Permanent Custodians Limited v Geagea

Proportionate Liability 3The plaintiff, Permanent Custodians Limited, sued the fourth to sixth defendants under three causes of action: negligence; breach of warranty of authority; and misleading or deceptive conduct. The liability judgment did not find liability on the basis of the claim in negligence, but did find liability for damages arising from a breach of warranty of authority and for misleading or deceptive conduct. 4The issue in relation to proportionate liability concerns the operation of s 34 of the Civil Liability Act 2002. Section 34 is in the following terms: "s 34 Application of Part (1) This Part applies to the following claims (apportionable claims): (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. (1A) For the purposes of this Part, there is a single apportionable claim in proceedings in respect of the same loss or damage even if the claim for the loss or damage is based on more than one cause of action (whether or not of the same or a different kind). (2) In this Part, a concurrent wrongdoer, in relation to a claim, is 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. (3) For the purposes of this Part, apportionable claims are limited to those claims specified in subsection (1). (3A) This Part does not apply to a claim in an action for damages arising from a breach of statutory warranty under Part 2C of the Home Building Act 1989 and brought by a person having the benefit of the statutory warranty. (4) For the purposes of this Part it does not matter that a concurrent wrongdoer is insolvent, is being wound up or has ceased to exist or died." 5A claim in negligence is an "apportionable claim". A claim for breach of warranty of authority is not an "apportionable claim". A claim for loss or damage arising under either the Fair Trading Act 1987 or the Australian Consumer Law 2012 is an apportionable claim pursuant to the terms of s 34(1)(b) of the Civil Liability Act. 6Thus, pursuant to the findings in the liability judgment, two causes of action give rise to damages, one of which is an apportionable claim and one of which is not. The parties dispute as to the effect of such a situation. 7The defendants' position is that s 34 of the Civil Liability Act operates on any and all damages awarded because the plaintiff has succeeded in one cause of action that falls under that section (the misleading or deceptive conduct claim). As I understand it, the defendants submit that, because sections 34 and 35 of the Civil Liability Act apportions damages "in the proceedings", which term includes the "non-apportionable" claim, all damages in the proceedings regardless of the cause of action or whether it is "apportionable" are apportioned. 8The difficulty with the foregoing submission is that it seems to be inconsistent with the operation of the provisions in s 35(2) of the Civil Liability Act. It is appropriate to set out the provisions of s 35 of the Civil Liability Act, which are in the following terms: "s 35 Proportionate liability for apportionable claims (1) In any proceedings involving an apportionable claim: (a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant's responsibility for the damage or loss, and (b) the court may give judgment against the defendant for not more than that amount. (2) If the proceedings involve both an apportionable claim and a claim that is not an apportionable claim: (a) liability for the apportionable claim is to be determined in accordance with the provisions of this Part, and (b) liability for the other claim is to be determined in accordance with the legal rules, if any, that (apart from this Part) are relevant. (3) In apportioning responsibility between defendants in the proceedings: (a) the court is to exclude that proportion of the damage or loss in relation to which the plaintiff is contributorily negligent under any relevant law, and (b) the court may have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceedings. (4) This section applies in proceedings involving an apportionable claim whether or not all concurrent wrongdoers are parties to the proceedings. (5) A reference in this Part to a defendant in proceedings includes any person joined as a defendant or other party in the proceedings (except as a plaintiff) whether joined under this Part, under rules of court or otherwise." 9Sub-section 35(2) expresses the legislative intention that, where proceedings involve both an apportionable and a non-apportionable claim, liability for the apportionable claim is determined in accordance with proportionate liability and liability in relation to the non-apportionable claim is determined in accordance with the legal rules that apply, apart from Part 4 (i.e. otherwise in accordance with proportionate liability). 10In most usual cases, a proceeding that involved both an apportionable claim and a non-apportionable claim would be proceedings where the plaintiff claimed against two defendants under two different causes of action e.g. claims against an employer for liability and claims in negligence against an occupier of premises. There are innumerable examples of such proceedings. 11If, as the terms of s 35(2) of the Civil Liability Act purport to effect, a non-apportionable claim is to be determined otherwise in accordance with Part 4 of the Civil Liability Act, it is difficult to conclude that the non-apportionable claim should be the subject of apportionment. 12I am comforted in the foregoing approach by the comments of Brereton J in Perpetual Trustee Co Ltd v Ishak [2012] NSWSC 697 in which his Honour separated the two causes of action and declined to reduce the damages arising under the non-apportionable by reference to the proportionate liability regime. 13The defendants submit that the issue of proportionate liability should be determined in accordance with the judgment of the majority of the High Court in Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10; (2013) 247 CLR 613. Those proceedings concerned whether the misconduct of fraudsters had contributed to the damages caused by the negligence of solicitors. The High Court was dealing with two apportionable claims and the judgment concerns whether fundamentally different causes of action contributed to the damages caused to the plaintiffs. 14The judgment of the High Court did not concern a non-apportionable claim and the High Court determined that contribution was established by the determination of whether the conduct was seen as contributing to the loss or damage; not whether the conduct contributed to the breach of the duty of the other tortfeasor. 15The passage in Hunt & Hunt, at [16]-[18], on which the defendants rely must be understood in the context that the reference by the plurality to "acts or omissions of all concurrent wrongdoers" is a reference to acts or omissions of concurrent wrongdoers who are liable under an apportionable claim. That, of course, was the circumstance with which the High Court was dealing. 16Section 34(1A) of the Civil Liability Act deals with the situation where damages are to be awarded under an apportionable claim. It does not deal with circumstances where the apportionable claim and the non-apportionable claim cover the same loss or damage. The latter situation is covered by the provisions of s 35(2) of the Civil Liability Act, as earlier stated. 17If it were to have been otherwise intended by the legislature, then the provisions of s 35(2) of the Civil Liability Act would need to be ignored. For, if the non-apportionable claim is to be apportioned, as the defendants submit, then s 35(2)(b) of the Civil Liability Act operates inconsistently with such an approach. 18In so holding, I accept as compelling the reasons for judgment of the Full Court of the Federal Court in ABN Amro Bank NV v Bathurst Regional Council [2014] FCAFC 65; (2014) 309 ALR 445 (Jacobson, Gilmour and Gordon JJ) when dealing with apportionable and non-apportionable claims under s 1041L(1) of the Corporations Act 2001 (Cth). Their Honours, in so doing, departed from the majority view of the Full Court of the Federal Court in Wealthsure Pty Ltd v Selig [2014] FCAFC 64; (2014) 312 ALR 183 and preferred the minority judgment of White J. 19To like effect is the judgment of Finkelstein J in BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2) [2008] FCA 1656, which concerned a cause of action for breach of warranty of authority together with a cause of action for misleading or deceptive conduct, as is the case in the present proceedings. In each case, the traditional approach was undertaken, which permitted a successful plaintiff to elect which of a number of remedies it would pursue, provided that the election occurred before the entry of judgment. 20In this case, the plaintiff has elected to pursue and obtain a remedy under its claim for a breach of the warranty of authority and no apportionment applies to the damage caused thereby. 21If, contrary to the view just expressed, the claim for breach of warranty of authority is able to be apportioned and is to be reduced for the proportionate liability of Mr Tony Geagea, then applying the evaluation arising from application of the principles in Podrebersek v Australian Iron & Steel Pty Ltd [1985] HCA 34; (1985) 59 ALJR 492, I would assess that Mr Tony Geagea would bear the greatest proportion of liability. He was knowingly dishonest, perpetrated a fraud, misrepresented to the defendants the identity of one of his brothers and the consent of the other brother. I would assess his liability at 65% of the total liability and, as stated in the liability judgment, assess Yes Home Loans at 33 1/3% of the remaining liability. Nevertheless, as a result of the earlier findings about proportionate liability, I do not reduce the damages to be awarded, payable by the defendants.

Costs 22The plaintiff in its primary post-judgment written submissions seeks indemnity costs on the basis of the principles in Calderbank v Calderbank [1975] 3 WLR 586. Offers were made by the plaintiff on 9 April 2013 and on 27 May 2013. The latter offer was slightly lower than the earlier offer. Each of them were offers to settle the matter for an amount less than the damages that will be awarded. Neither offer complies with the rules and cannot be dealt with as an Offer of Compromise: see Part 42 of the Uniform Civil Procedure Rules 2005. 23Nevertheless, each offer to settle alerted the defendants to the intention of the plaintiff to rely upon the offer in terms of costs and alerted the defendants to the principles in Calderbank. 24Each offer was a genuine offer of compromise. Each of the offers were inclusive of costs, which, even though the proceedings were at a very early stage, significantly improved the reasonableness of the offer. For reasons which are difficult to understand, the defendants rely upon the fact that the offers are inclusive of costs to question the reasonableness of the offer. It seems they have misunderstood that inclusive term. 25Nevertheless, the issue before the Court involved a real factual contest in which the credibility of Mr Tony Geagea, and to a lesser degree, Mr David Geagea, were crucial. Further, the liability rested ultimately upon a warranty in relation to the disbursement of funds and did not include a number of items for which the plaintiff argued and upon which evidence was adduced. 26The offer of 27 May 2013 was open for a period of two days only, while the earlier offer was open for a period of two weeks. In any event, the earlier offer was overtaken by the offer of 27 May. 27The awarding of costs is compensatory, not punitive. Nevertheless, the purpose of rules relating to Offers of Compromise (and I include in this Calderbank offers) is essentially for the purpose of encouraging a commercial compromise of litigation and ensuring the parties pay proper regard to the need to resolve issues without litigation (or further litigation). 28However, in the circumstances of this case and given the issues that were before the Court and the manner in which those issues were decided, it is not appropriate, as a matter of compensation, or for the general encouragement of the compromise of litigation, for an order for indemnity costs to be made. As a consequence, the Court will not alter the order already made as to the payment of costs. 29I make it clear that the foregoing is a consideration of all of the issues associated with the offer and the manner in which the proceedings were conducted. By that I do not mean any criticism of the plaintiff. Nevertheless, significant issues were agitated in a manner that ultimately was unsuccessful for the plaintiff and the issues of credit on which the plaintiff largely relied were decided otherwise than in favour of that for which the plaintiff agitated.

Calculation of Damage 30As already stated, I do not consider that the damages are to be reduced on account of proportionate liability. There is a degree of unfairness in that approach. 31The reality is that the major damage was caused by the conduct of the first defendant. The first defendant not only perpetrated a fraud on Yes Home Loans, on the fourth to sixth defendants and on the plaintiff, but the fraud on the fourth to sixth defendants was the fundamental cause of the breach of warranty of authority for which they are now liable. Moreover, the loans were for the benefit of the first defendant. 32The plaintiff settled proceedings against the first to third defendants. It did so on a basis that was significantly less than the damage it suffered and significantly less than could reasonably have been estimated was a proportionate liability for the damage suffered. 33Again, I do not make the foregoing comments for any reason of criticism of the plaintiff. No doubt the compromise was reached in the terms that it was for good reason. Perhaps, no doubt most likely, that reason was the inability of the first defendant (and possibly the second and third defendants) to meet any greater contribution to the damage. 34However, the effect of that compromise, on the plaintiff's submission in the Court, is to increase the liability of the fourth to sixth defendants. While I have held, as a matter of statutory construction, that proportionate liability does not run to the claim for breach of warranty of authority, the inequity associated with such an arrangement is that which the legislature sought to overcome with provisions such as those in Part 4 of the Civil Liability Act. There is an obvious unfairness in the effect of that course of events. 35Nevertheless, on the basis of the principles of law otherwise applied, the fourth to sixth defendants are liable in damages for the loss they have caused, less any amount otherwise received for the same loss. 36The plaintiff submits that, once one deducts any amount received during the course of the loan that reduced the principal debt from the amount of the original loan, the remainder (an amount of $645,654.18) is payable by the fourth to sixth defendants. That takes no account of any amount payable in accordance with the settlement reached with the first to third defendants. The plaintiff submits that no account should be taken of that because no monies had, at least at the time of the post judgment submissions, been received: Paragraph 4 of the affidavit of Michael Brain Wirth of 4 June 2014. 37In my view, the failure or inability, thus far, to enforce the settlement agreement is not a basis upon which the plaintiff should be entitled to double counting the damages. Enforcement of the settlement agreement is within the capacity of the plaintiff, and only the plaintiff. There is no evidence that any attempt has been made to enforce the settlement. 38The award of damage payable by the fourth to sixth defendants will be reduced by the amount (not including interest) payable under the settlement, namely, $300,000: see Exhibit F in the proceedings. 39Next I deal with the question of pre and post judgment interest. The plaintiff seeks (and sought in its initiating process) payment of interest up to judgment and after judgment. Interest is compensatory and is intended to compensate a plaintiff for the fact that the amount of judgment has not been available to it for pre-judgment interest under s 100 of the Civil Procedure Act 2005 from the time that the cause of action arose until the date of judgment, and, in relation to interest after judgment, in accordance with s 101 of the Civil Procedure Act. 40I make no order that would interfere with interest accruing under s 101 of the Civil Procedure Act and interest will run in accordance with s 101 and the provisions of the Uniform Civil Procedure Rules 2005. I deal with the rate of interest below. 41As to interest under s 100, slightly different issues arise. For the reasons previously stated and to which reference is made in the liability judgment, the loss occasioned by the fourth to sixth defendants was on account of a warranty as to the disbursement of the funds. Interest and capital were paid, in accordance with the loan agreements, for some period of time. 42The non-payment of the loans was not a matter for which the fourth to sixth defendants are directly liable. Nevertheless, the monies would not have been disbursed but for the authority given by the fourth to sixth defendants. It seems, given that the awarding of interest is a matter of compensation not punishment, that the plaintiff should be reimbursed for the loss or detriment suffered by being kept out of its funds for the relevant period. It should not, however, be compensated for the loss of profit associated with the period during which it is kept out of its funds. 43For that reason, while it is appropriate to award pre-judgment interest under s 100 of the Civil Procedure Act and for interest to run in accordance with s 101 of the Civil Procedure Act, in each case interest will run at the Reserve Bank rate applicable from time to time plus 1% and not at the prescribed rate.

Conclusion 44The damages are not subject to apportionment in accordance with Part 4 of the Civil Liability Act. The amount of damages is to be reduced by the amount specified in the settlement with the first to third defendants and is not dependent upon the amount received pursuant to that settlement. 45Further interest will run before and after judgment at a rate of the Reserve Bank rate, from time to time, plus 1%, rather than the prescribed rate in the Uniform Civil Procedure Rules. Pre-judgment interest will run from 29 September 2005. 46The plaintiff will bring in Short Minutes of Order in accordance with the foregoing calculations.

Amendments 05 July 2016 - Parties to the proceedings amended on Cover Sheet. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 July 2016