Plaintiffs v Defendants

Supreme Court of Victoria|2008-08-29|Before: HANSEN J

PRACTICE AND PROCEDURE - Discovery sought by sixth and seventh defendants of confidential settlement between plaintiffs and first to fifth defendants - Claims involve proportionate liability - Whether terms of settlement relevant to any fact in issue - Wrongs Act 1958 (Vic), Part IVAA.

No appearance by or on behalf of any other Defendant or Third Party

1 By a summons filed 28 July 2008 the sixth and seventh defendants make application for discovery[1] of terms of settlement between the plaintiffs and the first to fifth defendants. The plaintiffs oppose the application. There was no appearance by or on behalf of the first to fifth defendants in relation to the application.

2 It is convenient to begin with a brief overview of the proceeding. The plaintiffs, who are the joint owners of a townhouse dwelling at Patterson Lakes constructed in 1997 and purchased by them in 1999, allege that in consequence of the defendants' negligence and breaches of statutory warranties, the foundations of their dwelling have subsided, the walls have cracked, and the dwelling has deteriorated to such an extent that it requires demolition and reconstruction, at an estimated cost of $1,232,880.

3 The further amended statement of claim, filed 30 August 2007, pleads the case essentially in two ways. First, it is alleged that the first to fifth defendants, who were involved in the design and/or construction of a 1200mm Circulation Drain running immediately adjacent to the western boundary of the property (this work being part of the Patterson Lakes Development which included filling land, constructing dwellings, and developing the Patterson Lakes tidal waterways system to ensure adequate circulation of water), breached duties of care owed to the plaintiffs (as subsequent owners of the property) to perform their works relating to the Circulation Drain with reasonable care and skill. The consequence of their breach was the damage to the dwelling referred to above, which they claim from each defendant. Secondly, it is alleged that Timelink Pacific Pty Ltd and Wharington (the sixth and seventh defendants, who I will call "the builders" wherever convenient) breached duties of care owed to the plaintiffs (as subsequent owners of the property) and breached warranties implied by s 8 of the Domestic Building Contracts Act 1995. The consequence of their breaches was the damage to the dwelling referred to above. The builders' alleged breaches fall into two categories, first a failure to properly carry out site preparation works, and secondly a failure to properly build the dwelling. More specifically, the particulars allege that the builders failed to ensure that the tops of two pre-existing concrete piles on the land were cut down to achieve a 300mm clearance between the top of those piles and the underside of the footing beams to allow settlement of the slab, and the builders failed to place 300mm of compacted sand between the cut-down piles and the footing beams, as prescribed by the design drawing.

4 There were claims for contribution and indemnity as between the first, second, third fourth and fifth defendants, and it was alleged that the proceeding involves an apportionable claim within the meaning of the proportionate liability provisions of Part IVAA of the Wrongs Act 1958.

5 There were also third and fourth party notices filed which added parties to the proceeding as follows. The first defendant filed a third party notice adding Mitford Engineering (Aust) Pty Ltd and Mitford Engineering Pty Ltd (the first and second third parties) and alleging in essence that those parties failed to exercise reasonable care and skill in preparing engineering designs and structural drawings which they provided for the property. Pursuant to leave granted by Habersberger J on 16 March 2007, the first defendant filed a third party notice against the builders (who thus became the third and fourth third parties) alleging in essence that any loss suffered by the plaintiffs was caused by the builders' failure to exercise reasonable care and skill in performing their work. On 4 May 2007 Habersberger J gave the plaintiffs leave to join the builders as the sixth and seventh defendants. On 31 May 2007 the third defendant filed notices claiming contribution and/or indemnity from the other six defendants and the four third parties respectively, and stating that the proceeding constituted an apportionable claim. On 13 August 2007 the builders filed a third party notice adding Peter Luzinat & Associates Pty Ltd (the building surveyor) and Paul William Radford (the slab sub-contractor) as the fifth and sixth third parties to the proceeding respectively. On 6 August 2008 Peter Luzinat & Associates Pty Ltd filed a fourth party notice joining as fourth parties Robert Holmes and Paul Simmons, who are building inspectors said to have provided Certificates of Compliance in relation to the site works and building work.

6 The above is a sufficient overview of the complex way in which the proceeding has been constituted.

Settlement between plaintiffs and first to fifth defendants

7 By letter dated 19 June 2008 the solicitors for the second defendant (writing on behalf of the plaintiffs and the first to fifth defendants) informed the Court that the plaintiffs and the first to fifth defendants had finalised settlement of all claims between them. The letter further advised that each of the first to fifth defendants would remain a party to the proceeding "solely for the purposes of any apportionment of the plaintiffs' claims against the other defendants pursuant to any applicable proportionate liability regime". I have not seen and do not know the terms of the settlement reached between the plaintiffs and the first to fifth defendants.

8 On 9 July 2008 I ordered by consent that the claims for contribution and/or indemnity as between the first, second, third, fourth and fifth defendants be dismissed with no order as to costs.

9 In support of the application for discovery, the builders' solicitor filed an affidavit sworn 28 July 2008 in which he deposed that the builders were not parties to the settlement between the plaintiffs and the first to fifth defendants, that he wrote to the plaintiffs' solicitor on 15 July 2008 requesting a copy of the terms of settlement and the plaintiffs' solicitor responded by letter dated 17 July 2008 stating that he could not provide the terms of settlement as they were confidential between the parties.

10 The deponent added, really by way of submission, that the builders seek discovery of the terms of settlement because the plaintiffs' claims against each of the seven defendants are "one and the same", the same relief is sought against each defendant, and the terms of settlement "impact on the plaintiffs' claim against the defendants generally and particularly against my clients". And because questions of apportionment arise, the builders are entitled to know what amount, if any, the plaintiffs have recovered from the first to fifth defendants, as that will affect the nature and quantum of the plaintiffs' claim against the builders.

11 Counsel for the builders submitted that the terms of settlement were relevant to the issue of double recovery, in the sense that the builders needed to know the amount recovered by the plaintiffs from the other defendants, because that amount, when added to whatever amount was recovered from the builders, would determine whether or not the plaintiffs had recovered more than their proved loss and damage. Counsel referred to the decision of Byrne J in Gunston v Lawley[2], which in turn referred to Boncristiano v Lohmann[3].

12 Further, counsel said that the application was pressed solely on the basis that discovery of the terms of settlement was relevant to the issues in the case. He did not put the application on the basis that discovery would assist the builders to settle with the plaintiffs, although he frankly recognised that if he knew the terms of settlement he would advise his clients accordingly.

13 Counsel for the plaintiffs submitted, as his primary argument, that the terms of settlement were irrelevant to the proportionate responsibility of the builders for the plaintiffs' loss and damage. He referred to the observations of Byrne J in Gunston as to the difference between traditional "solidary liability" and the new proportionate liability regime. He submitted that, in "solidary liability", a settlement by one defendant reduced the liability of the other defendants, hence the terms of the settlement would be relevant and discoverable. Under the proportionate liability regime, however, a settlement by one defendant does not alter the liability of any other defendant, because each defendant is only liable for its respective proportionate responsibility for the plaintiff's loss and damage.

14 Counsel submitted, in the alternative, that even if the terms of settlement could be relevant, they would only ever become so after issues of damages and proportionate liability had been determined. If the defendants were found to be not liable, or if the amount the plaintiff was awarded was less than the total amount of proved loss and damage, no question of double recovery would arise, hence the terms of settlement would be irrelevant.

15 Finally, counsel submitted that from a public policy perspective, it was undesirable that the terms of a confidential settlement should be discoverable in the present circumstances. If courts were to hold that confidential terms of settlement were discoverable, simply because a double recovery issue might arise at some point in the proceeding, litigants might be less likely to settle cases. Further, a defendant who had not settled might use the discovery process for tactical reasons, namely to find out what settlement figure the plaintiff had accepted from other defendants and tailor its bargaining approach accordingly.

16 It is convenient to first set out relevant parts of the proportionate liability provisions, found in Part IVAA of the Wrongs Act 1958.

'apportionable claim' means a claim to which this Part applies;

'damages' includes any form of monetary compensation;

(a) a claim for economic loss or damage to property in an action for damages (whether in tort, in contract, under statute or otherwise) arising from a failure to take reasonable care; and

(1) A concurrent wrongdoer, in relation to a claim, is a person who is one of 2 or more persons whose acts or omissions caused, independently of each other or jointly, the loss or damage that is the subject of the claim.

24AI. Proportionate liability for apportionable claims

(1) In any proceeding 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 loss or damage claimed that the court considers just having regard to the extent of the defendant's responsibility for the loss or damage; and

(b) judgment must not be given against the defendant for more than that amount in relation to that claim.

(3) In apportioning responsibility between defendants in the proceeding the court must not have regard to the comparative responsibility of any person who is not a party to the proceeding unless the person is not a party to the proceeding because the person is dead or, if the person is a corporation, the corporation has been wound-up.

24AJ. Contribution not recoverable from defendant

Despite anything to the contrary in Part IV, a defendant against whom judgment is given under this Part as a concurrent wrongdoer in relation to an apportionable claim-

(a) cannot be required to contribute to the damages recovered or recoverable from another concurrent wrongdoer in the same proceeding for the apportionable claim; and

(b) cannot be required to indemnify any such wrongdoer.

(1) In relation to an apportionable claim, nothing in this Part or any other law prevents a plaintiff who has previously recovered judgment against a concurrent wrongdoer for an apportionable part of any loss or damage from bringing another action against any other concurrent wrongdoer for that loss or damage.

(2) However, in any proceeding in respect of any such action the plaintiff cannot recover an amount of damages that, having regard to any damages previously recovered by the plaintiff in respect of the loss or damage, would result in the plaintiff receiving compensation for loss or damage that is greater than the loss or damage actually suffered by the plaintiff."

17 It is plain enough on the pleadings, and I will assume for the purposes of the application, that the present proceeding involves an apportionable claim.

18 The real question is whether the terms of the settlement between the plaintiffs and first to fifth defendants are (or could at any later stage become) relevant to an issue in the proceeding. The builders' argument is that the terms of settlement are relevant to the question of double recovery.

19 As to that, in Boncristiano Winneke P[4] observed that[5]:

"... in cases where the plaintiff seeks to recover from the several defendants compensation in respect of the same damage it is fundamental that the plaintiff cannot recover more than the total damage which he or she has sustained. Where the claims for damages are concurrent, in the sense that the claims 'overlap', recovery by the plaintiff of the whole or part of the loss claimed from one defendant will necessarily be taken into account in assessing the damages to be recovered from the other."

"The fundamental question is whether the claims against the various defendants are 'concurrent' in the sense that the relief sought is the same. Nor is it to the point that the damages received from one defendant have been received pursuant to a compromise of the claim against that defendant, by way of acceptance of moneys in court or otherwise."

20 In Gunston Byrne J referred to Boncristiano and observed, by reference to s 24AK, that "the rule against double recovery may come into play to bring about some adjustment as between the wrongdoers" (emphasis added). I note, however, that no question of double recovery or "adjustment as between the wrongdoers" arose on the facts in Gunston because the amount recovered by the plaintiff from all the concurrent wrongdoers did not exceed her total loss and damage.

21 Nevertheless, the terms of s 24AK contemplate that, in determining whether a plaintiff's recovery of damages in a subsequent action will result in the plaintiff recovering more than his or her actual loss or damage, regard be had to any damages previously recovered by the plaintiff in respect of the loss or damage. The expression "damages previously recovered by the plaintiff in respect of the loss or damage" is presumably a reference to any amount recovered by the plaintiff under a settlement with any of the concurrent wrongdoers, in addition to any amount recovered by the plaintiff under a previous judgment against any of the concurrent wrongdoers in respect of the apportionable claim. In those circumstances, the terms of any settlement might well be relevant to the proper application of s 24AK, and to any "adjustment between wrongdoers" which may be required. But these matters would not arise for determination until the Court had determined in the later proceeding that the defendant was liable. That is because if the later defendant was found not to be liable, no amount of damages would be recoverable from that defendant at all, hence there would be no need to limit the amount the plaintiff could recover from that defendant by reference to what the plaintiff had already recovered, and consequently no need for any adjustment as between the defendants. In short, any amount recovered under an earlier judgment and/or settlement would be irrelevant as against the later defendant.

22 In these circumstances, and to the extent that the builders in the present case seek to bring their application on the basis of s 24AK and the observations of Byrne J in relation thereto, the application is premature because the builders have not yet been held liable for the plaintiffs' alleged loss or damage.

23 In any event, s 24AK is not relevant to the present case, because the section does no more than make clear that where a plaintiff has previously recovered judgment against a concurrent wrongdoer, that judgment does not prevent the plaintiff from bringing another action against any other concurrent wrongdoer, provided that the amount recovered in the later proceeding (when combined with any recovery under the earlier judgment and any settlement) does not exceed the plaintiff's total loss or damage. As the present case is not one in which any party has already recovered judgment, s 24AK has no work to do here. Rather, the plaintiffs have settled with the first to fifth defendants, and wish to continue their action against the builders. There is nothing to prevent them from doing so. The first to fifth defendants will remain in the proceeding so that if and when the case proceeds to a decision on the merits, the Court can, as it is required to do under s 24AI(1)(a), determine the liability of each defendant and third party who is a concurrent wrongdoer in relation to the claim. That is to say, the Court will determine the respective liability of each defendant and third party, the liability of each being limited to an amount reflecting the proportion of the loss or damage claimed that the Court considers just having regard to the extent of each defendant or third party's responsibility for the loss or damage.

24 As to the extent of the respective defendants' liability, I do not accept the builders' submission that their liability depends on the amount recovered or recoverable under the terms of settlement. Although it was obiter, I agree with the analysis of Byrne J in Gunston[7] to the effect that in a proceeding involving an apportionable claim, a settlement by the plaintiff against one concurrent wrongdoer does not affect the liability of any of the other concurrent wrongdoers, at least insofar as the plaintiff does not recover an amount in excess of his or her total loss or damage.

25 As to that, the principle in Boncristiano is applicable, but it only arises if and when the builders are held to be liable. If that occurs, it may be that any amount recovered by the plaintiffs in the settlement will need to be taken into account when entering judgment against the builders, but at present there is no issue between the parties as to double recovery, so the terms of settlement are irrelevant and not discoverable.

26 For these reasons the summons will be dismissed with costs.

Building Contracts Act 1995

Court (General Civil Procedure) Rules 2005

At a glance

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Before

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Judgment (51 paragraphs)

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Legislation Cited (2)