Hayne and Kiefel JJ said of the analogue of SubDiv GA that is Pt 4 of the NSW Act:
"The evident purpose of Pt 4 is to give effect to a legislative policy that, in respect of certain claims such as those for economic loss or property damage, a defendant should be liable only to the extent of his or her responsibility. The court has the task of apportioning that responsibility where the defendant can show that he or she is a 'concurrent wrongdoer', which is to say that there are others whose acts or omissions can be said to have caused the damage the plaintiff claims, whether jointly with the defendant's acts or independently of them. If there are other wrongdoers they, together with the defendant, are all concurrent wrongdoers."
47 Their Honours noted that ss 34(2) and 35(1)(a) of the NSW Act, which are the analogues of ss 12GP(3) and 12GR(1)(a), require the Court to determine the proportion of damage or loss claimed that the defendant should bear having regard to the extent of the defendant's responsibility for that loss or damage. They said, however, that the word "damage" in the sense used in the proportionate liability legislation was not equivalent to the amount of damages. Rather, the word referred to the harm suffered to a plaintiff's economic interests (247 CLR at 628-629 [23]-[24]). They held that the Court had to address the essentially factual question of whether the alleged concurrent wrongdoer was also a cause of the loss (i.e. harm to the plaintiff's economic interests) as claimed against the defendant (247 CLR at 635 [45]-[48]).
48 I am of opinion that a court needs evidence, based on an identifiable and intelligible issue, as to why an apportionable claim between concurrent wrongdoers can be made good, in order to determine, for the purposes of s 35(1)(a) or s 12GR(1)(a), the extent of a defendant's responsibility for the damage or loss suffered by a plaintiff. Importantly, s 12GR(1)(b) provides that the Court can give judgment against a defendant whose liability it has found to be limited under s 12GR(1)(a) for not more than an amount fixed by reference to the proportionate share of damage or loss for which it found that defendant liable. A defendant must show on the evidence (whether or not that evidence had been tendered or led by that defendant) that he, she or it is a concurrent wrongdoer before the Court can undertake any apportionment: cf: Hunt & Hunt 247 CLR at 626 [16]. That is why, where the plaintiff does not sue all potential concurrent wrongdoers, s 12GS(1) enables a defendant to raise the matter by giving notice of the information it has about the identity of, and the circumstances that may make the person, a concurrent wrongdoer. If a defendant wishes to establish that someone else has a concurrent liability for the damage or loss claimed by a plaintiff, ordinarily the defendant will have to persuade the Court of the amount by which the defendant's responsibility for that damage or loss is less than 100% for the purposes of s 12GR(1)(a).
49 The statutory criteria for fixing the proportion in s 12GR(1)(a) are, first, that the proceedings involve an apportionable claim (the chapeau in s 12GR(1)), secondly, the defendant is a concurrent wrongdoer, and thirdly, having regard to the defendant's responsibility for the loss and damage. The Court must make a finding of what proportion it is just for that defendant to bear.
50 Essentially, the establishment that someone is a concurrent wrongdoer with a, or another, defendant creates a defence to the plaintiff's entitlement to recover from each defendant 100% of the loss or damage claimed. Once another person, be it another defendant or a stranger to the proceedings, has been found to be a concurrent wrongdoer, each defendant who is liable has a partial defence to the plaintiff's claim to the proportionate extent of the other wrongdoer's proven responsibility for the damage or loss. The substance of that partial defence is that the Court will have decided that that the defendant is excused from any liability to pay the proportion of the loss or damage that is just. The Court fixes such a limitation of liability to pay compensation under s 12GR(1)(a) and its analogues as a defence to the full responsibility for that liability that, absent the finding that a concurrent wrongdoer exists, the defendant would otherwise have to bear.
51 A plaintiff may sue more than one defendant so as to create an immediately apparent apportionable claim. Alternatively, the plaintiff may sue only one defendant who then pleads a defence raising an apparent apportionable claim. In each case, a defendant has an interest in defeating or minimising the proportion of liability that the Court will find it just to attribute to it. A plaintiff may also seek to target one or more defendants as the person or persons to whom the Court should apportion all or a larger share of liability.
52 However, none of these scenarios, involving forensic tactical considerations, should be allowed to obscure the evident purpose of the proportionate liability legislation. That purpose is to create a defence that protects a defendant from having to bear more than a just share of liability as determined in proceedings brought against that defendant. The essential criterion that there be "proceedings involving an apportionable claim" exists throughout Subdiv GA. Moreover, a defendant whose liability has been found to be that of a concurrent wrongdoer gains the following statutory protections: first, regardless of the financial position of any co-defendant or other concurrent wrongdoer (s 12GP(5)), that defendant's proportionate responsibility to pay damages is both limited and fixed by a decision under s 12GR(1)(b), and, secondly, that defendant cannot subsequently be sued by any other person who is a concurrent wrongdoer for contribution or indemnity in respect of the apportionable claim by force of s 12GT. In contrast, the proportionate liability legislation does not, in terms, give a concurrent wrongdoer who is not a defendant in "proceedings involving an apportionable claim" any protection from being sued by a plaintiff or by a defendant found to be liable provided that in the subsequent proceedings, by force of s 12GU(2), the plaintiff cannot receive an amount more than the amount of damage or loss actually sustained.
53 Importantly, s 12GU(1) preserves the right of a plaintiff to sue another alleged concurrent wrongdoer, after recovering judgment against a concurrent wrongdoer, "for an apportionable part of any damage or loss". Nonetheless, s 12GU(2) precludes the plaintiff from recovering an amount of damages that, after taking into account the amount recovered already in respect of the damage or loss, would result in any recovery greater than the damage or loss sustained. That reflects the general law as explained by Gleeson CJ and Callinan J in Baxter v Obacelo Pty Limited (2001) 205 CLR 635 at 656-657 [47]-[48]. Their Honours discussed the position where a judicial assessment of the whole of a plaintiff's loss results in a judgment for damages in that amount against one tortfeasor. They said that when that tortfeasor satisfied the judgment that satisfaction "put an end to any claim, or possible claim, against another tortfeasor, whether a joint tortfeasor or one of several tortfeasors, for two reasons". Those reasons were that, first, full recoupment of the judicially determined damages had the consequence that any claim against another tortfeasor "lacks a subject matter", and secondly, it would be inequitable to permit additional recovery.
54 They then discussed the position if the plaintiff settled a claim against one tortfeasor, whether joint or concurrent, saying (at 656-657 [48]):
"If it would be unconscientious of the plaintiff to pursue a claim against another tortfeasor, or if the amount received pursuant to the settlement is, or ought to be regarded as, recoupment of the whole of the plaintiff's loss or damage, then action against another tortfeasor, whether in separate proceedings, or, where the other tortfeasor was a party to the original proceedings, by way of continuation of those proceedings, must fail. If, either expressly or by implication, a settlement agreement manifested a common intention of the parties to the agreement that the settlement sum was to be paid and received in full satisfaction of the rights of the plaintiff, against the defendant or anyone else, in relation to the loss or damage incurred, then, for both of those reasons, a further claim would fail. The most obvious way to negative such an intention would be by an express reservation of rights. While the effect of the settlement agreement, in the ordinary case, will be the most significant factor bearing upon either or both of the two possible grounds mentioned, it is not possible to eliminate any other circumstances which, in a given case, could indicate unconscientiousness, or loss of the subject matter of a claim." (emphasis added)
55 Gummow and Hayne JJ said (205 CLR at 661 [64] and see too per Kirby J at 664-665 [75], 670 [92]):
"Where it is accepted that the recovery under a settlement of the first action is of a sum less than that otherwise recoverable by judgment in the second action, it is not apparent that a question of "double satisfaction" arises. There will be no breach of the universal rule that the plaintiff cannot recover more than he or she has lost if the judgment in the second action gives credit for the recovery upon settlement of the first." (emphasis added)
56 Here, s 12GU(1) provides expressly that, despite having recovered a judgment against one concurrent wrongdoer "for an apportionable part of any damage or loss", the plaintiff can bring "another action against any other concurrent wrongdoer for that damage or loss" (emphasis added): i.e. in respect of the same harm to the plaintiff's economic interest that the original defendant had been found to have infringed. That right is constrained only by the prohibition imposed in s 12GU(2) against the plaintiff recovering an amount of damages in the second action that would result in him, her or it receiving compensation for damage or loss that is greater than the loss actually sustained. In other words, s 12GU in its very terms contemplates that, subsequently, events may occur that allow a plaintiff to sue another concurrent wrongdoer for a shortfall in recovery of a previously apportioned part of the damage or loss, provided that there is no double recovery involved. If, as S & P argued, the proportionate liability legislation precluded such an action, s 12GU would have no work to do. Likewise, s 12GU permits a plaintiff to sue in subsequent proceedings another person who was known, before judgment in the first proceeding, to be a potential concurrent wrongdoer.
57 Once the apportionment of an apportionable claim has occurred, s 12GU can only operate if it allows recovery of the unrecovered whole or part of the same damage or loss (i.e. harm to the economic interest infringed) as the first judgment had apportioned against the first concurrent wrongdoer. There could never be a question of double recovery if the initial apportionment resolved once for all the question of who was liable for the apportioned share of damage or loss. Rather, s 12GU only operates where the plaintiff has not recovered the full amount of the apportioned damage or loss from the wrongdoer(s) found liable by the first judgment.
58 The apportionment in the first judgment, ordinarily, but not exhaustively, will fix the responsibilities of all concurrent wrongdoers. The reason it will not do so exhaustively is not far to seek. It is because facts may emerge subsequently that demonstrate that a concurrent wrongdoer, not party to the original proceedings, had an, or a greater, apportionable share of responsibility for the plaintiff's damage or loss than appeared in the first proceeding. Ordinarily, the initial apportionment will resolve, as most litigation resolves, issues finally. But, where not all persons whose rights and liabilities may be in issue are party to one proceeding, the law has long recognised that litigation between different parties in different proceedings may bring about different, and possibly not wholly consistent, results, as does s 12GU in terms.
59 This does not mean that, ordinarily, a plaintiff who obtained a judgment against a concurrent wrongdoer who was, or became, insolvent can use s 12GU to recover the shortfall between the judgment sum including interest and the total dividend paid to the plaintiff from the insolvent's estate. If the plaintiff had sued other defendants together with the insolvent, or if the insolvent or another defendant had raised and proved that some other person who had not been sued was also a concurrent wrongdoer, the court would find and apportion responsibility among those defendants and the other person.
60 But, neither the plaintiff nor the other person would be bound in subsequent proceedings by any such finding as to the fact, or the share, of the other person's responsibility as a concurrent wrongdoer. That other person's liability will be limited by two mechanisms, first, the general law principle, now given statutory effect in s 12GU(2), that the plaintiff cannot recover more than full compensation for the damage or loss he, she or it sustained and, secondly, the apportionment that the Court makes in the proceedings in which that person is a party pursuant to s 12GR(1)(a) or its analogues.
61 Moreover, s 12GS makes provision in respect of a defendant affected by s 12GS(1)(a) who fails to give a plaintiff written notice of information that the defendant has about the identity and role of another potential defendant who may be a concurrent wrongdoer. But, Subdiv GA is silent on the position, other than as to costs, if the defendant does not do so. That is, the proportionate liability legislation does not provide a consequence barring, or otherwise affecting, a plaintiff from bringing subsequent proceedings against someone as a concurrent wrongdoer to recover no more than the damage or loss actually sustained by the plaintiff.
62 I do not accept S & P's contention that the findings, that Grange was the sole wrongdoer and the answer to question 9 in the Wingecarribee proceedings, amounted to a judgment that was inconsistent with the relief sought in these proceedings. It put that contention on the basis the decision in Rennie Golledge Pty Ltd v Ballard (2012) 82 NSWLR 231 at 236 [16] per Basten JA and 266-267 [154]-[157] per Barrett JA. That decision is distinguishable. It concerned the effect of a consent judgment, against a sole defendant, for damages to be assessed on the ability of that defendant to seek leave to amend its defence on the basis that the claims against it were apportionable claims under the NSW Act. Each of Basten JA and Barrett JA held that, while the judgment for damages to be assessed remained in place solely against the defendant, the defendant could not claim that there was anyone else who was capable of being found to be a concurrent wrongdoer. They held that any apportionment would be inconsistent with the defendant's admission of admitted sole liability for the plaintiff's damage or loss and, accordingly, they held that the amendment had been properly refused by the trial judge. Because that case concerned the defendant's position, their Honours did not need to, and did not, consider the operation of the proportionate liability legislation on a plaintiff exercising his, her or its right to bring further proceedings, including under s 12GU.
63 In essence, their Honours held that, because the sole defendant had not raised a defence of proportionate liability when consenting to judgment against it, it could not contend that the damages to be assessed were apportionable to anyone else. That recognised that a finding of proportionate liability is a partial defence to the plaintiff's cause of action for the harm to the economic interest infringed. In other words, the finding that the defence has been established is distinct from and anterior to the quantification of the amount of damages assessed in the proceedings. As I explain in these reasons, the proportionate liability legislation does not envisage that the quantification of the plaintiff's damages necessarily will be finalised in the first proceedings; those proceedings will only crystallise and finalise the proportion of liability of the defendant(s) to them and the amounts which he, she, it or they must pay. Subsequent proceedings can arrive at differing apportionments for other concurrent wrongdoers and different judgment sums, subject to the cap on recoveries mandated by s 12GU(2).
64 The evident intent of s 12GU is that the plaintiff can sue to recover the outstanding balance from anyone who is another concurrent wrongdoer. Considerable inconvenience, expense and injustice could be caused to a plaintiff if the proportionate liability legislation operated in the once for all way propounded by S & P. That is because, as Swan and Moree argued was the case in the Wingecarribee proceedings, the bare identification of a concurrent wrongdoer and circumstances that "may make" it a concurrent wrongdoer may be insufficient, within the meaning of s 12GS(1)(b), to justify the plaintiff pursuing that person. The defendant may not have an interest in highlighting or developing why the potential concurrent wrongdoer is also liable, because to do so might make the defendant's forensic position worse.
65 The construction of the proportionate liability legislation advanced by S & P also could lead to serious injustice if a defendant gave notice of a potential other concurrent wrongdoer pursuant to s 12GS(1) and pleaded, but did not prove, a defence based on that person's alleged responsibility. The proportionate liability legislation does not require the plaintiff to join such a person or undertake the risk, and expense, of suing him, her or it in the proceedings. The legislation does not extinguish or affect a plaintiff's cause of action against any third person merely because a defendant alleges or relies on a defence that the person was a concurrent wrongdoer based upon allegations that the defendant failed to establish in the proceedings. A plaintiff may consider that the case against the person notified by the defendant as a potential concurrent wrongdoer is weak. If the plaintiff fails to join that person and the defendant proves that the person is a concurrent wrongdoer so that the defendant's liability is apportioned below 100%, the defendant will have limited its own liability and to that extent established a partial defence.
66 But, if the plaintiff subsequently sued the other person, pursuant to s 12GU, that person would not be bound by the findings in the earlier proceeding as to liability or apportionment, save that s 12GU(2) would limit the compensation that the plaintiff could recover to no more than the damage or loss actually sustained. In particular, the court could find in the second proceedings, on the evidence, that the other person bore a lesser share of apportioned liability than found in respect of him, her or it in the first. But, in such a case, the defendant in the first proceedings would not be at risk of any adjustment in the judgment that had earlier established his, her or its apportioned degree of responsibility or, by force of ss 12GT and 12 GV(2), of any claims for contribution or indemnity.
67 Alternatively, the defendant in the first proceedings may have raised the issue of the potential liability of the other person, but then run no, or a desultory, case to establish that liability, so that no apportionment is found justified. In such a case, the plaintiff may have no interest in assisting the defendant in the effort of establishing a lesser share of liability. If S & P's argument were correct, nonetheless, despite s 12GU(1), the plaintiff would lose all its rights against the person if the court decided, in accordance with its function under s 12GR(1)(a), that the defendant's liability to the plaintiff should not be affected by apportioning any responsibility to the non-party.
68 A defendant can always protect his, her or its position by bringing a cross-claim seeking declaratory relief against a third person, whom he, she or it believed was a concurrent wrongdoer, as well as the plaintiff, if the plaintiff did not join that person after being given notice under s 12GS(1), in order to establish an entitlement to an apportionment of responsibility for the damage or loss found. That cross-claim would create a binding decision on all relevant parties. For example, in the Wingecarribee proceedings, it is not hard to imagine why Grange would not have developed a detailed evidentiary case that the ratings agencies were negligent, given both its own expertise and failure to advise its clients, the Councils, about that subject matter. Had Grange put such a case, it may well have shown that it had no appropriate product to sell and thus would have proven that, as the Councils had alleged, it had engaged in misleading and deceptive conduct, was negligent and in breach of its fiduciary duties to them.
69 Critically, s 12GR(1)(a) limits the liability of a defendant to proceedings who is a concurrent wrongdoer in relation to a single apportionable claim in respect of damage or loss. The concurrent wrongdoers are persons whose act(s) or omission(s) caused independently or jointly the damage or loss that is the subject of that claim by force of s 12GP(3). The provisions of Subdiv GA and its analogues do not refer to the liability of potential or other possible concurrent wrongdoers who are not made defendants in proceedings in respect of the single apportionable claim. Instead, s 12GS requires a defendant only to give notice to a plaintiff about the existence and role of a person whom the defendant has reasonable grounds to believe is a concurrent wrongdoer.
70 The use of these provisions in the structure of the proportionate liability legislation indicates that the apportionment of liability in proceedings is a substantive defence established after a trial on identified issues. A court can only arrive at an apportionment under s 12GR(1)(a) that it "considers just having regard to the extent of the defendant's responsibility for the damage or loss" after making findings of fact on the evidence of each defendant's responsibility. Barrett J arrived at this conclusion in respect of the NSW Act in Reinhold 82 NSWLR at 769-771 at [19]-[24], [29]-[32]. He followed what Middleton J had said, obiter dicta, in Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd (2007) 164 FCR 450 at 458 [30]-[31]. Middleton J had held that the Victorian proportionate liability legislation in Pt IVAA of the Wrongs Act 1958 (Vic) was not picked up as a surrogate federal law by s 79 of the Judiciary Act 1903 (Cth) because that legislation made no provision for proportionate liability for claims made there under the Corporations Act 2001 (Cth): see 164 FCR at 456-457 [18]-[20], 458 [32].
71 I reject S & P's argument that what Barrett J decided as to this construction was affected by the reasoning of French CJ, Hayne and Kiefel JJ in Hunt & Hunt 247 CLR 613. Indeed, their Honours' construction was consistent with that of Barrett J, Middleton J and my own.
72 I should also note that Swan and Moree argued that the proportionate liability legislation had no application here because the Councils in the Wingecarribee proceedings recovered no damages. They submitted that s 12GU(2) did not prevent them seeking to recover their losses in full in these proceedings. They argued that the Councils had merely established the sums for which they should be admitted to proof in Grange's liquidation. I reject that argument. It ignored the express terms of s 12GP(5) and its analogues. That provided that, for the purposes of Subdiv GA, it did not matter that a concurrent wrongdoer was insolvent or was being wound up. The expression "damages previously recovered" in s 12GU(2) must include any amounts received or receivable as dividends from an insolvent estate or a company in liquidation. The principle against double recovery is reflected in s 12GU(2) as explained above.
73 For these reasons, I am of opinion that the proportionate liability legislation creates an effective defence for a defendant who can persuade a court that his, her or its responsibility for a claim should be limited, as French CJ, Hayne and Kiefel JJ said, by "apportioning that responsibility where the defendant can show that he or she is a 'concurrent wrongdoer'" (Hunt & Hunt 247 CLR at 626 [16]). A defendant who can show - i.e. prove - that, gets the benefit of a limitation, once for all, of his, her or its liability. And, if there is more than one concurrent wrongdoer joined as a party in the action, all of them will seek to have their respective liabilities to the plaintiff apportioned to as little as possible so as to thrust the balance onto each other defendant. The consequence of the court's determination, once made, will be that that apportioned share(s) cannot later be altered (subject to the principles affecting judgments obtained by fraud or other irregularities, none of which need be considered here) and, by force of ss 12GT and 12GV(2), those concurrent wrongdoer defendants cannot be called upon to make contribution or indemnity to a person who is later sued in a separate proceeding to which s 12GU applies.
74 Thus, the effect of a defendant succeeding in having his, her or its responsibility for a claim apportioned is only to limit the liability to the plaintiff of that defendant. That result does not limit a plaintiff's available remedies against other concurrent wrongdoers who are not defendants in the proceedings to recover any damage or loss actually sustained that is not recovered from that defendant.
75 I am of opinion that there is nothing in Subdiv GA that operates to exclude the availability of any cause of action to Swan or Moree to seek recovery, pursuant to s 12GU, of any damage or loss from S & P that they do not recover from Grange and that they actually sustained from investing in SCDOs.