Supreme Court of SA|2003-11-18|Before: Doyle CJ, Duggan J

DUKE GROUP (IN LIQ) v PILMER & ORS (NO 5) No. SCCIV-92-1874 [2003] SASC 381 (18 November 2003)

1 DOYLE CJ and DUGGAN J: In December 2000 the Full Court published reasons dealing with appeals against orders for contribution between defendants in an action in this court: see Duke Group Ltd (In Liq) v Pilmer and Others (No 2) [2000] SASC 418; These reasons were published after the court had decided an appeal in the same matter. In that decision the court substantially upheld the decision of the trial judge which was that the defendants were liable to the plaintiff company for loss that it suffered when it paid too much to acquire the shares in another company: see ; We will refer to that decision as "the main appeal".

2 Later, in May 2001, the High Court published its reasons dealing with an appeal against the Full Court's decision in the main appeal see: Pilmer and Others v The Duke Group Ltd (In Liquidation) [2001] HCA 31; (2001) 207 CLR 165. The effect of that decision was to reduce the damages recoverable by the plaintiff from the defendant.

3 The defendants in the action were partners of an accountancy firm known as Nelson Wheeler practising in Perth ("NWP") who prepared a report relating to the value of the shares, and five directors of the company, Quilty, Somes, Lee-Steere, Abbott and Singleton.

4 In its reasons dealing with the main appeal, this court touched on the question of contribution between the defendants, but called for further submissions on the matter: at [1087].

5 The effect of the Full Court's reasons on the question of contribution was to allow the appeal, and to depart from the contribution orders made by the trial judge. The trial judgment is reported as Duke Group Ltd (In Liquidation) v Pilmer & Ors [1998] SASC 6529; (1998) 27 ACSR 1. The judge's reasons on the question of contribution as between the defendants appear at [1998] SASC 6529; (1998) 27 ACSR 1 at 382-384.

6 The plaintiff and two of the directors, Quilty and Somes, applied to the Full Court for an order that the court re-open the hearing of that part of the appeal relating to the trial judge's orders as to contribution.

7 In brief, the application was made on the basis that the Full Court's decision was made on a basis on which the parties had not been heard properly or fairly, through no fault of theirs, and further on the basis that the reasons were affected by errors of law and fact.

8 The application was opposed by NWP. The court has heard submissions on the question of whether it should re-open the hearing of the appeal, and also on the orders it should make as to contribution, if it decides to re-open the hearing of the appeal.

9 The plaintiff submitted that it should be permitted to intervene to put submissions in support of the application by Quilty and Somes. In his submissions Mr Whitington QC, counsel for the plaintiff, appeared to accept that the plaintiff did not have standing to apply to have the hearing re-opened, because the order was one as between the defendants. However, he argued that the plaintiff should be heard as an intervener in support of the application, because the plaintiff had reached a settlement with Quilty, as part of which it had given him an indemnity, and the decision of the Full Court had the potential to impact adversely on the plaintiff by virtue of that indemnity. The court was of the opinion that the indemnity did not give the plaintiff standing on the application, and that there was no good reason why the court should exercise its discretion and allow the plaintiff to be heard as an intervener. The court was of the view that all relevant submissions in support of the application could be put by counsel for Quilty and Somes.

10 It is convenient to repeat that part of our reasons on the appeal against the contribution orders that sets out the background to the appeal against the trial judge's orders as to contribution. In the following paragraphs we explain how the appeal arose and, in brief terms, a number of matters relevant to the decision of the court:

"[1] The Court has already dealt with an appeal against the decision of the trial judge in this action: Duke Group Ltd (In liq) v Pilmer [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 at 301-302 [1087]. 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 at 298‑300 [1071] - [1078].

[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 at 199 [653] - [658].

[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 at 300-301 [1082].

[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 at 300 [1081].

[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 Liq) v Pilmer [1998] SASC 6529; (1988) 144 FLR 1 at 129-132_._ 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 1936 (SA). That is the well known provision for contribution between tortfeasors. 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 tortfeasor 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 tortfeasor under s 25(1)(c) it suffices that the claimant be a person who is in fact a tortfeasor 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.

[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 tortfeasors, 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 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 (at 877); Daniels v Anderson 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 (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 tortfeasor, and is certainly not a tortfeasor 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."

11 The trial judge ordered that NWP pay thirty percent of the damages awarded to the plaintiff, and that of the directors, Abbott pay fifty percent of the damages, and Quilty, Somes, Lee-Steere and Singleton five percent each. The order of the court, as drawn up and sealed, was as follows:

"On the third party proceedings that the first defendants [NWP] recover 50% of the judgment sum from Harold Abbott; 5% of the judgment sum from Francis Anthony Quilty; 5% of the judgment sum from Keith Daniel Singleton; 5% of the judgment sum from Kevin Clarence Somes; and 5% of the judgment sum from Sir Ernest Lee-Steere."

12 NWP appealed to the Full Court against the finding that it was liable to the plaintiff, and against the judge's order as to contribution between the defendants. NWP put submissions in support of that appeal at the hearing of the main appeal and when the court heard submissions on the question of contribution. Somes and Lee-Steere likewise appealed against both aspects of the judge's order. They both put submissions on the hearing of the main appeal. When the court heard submissions on the question of contribution Somes put submissions, but Lee-Steere did not. At neither stage did Somes attack the judge's order as to contribution between the defendants, contenting himself with the submission that, provided the court did not disturb the judge's findings as to liability, he sought no change in the orders as to contribution, but opposed any order increasing the contribution recoverable by NWP from him.

13 Singleton and Abbott appealed, but took no part in either appeal. Quilty did not appeal. However, at various stages in the course of the appeal proceedings counsel for Quilty appeared and indicated that his only interest was to oppose submissions by NWP, presumably meaning submissions that might increase his liability to contribute to the judgment. Pursuant to a direction given by the Chief Justice before the court heard submissions on the question of contribution, solicitors for Mr Quilty filed a written submission arguing that the trial judge's decision with respect to contribution should not be disturbed, but seeking a variation of the order to take account of the view the Full Court had expressed on the question of contributory negligence.

14 The essential aspect of our reasoning on the question of apportionment as between NWP and the directors appears in the following part of our reasons:

"[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 tortfeasor, 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 liq) v Pilmer (at 131-132). 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; (1999) 73 SASR 64 at 199 [653] - [658]. 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" (at 199 [655]).

[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."

15 Bleby J took a somewhat different approach, but he also took the approach that for the purposes of apportionment the directors should be treated collectively. He said at [71]:

"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."

16 The court adjourned for further consideration the making of orders to implement its decision, and also the question of contribution as between the directors. We were not sure what applications had been made to the trial judge in that respect. This matter has not been pursued by the parties.

17 The judge apportioned liability to the partners of NWP as a group, and to each of the directors individually. There is no suggestion that he erred in the approach he took to the partners of NWP. As partners they are jointly and severally liable for the damages payable to the plaintiff.

18 Our approach was to treat the directors as a group in determining the contribution that NWP could recover from the directors, and to defer to a later stage a decision on the contribution that could be recovered by each director from the other directors.

19 As we noted in our reasons at [21], the effect of the trial judge's order was that NWP could recover from the directors up to seventy percent of the damages that it paid. Our decision had the effect of limiting the amount that NWP could recover to fifty percent of the damages paid. Our decision exposed Quilty and Somes to a liability to contribute fifty percent of the damages paid, rather than the five percent that they were liable to contribute under the trial judge's order.

20 We so decided although NWP in the course of the main appeal, and when dealing with the question of contribution, did not seek such an order. Broadly, its submissions sought an order that would increase the contribution recoverable from the directors and decrease the proportion of liability attributed to NWP. In broad terms, the submissions by NWP at each stage appeared to contemplate an order structured in the same manner as that made by the trial judge. On the other hand, NWP did argue that it was entitled to be indemnified by the directors.

21 Quilty did not appear when the court considered the question of contribution, but Somes did.

22 Mr Karkar QC, counsel for Quilty, and Mr Hoile for Somes, argue that the court has made an order which adversely affects Quilty and Somes in a substantial way (the difference between contribution fixed at five percent and contribution fixed at fifty percent is measured in millions of dollars), and that the court has done so without hearing from their clients, and without giving their clients an opportunity to be heard, through no fault of their clients. They argue that the court in these circumstances has power to re-open the hearing on the question of contribution as between NWP and the directors.

23 They argue also that our approach is flawed in fact and in law. They rely on that submission to support their application to have the hearing re-opened and, if the hearing is re-opened, in support of a submission that the court should dismiss NWP's appeal against the apportionment ordered by the trial judge.

24 We accept the first of these submissions. We agree that the court should re-open the hearing of the appeal by NWP against the contribution orders. We defer for the moment our consideration of the second submission.

25 We record that when the court published reasons on the appeal against contribution orders, the court made no orders. There were some matters outstanding and we anticipated further submissions in respect of those matters. In any event, we invited the parties to prepare Minutes of Order to effect our reasons. Until recently that had not been done.

26 We consider that the court has power to re-open the hearing of this aspect of the appeal, applying principles identified by the High Court in Autodesk Inc and Another v Dyason and Others [No 2] [1993] HCA 6; (1993) 176 CLR 300.

27 The relevant principle is to be found in the reasons of Brennan J in Autodesk. He said at 308:

"This Court has undoubted jurisdiction to recall a judgment which it has pronounced, at least prior to the formal entry of the judgment, if the judgment has been pronounced against a person who, without fault on the part of that person, has not had an opportunity to be heard as to why that judgment should not be pronounced. The jurisdiction is exercised sparingly for it is important to bring litigation to finality in this Court. Nevertheless, natural justice would be denied if, in a case in which the stated conditions are satisfied, the judgment were not vacated.

It is desirable to add in the context of the present case a further observation about the opportunity to be heard. A court should not pronounce a judgment against a person on a ground which that person has not had an opportunity to argue. However, a sufficient opportunity to argue a ground is given when the ground is logically involved in a proposition that has been raised in the course of argument before the court or is to be considered by the court as an unconceded step in determining the validity of a conclusion for which one of the parties contends. Of course, the precise ground which a court or judge assigns for a decision will frequently be formulated in terms different from the terms of a submission by counsel but, provided the ground has arisen in one of the ways mentioned, the court or judge may properly proceed to judgment without requiring the case to be relisted for further argument and without inviting supplementary submissions to be made." (footnotes omitted)

28 Although the members of the High Court divided on the application of the relevant principle to the facts, all members of the court took substantially the same view of the relevant principle: see Mason CJ (diss) at 301-302, Deane J (diss) at 312, Dawson J at 317, Gaudron J at 322. It is convenient to set out one further short passage from the reasons of Dawson J at 317:

"And it should be added that even though a party fails to present his case in manner which is open on the pleadings and on the facts, a final appellate court with responsibility to determine the law cannot be precluded from disposing of a case upon the basis which appears to it to be correct. This is particularly so where matters not raised on appeal have been raised in the courts below." (footnotes omitted)

29 This court has applied those principles in McAdam v Robertson [1999] SASC 169; (1999) 73 SASR 360 and Australian Education Union, South Australian Branch v Grieve (No 2) [1999] SASC 369.

30 As all members of the High Court said, the jurisdiction is to be exercised with great care. There is a strong public interest in the finality of litigation. It is often possible after the conclusion of a hearing, and in the light of reasons for a decision, to think of something more that could be said, or of a better way of putting submissions that have been put. The jurisdiction does not exist to allow matters to be re-argued, to be argued more fully or to be argued better. That goes without saying.

31 The matters that persuade us that the power to re-open the hearing arises, and should be exercised, are these.

32 No party argued before us that the court should depart from the judge's approach of assessing the amount of contribution recoverable by NWP from the directors separately in relation to each director. Our decision to assess the contribution recoverable from the directors collectively rested in part on a finding that the directors were collectively responsible for the conduct of the Board. No submission to that effect was put to us. As will appear, on reflection we agree that that finding is not correct as a matter of law, as a statement of the liability in tort of the directors to the plaintiff. There was no submission to us that the responsibility of Quilty and Somes for the damage suffered by the plaintiff should be equated with the responsibility of Abbott.

33 Nor did the court alert the parties before it heard submissions on the question of contribution, at the hearing or subsequently, that it was considering taking an approach along the above lines.

34 It follows that Somes had no notice that the court might assess the contribution recoverable by NWP from him on that basis. Nor did Quilty or Somes have any reason, prior to the hearing, to anticipate that this might happen.

35 No submissions were put by Quilty or Somes in relation to these matters. The end result was an order adverse to the interests of Quilty and Somes.

36 It is true that the Notice of Appeal filed by NWP indicated that NWP sought an order that it be indemnified by the directors, in the event of the appeal against the finding that NWP was liable to the plaintiff failing. At trial NWP appears also to have claimed an indemnity from the directors. However, a case based on collective responsibility does not appear to have been advanced. The effect of the submissions before us, both written and oral, when the main appeal was argued, was that the contribution recoverable from the directors should be substantially increased. No suggestion was made that the matter should be approached on the basis that the directors were collectively responsible, or that they were jointly and severally liable. The submissions contemplated an order structured like that of the trial judge. We do not put any great emphasis on that, because the appeal was a long one in which many different matters were argued, and as often happens, issues such as the recovery of contribution received only passing attention. More importantly, in the submissions filed for the purpose of the court determining the appeal against the contribution orders, and in the oral submissions, no submission was made by NWP supporting the approach that we took. The order proposed by NWP in its written submission and its oral submissions at this stage was structured in the same way as that of the trial judge.

37 We do not need to consider whether, as between the plaintiff and NWP, the manner in which NWP conducted the trial and the appeal, coupled with the plaintiff's decision to settle with Quilty and others, gives rise to an estoppel the effect of which is to prevent NWP asserting that the directors, or at least Quilty, bear a collective responsibility that includes responsibility for the conduct of Abbott. That issue is not before us.

38 For our purposes, it suffices to say that having regard to the conduct of the proceedings neither Quilty nor Somes could reasonably have anticipated that the court would take the approach that it took.

39 We agree with Mr Myers QC, counsel for NWP, that Quilty and Somes could not have complained if the court had increased the amount of contribution recoverable by NWP from them. That is what NWP sought. But Quilty and Somes were never given the opportunity to put submissions as to the basis on which the court increased that contribution. There is a significant difference between deciding, on an individual basis, that the contribution recoverable from a director should be increased, and deciding that contribution should be determined on the basis of collective responsibility.

40 The approach that we took was not logically involved in a proposition raised in argument, or a step in consideration of the submissions advanced by NWP. As we have said, the effect of those submissions was that NWP should recover an increased contribution from each director, such contribution being assessed individually.

41 Mr Myers argued that when one defendant applies for an order for contribution from other defendants, there is always the prospect of a court determining the liability to contribute on a collective basis, and accordingly Quilty and Somes were always at risk of such an order being made and must accept the consequences of their own failure to make submissions directed to that possibility.

42 There are two answers to this submission. The first is that Quilty and Somes were not given a fair opportunity to be heard on the approach that we took. The second answer is that an order for the recovery of contribution from several defendants is most likely to be made on a collective basis when those defendants are liable as joint tortfeasors, in the case of agency, vicarious liability and concerted action: see Fleming, The Law of Torts (9th ed., LBC Information Services 1998), p 288. In the present case the only possible basis for finding that the directors were joint tortfeasors was one based on a finding of concerted action. As we understand the manner in which the case has been conducted so far, no such allegation had been made, no such finding was sought and no such finding was made. It is true that each of the directors, as a several tortfeasor, is liable for the full amount of the damage recoverable by the plaintiff in tort. The plaintiff may recover some or all of that loss from any one of the directors, according to the plaintiff's wishes and the ability of each director to pay. In that sense the directors are jointly and severally liable for the full amount of the damages, but that leaves for further decision the question of what contribution orders should be made at the instance of NWP against each director. If the directors were joint tortfeasors an order in favour of NWP that they pay contribution on a collective basis might well be open, and might reasonably have been anticipated, but, as we have just said, it had not been contended that they were joint tortfeasors and there was no decision to that effect.

43 We should add here that Mr Myers pointed out that in our reasons in the main appeal at [1087] we referred to the need for further submissions on the question of contribution "between NWP and the directors", and he referred to some comments to a like effect in correspondence between the Chief Justice's Associate and the parties leading up to the hearing of submissions on the appeal against the orders for recovery of contribution. He suggested that this was an indication that the approach ultimately taken might be taken. We reject that submission. That is reading far too much into the words in question.

44 We accept the submission by Mr Myers that a decision to increase the contribution recoverable individually from Quilty and Somes to a substantial extent might have had the same practical effect as our decision. In that event, all that they could do would be to seek special leave from the High Court to appeal against our decision. But, to our mind, the possibility of reaching a somewhat similar financial consequence by a different route does not detract from the argument by Quilty and Somes that the result in fact reached came by a process that was not fair.

45 It is appropriate to exercise the power to re-open the hearing of the appeal, rather than to leave Quilty and Somes to their remedy by way of appeal. In our view it is preferable that this court should remedy the procedural error that has occurred.

46 We agree that Quilty is not in as strong a position as Somes. Quilty did not participate in the main appeal nor did he participate in the part of the appeal dealing with the question of contribution. No doubt that decision was influenced by the settlement that he had reached with the plaintiff. It could be said that he "chanced his arm" but, on reflection, we agree that he was entitled to be given notice of a possible significant change of approach to the issue of contribution, even though he did not ask to be heard on the question of the assessment of his contribution on an individual basis.

47 For those reasons we have decided that we should re-open the hearing of the appeal by NWP against the order of contribution made in its favour by the trial judge.

48 We adhere to the decisions previously given by us, revisiting only the question of whether the judge should have determined that the directors' liability to contribute to any payments made by NWP should be determined collectively, and the question of the appropriate contribution by the directors. The re-opening should be limited to that matter, and to anything consequential on our decision on that.

49 Having had the benefit of full submissions, we consider that the judge was right to determine the liability of each director to contribute to any payment made by NWP on an individual basis.

50 We agree, as we did before, with the majority of the Court of Appeal of the Supreme Court of New South Wales in Daniels and Others v Anderson and Others (1995) 37 NSWLR 438 that each director owed to the plaintiff an individual duty at common law to exercise reasonable care and diligence in the exercise of his powers as a director: see Clarke and Sheller JJA at 505 and c.f. Powell JA at 606. The duty required them to act collectively in the management of the affairs of the plaintiff, but the duty of care was owed by each director individually. Whether a particular director had breached that duty called for separate consideration. The answer to that question depended in each case on the facts relevant to that director. No director was responsible in tort for the conduct of another director, although, for example, Abbott's role as the driving force behind the takeover meant that it might, as a matter of fact, be appropriate to treat him as responsible for facts or events which in turn led to another director breaching that director's duty.

51 We now accept that the approach that we took in our previous decision, in particular at [17] (set out above), undermines the position as we have described it. By treating the directors as collectively responsible for the purpose of determining the contribution recoverable by NWP, we departed from the basis upon which that director was liable to the plaintiff. We realise, of course, that determining the liability of a defendant pursuant to s 26 of the Wrongs Act 1936 (SA) ("the Act") is not the same as determining whether that defendant is liable in tort to the plaintiff. We recognise also the width of the statutory requirement to determine what is "just and equitable, having regard to the extent of that person's responsibility for the damage". But those matters have to be considered, bearing in mind the basis upon which the defendant is liable in law, and by approaching the question of contribution on the basis of a collective responsibility we departed in a significant manner from the basis of the relevant directors' liability.

52 We also agree, in considering the contribution that should be made by each director, that it was appropriate to consider the culpability of each director and the contribution that the conduct of each director made to the loss that occurred. On reflection, we agree that in bringing into that process the concept of collective responsibility we included an element that should not have been included.

53 We accept the submission by Mr Karkar that the orders for contribution should be made on an individual basis, as did the trial judge. The directors are not liable to the plaintiff as joint tortfeasors. There is no warrant, simply because the court is now considering the question that arises under s 26 of the Act, for intruding a notion of collective responsibility.

54 We agree with Mr Myers that there are findings by the judge that could support a conclusion that the directors were joint tortfeasors on the basis that they acted in furtherance of a common design: see Fleming, The Law of Torts p 288. But when the judge made these findings he was not directing his mind to a claim of common design or conspiracy among the directors. That is not a case that was run at trial or on appeal. The contribution recoverable by NWP from the directors is not to be determined on the basis that they are jointly liable. Finally, referring to the submission that when determining the contribution to be made by the directors it is appropriate in the circumstances to treat them collectively, because of the nature of their conduct, we make the point that to do so is to attribute Abbott's responsibility (which we regard as clearly being the greater) to the other directors. It seems to us that the mere fact that the court is considering the issue that arises under s 26 of the Act is not a sufficient basis to do that. To do so is not just and equitable. In short, we agree with the approach that the trial judge took. The judge was not wrong, and there are no grounds for interfering with his approach.

55 In our previous reasons we envisaged that, ultimately, we would make orders for contribution as between the directors. Those orders, we thought, would produce a just and appropriate result as between the directors. The approach that we took meant that we imposed on Quilty and Singleton a liability to contribute to damages paid by NWP that was not just and equitable as between them and NWP.

56 Having concluded that the order for contribution should be made on an individual basis, we return to the trial judge's findings. We recognise that because the assessment of contribution involves matters of balance and emphasis and degree, the final decision will always be one on which there can be a range of views. In such a case, a court of appeal can interfere only if the decision is outside an acceptable range, or appears to rest on a misunderstanding of the evidence or on an error of principle: Pennington v Norris [1956] HCA 26; (1956) 96 CLR 10; Watt v Bretag (1982) 56 ALJR 760 at 761; Podrebersek v Australian Iron and Steel Pty Ltd [1985] HCA 34; (1985) 59 ALJR 492 at 494. We have already indicated that we consider there was no error of principle.

57 Underlying our consideration of the judge's findings is the fact that all defendants caused the loss that the plaintiff suffered. We consider that no significant distinction can be drawn between them in terms of the causative significance of their conduct. In the present case, we consider that matters of culpability, and the degree of departure from the standard of care required, are more significant, although in the end we must consider the whole conduct of each of the defendants.

58 We agree with the trial judge's finding that Abbott was the driving force. This has never seriously been challenged. His culpability is greater than that of the other directors. The contribution recoverable by NWP from him should be greater than the contribution recoverable from the other directors. He should also contribute a greater proportion of the damages than should NWP.

59 We agree with the judge that NWP is entitled to recover contribution from the other directors. If we were approaching the matter afresh, we would be inclined to distinguish on the one hand between Somes and Lee-Steere, and on the other hand between Quilty and Singleton, with a slightly greater allocation of responsibility to the former directors. But we have in mind a relatively minor adjustment only, and we are not satisfied that the judge was wrong to treat them equally.

60 We are not satisfied that, looking at the matter as a whole, the judge erred. We consider that he was right to order that NWP recover from the directors, considering the position cumulatively, seventy percent of the damages recoverable from NWP. Contribution of that order was appropriate. A feature of the order that we were previously inclined to make was that it reduced the total amount recoverable by NWP. Overall, we consider that the judge was right to order that the contribution recoverable from Abbott be substantially greater than that recoverable from the other directors.

61 If we were approaching the matter afresh we would slightly reduce the contribution recoverable from Abbott, and slightly increase the contribution recoverable from each of the other directors. However, the adjustment that we have in mind is a relatively minor one, and to do this would be to do no more than substitute a different view of the final outcome.

62 We are not persuaded that the judge erred. We would dismiss the appeal by NWP against the contribution order that the judge made in favour of NWP.

63 We will hear submissions from the parties as to the appropriate form of order. We refer below to some matters that need consideration.

64 Quilty now seeks an order for contribution against NWP. As we now understand things, Quilty did not appeal against the trial judge's decision. The trial judge made no order for contribution in favour of Quilty against NWP. Orders made by the trial judge on 15 April 1994 had the effect of treating existing third party proceedings, and pleadings in those proceedings, as contribution notices and claims as between NWP and the directors. As drawn up, the order is not entirely clear, but that is how we understand it. In his reasons ((1998) [1998] SASC 6529; 27 ACSR 1 at 384), after apportioning liability as between NWP and the directors in NWP's third party proceedings, the judge gave the directors liberty to apply for contribution against NWP and each of the other directors. It is not clear that it was necessary to do so, if we have correctly understood the effect of the order of 15 April 1994. As well, it seems to us that the contribution order made in favour of NWP settled the position as between the directors and NWP. All that remained was to make an order in the common form for any defendant, from whom the plaintiff recovered a proportion of the judgment in excess of the specified contribution, to be at liberty to enter judgment for the excess against the other defendants. No such order has been made, in favour of NWP or in favour of any director. There are issues here that may need to be sorted out.

65 In any event Quilty sought an order that he recover contribution from NWP in a written submission dated 2 March 1998, as did the other directors, including Singleton. On 9 July 1998 those applications were adjourned to a date to be fixed, possibly because the appeals to the Full Court were pending by then. It may be that Quilty can still seek an order from the judge. It may be that other directors can do so as well. However, we make no decision on that point.

66 But Quilty did not appeal, knowing that no such order had been made. It is not appropriate to re-open the appeal proceedings now for the purpose of enabling him to seek relief, by way of appeal, that he has not previously sought in the appeal proceedings. Nothing that any other party has done or that the court has done has disadvantaged him in that respect.

67 We would not make an order for contribution in favour of Mr Quilty against NWP.

68 At the further hearing it was pointed out that in our reasons at [28] we indicated that we would order that the contribution recoverable by NWP be in respect of its liability under the judgment and for costs. That order has not yet been made. Mr Hoile pointed out that the costs payable by NWP to the plaintiff include indemnity costs ordered by the trial judge. We agree that that matter requires consideration and wish to hear the parties on that.

69 In light of the orders that we would make, it is necessary to reconsider the question of the costs of this aspect of the appeal. In that connection, we note that Somes did not ultimately challenge the judge's order against him for contribution, and limited his submissions to opposing an order that his contribution be increased.

70 As before, 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. As before, we are of the view that Somes and Lee-Steere are entitled to recover contribution from NWP: see our previous reasons at [24]. They are entitled to recover from NWP thirty percent of any damages recovered by the plaintiff from them. The question of costs may require separate consideration.

71 As before, we would dismiss the appeal by NWP against the trial judge's order giving the directors leave to claim contribution from NWP. As we have pointed out, it is not clear that the order was needed.

72 For the reasons indicated in our previous reasons, the amount of contribution recoverable by NWP from the directors should be the appropriate percentage of the full amount of the judgment against NWP: see our previous reasons at [13] - [15]. The amount recoverable by NWP should not be reduced by reference to the amount by which the court would have reduced the judgment against NWP on account of contributory negligence, were it able to do so.

73 For those reasons we would, in summary, re-open the hearing of the appeal against the contribution orders, we would dismiss the appeal by NWP against the contribution orders, and subject to the variations indicated and the need to hear submissions on incidental matters, would make the orders indicated above.

74 BLEBY J: In his judgment on the trial of this action (Duke Group Ltd (In Liquidation) v Pilmer & Ors [1998] SASC 6529; (1998) 27 ACSR 1) the trial Judge assessed the plaintiff's damages as against the partnership of Nelson Wheeler ("NWP") and as against the defendant directors of the plaintiff at the same figure. He entered judgment against all defendants accordingly. He had found NWP liable for damages for breach of contract and in tort and the directors liable for breach of fiduciary duty and statutory duties. The trial Judge rejected the argument of NWP that the plaintiff was guilty of contributory negligence. He apportioned liability between the defendants as follows:

The trial Judge subsequently made orders on the third party proceedings by NWP against the director defendants that they contribute to the amount of the judgment against NWP in those proportions.

75 In the main appeal against that judgment (Duke Group Ltd (In Liquidation) v Pilmer & Ors [1999] SASC 97; (1999) 73 SASR 64) we likewise assessed the plaintiff's damages against NWP as being the same amount in contract, in tort and for what we considered to be NWP's breach of fiduciary duty. We held that if we were free to do so, we would have reduced the plaintiff's damages by 35% on account of the plaintiff's contributory negligence or, in the case of damages for breach of fiduciary duty, contributing fault. However, we considered that we were precluded from reducing the amount of the judgment by virtue of the decision of the High Court in Astley v Austrust Ltd (1999) 197 CLR 1.

76 In its decision on appeal from this Court the High Court in Pilmer & Ors v Duke Group Ltd (In Liquidation) [2001] HCA 31; (2001) 207 CLR 165 reduced the amount of the plaintiff's damages recoverable from NWP, and held that there was no breach of fiduciary duty on their part. The Court did not alter the amount of damages recoverable from the directors. Consequent upon that decision we directed that judgment be entered for the plaintiff against NWP for $31,737,464.87 inclusive of interest to 30 January 1998. The judgment against the defendant directors in the sum of $188,662,619.12 inclusive of interest to the same date was not disturbed. The High Court did not interfere with our finding that the plaintiff's damages in tort, if that were the only cause of action available, should be reduced by 35% for the contributory negligence of the plaintiff.

77 The reasons for the much higher amount of the judgment against the director defendants were:

(a) That the High Court substantially reduced the assessment of the plaintiff's damages in contract and in tort by excluding from the assessment any loss said to have been suffered by the issue and allotment of shares in itself to shareholders of Western United Ltd. There was no appeal by the director defendants against the judgment entered against them; and

(b) The finding of breach of fiduciary duty against the director defendants had resulted in our assessing a higher figure by way of equitable compensation to the plaintiff than the damages that we had assessed against NWP for breach of contract and in tort. That figure was also higher than the damages assessed against the director defendants for breach of statutory duty. There was no appeal to the High Court by the director defendants against that judgment.

78 When, following the main appeal, the question of contribution between defendants was argued in Duke Group Ltd (In Liquidation) v Pilmer & Ors (No 2) [2000] SASC 418; (2000) 78 SASR 216 ("the contribution decision"), I differed from the majority in the result. However, I took a similar approach to the majority in determining that there should be an order that NWP should recover contribution from the director defendants as a group, anticipating that there would be further orders of contribution as between the director defendants themselves. Unlike the majority, I considered that the liability should be apportioned 30% to NWP, as the trial Judge had done, with the director defendants as a group bearing 70%. I also considered that for the purposes of s 25 of the Wrongs Act 1936 the damage suffered by the plaintiff as a result of the tort of NWP was the amount of damages as assessed against them, reduced by 35% on account of the plaintiff's contributory negligence.

79 I agree that, for reasons now expressed by the Chief Justice and Duggan J, we erred in treating the director defendants as a group for the purpose of ordering contribution between the defendants without any warning to the parties affected that that was what we might do. I have nothing to add to those reasons. Accordingly, I agree that it is appropriate, particularly as no judgment has yet been sealed, that the contribution decision be re-opened for the purpose of hearing further argument as to what the appropriate orders should be. I also agree, for the reasons given by the Chief Justice and Duggan J, that we were wrong to treat the director defendants as a group for the purpose of ordering contribution between them and NWP.

80 For the reasons which I gave in the contribution decision, I adhere to the view that the amount of NWP's liability to the plaintiff in tort for the purposes of s 25 of the Wrongs Act is the amount of damages now assessed in accordance with the decision of the High Court, less 35% by virtue of the plaintiff's contributory negligence.

81 I also adhere to the view, for the reasons then expressed, that notwithstanding that notional reduction on account of the plaintiff's contributory negligence, it was still appropriate to order contribution between the defendants, even though some of the conduct of the director defendants had been taken into account in determining the extent of the plaintiff's contributory negligence. I will not repeat the reasons that I then gave for that approach.

82 Although, unlike the trial Judge, I would award contribution on a lesser figure than the full assessment of the plaintiff's damages in tort, I adhere to the view I earlier expressed that as between NWP and the defendant directors, the apportionment awarded by the trial Judge of 30% to NWP is appropriate, and properly represents their share of the defendants' common liability to the plaintiff for damages in tort. As to how the 70% between the director defendants should be apportioned, I might have awarded slightly different proportions against particular defendants, but I do not consider that the apportionment arrived at by the trial Judge reflects any appealable error. Accordingly, I would agree with the apportionment of responsibility between all defendants as determined by the trial Judge.

83 This means that I join in allowing the question of contribution between defendants to be re-opened for the purpose of correcting any errors based on the grouping of the defendants for the purpose of making contribution orders between them.

84 I would allow the appeal by NWP against par 8 of the trial Judge's order, but only for the purpose of determining that the order be made in respect of 65% of the amount of the judgment entered against NWP. I would confirm the respective percentages mentioned in that paragraph. As I indicated in the contribution decision, I would dismiss the appeal of NWP against the grant by the trial Judge to the director defendants of liberty to apply for orders for contribution. For reasons which follow such leave may well not have been necessary. For reasons given in the contribution decision I would, if still necessary, make orders for contribution in favour of the defendants Somes and Lee-Steere against NWP reflecting the apportionment now determined.

85 In the contribution decision I noted that Mr Quilty had not made any application for contribution against NWP pursuant to the liberty granted by the trial Judge. In that I was wrong. A written submission was filed by him to that effect on 2 March 1998, shortly after the publication of the trial Judge's reasons. Questions of contribution between defendants, other than on NWP's third party notice against the director defendants, were adjourned sine die by the trial Judge on 9 July 1998, after the appeals to this Court had been instituted, and have never been resolved by the trial Judge. That applied to the claims of the defendants Somes and Lee-Steere as well as to the claim of Mr Quilty. However, both Somes and Lee-Steere appeared on the appeal and sought contribution orders against NWP. In the previous decision I considered that we should treat that as an application to this Court, and was content to make an order on the basis then being proposed. That is why I would still make such an order now on the basis presently proposed, if indeed an order is necessary at all to that effect.

86 However, Mr Quilty did not participate in the appeal or in the subsequent contribution proceedings before this Court. It is too late to raise before this Court, for the first time, a claim for an order for contribution on an application to re-open for reasons which have no bearing on Mr Quilty's failure to process his claim for contribution. He chose not to pursue his claim before this Court. If he still has a remedy it would appear to be before the trial Judge. The re-opening of the contribution proceedings should only be to the extent necessary to correct the previous errors.

87 However, it may be that the order for contribution made by the trial Judge was mistakenly applied only to the third party proceedings in action number 1847 of 1992. In that action the director defendants were originally joined as third parties by NWP. However, they were later joined as defendants by the plaintiff, and that action was consolidated with action number 1810 of 1993, being an action by the plaintiff against other persons alleged to be partners of NWP. The effect of par 7 of the trial Judge's order of 15 April 1994 by which all proceedings were consolidated appears to have rendered the third party proceedings as such unnecessary. All that may have been needed was a judgment in common form by way of contribution between the relevant defendants in the consolidated action. If that is correct, it would seem that specific contribution orders in favour of one defendant against another are not necessary. I would want to hear the parties further on the form of the order, as to contribution orders affecting costs of the trial and as to costs of the contribution proceedings before this Court. However, that is also a matter for the trial Judge to rectify, if appropriate. Although if the parties are agreed, I see no reason why the standard contribution order should not be incorporated into the judgment of this Court.

88 I calculate the reduced amount on which I would make the contribution orders at $20,629,352.17. That represents, in my view, the damage in respect of which NWP is liable to the plaintiff. It is only in respect of the same damage for which the defendant directors are liable to the plaintiff in tort that the contribution order can be made. NWP has a greater liability in contract, but in my opinion that cannot be the subject of contribution under s 25(1) of the Wrongs Act. The directors have a greater liability in tort and a still greater liability in equity, but that is not the same damage in respect of which NWP is liable.

89 On the orders I propose, and indeed on the orders proposed by the majority, there could arise questions as to which of the respective liabilities have been satisfied by any payment made in part satisfaction of the judgment by individual defendants. That may in turn give rise to questions of contribution in equity which have not been the subject of argument on this re-opening, and which may, in any event, depend on what monies have been paid.

DUKE GROUP (IN LIQ) v PILMER & ORS

At a glance

Court

Decision date

Before

Source

Judgment (100 paragraphs)

DUKE GROUP (IN LIQ) v PILMER & ORS (NO 5) No. SCCIV-92-1874 [2003] SASC 381 (18 November 2003)

Parties

Cases Cited (14)