Plaintiff and Second Defendant by Counteralim v First Defendant and Plaintiff by Counterclaim

Plaintiff and Second Defendant by Counteralim v First Defendant and Plaintiff by Counterclaim - [2005] VSC 423 - VSC 2005 case summary — Zoe

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The Application

1 This is an application by the first defendant to stay or strike out that part of the plaintiff's amended statement of claim in which it claims contribution from the first defendant under s.23B of the Wrongs Act 1958 (Vic).

The Factual Background

2 An affidavit in support of the application was sworn on 15 September 2005 by John James Boon Cooper, the solicitor for the first defendant. That affidavit referred in turn to the earlier affidavit of Mr Cooper, sworn on 21 April 2005. The following factual background, which for present purposes seemed to be common ground, is taken from statements in, and exhibits to, Mr Cooper's two affidavits and from the pleadings in the proceeding. Reference to the affidavits was permissible under r.23.04 of the Supreme Court Rules, because, as will be seen, essentially the application was for a stay, under r.23.04, because the alleged claim was said to be bad in law rather than for an order, under r.23.02, striking out the relevant part of the amended statement of claim with leave to replead the claim in the proper way.

3 By an agreement made on or about 20 June 1996 between the second defendant, Minara Resources Limited (then known as Anaconda Nickel Limited) ("Minara"), and the plaintiff, Fluor Australia Pty Ltd ("Fluor"), ("the EPCM Agreement"), Minara engaged Fluor to provide engineering, procurement, construction and management services for the design, construction and commissioning of a facility to treat nickel and cobalt bearing lateritic ores at Murrin Murrin in Western Australia ("the Facility").

4 By an agreement made on or about 21 February 1997 between Minara and the first defendant, ASC Engineering Pty Ltd ("ASC"), Minara engaged ASC to design, manufacture and supply four acid leach autoclaves to the Facility ("the ASC Contract"). Fluor was not a party to the ASC Contract, although it was named in that Agreement as the "Engineer".

5 In or prior to August 1997 Minara transferred the whole of its interest in the Facility, including the development of the Facility, to its wholly owned subsidiary Murrin Murrin Operations Pty Ltd (then known as Anaconda Operations Pty Ltd) ("MMO") as agent for the Murrin Murrin Joint Venture between Murrin Murrin Holdings Pty Ltd ("MMH"), a wholly owned subsidiary of Minara, as to 60% and Glenmurrin Pty Ltd ("Glenmurrin"), a wholly owned subsidiary of Glencore International AG, as to 40%, which interest it purchased from Minara. MMO was appointed the manager under the Joint Venture Agreement and each of MMH and Glenmurrin appointed MMO to act as its agent.

6 By an agreement dated 27 August 1997 but executed and operative from 21 August 1997 and made between Fluor and MMO, as agent for MMH and Glenmurrin ("the EPC Agreement"), Fluor agreed to assume responsibility for the design and construction of the Facility.

7 The autoclaves were designed and manufactured by ASC in South Australia and installed by ASC at the Facility in early 1998. Alleged defects were subsequently found in wear plates affixed to the inside of the autoclaves. ASC attempted unsuccessfully to repair the wear plates. In November 2000 MMO engaged ASC to remove all of the wear plates, which task was completed by April 2001.

8 MMO commenced arbitral proceedings against Fluor under the EPC Agreement in respect of, among many other things, the allegedly defective wear plates in the autoclaves. The Commercial Arbitration Act 1984 (Vic) was the Act under which the arbitration was conducted. Under the interim and final arbitral awards delivered in late 2002 Fluor was ordered to pay MMO $3,276,189 plus interest in respect of the defective wear plates.

9 Fluor appealed the arbitral award in MMO's favour to this Court. Judgment was delivered on 28 July 2003.[1] The appeal was largely unsuccessful and, relevantly, Fluor remained liable to pay MMO $3,276,189 plus interest in respect of the defective wear plates. A further appeal to the Court of Appeal was settled. On 5 May 2004 Minara, MMO, Fluor and three other parties entered into a Release by which, among other things, MMO and Minara purported to agree to assign or novate the ASC Contract to Fluor.

The Proceeding

10 Fluor commenced this proceeding by writ and indorsement of claim on 7 May 2003. It filed a statement of claim on 1 July 2004 and then an amended statement of claim on 23 August 2005. Three claims are pleaded by Fluor. First, Fluor seeks damages from ASC for breach of the ASC Contract, the benefit of which it alleges is held by Minara on trust for it ("the contract claim"). Secondly, Fluor seeks damages from ASC in negligence. Thirdly, and alternatively, Fluor claims contribution from ASC under s.23B of the Wrongs Act 1958 (Vic) ("the contribution claim"). It pleads that as it was Minara's intention that MMO would have the benefit of the contractual promises of ASC pursuant to the ASC Contract, ASC is therefore liable to MMO for the same damage for which Fluor has been held liable to MMO in the arbitration.

11 By a summons filed on 16 September 2005 ASC sought an order, pursuant to r.23.01 of the Supreme Court Rules, staying the contract claim and the contribution claim, alternatively an order, pursuant to r.23.02, striking out the contract claim and the contribution claim.

The Appropriate Test

12 The traditional statement of when a court can summarily determine a proceeding by, for example, staying the proceeding or a claim in the proceeding, under r.23.01, on the ground that it does not disclose a cause of action has been expressed in a variety of ways. In General Steel Industries Inc v Commissioner for Railways (NSW)[2], Barwick CJ summarised past approaches. His Honour said:

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28 ASC responded by submitting that, in the present case, the substantive rights and obligations of ASC, Fluor and MMO were exclusively governed by the law of Western Australia, by reason of the governing law clauses in the ASC Contract and the EPC Contract. It submitted that any Australian court hearing and determining a dispute between these parties arising out of those contracts would have to apply the substantive law of Western Australia, including the substantive law of Western Australia concerning rights of contribution between parties. Such a court was not free simply to elect to apply some part of the substantive law of another jurisdiction such as Victoria.

29 ASC submitted that sub-s.23B(6) of the Wrongs Act did not avail Fluor. Because s.23B was part of the substantive law of Victoria, and the substantive law of Victoria played no part as a matter of private international law in the resolution of the dispute between the parties, sub-s.23(b)6 simply had no application.

30 It was further submitted by ASC that sub-s.23B(6) was not, as Fluor contended, a "statutory choice of law" provision. It was a provision directed to a different issue, and had an important role to play. Sub-section 23B(6) operated, ASC submitted, where the rights as between a plaintiff and one defendant were governed by the law of Victoria (thereby resulting in the court having to apply the substantive law of Victoria to part of a dispute), while the rights as between a plaintiff and a second defendant were governed by the law of some other State or Territory. In such a case, sub-s.23B(6) made it clear that the second defendant could not contend that s.23B did not apply to matters of contribution as between the defendants. That, however, was not this case. This case did not involve the substantive law of Victoria at all.

31 ASC further submitted that if Fluor's contention were correct, absurd consequences would follow, in that it would be open in any case arising anywhere in Australia for a defendant to seek contribution under s.23B, or to institute proceedings in Victoria for contribution under s.23B in respect of a case with no nexus whatsoever to this jurisdiction. It would result in "forum shopping" in its worst sense and would defeat the reason why matters of substance were determined by the law of the cause, not the law of the forum.

32 Finally, ASC submitted that there was no substance to Fluor's submission that there was a nexus with Victoria by reason of the fact that the arbitration between MMO and Fluor was conducted under the Victorian Arbitration Act. Fluor's liability to MMO arose under the EPC Contract, which required the application of the substantive law of Western Australia. Fluor's liability did not arise under the Victorian Arbitration Act. Again, if Fluor's contention were correct, it would be possible for a plaintiff and one defendant to circumvent the operation of the contribution legislation of any other State or Territory, to the prejudice of any other defendant, simply by deciding to conduct an arbitration under the Victorian Arbitration Act.

Is Fluor's Argument Untenable?

33 The Wrongs (Contribution) Act 1985 (Vic), which contained the amendments to Part IV, was largely modelled[14] on the Civil Liability (Contribution) Act 1978 (UK) ("the Contribution Act"). Regrettably, no assistance as to the precise meaning of, or reason for, s.23B(6) of the Wrongs Act or its English equivalent is to be found in either the England and Wales Law Commission's "Report on Contribution"[15] (the source of the Contribution Act); the Victorian Chief Justice's Law Reform Committee Report[16] (the source of the Victorian amending Act); or the Victorian parliamentary debate on that Act.

34 Indeed, despite the relative antiquity of these two amending Acts, it would appear that the Courts are still grappling with the precise meaning of the various provisions. For example, in Alexander the High Court split three all on the question of what was meant by the expression "liable in respect of the same damage" in s.23B(1) of the Wrongs Act. Pursuant to s.23(2)(a) of the Judiciary Act 1903 (Cth), Kirby J was one of the three Justices whose view did not prevail. After referring to "the remedial and reformatory character of the legislation" amending the Wrongs Act, his Honour stated as follows:

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"The correct approach was not to ask whether, under some rule of English private international law which was to be found or ascertained independently of and without regard to the provisions of the Act itself, the contribution claim was to be determined by reference to the Act but, rather, to ask whether under the rules of law applicable in an English court, which included the provisions of the Act itself, the contribution claim ought to succeed.

In a case involving foreign elements that required the court to decide whether, on a true construction of the Act, the legislature intended to confer on B a right of contribution against C which was to be recognised and enforced in England. The court was not concerned with any obligation to contribute which might exist between C and B independently of the Act.

It would therefore be strange if, before it came to construe the Act at all, the court were required to answer a preliminary question which was unrelated to and inconsistent with the basis upon which the statutory right of contribution arose under English law.

To ask whether a right of contribution, arising out of any relationship between B and C other than their relationship as persons each of whom was liable to A in respect of the same damage, ought to be determined by English domestic law would be to ignore the basis upon which the right arose under that law.

...

His Lordship was not persuaded, therefore, ... that he should alter his prima facie view on consideration of the Act itself, namely that in order to decide whether a claim was properly brought under the Act it was necessary to construe the statutory language.

If B and C were each persons against whom liability had been or could be established in an action brought against them by A in an English court, applying the appropriate law in accordance with English private international law rules, then the Act conferred on B a right of contribution against C to which the court had to give effect. There was no preliminary question as to proper law the answer to which determined, independently of the Act, whether the Act applied."[22]

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42 In its responding submissions, ASC made the valid point that it was impossible from The Times report of the case to identify the relevant facts. It was not clear whether the claimants' liability to the Fund or Dr Hashim's liability to the Fund arose under foreign law or English law. Nor was it clear as to the basis upon which the Court had jurisdiction to hear and determine the contribution claim. However, the relevant facts become tolerably clear when one reads the judgments[23] in an earlier application in the proceeding involving the Fund's claim against Dr Hashim alleging that he, the Fund's former director-general, stole about $50 million of its money and that the First National Bank of Chicago and its subsidiaries enabled him to launder a substantial part of the money through numbered accounts in Geneva. The Fund's headquarters were in Abu Dhabi and the fraud on which it relied was alleged to have been committed in Abu Dhabi. Dr Hashim and most of the other individual defendants were resident in England and the First National Bank of Chicago had a place of business in London.

43 In any event, ASC submitted that the context in which the decision of Chadwick J, a single Judge in the Chancery Division in the United Kingdom, was made was fundamentally different to the Australian federal context. It submitted that central to the Australian approach, as illustrated by the High Court's decision in John Pfeiffer, is the recognition that the law must provide certain and predictable norms neutrally applied between the parties, rather than variable rules based upon the plaintiff's choice of forum.

44 ASC finally submitted that if the decision in Arab Monetary Fund bore the interpretation which Fluor sought to place on it, it was inconsistent with the High Court's decision in Alexander, which applied s.23B of the Wrongs Act in a proceeding brought in New South Wales. If Fluor's contention were correct, then the Victorian Act would have had no application and the Court would simply have applied s.5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW). Alternatively, ASC submitted that the Court would have had to find some other mechanism for resolving which of the NSW and Victorian Acts applied. ASC submitted that in that case the only answer consistent with authority would have been to apply the contribution law of the cause (Victoria) and to ignore the contribution law of the forum (NSW).

45 I note that according to the report of his judgment, Chadwick J referred to following statement from The Law Commission's Working Paper No. 75: "Classification of Limitation in Private International Law":

At a glance

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Cases Cited (9)