Landpower Australia Pty Ltd v Penske Power Systems Pty Ltd

Court of Appeal (NSW)|2019-06-17|Before: Bell P, Macfarlan JA, Payne JA

Introduction

This is an application for leave to appeal from a decision of Gibson DCJ in which her Honour ordered that a first cross-claim/amended statement of cross-claim filed on 10 August 2018 (the Amended Cross-Claim) be struck out and dismissed with costs.
The application raises important questions in relation to the circumstances in which a defendant who raises a proportionate liability defence within the meaning of s 87CB of the Competition and Consumer Act 2010 (Cth) (CCA) and s 35(1) of the Civil Liability Act 2002 (NSW) (CLA) and names concurrent wrongdoers may still bring cross-claims against such wrongdoers. The importance of this question, and the fact that it is still being litigated more than 15 years after the introduction of the legislative regimes giving effect to proportionate liability, warrant the grant of leave to appeal.

The judgment

The application for summary dismissal of the Amended Cross-Claim was evidently heard in a busy duty list, and the judgment was delivered ex tempore.
In her reasons, the primary judge recorded that: "Essentially what Penske says is that having regard to s 36 of the Civil Liability Act and authorities discussing this provision, principally, Dymocks Book Arcade Pty Ltd v Capral Ltd & Ors [2010] NSWSC 195 at 9. 'Landpower cannot seek contribution or indemnity from [Penske] in the forms set out in the amended cross-claim.'"
Her Honour also referred to the decision of Ball J in Sanderson Motors Pty Ltd v Lindsay Bennelong Developments Pty Ltd [2014] NSWSC 846, and in particular the series of observations made by his Honour at [31]ff of that decision. Although not reproduced in the primary judge's reasons, it is convenient to set out at this point in the judgment the key aspects of Ball J's analysis: "Pt 4 does not set out a mechanism for the identification of all those persons who may be concurrent wrongdoers and between whom the claim is to be apportioned. In any particular case, that will depend on the pleadings. Any apportionment by the court will only occur between those persons who are identified by the pleadings as concurrent wrongdoers. It is not for the court to determine independently of the pleadings who the concurrent wrongdoers might be. … … from a practical point of view, it will often be a defendant, rather than the plaintiff, who has an interest in identifying all the concurrent wrongdoers since the existence of other concurrent wrongdoers provides a mechanism by which the liability of the defendant may be reduced. The plaintiff, on the other hand, has no interest in identifying concurrent wrongdoers against whom it may not recover (because, for example, they are insolvent) since the effect of doing so may simply be to reduce the plaintiff's recoverable loss. … … where an entity is joined as a defendant in the proceedings, that entity cannot be made liable for more than its proportionate share. The court cannot give judgment against that entity for more than that amount: s 35(1)(b); and that entity, once judgment is given against it, cannot be liable for contribution or indemnity to another concurrent wrongdoer: s 36. Nor can it be joined in subsequent proceedings concerning the apportionable claim: s 38. … … in apportioning liability to a particular defendant, the court must take into account the extent of the defendant's responsibility for the damage or loss having regard to the extent of the responsibility of other defendants for that damage or loss and may (but need not) take into account the comparative responsibility of any other concurrent wrongdoer who is not a party to the proceedings (but who has been identified by the pleadings as a concurrent wrongdoer). …"
Ball J also noted the decision of McDougall J in Dymocks Book Arcade Pty Ltd v Capral Ltd [2010] NSWSC 195 (Dymocks) dealing with claims for contribution pursuant to s 5 of the LRMPA against concurrent wrongdoers, and which is considered in further detail below, given the significance that that decision played in the primary judge's reasons. In respect of that decision, Ball J noted that: "Part 4 does not expressly limit rights of contribution except in s 36. For the reasons given by McDougall J, s 35(1) must be construed as impliedly preventing a defendant from making a claim for contribution in the same proceedings. That is because such a claim for contribution would necessarily fail." The reference to a claim for contribution must be understood in context as a claim for contribution pursuant to s 5 of the LRMPA.
In the present case, the primary judge stated that she was unaware of any previous case where the proposed cross-defendant had not also been joined by the plaintiff as a defendant in the proceedings. Although that may be the normal position, the present case was not unique, as will be seen later in these reasons.
The primary judge went on to state that the real issue in the case was whether or not there was a "direct cause of action between the defendant and the cross-claimant". (Her Honour presumably meant between the defendant (which was the cross-claimant) and the cross-defendant). The primary judge then said, somewhat elliptically, that "the issue of concurrent wrongdoers is one which amounts to an absolving of liability for the defendant and unless some original cause of action can be identified with precision, the cross-claim must be struck out." She went on to express the opinion that "the cross-claim does not disclose a bona fide cause of action" and that, whilst noting the caution that must be exercised on a summary dismissal application, said that: "… the legal issues in this case are readily capable of disposal conformably with the reasoning of McDougall J in Dymock Books Pty Ltd and I note that there is no disputed issue of fact or indeed any clear identification of the cause of action independent of the claim which the defendant cross-claimant has."
It is not, with respect to the primary judge, particularly easy to follow the judgment and what her Honour meant by various statements that I have set out above. As already noted, it was delivered ex tempore, apparently in the course of a busy duty list.
Before the Court of Appeal, Ms Horvath, who appeared for Penske, sought to interpret the decision as one which went to the form of the pleading and its (the pleading's) lack of precision, rather than as turning on any matter of principle. I do not think that this is a proper reading of the judgment and, if it was, as Mr Cheshire SC, who appeared for Landpower, submitted, the judgment would be deficient as lacking a sufficient reasoning process in relation to any pleading deficiencies. None were specifically identified or discussed and it does not seem to me that the form of the Amended Cross-Claim was defective. Nor, in fairness to the primary judge, do I think that it so appeared to her Honour.
The primary judge's reference to the decision in Dymocks in the passage I have extracted at [28] above makes it sufficiently clear that she dismissed the proceedings by reference to matters going beyond the mere form of the Amended Cross-Claim. In order properly to understand her Honour's reasons, it is necessary to consider the judgment of McDougall J in Dymocks to which she referred in the key part of her reasoning.

Dymocks Book Arcade Pty Ltd v Capral Ltd

This case involved a claim by Dymocks, as plaintiff, in respect of damage said to have been caused by water penetration through a metal roof of a building which it owned. Dymocks had relevantly sued an architect who had given it advice in relation to the roof of the building and its affixing to underlying steel rafters. The architect, in turn, filed a cross-claim which sought relief against a number of parties for contribution or indemnity pursuant to the LRMPA in respect of any amount that it might be ordered to pay to the plaintiff. One of the cross-defendants was an engineer which had given advice to the architect as to the suitability of certain roofing screws for the affixing of the roof to the rafters.
The engineer contended that the plaintiff's claim against the architect was an apportionable claim and said that the claim against it for contribution could not be maintained and must be summarily dismissed. The architect, similarly, had said in its response to Dymocks' commercial list statement that Dymocks' claim was apportionable, and had nominated, inter alia, the engineer as concurrent wrongdoer.
The engineer based its claim for summary dismissal on s 36 of the CLA which relevantly provides that a defendant against whom judgment is given as a concurrent wrongdoer in relation to an apportionable claim cannot be required to contribute to any damages recovered from another wrongdoer in respect of the same apportionable claim, or to indemnify any such wrongdoer.
In his reasons for judgment, McDougall J said as follows: "8 In my view, when s 36 talks of a defendant against whom judgment is given under Part 4 as a concurrent wrongdoer, it is referring to a judgment given against the defendant by the plaintiff or other person claiming relief. The purpose of s 36 is to bar cross-claims. It cannot be the case that s 36 comprehends within its field of operation judgments under the very cross-claims that it seeks to bar. 9 But that does not mean that the architect's cross-claim, as originally propounded, was maintainable. The purpose of contribution under s 5 is to adjust rights and liabilities between, on the one hand, defendants to suits who are adjudged to be liable, and, on the other, those who are joined as cross-defendants and are adjudged also to have been liable for the loss in respect of which the defendant is adjudged liable. By contrast, the purpose of Part 4 of the Civil Liability Act is to enable that apportionment of liability to occur in the action brought by the plaintiff, whether or not those responsible for any damage suffered by the plaintiff have been joined as concurrent wrongdoers. Thus, as Part 4 of the Civil Liability Act works its way out, the judgment given against a concurrent wrongdoer who is a defendant will represent only that concurrent wrongdoer's proportion of responsibility. It will not reflect any proportion of responsibility that the court attributes to any other concurrent wrongdoer. It follows, in my view necessarily, that when a judgment is given against a concurrent wrongdoer in respect of an apportionable claim, that judgment is not one in respect of which the concurrent wrongdoer is entitled to contribution or indemnity from any other concurrent wrongdoer. That is because, on the hypothesis that Part 4 requires to be considered, no other concurrent wrongdoer has contributed to the particular loss which is the particular or apportioned responsibility of the concurrent wrongdoer who is sued and against whom a judgment is given. 10 For those reasons, the cross-claim as it was originally propounded was not maintainable and the relief sought by the engineer, that it should be summarily dismissed, would have been granted."
As already noted at [21] above, Landpower conceded that that aspect of its Amended Cross-Claim which sought contribution or indemnity from Penske was bound to fail in accordance with Dymocks. Dymocks, however, does not stand for any broader proposition than that a cross-claim for contribution or indemnity pursuant to s 5 of the LRMPA on the basis that the cross-defendant is liable as a concurrent wrongdoer will be liable to summary dismissal for the reasons given by McDougall J. Such a claim is, effectively, redundant as the cross-claimant will not be liable for any greater damage than represents its own share of responsibility for the loss.
Dymocks did not provide a basis for disposing of any issues in the present case beyond Landpower's claim for contribution pursuant to s 5 of the LRMPA. In particular, it does not stand for any general proposition that cross-claims are not or are never permitted where there is said to be an apportionable claim. The statement by McDougall J in Dymocks at [8] that "[t]he purpose of s 36 is to bar cross-claims" did not mean that a defendant sued on what is claimed to be an apportionable claim may not ever cross-claim against a party if either the plaintiff or the defendant has nominated that entity as a concurrent wrongdoer.
To the extent that the primary judge considered that the reasoning in Dymocks dictated that the Amended Cross-Claim should be dismissed, her Honour erred.

Further consideration

In Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613; [2013] HCA 10 at [16], French CJ, Hayne and Kiefel JJ said: "The evident purpose of Pt 4 [of the CLA] is to give effect to a legislative policy that, in respect of certain claims such as those for economic loss or property damage, a defendant should be liable only to the extent of his or her responsibility. The court has the task of apportioning that responsibility where the defendant can show that he or she is a "concurrent wrongdoer", which is to say that there are others whose acts or omissions can be said to have caused the damage the plaintiff claims, whether jointly with the defendant's acts or independently of them. If there are other wrongdoers they, together with the defendant, are all concurrent wrongdoers."
Section 34(2) of the CLA defines "concurrent wrongdoer", in relation to a claim, as "a person who is one of two or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim". "Apportionable claim" is defined in s 34(1) as: "(a) a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care, but not including any claim arising out of personal injury, (b) a claim for economic loss or damage to property in an action for damages under the Fair Trading Act 1987 for a contravention of section 42 of that Act (as in force before its repeal by the Fair Trading Amendment (Australian Consumer Law) Act 2010) or under the Australian Consumer Law (NSW) for a contravention of section 18 of that Law."
Just because a defendant names other parties as concurrent wrongdoers (and, as Ball J pointed out in Sanderson, it will generally be a defendant rather than a plaintiff who does this), it does not follow that a plaintiff or, ultimately, the court will accept this characterisation. That may be, for example, because the court does not ultimately accept that one or more of the parties nominated as concurrent wrongdoers owed any duty of care to a plaintiff or was otherwise under any liability to the plaintiff or caused the damage or loss that is the subject of the claim.
This is a matter that does not fall to be determined simply on the pleadings. But rather the question whether or not a claim is "apportionable" will generally involve a characterisation of a claim based on the evidence before the court: Reinhold v New South Wales Lotteries Corporation (No 2) (2008) 82 NSWLR 762; [2008] NSWSC 187 at [25]-[27]. Whether or not a person or entity is a concurrent wrongdoer is not usually capable of being determined on the pleadings and may be far from straightforward where, for example, a novel duty of care is alleged or a multifactorial analysis of the kind referred to by Allsop P (as he then was) in Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649; [2009] NSWCA 258 is required.
Where factual inquiries of this character are potentially in play, summary dismissal of the kind that occurred in the present case is quite inappropriate: cf Spellson v George (1992) 26 NSWLR 666. In Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 at [57], the plurality said: "It is, of course, well accepted that a court whose jurisdiction is regularly invoked in respect of a local defendant (most often by service of process on that defendant within the geographic limitations of the court's jurisdiction) should not decide the issues raised in those proceedings in a summary way except in the clearest of cases. Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way." (Footnote omitted)
In Dey v Victorian Railways Commissioner (1949) 78 CLR 62 at 91; [1949] HCA 1, Dixon J said that "once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process". It might be noted that the language of "frivolous" and "vexatious" and "abuse of process" survives in r 13.4 of the UCPR pursuant to which Penske moved for dismissal of the Amended Cross-Claim in the present case.
Legal and factual questions relating to a party's status as a wrongdoer for the purposes of the definition of "concurrent wrongdoer" and to questions of causation of loss for the purposes of that definition and also for the purposes of assessing whether or not the claim for economic loss or damage arises from a failure to take care for the purposes of the definition of "apportionable claim" will frequently, if not invariably, need to go to trial. As Middleton J observed with regard to apportionable claims in Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd (2007) 164 FCR 450; [2007] FCA 1216 at [31]: "If a respondent calls in aid the benefit of the limitation on liability provided for in Pt IVAA of the Wrongs Act, then the respondent has the onus of pleading and proving the required elements. The court, after hearing all the evidence, will then need to determine, as a matter of fact, whether the relevant claim brought by the applicant is a claim arising from a failure to take reasonable care."
By way of contrast, the reasons why cross-claims for contribution pursuant to s 5 of the LRMPA may be and frequently are dealt with summarily is that such claims are predicated on effectively the same criteria as determine proportionate liability, as McDougall J pointed out in Dymocks.
If the nominated concurrent wrongdoer is not in fact found to have that character, namely of a concurrent wrongdoer, because, for example, he, she or it owed no duty to the plaintiff or did not cause or contribute to the cause of the plaintiff's loss but the nominated wrongdoer did owe a relevant duty to the defendant and breached it or was otherwise under a liability to the defendant, the defendant will be entitled to cross-claim to recover damages from that party in the event that the breach or contravening conduct is found to have caused loss or damage to the defendant/cross-claimant. In some cases, that damage may be represented by a liability the defendant/cross-claimant has to the plaintiff. Implicit support for this conclusion may be derived from the judgment of Campbell JA in Rennie Golledge Pty Ltd v Ballard (2012) 82 NSWLR 231; [2012] NSWCA 376 at [151] who spoke in terms of a putative cross-claimant with "rights of any substance against any alleged concurrent wrongdoer". The proportionate liability regimes in both State and federal legislation were not designed to emasculate such independent substantive rights.
Another example of a case where a defendant may bring a cross-claim against an alleged concurrent wrongdoer is where the cross-claim is founded on a contract which may give rise to an express right to damages or indemnity. Perpetual Trustee Company Ltd v CTC Group Pty Ltd (No 2) [2013] NSWCA 58 (Perpetual) was such a case although, as Macfarlan JA explained at [11], the availability of such a claim was driven by s 3A(2) of the CLA which provides: "This Act (except Part 2) does not prevent the parties to a contract from making express provision for their rights, obligations and liabilities under the contract with respect to any matter to which this Act applies and does not limit or otherwise affect the operation of any such express provision." In such a case, a cross-claim would be available even if the cross-defendant was also found to be a concurrent wrongdoer; see also B McDonald, "Proportionate Liability in Australia: The Devil in the Detail" (2005) 26 Aust Bar Rev 29, 44 and B McDonald "Indemnities and the Civil Liability Legislation" (2011) 27 JCL 56, 62.
Cross-claims for declaratory relief against named concurrent wrongdoers who are not joined as defendants by a plaintiff have also been permitted: see, for example, Fudlovski v JGC Accounting & Financial Services Pty Ltd (No 3) [2013] WASC 476; Lion‐Dairy & Drinks Pty Ltd v Sinclair Knight Merz Pty Ltd (No 3) [2014] FCA 386; cf. Rivercity Motorway Finance Pty Ltd (Administrators Appointed) (Received and Managers Appointed) v AECOM Australia Pty Ltd (No 2) [2014] FCA 713. In the Lion-Dairy case, it should also be noted that a cross-claim based upon a direct claim in negligence against one of the nominated concurrent wrongdoers was not opposed: see at [13].
One possible way of viewing and seeking to understand the primary judge's decision and, in particular, her statement that "the cross-claim does not disclose a bona fide cause of action", is that her Honour may have assumed that the claim was apportionable and that Penske was a concurrent wrongdoer because Landpower had pleaded as much in its Defence and the Northcotts had accepted, at least by the time the notice of motion was heard, that the claim was apportionable. In my opinion, a defendant who in its defence nominates a party as a concurrent wrongdoer is not by reason of that fact alone precluded from bringing a cross-claim against such an entity based upon an independent cause of action it has against that entity.
Such a claim may be warranted by way of what is, in effect, an alternative plea against the possibility that the cross-defendant is not found to be a concurrent wrongdoer and/or the plaintiff's claim is not held to be apportionable. So long as the cross-claim is brought bona fide and is not demurrable, the fact that it may not ultimately succeed (wholly or in part) in the event that the cross-defendant is ultimately held on the evidence at the trial to be a concurrent wrongdoer whose want of reasonable care has contributed to the plaintiff's loss, does not mean that the cross-claim should be summarily dismissed. The cross-claimant will be at risk of costs in this eventuality but that is a matter for it.
It would be highly undesirable for a defendant who has raised but failed to establish that a particular entity was a concurrent wrongdoer should have to wait until after a case had been determined to bring separate proceedings against that entity under an independent cause of action it had. That course would be contrary to s 63 of the Supreme Court Act 1970 (NSW) which provides that: "The Court shall grant, either absolutely or on terms, all such remedies as any party may appear to be entitled to in respect of any legal or equitable claim brought forward in the proceedings so that, as far as possible, all matters in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of those matters avoided."
It may also be highly prejudicial to the defendant, both in terms of cost and the potential running of any limitation periods. In Perpetual, Macfarlan JA contemplated a defendant bringing a cross-claim against a nominated concurrent wrongdoer to guard against the possibility that the court might hold that the apportionment provisions of the CLA were inapplicable.
In my opinion, the Amended Cross-Claim in the current case should not have been dismissed or struck out.

Orders

I would make the following orders: 1. Leave to appeal granted. 2. Appeal allowed with costs. 3. Set aside the orders of Gibson DCJ dismissing the Amended Cross-Claim. 4. Order that Penske pay Landpower's costs of the notice of motion in the District Court. 5. Order that Landpower pay the costs (if any) thrown away by the amendment.
MACFARLAN JA: I agree with Bell P.
PAYNE JA: I agree with Bell P.

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Trade Practices Act 1974(Cth)

Headnote [This headnote is not to be read as part of the judgment] Landpower Australia Pty Ltd (Landpower) was the sole defendant in proceedings brought in the District Court by Lindsay Northcott and Faith Northcott (the Northcotts). The Northcotts seek damages in those proceedings for breach of contract, negligence, misleading or deceptive conduct and negligent misrepresentation. The causes of action related to the performance of a harvester used by the Northcotts in their agricultural cropping business. Landpower, by its defence, denied the allegations advanced by the Northcotts and, in the alternative, pleaded that the Northcotts' claims were apportionable claims within the meaning of s 87CB of the Competition and Consumer Act 2010 (Cth) (CCA) and the Trade Practices Act 1974 (Cth) and s 35(1) of the Civil Liability Act 2002 (NSW) (CLA). Landpower named a number of alleged concurrent wrongdoers in its defence, none of which were joined as defendants in the proceedings. Landpower brought a cross-claim against one of the concurrent wrongdoers named in its defence: Penske Power Systems Pty Ltd (Penske). The cross-claim alleged that if Landpower were liable to the Northcotts then that was because Penske had breached a separate contract with Landpower, was negligent in undertaking its work for Landpower, had engaged in misleading or deceptive conduct and/or had made negligent misrepresentations to Landpower. By a notice of motion, Penske sought summary dismissal of Landpower's cross-claim. It was accepted before the primary judge that each of the claims by the Northcotts against Landpower were relevantly apportionable claims. The primary judge summarily dismissed Landpower's cross-claim. The issue on appeal was whether the primary judge erred in summarily dismissing Landpower's cross-claim. The Court (Bell P, Macfarlan and Payne JJA agreeing) held, allowing the appeal: 1. Other than cross-claims for contribution pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW), s 36 of the CLA and s 87CF of the CCA do not necessarily preclude cross-claims against alleged concurrent wrongdoers: [32]-[37], [49]. Dymocks Book Arcade Pty Ltd v Capral Ltd [2010] NSWSC 195, considered. 1. That a claim is said to be apportionable does not of itself preclude the bringing of a cross-claim against alleged concurrent wrongdoers. The claim may be found not to be relevantly apportionable, the named concurrent wrongdoer(s) may not be found to have that status or the cross-claim may advance independent causes of action. The proportionate liability regimes in both State and federal legislation were not designed to emasculate independent substantive rights: [37]-[53]. 2. The cross-claim should not have been summarily dismissed: [54].

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