Supreme Court of SA|2000-12-08|Before: Mullighan J

DUKE GROUP LTD (IN LIQ) v PILMER & ORS (NO 2) No. SCGRG-92-1874 [2000] SASC 418 (8 December 2000)

CLAIMS FOR CONTRIBUTION AS BETWEEN DEFENDANTS Contribution between tort-feasors pursuant to s 25(1)(c) Wrongs Act (SA) 1936 - defendant partnership (NWP) found to be liable to plaintiff in contract and tort and for breach of fiduciary duty - directors of plaintiff company found liable to the plaintiff for breach of fiduciary duty and breach of statutory duty - damage for which NWP is liable in tort is same as damage for which it is liable in contract and for breach of fiduciary duty - judgment entered in favour of plaintiff against NWP for the full amount of its claim in contract - if damages for tort had been awarded they would have been reduced by reason of contributory negligence - whether NWP is to be considered a tort-feasor for the purposes of s 25(1)(c) of the Wrongs Act - if so and an order for contribution is made, whether it should be referable to the amount of damages recoverable by the plaintiff in tort before any reduction for contributory negligence - distinction drawn between making contribution orders as between defendants after judgment entered in contract in favour of plaintiff and reducing award of damages in tort at first instance for contributory negligence - whether each director is a tort-feasor for the purpose of s 25(1)(c) - whether appropriate to distinguish between directors of the plaintiff company for the purpose of assessing directors' contribution to loss suffered by plaintiff - extent of contribution as between NWP and directors for loss suffered by plaintiff discussed.

Duke Group Ltd (In Liquidation) v Pilmer & Ors [1999] SASC 97; (1999) 73 SASR 64;
Duke Group Ltd (In Liquidation) v Pilmer & Ors (No 7) (Mullighan J, S6529, 30 January 1998)[1998] SASC 6529; , (1998) 27 ACSR 1;
Daniels v Anderson (1995) 37 NSWLR 438;
Albion Insurance Co Ltd v Government Insurance Office of NSW [1969] HCA 55; (1969) 121 CLR 342;
AWA Ltd v Daniels (1992) 7 ACSR 759;
Jones v Mortgage Acceptance Nominees Ltd [1996] FCA 1255; (1996) 63 FCR 418;
Australian Breeders Co-operative Society Ltd v Jones [1997] FCA 1405; (1997) 150 ALR 488, 26 ACSR 26;
Trade Practices Commission v Manfall Pty Ltd (No 3) (In Liquidation) [1991] FCA 650; (1991) 33 FCR 382;
Sky Channel Pty Ltd v Tszyu [2000] NSWSC 838;
Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1;
Barisic v Devenport [1978] 2 NSWLR 111;
Street v Retravision (NSW) Pty Ltd [1995] FCA 1197; (1995) 56 FCR 588, considered.

Counsel: MR T GRAY QC WITH MR S LIPMAN - Solicitors: FISHER JEFFRIES

First And Fifth Defendants: ANGUS PILMER & ORS AND RONALD WILLIAM EDWARD ARNOLD & ORS

Counsel: MR S LANE WITH MR ZAPPIA - Solicitors: PHILLIPS FOX

Fifth Defendants: ALLAN KEITH LAVIS, KEITH GAY AND IAN KEITH TAYLOR

Counsel: MR J WHITE - Solicitors: THOMPSON PLAYFORD

Counsel: MR A CAMP - Solicitors: HUME TAYLOR & CO AS AGENT FOR ATKINS & CO

Judgment No. [2000] SASC 418

DUKE GROUP LTD (In Liquidation) v PILMER & ORS (NO 2)

1 DOYLE CJ and DUGGAN J. The Court has already dealt with an appeal against the decision of the trial Judge in this action: Duke Group Ltd (In Liquidation) v Pilmer & Ors [1999] SASC 97; (1999) 73 SASR 64. These reasons deal with claims for contribution as between the defendants. Those issues are not dealt with in the Court's earlier judgment: see [1999] SASC 97 at [1087], [1999] SASC 97; 73 SASR 64 at 301-302. The issue of contribution was the subject of relatively brief submissions by the parties after the Court had published its earlier decision.

2 The Court found that the partners of Nelson Wheeler in Perth ("NWP") were liable to the plaintiff for breach of a contractual obligation to exercise reasonable care and skill in the preparation of certain reports. The Court also found that NWP was liable to the plaintiff in tort for breach of a duty of care relating to the same matter. The Court found that the loss in each case was the same, and the damages in each case should be assessed at the same amount: see [1999] SASC 97 at [1071] - [1078][1999] SASC 97; , (1999) 73 SASR 64 at 298-300.

3 The Court found that the plaintiff was entitled to judgment against NWP for the full amount of its claim. It so found because the plaintiff was entitled to rest its claim upon the claim in contract, and the amount of damages recoverable in contract was not subject to reduction for contributory negligence on the part of the plaintiff. Had it been open to the Court to reduce the amount claimed by the plaintiff on account of contributory negligence, the Court would have reduced the amount of the judgment by 35 per cent on account of the conduct of the plaintiff by its directors: see [1999] SASC 97 at [653] - [658][1999] SASC 97; , (1999) 73 SASR 64 at 199.

4 The Court also found that NWP was liable for breach of a fiduciary duty owed to the plaintiff. The Court found that the amount recoverable under that head was the same amount as was recoverable in contract and in tort. A judgment being entered on that basis, the Court would have reduced the amount awarded by 35 per cent on account of the fault of the plaintiff: see [1999] SASC 97 at [1082], [1999] SASC 97; (1999) 73 SASR 64 at 300-301.

5 The Court upheld a finding by the trial Judge that the directors were liable to the plaintiff for breach of fiduciary duty and breach of statutory duty: see [1999] SASC 97 at [1081], [1999] SASC 97; (1999) 73 SASR 64 at 300.

6 The trial Judge took the view that the conduct of the directors was tortious as well, presumably meaning by that that the directors were in breach of a duty of care owed by them to the plaintiff: Duke Group Ltd (In Liquidation) v Pilmer & Ors (No 7) (Mullighan J, S6529, 30 January 1998), (1998 ) [1998] SASC 6529; 27 ACSR 1 at 381-383. We are prepared to accept that finding for present purposes. The view that a director of a company owes a duty of care to the company is supported by the majority of the Court of Appeal of New South Wales in Daniels v Anderson (1995) 37 NSWLR 438 at 505.

7 The claim by NWP for contribution from the directors is founded on s 25(1)(c) of the Wrongs Act (SA) 1936. That is the well known provision for contribution between tort-feasors. In the alternative, the claim to contribution is based on the equitable principle of contribution identified by the High Court, and in particular in the reasons of Kitto J in Albion Insurance Co Ltd v Government Insurance Office of NSW [1969] HCA 55; (1969) 121 CLR 342.

8 For the purposes of s 25 we are satisfied that NWP is to be considered a tort-feasor liable in respect of damages to the plaintiff. It is to be so regarded even though the judgment entered against NWP is referable to the claim in contract. There is authority to support the view that for the purposes of a claim by a tort-feasor under s 25(1)(c) it suffices that the claimant be a person who is in fact a tort-feasor liable in respect of damages, even though a judgment has not been entered against that person on that basis: see AWA Ltd v Daniels (1992) 7 ACSR 759 at 856-858, Jones v Mortgage Acceptance Nominees Limited [1996] FCA 1255; (1996) 63 FCR 418 at 419-422, Australian Breeders Co-operative Society Ltd v Jones [1997] FCA 1405; (1997) 150 ALR 488 at 548-549[1997] FCA 1405; , 26 ACSR 26 at 86-87.

9 The damage for which NWP is liable in tort is the same damage as that for which it is liable in contract. The damages for which NWP is liable in tort should be assessed at the same figure as the damages for which it is liable in contract.

10 Accordingly, provided that the directors can be regarded as tort-feasors, liable to the plaintiff in respect of the same loss as that for which NWP is liable to the plaintiff, NWP has a claim under s 25(1)(c) for contribution from the directors. As we have indicated, we are of the view that the directors owed a duty of care to the plaintiff, were in breach of that duty of care and that the damage caused to the plaintiff by that breach of duty of care is the same damage as that for which NWP has been held to be liable.

11 It was not necessary for us or for the trial Judge to assess the damages for which the directors were liable in tort. As the damage caused by their breach of duty in tort is the same damage as that for which NWP is liable in tort, we are satisfied that the damages for which the directors are liable in tort would be assessed at the same figure as the damage for which NWP was liable in tort. Accordingly, subject to a point yet to be mentioned, NWP is entitled to an order for contribution.

12 The amount of contribution to which NWP is entitled is to be such "as may be found by the Court to be just and equitable, having regard to the extent of that person's [the directors'] responsibility for the damage": s 26 of the Wrongs Act (SA) 1936.

13 If the damages awarded to the plaintiff against NWP had been reduced for contributory negligence, on account of the conduct of the directors, authority suggests that it would not be appropriate to order contribution as between NWP and the directors: see AWA Limited v Daniels (1992) 7 ACSR 759 at 877, Daniels v Anderson (1995) 37 NSWLR 438 at 578-580. The reason for this is that had the damages awarded against NWP been reduced for contributory negligence, NWP would already have had the benefit of a reduction of its liability on account of the fault of the plaintiff by its directors. The view has been taken that in those circumstances it would not be just and equitable that NWP secure a further reduction in its liability in damages on the same basis.

14 As there has been no reduction for contributory negligence, we see no reason why an order should not be made for contribution, the order being referable to the amount of damages recoverable against NWP in tort before any reduction for contributory negligence, which is the same amount as the amount of damages recoverable against NWP in contract and for breach of fiduciary duty. The same amount of damages is recoverable against the directors in tort.

15 Like the majority in Daniels v Anderson (1995) 37 NSWLR 438 at 579, we are of the view that whatever answer is given here will not be satisfactory. The plaintiff is entitled to recover the full amount of its damages from NWP, because the plaintiff is entitled to recover in contract. NWP has lost the opportunity to have its liability in damages reduced on account of the contributory negligence of the directors. Had the liability been reduced on that basis, there is support for the view that contribution should not be ordered by reference to the same conduct as provided the basis for a reduction in damages on account of contributory negligence. But, the damages not having been reduced, we consider that the Court is entitled to make the order for contribution by reference to the full amount of the damages. It does not seem to us appropriate to make an order by reference to a notionally reduced amount of damages (the notional amount for which NWP would have been liable in tort, subject to a reduction for contributory negligence), because that, in a sense, would be self defeating. On the authority of the case to which we have referred, no order for contribution would then be made. It does not seem to us inconsistent with the statutory scheme to proceed on the basis of the full amount of the damages recoverable from NWP. If an order for contribution is made, it means only that, at the end of the day, the directors will be liable to contribute to that order in an amount assessed as just and equitable. The order that we propose to make cannot result in the directors having to contribute an amount that exceeds the amount for which they would have been liable in tort had judgment been entered on that basis. For those reasons, recognising the awkwardness of the situation, our view is that we have power to make an order for contribution, and should do so.

16 In considering the amount of contribution to be ordered, we bear in mind the statutory terms. We note that the expression used is substantially the same as the expression used in the Wrongs Act to describe the basis upon which the Court approaches the reduction of damages on account of contributory negligence: see s 27A(3). However, it may be that matters to be considered under the respective provisions are not precisely the same. A person who suffers a reduction in damages on account of contributory negligence is not necessarily a tort-feasor, and is certainly not a tort-feasor in respect of those damages. The damages are damages awarded for a tort committed against the person who suffers the reduction in damages. In the case of contribution the Court considers contribution as between persons all of whom are liable in tort to the same person for the same damages.

17 It is also appropriate to bear in mind that, as the present case illustrates, in deciding by what amount the plaintiff's damages should be reduced for contributory negligence, it is both convenient and appropriate to have regard to the conduct of the directors as a group, and to consider to what extent the damages of the plaintiff should be reduced having regard to the effect of the conduct of the directors on the plaintiff's share in the responsibility for the damage suffered by the plaintiff. When considering contribution, one has to consider the position of the directors individually, as the order for contribution will be an order made in favour of NWP against each of the directors. On the other hand, as a tort-feasor, each director is liable to the plaintiff for the whole loss suffered, even though the fault or culpability of particular directors might be considered to be less than the fault or culpability of other directors. As well, each Director bears a collective responsibility for the conduct of the board as a group. In the present case, when the trial Judge considered the question of contribution, he ordered that the defendant Abbott bear 50 per cent of the responsibility, and that each of the other four directors bear five per cent of the responsibility for the damage suffered by the plaintiff. He ordered that NWP bear 30 per cent of that responsibility. The distinction that the trial Judge drew reflected his conclusion that the defendant Abbott was more culpable, in layman's terms more at fault, than the other directors: see Duke Group Ltd (In Liquidation) v Pilmer & Ors [1998] SASC 6529; (1998) 27 ACSR 1 at 382-383. We agree with the trial Judge's view that the defendant Abbott was more culpable than the other directors. We agree with the trial Judge's finding that he was the "driving force" behind the events that led to the damage suffered by the plaintiff. However, we consider that that is a matter to be reflected by the orders for contribution as between the Directors.

18 When we considered the question of the reduction of damages on account of contributory negligence, we took the view that had the occasion to reduce damages arisen, we would have reduced the plaintiff's damages in tort by 35 per cent on account of its fault, the fault being measured by the conduct of the directors. We took that view because we considered that the advice of NWP was sought specifically as a protection against unwise and self interested conduct by the directors, and because NWP knew that: see [1999] SASC 97 at [653] - [658][1999] SASC 97; , (1999) 73 SASR 64 at 199. In other words, we were influenced by the fact that we were considering the plaintiff's claim for damages, the plaintiff's responsibility for the loss that it suffered, and we considered that we should differentiate between the directors and the plaintiff, even though the plaintiff was responsible for the conduct of the directors and could be substantially identified with them. At the same time we observed that there was no "significant differentiation" as between NWP and the directors when one considered the extent to which they each had fallen short of the degree of care required, and we found it "difficult to distinguish between them in terms of responsibility for the damage suffered": [1999] SASC 97 at [655], [1999] SASC 97; (1999) 73 SASR 64 at 199.

19 We consider that it is appropriate, in the present case, to distinguish between the approach to be taken in considering the reduction of damages on account of contributory negligence, and the approach to be taken in assessing contribution as between the defendants. Reflecting the findings of fact to which we have just referred, we take the view that it is just and equitable that as between NWP and each of the directors, they should be ordered to contribute equally to the damage suffered by the plaintiff. Considering their respective positions we take that view because they are equally at fault, they are equally responsible for the damage suffered, and in contrast to the position of the plaintiff, it cannot be said that the advice of NWP was sought to protect the directors against an unwise and self interested proposal. To the extent that the advice of NWP might have been sought for the benefit and assistance of the directors, it is clear under the circumstances that the directors did not in reality proceed on that basis.

20 Accordingly, we would order that, in respect of the claim by NWP against the directors, the amount of contribution as between NWP and each of the other defendants in respect of their liability to the plaintiff under our judgment and for costs shall be as to the defendant NWP 50 per cent and as to each other defendant 50 per cent. We make it clear that the intent of this order is that NWP should recover from the directors collectively an amount not exceeding 50 per cent of the amount recovered by the plaintiff from NWP.

21 On its face, the order that we would make is less favourable to NWP than that made by the trial Judge. He ordered that NWP recover 50 per cent of the judgment sum from the defendant Abbott, and 5 per cent from each of the defendants Quilty, Singleton, Somes and Lee-Steere. We take the view that it is just and equitable that responsibility should be borne equally as between NWP and the directors. As between NWP and the directors, we do not consider that it is appropriate to approach the issue of contribution on a basis that reflects the individual responsibility of each of the directors as between themselves. That is a matter that can be dealt with by orders for contribution as between the directors.

22 Accordingly, we would allow NWP to consider whether, in light of what we have said, it asks the Court to interfere with the order for contribution made by the trial Judge. It follows that we would dismiss the appeal by Somes and Lee-Steere to the extent that they complain of the apportionment of responsibility made by the trial Judge.

23 We would dismiss the appeal by NWP against the trial Judge's order giving the Directors leave to claim contribution against NWP. We do not consider that the making of that order gives rise to any unfairness.

24 We would make the same order for contribution in favour of the directors Somes and Lee-Steere against NWP. The order is limited to Somes and Lee-Steere because they are the only two directors who pursued their appeal against the contribution orders made by the trial Judge. Again, the order operates on the full amount of the damages that would have been payable in tort, being the same amount as the amount payable by NWP to the plaintiff. The order does not operate by reference to the amount of the judgment entered against the directors.

25 The submissions to us indicate that there is some uncertainty about the status of the claim by the defendant directors for contribution from NWP. The trial Judge gave leave to the directors to seek contribution from NWP. Applications pursuant to that leave were made by Somes and Lee-Steere. Abbott also made an application, but has not pursued an appeal to this Court. Quilty and Singleton did not make any application. None of the applications by the directors have been dealt with by the trial Judge. However, all of the relevant material is before us, and we have heard submissions that bear on the question of contribution as between NWP and the directors, although those submissions were brief. We consider that there is no injustice in us making orders on the application for contribution made by Somes and Lee-Steere, they being the only two directors who pursued an appeal.

26 These reasons do not deal with the question of whether there should be orders for contribution as between the directors. Abbott, Somes and Lee-Steere sought contribution from the other director defendants. It appears that none of the other Directors did. Neither Abbott, Quilty or Singleton have a current appeal before us that raises this issue. Nor is it clear whether Somes and Lee-Steere have appealed against the apportionment as between the directors. However, because the contribution order made by the judge reflected an assessment of contribution as between the directors individually, we think it fair to treat their appeal as raising that issue. We are of the view that as between the directors, their responsibility is of a lesser order than that of Abbott. However, the submissions before us barely touched on the issue of the allocation of responsibility as between the directors. We take the view that we should hear further submissions from Somes and Lee-Steere before making any orders as between directors. It may be necessary for Somes and Lee-Steere to serve notice on the other directors of their intention to seek a variation of those orders, and for us to give those other directors an opportunity to be heard on the point. On the other hand, it may be that the notice of appeal filed by Somes and Lee-Steere adequately raises the point, and the other directors can be taken as not wishing to be heard on the matter. That also is a matter on which we need to hear submissions.

27 In the light of the conclusion that we have reached, there is no need to consider the separate claim for contribution in equity. Our tentative view is that an order for contribution could have been made on this basis. We are attracted by the reasoning by Lee J in Trade Practices Commission v Manfall Pty Ltd (No 3) (In Liq) [1991] FCA 650; (1991) 33 FCR 382 at 387[1991] FCA 650; , 105 ALR 520 at 524-525. This approach was also favoured by Young J in Sky Channel Pty Ltd v Tszyu [2000] NSWSC 838 at [35] - [36]. However, it is unnecessary to come to a decision on this point.

28 Accordingly, we are prepared to order that the amount of contribution as between the defendants in respect of the liability to the plaintiff in tort under the judgment in this action and for costs shall be as to the defendant NWP 50 per cent, and as to each of the other defendants 50 per cent, provided that the amount recoverable by NWP under this order from the other defendants shall not exceed an amount equal to 50 per cent of the amount recovered by the plaintiff from NWP under the judgment and for costs. We are prepared to order that the amount of contribution as between the defendants Somes and Lee-Steere and NWP in respect of the liability of those defendants to the plaintiff under this judgment and for costs shall be as to each of those defendants 50 per cent of an amount not exceeding $117,073,842.91, being the amount of damages recoverable in tort, and as to the defendant NWP 50 per cent of that amount, provided that the amount recoverable by those defendants from NWP under this order shall not, in total, exceed 50 per cent the amount referred to.

29 We would make no order on the question of contribution as between the directors, leaving it to Somes and Lee-Steere to make further application in relation to that if so advised.

30 The relevant party should prepare Minutes of any order sought on the basis of our reasons.

31 We would order that the costs of the application for contribution be paid by the other defendants to NWP, the other defendants having opposed the making of the contribution orders. As they opposed the making of those orders, it is appropriate that they should pay the costs of the application, even though we have seen fit to make an order for contribution in their favour.

32 We add that the need to distinguish between a cause of action in contract and in tort in cases like this, and the consequences of doing so indicates that this is an aspect of the law relating to contribution that warrants Parliament's consideration.

33 BLEBY J. By our judgment in Duke Group Ltd (In Liquidation) v Pilmer & Ors [1999] SASC 97; (1999) 73 SASR 64, we found that the partners of Nelson Wheeler in Perth ("NWP") were liable to the plaintiff for damages for breach of contract. The amount of such damages was assessed at $76,769,842.91, together with interest under s 30C of the Supreme Court Act 1935 calculated at $40,304,000. This made a total judgment sum of $117,073,842.91.

34 We also found that NWP were liable to the plaintiff for damages in tort. The calculation of the plaintiff's loss as a result of the breach of contract and as a result of the breach of duty of care was the same. However, by virtue of what we found to be the contributory negligence of the plaintiff, NWP's liability to the plaintiff in tort would have been reduced to 65% of the plaintiff's loss, or a sum of $49,900,397.89. Together with interest under s 30C of the Supreme Court Act to 30 January 1998, the date of judgment, that came to $76,098,106.78 (ibid [1080]). That reduction was on account of the failure of the plaintiff to take proper care for the plaintiff's own protection (ibid at [593] - [596]). As it happens, that failure was brought about by the acts or omissions of the directors of the plaintiff (ibid at [597] - [606]).

35 We further found that NWP were liable to the plaintiff for a breach of fiduciary duty (ibid [782] - [788]). After making allowance for what we considered to be the contributing fault of the plaintiff (ibid [816], [890]), the liability of NWP on this basis for compensation in equity (including a component of equitable interest) was held to be the same amount as their liability in tort plus the statutory interest, i.e. $76,098,106.78.

36 By virtue of the decision of the High Court in Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1, we were precluded from reducing the liability of NWP in contract on account of any contributory negligence of the plaintiff (ibid [574] - [579]). Likewise, we considered that we were unable to reduce NWP's liability in contract by virtue of any contributing fault of the plaintiff in respect of its claim in equity against NWP (ibid [891] - [894]). NWP's liability in tort and their liability for breach of fiduciary duty to the plaintiff were therefore both overtaken by their liability in contract.

37 In relation to the directors of the plaintiff, we confirmed the trial Judge's finding that the directors were liable to the plaintiff for breach of their fiduciary duty (ibid [660] - [685], [693] - [697]). The total measure of that liability (including a component of equitable interest) was eventually quantified at $188,662,619.12 as at 30 January 1998.

38 We also confirmed the liability of the directors to the plaintiff for a breach of statutory duty (ibid [692] - [697]). We made no specific finding in this regard, but I would now hold that the plaintiff's loss, as a result of the breach of the statutory duty of the directors, was the same as its loss as a result of NWP's breach of contract. I would also feel constrained to hold that the directors were liable in tort for the same amount, even though a judgment has not been entered against them on that basis: Daniels v Anderson (1995) 37 NSWLR 438 at 488 - 505; Jones v Mortgage Acceptance Nominees Ltd [1996] FCA 1255; (1996) 63 FCR 418 at 419 - 422; Australian Breeders Cooperative Society Ltd v Jones [1997] FCA 1405; (1997) 150 ALR 488 at 548 - 549. I consider that they would also have been liable for the same statutory interest as calculated in respect of NWP's breach of contract.

39 However, there was no question of any contributory negligence of the plaintiff reducing the liability of the directors in tort. Their liability in that regard would therefore have been $76,769,842.91, or $117,073,842.91 including interest. That is a liability for a different amount from the amount for which NWP would have been liable to the plaintiff in tort.

40 The liability of the directors for breach of statutory duty and in tort was also overtaken by their liability to the plaintiff for the breach of fiduciary duty, that loss being assessed differently (ibid at [805] - [820]). That resulted in judgment for the plaintiff against the directors for breach of fiduciary duty in the sum of $188,662,619.12.

41 I deal first with the claim by NWP for contribution insofar as it is based on the Wrongs Act 1936. There is a claim by them for contribution in equity to which I shall briefly return.

42 Section 25(1)(c) of the Wrongs Act provides:

"25. (1) Where damage is suffered by any person as a result of a tort (whether a crime or not) -

(c) any tort-feasor liable in respect of that damage may recover contribution from any other tort-feasor who is, or would at any time have been, liable in respect of the same damage, whether as a joint tort-feasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought."

"26. In any proceedings for contribution under the last preceding section the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable, having regard to the extent of that person's responsibility for the damage; and the court shall have power to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity."

44 "Damage" in the opening words of s 25(1) must refer to the damage suffered by the plaintiff. However, the damage suffered by the plaintiff as a result of NWP's tort is only 65% of the plaintiff's total loss. In respect of the claim for contribution by NWP against the directors, we are only concerned with the contribution of the tort of the directors to the plaintiff's loss. We are not concerned with any breach of a duty of care that the directors may independently have owed to NWP. No such duty or breach was found by the trial Judge, and NWP's argument before us on contribution did not seek an apportionment other than by way of assessment of the relative fault of the parties in causing the plaintiff's loss.

45 NWP may recover contribution from another tort-feasor who would have been liable "in respect of the same damage", i.e. the damage suffered by the plaintiff as the result of NWP's tort. NWP cannot recover from the directors an amount greater than their liability in tort to the plaintiff. There is therefore a statutory ceiling on the amount which NWP may recover.

46 Section 25(1)(c) does not allow recovery of contribution in respect of NWP's liability in contract. It does not allow recovery of contribution in respect of NWP's liability for breach of fiduciary duty.

47 A question arises as to whether the section allows contribution in respect of interest awarded under s 30C, Supreme Court Act. That forms a significant component of the judgments in this case.

48 At the time when s 25(1)(c) was enacted, there was no power to award interest on damages. Those provisions were not enacted until 1972, and s 25(1)(c) does not in its terms refer to an award of interest. Nevertheless, I would hold that the power to order contribution under s 25(1)(c) includes the power to award contribution on any statutory interest included in the judgment. I do so for two reasons.

49 Section 25(1)(c) applies for the benefit of a tort-feasor liable "in respect of" the damage suffered by the plaintiff against another person also liable "in respect of" the same damage. Subject to s 26 of the Wrongs Act, there is no limit on the power to award contribution in respect of that liability. A liability "in respect of" the plaintiff's damage is greater than a liability "for" the plaintiff's damage. The liability in respect of the plaintiff's damage would include a liability for interest on the amount of damages so awarded.

50 In the second place, s 30C of the Supreme Court Act itself requires the Court to "include in the judgment" for the payment of damages an award of interest. It is not to be a separate judgment, but to be included in the one judgment. This tends to suggest that, in enacting s 30C, parliament intended to treat interest in the same manner as a liability for damages, at least for the purpose of the application of the Wrongs Act.

51 If the power to award contribution under s 25(1)(c) did not include a power to order contribution in respect of the interest component of a judgment, there could arise grave anomalies, particularly where, as in this case, the interest component is very large. If there are any considerations in a particular case affecting the payment of interest which are applicable to one defendant but not to another, then an appropriate adjustment can be made to accommodate that when considering what is just and equitable under s 26 of the Wrongs Act.

52 Because there is a concurrent and greater liability to the plaintiff in contract does not mean that s 25(1)(c) can have no operation. That much must be taken now to be settled by AWA Ltd v Daniels (1992) 7 ACSR 759 at 856 - 858, Jones v Mortgage Acceptance Nominees Ltd [1996] FCA 1255; (1996) 63 FCR 418 at 419 - 422 and Australian Breeders Cooperative Society Ltd v Jones [1997] FCA 1405; (1997) 150 ALR 488 at 548 - 549. However, the section in its terms can only operate in respect of NWP's tortious liability to the plaintiff, and NWP can only recover contribution towards the sum of $76,097,997.89, being the total of their liability in tort (including interest) to the plaintiff.

53 The directors' position is different. Their liability in tort to the plaintiff is for a greater sum ($117,073,842.91 including interest), although that is a sum which is exceeded by their liability for the breach of fiduciary duty. They are tort-feasors liable in respect of that damage. They would be entitled to claim contribution from a tort-feasor liable "in respect of the same damage". However, NWP are not liable in respect of the same damage. They are only liable in respect of a portion of the same damage. Once again, anomalies will arise if D1, liable in tort to P for a greater amount than D2, could recover from D2 an amount which exceeds D1's primary liability to P. Because we are dealing with questions of contribution towards the plaintiff's loss in tort, NWP can justifiably say that, if liable for contribution under s 25(1)(c), their contribution cannot exceed their primary liability in tort, namely $76,097,997.89.

54 I would therefore be constrained to hold that the only amount in respect of which contribution can be ordered under s 25(1)(c) is the amount for which it can be said that both sets of defendants are liable to the plaintiff in tort, i.e. $76,097,997.89.

55 I know of no case where this particular question has arisen in the application of s 25(1)(c) of the Wrongs Act or its equivalent in other jurisdictions. There is some support for my conclusion from what Clarke and Sheller JJA said in Daniels v Anderson (1995) 37 NSWLR 438 at 579. When speaking of the equivalent New South Wales section which, for present purposes, is in identical terms to s 25(1)(c), they said (at 579):

"In order to succeed in its claim for contribution Deloitte Haskins & Sells was required to establish that:

(1) Hooke would, if he had been sued by AWA, have been liable to it for the same damage as Deloitte Haskins & Sells was liable;

(2) That it would be just and equitable that Deloitte Haskins & Sells recover a contribution from Hooke.

While in some cases (that is, some examples were given in Barisic v Devenport [1978] 2 NSWLR 111) difficult questions may arise as to whether two or more persons are, or would if sued have been, liable to the plaintiff for the same damage (our emphasis) those questions do not arise in this case."

56 It is true that some examples were raised in Barisic relating to different judgments against co-defendants for different amounts, but the Court in that case did not consider it necessary to resolve those difficulties. What is significant about Barisic, however, is that in a situation involving joint and several tort-feasors and contributory negligence of the plaintiff having the effect of reducing the damages payable by all the defendants, the Court endorsed the principle of first fixing the liability of the defendants as a group and then apportioning responsibility for that sum between them, rather than entering a judgment against each for its proportion of the overall responsibility, taking into account the plaintiff's contributory negligence. The Court concluded, for a number of reasons, that the section was primarily concerned with the apportionment of a common sum for which all defendants were liable.

57 It is also significant that in addressing what was argued to be a gap in the operation of the equivalent New South Wales section, Davies J in Jones v Mortgage Acceptance Nominees Ltd [1996] FCA 1255; (1996) 63 FCR 418 called in aid the principle of contribution in equity enunciated in Albion Insurance Co Ltd v Government Insurance Office of New South Wales [1969] HCA 55; (1969) 121 CLR 342, requiring that there be a "common or coordinate obligation" (at 421).

58 Reference in such cases to "the same damage" and to "a common or coordinate obligation", if applied to s 25(1)(c) would limit, in this case, the amount of any possible apportionment to the amount for which NWP would be liable to the plaintiff in tort.

59 The next question which arises is the extent to which, under present circumstances, it is just and equitable to make orders for contribution (Wrongs Act, s 26).

60 It has been decided in Daniels v Anderson (supra) at 578 - 580 that where a defendant has the benefit of a finding of contributory negligence of the plaintiff, which contributory negligence arises out of the conduct of a director of the plaintiff, it is not just and equitable for the defendant to recover any further contribution from that director. However, that was in circumstances where the majority (Clarke and Sheller JJA) made the following observation (at 579):

"While there is not necessarily a strict correspondence between the acts and omissions of Hooke [the director] which were properly to be taken into account in determining the contributory negligence issues and those which constituted his notional liability to AWA for negligence the former would, in the circumstances of this case, include the latter. Those aspects of Hooke's conduct which we regarded as relevant to the issue of contributory negligence went beyond the acts and omissions which constituted his notional breach of duty to AWA and included, for instance, his participation in the board decision in July 1986 approving the 1987 budget. Although, therefore, there was not that strict correspondence it is appropriate to approach the present question upon the basis that all the conduct which goes to constitute Hooke's notional liability to AWA has already been taken into account in Deloitte Haskins & Sells' favour."

61 It was only because of those circumstances that it was just and equitable that no contribution should be made.

62 The situation in this case is different. Those aspects of the directors' notional breach of duty to the plaintiff, as found by the trial Judge and confirmed on the appeal, went a long way beyond the acts and omissions which we regarded as relevant to the issue of the plaintiff's contributory negligence.

63 The actions of the plaintiff, through its directors, which constituted contributory negligence were the provision of unreliable information to NWP, being information which the directors knew was unreliable, the failure to provide relevant information to NWP, making use of the report provided by NWP and failing to apply the directors' own knowledge and a sound business judgment on the advice given by NWP. They "failed to give proper consideration to the fairness of the price, and to the soundness of the takeover, and to the reliability of the advice provided" (Duke Group, supra, at [602]).

64 The conduct constituting the breach of duty of care of the directors to the plaintiff was much more extensive. Harold Abbott was found to have manipulated the assets and affairs of the company for his own personal gain. As the trial Judge found:

"The purpose of the takeover was to direct the proceeds of the sale of the second half of the Marvel Loch mine into the pockets of Harold Abbott, Gary Abbott and Schneider-Paas and their associates and, as an additional purpose, to financially benefit other directors and senior staff of the two companies and associates and I reject the suggestion to the contrary."

Harold Abbott was found to have acted dishonestly, contrary to the interests of the plaintiff and in preferment of his own interests, in the course of a whole range of activities associated with the takeover and the events preceding it. His conduct was found to have been undertaken with the intent to defraud the plaintiff for his own personal benefit.

65 Quilty and Singleton were the persons appointed as the supposedly independent directors for the purpose of the takeover. Their breach of duty to the plaintiff was found to include not becoming familiar with the business of the plaintiff in a way relevant to the takeover process, and not obtaining a basic knowledge of Western United and its subsidiaries so that they could discharge their duties properly, with the result that they could not make any informed decisions about whether the takeover was in the best interest of the plaintiff and its shareholders. They were found to have lacked due diligence in the discharge of their duties as directors, and to have caused, consented to or allowed the plaintiff to proceed with the takeover. Quilty was found to have signed the letter to shareholders recommending the takeover. Neither made inquiries to verify the statements in the letter to shareholders. They were held to have been in breach of their duty in sending the letter. They failed in their duty to move for the adjournment of the meeting in view of the share market crash, pending independent advice and appraisal. They erred in failing to ask NWP to reconsider their report in the light of the share market crash.

66 Lee-Steere and Somes were held to be in breach of their statutory and fiduciary duties and, I would add, their common law duty of care, at every stage of the process. They well knew that the NWP report was not fit to be relied on by shareholders. They should have opposed Harold Abbott and the others controlling the plaintiff and should have counselled the independent directors, Quilty and Singleton, to the same view. They gave no consideration as to whether the takeover was in the best interests of the plaintiff. They must have known that the letter to shareholders contained inaccuracies and was misleading. They did nothing after the share market crash. They sought no advice. They did not approach NWP. They did not even require the matter to be discussed with the directors. Neither of them acted honestly. Neither acted bona fide in the interests of the plaintiff. As the trial Judge concluded, their conduct was driven by motive of self-interest which was preferred to the interests of the plaintiff. They acquiesced in the conduct of Harold Abbott, Gary Abbott and Gardiner in the takeover process without query, let alone objection.

67 In my opinion, in these circumstances, Daniels v Anderson is to be distinguished. The conduct which constitutes the contributory negligence of the plaintiff does not encompass the conduct of the directors giving rise to their primary liability to the plaintiff. It would be appropriate to order the payment of contribution by the directors to NWP, notwithstanding that some of their conduct has been brought to account in the finding of contributory negligence of the plaintiff. It is obvious that that contribution can never exceed NWP's primary liability in tort to the plaintiff.

68 The judgment as to the appropriate level of contribution in circumstances such as these will always be difficult. It may appear to be somewhat arbitrary. In making the assessment, I should take into account, in broad terms, what I regard as the overall relative contribution of both groups of defendants to the plaintiff's loss as a result of their respective torts. There is nothing in either s 25 or s 26 of the Wrongs Act which would prevent the awarding of contribution under that section between identified groups of defendants, with further orders, if necessary, apportioning contribution within a group for the liability of that group either to the plaintiff or to another group.

69 On reflection, and in the light of arguments now put to us on contribution, I would wish to qualify what we said in our joint judgment at [655] that there was no "significant differentiation" as between NWP and the directors when one considered the extent to which they had each fallen short of the degree of care required and that it was "difficult to distinguish between them in terms of responsibility for the damage suffered". I consider that there should be reflected in the apportionment an overall greater responsibility of the directors as a group. That responsibility has been brought to account, in part, in the finding of contributory negligence against the plaintiff. There is additional relative fault in their other actions. The trial Judge apportioned fault as between NWP on the one hand and the directors on the other hand as to 30% to NWP and 70% to the directors collectively. If I were the trial Judge I might have assessed it slightly differently, but I cannot detect any error in the trial Judge's reasoning or any reason why I should interfere with that judgment of what is just and equitable in the circumstances.

70 I would therefore confirm the trial Judge's assessment of NWP's overall responsibility at a level of 30% of the plaintiff's entitlement to damages in tort. That is an amount of $35,122,152.87. As NWP's liability to the plaintiff in tort is only $76,098,106.78, on that basis they would be entitled to recover by way of contribution from the directors the sum of $40,975,953.91. However, as this can only be by way of contribution towards the plaintiff's total entitlement to damages in tort, and as there is a distinct possibility that the liability of NWP to the plaintiff in tort may not be met in full, equity and justice require that it should only be paid at the rate which, when NWP have paid in full to the plaintiff their liability in tort, they have recovered from the directors the full amount of their contribution. Therefore, of the amount actually paid by NWP up to the limit of their liability to the plaintiff in tort ($76,098,106.78), they should recover from the directors 53.85% (to the nearest two decimal points) of the amount they have paid to the plaintiff.

71 As to how that liability should be apportioned (if at all) between the directors, we have not heard any argument in the circumstances now prevailing. Those circumstances are different from the ones considered by the trial Judge. Nor have we heard any argument by those who have made the claim as to how the directors' primary liability to the plaintiff should be apportioned between them. I think it is just and equitable that, vis-a-vis NWP, the directors should be regarded as a group and as jointly and severally liable to make the contribution to NWP. It is not appropriate to approach the claim on the basis that it reflects the responsibility of each individual director as between themselves. If it is necessary to make any further apportionment of that liability amongst the directors, that can be considered at a later time.

72 The claims for contribution by the directors need further analysis. No claims for contribution or indemnity against NWP were raised on the pleadings. In the order consolidating the two sets of proceedings made on 15 April 1994, the trial Judge did not order that the then existing pleadings in the two actions should stand as including mutual claims for contribution and indemnity by all defendants. He merely ordered that existing claims for contribution and indemnity in the two actions should stand as such in the consolidated proceedings. His Honour recognised this at two points in his reasons for judgment. He said (Judgment No S6529 at 456):

"No proceedings for indemnity or contribution have been instituted by any of the director defendants against the first defendants."

"As far as I can determine, the director defendants have not formally sought contribution from the first defendants or from each other through reciprocal proceedings. I give liberty to each of them to apply in case they seek any order or judgment against the first defendants or any of the others of them to which, at this stage, they are entitled."

73 Abbott, Somes and Lee-Steere all made applications pursuant to that liberty for orders for contribution against NWP and against the other directors. Quilty and Singleton did not make any application. The applications by Abbott, Somes and Lee-Steere were not pursued before the trial Judge. Abbott withdrew his appeal to this Court, as did Quilty and Singleton. Somes and Lee-Steere argued that some apportionment should be made in their favour, but in their case, there was no relevant order or decision of the trial Judge against which to appeal. NWP appealed against the grant by the trial Judge to the directors of liberty to apply for orders for contribution.

74 As to the last point, I would dismiss that appeal. Once it is decided that there should be an apportionment under s 25(1)(c) of the Wrongs Act, it follows that there should be, if claimed, reciprocal orders for contribution as between the defendants amongst whom liability is apportioned. There was no injustice in the trial Judge allowing a late application for that purpose.

75 Given the failure by Quilty and Singleton to apply for orders for contribution, I would not make any orders in their favour. Given Abbott's abandonment of the appeal, and no indication that he now seeks to pursue his application, I would not make any order in his favour.

76 Somes and Lee-Steere made but did not pursue their application before the trial Judge. They argued on the appeal that they were entitled to an order. As I have said, once a decision is made that there should be apportionment between groups of defendants, the entitlement to an appropriate order should normally follow as a matter of course. Therefore, there is little to be gained by relying on the barren argument that there is nothing against which to appeal. I would treat the application by Somes and Lee-Steere as an application to this Court, and would make an order of contribution in their favour which properly reflects the overall apportionment of tortious responsibility between NWP and the directors.

77 However, I would only make an order at this stage against NWP. For reasons I have expressed, and because it was not argued before us, I would not be prepared to make an order in favour of Somes and Lee-Steere against the other directors. That involves much wider questions, which have not been argued, of the relative responsibilities of the directors inter se for their tortious liability to the plaintiff, as well as their liability to contribute inter se to any contribution paid to NWP.

78 In the case of the claim for contribution by Somes and Lee-Steere under the Wrongs Act, their total liability in tort to the plaintiff is $117,073,842.91. Because part of their contribution to the plaintiff's loss is reflected in the award of contributory negligence of the plaintiff, the amount of contribution they can recover can never exceed the liability of NWP in tort to the plaintiff. They would be entitled to recover 30% of $117,073,842.91 from NWP, namely the sum of $35,122,152.87. However, as this is also only by way of contribution towards the plaintiff's total loss in tort, equity and justice require that it should only be paid at the rate which, when the directors have paid the full amount of their liability in tort, they have received from NWP the full amount of their contribution. Therefore for each dollar paid by the directors up to the limit of their liability to the plaintiff in tort of $117,073,842.91, they should recover from NWP 30% of the amount paid.

79 As will be seen from these figures, there is a significant amount for which NWP is liable to the plaintiff and another amount for which the directors are liable to the plaintiff for which no contribution can be recovered from the other. This is due to a combination of the fact that NWP is liable for the full amount of the plaintiff's damages in contract, without reduction, and the fact that liability in contract and (in the case of the directors) liability for breach of fiduciary duty cannot be made the subject of contribution between the defendants under s 25(1)(c) of the Wrongs Act.

80 I turn to consider the alternative claim by NWP for contribution in equity. The development of those principles is explained by Kitto J in Albion Insurance Co Ltd v Government Insurance Office (NSW) [1969] HCA 55; (1969) 121 CLR 342 at 348 - 352. It has nothing to do with apportionment of fault. Provided that the respective liabilities under the judgment are coordinate or of the same nature and the same extent in the sense described by Gummow J in Street v Retravision (NSW) Pty Ltd [1995] FCA 1197; (1995) 56 FCR 588 at 597, it matters not that the judgments are based on different causes of action. See also Sky Channel Pty Ltd v Tszyu [2000] NSWSC 838.

81 Because there is a coordinate liability to make good the one loss, the defendants must share the burden of the liability pro rata: Albion Insurance (supra) at 350. For this purpose, the defendants must each individually be regarded as liable to contribute pro rata to the common liability. Without agreement, they cannot be treated as groups, as is the case under s 25(1)(c) of the Wrongs Act. Their ability to recover from a co-defendant will depend on a number of factors. They will include what each defendant has paid, what may, in this case, be properly regarded as the coordinate liability, and the ultimate liability of each individual defendant to the plaintiff. It may also be affected by the nature of any releases that the plaintiff has given to some of the defendants, of which this Court is not aware, and on agreements reached between groups of defendants as to whether they will claim against each other.

82 It may well be that, in the circumstances, a reliance on principles of equitable contribution would be more favourable to one defendant than what I consider could be ordered under s 25(1)(c) of the Wrongs Act. As rights to contribution in equity would depend to some extent on what has happened since judgment, about which there may or may not be factual disputes, the claim is properly the subject of separate proceedings, albeit within the present action. It would not be possible to make a judgment on such claims with the information presently before the Court. I would therefore decline to make any order on this basis at present.

83 In summary, I would be prepared to make the following orders:

1. On the claim for contribution by the first defendants against the second, third and fourth defendants, subject to hearing further argument as to claims for contribution in equity, I would be prepared to order that the first defendants recover by way of contribution pursuant to s 25(1)(c) of the Wrongs Act 1936 the sum of $40,975,953.91, provided that the amount recovered shall not exceed 53.85% of the amount paid by them in satisfaction of the judgment against them in favour of the plaintiff.

2. I would dismiss the appeal of the first defendants insofar as it seeks to set aside the order of the trial Judge giving liberty to the second, third and fourth defendants to apply to seek orders for contribution against the first defendants.

3. On the claims for contribution by the fourth defendants against the first defendants, subject to hearing further argument as to claims for contribution in equity, I would be prepared to order that the fourth defendants recover by way of contribution pursuant to s 25(1)(c) of the Wrongs Act 1936 the sum of $35,122,152.87, provided that the amount recovered shall not exceed 30% of the amount paid by them in satisfaction of the judgment against them in favour of the plaintiff.

4. On the claim for contribution by the fourth defendants against the second defendants and the third defendant, I would make no order at this stage.

5. On the claim by the first defendants for contribution in equity, I would make no order at this stage.

6. I would need to hear the defendants further on the apportionment of the plaintiff's costs between them.

84 In view of the fact that mine is a minority view, it is not necessary for me to consider whether the orders I propose under s 25(1)(c) should now be made or should be deferred after an opportunity is given to consider further the claims for contribution in equity.

DUKE GROUP LTD (IN LIQ) v PILMER & ORS

At a glance

Court

Decision date

Before

Source

Judgment (113 paragraphs)

DUKE GROUP LTD (IN LIQ) v PILMER & ORS (NO 2) No. SCGRG-92-1874 [2000] SASC 418 (8 December 2000)

Parties

Cases Cited (8)