Sky Channel Pty Ltd v Tszyu

COUNSEL : P M Wood (Plaintiff/Respondent) M Aldridge SC and B Morris (Defendant/Appellant) SOLICITORS : Verekers (Plaintiff/Respondent) Benjamin & Khoury (Defendant/Appellant) CATCHWORDS : EQUITY [13]- Contribution- Co-ordinate liabilities- Plaintiff held liable in tort to F- Defendant held liable to F in contract for same amount- F gets judgment against both for same amount on basis that F will only be paid once- Plaintiff pays F- Whether plaintiff can recover contribution from defendant. LEGISLATION CITED : Law Reform (Miscellaneous Provisions) Act, 1946 Adamson v Jarvis (1827) 4 Bing 66; 130 ER 693 Albion Insurance Co Ltd v Government Insurance Office of NSW (1969) 121 CLR 342 Armstrong v Commissioner of Stamp Duties (1967) 69 SR (NSW) 38 Blois v Blois (1680) 2 Vent 347; 86 ER 478 BP Petroleum Development Ltd v Esso Petroleum Co Ltd [1987] SLT 345 Caldedonian Railway Co v Colt (1860) 3 MacQueen 833 Dall v The Blue Wren Taxi Co Pty Ltd [1926] VLR 365 Davenport v Commissioner for Railways (1953) 53 SR 552 Dering v Winchelsea (Earl) (1787) 1 Cox Eq 318; 29 ER 1184 Dorgal Holdings Pty Ltd v Buckley (1996) 22 ACSR 164 JF Elkins Construction Co v Naill Bros 76 SW (2d) 326 (1934) Ellesmere Brewery Co v Cooper [1896] 1 QB 75 The Englishman and The Australia [1895] P 212 Re EWA (A Debtor) [1901] 2 KB 642 CASES CITED : Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 Hanave Pty Ltd v Lfot Pty Ltd (1999) 168 ALR 318 Jones v Mortgage Acceptance Nominees Ltd (1996) 63 FCR 418 McConnell v Lynch-Robinson [1957] NI 70 McLaren Maycroft & Co v Fletcher Development Co Ltd [1973] 2 NZLR 100 Merryweather v Nixan (1799) 8 Tr 186; 101 ER 1337 Palmer v Wick & Pulteneytown Steam Shipping Co Ltd [1894] AC 318 Philips v Biggs (1659) Hardres 164; 145 ER 433 Spika Trading Pty Ltd v Harrison (1990) 10 NSWLR 211 Staples v Baker [1999] 1 Qd R 317 Street v Retravision (NSW) Pty Ltd (1995) 56 FCR 588 Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574 Trade Practices Commission v Manfal Pty Ltd (No 3) (in liq) (1991) 33 FCR 382 Windsor SC v Enoggera Divisional Board [1902] St R Qd 23 Wolmerhausen v Gullick [1893] 2 Ch 514 DECISION : Appeal dismissed.

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG J THURSDAY 24 AUGUST 2000

1 HIS HONOUR: This is an appeal from a summary judgment given by Master McLaughlin against the defendant for $3,875,000. 2 By its statement of claim the plaintiff says in essence that the present plaintiff and the present defendant were defendants in proceedings commenced by Fightvision Pty Ltd ("Fightvision"). Fightvision sued the present defendant for breach of contract and the plaintiff for procuring that breach of contract. The proceedings ended in the Court of Appeal and the net result was that Fightvision was awarded $7,310,445 plus interest against the plaintiff for the tort of inducing a breach of contract, and the same amount against the defendant for actual breach of contract. With interest, this meant that as at 13 December 1995 each of the plaintiff and the defendant severally was bound to pay to Fightvision $8,517,269.20. The Court of Appeal made it clear that Fightvision was only entitled to receive the amount I have stated once. The Court of Appeal's decision is now reported as Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473. 3 On 13 December 1999, the plaintiff paid Fightvision $7,750,000 in full satisfaction of its liability to Fightvision. It pleads that that payment also partially discharged the defendant's liability to Fightvision and that the defendant is liable to make contribution in equity to the plaintiff for one-half of that sum, namely $3,875,000. 4 The learned Master in his judgment in summary said as follows: "[30] The situation therefore is that Fightvision has two separate judgments in its favour… . … [31] The Court of Appeal further recognised that it would not be possible, and that Fightvision was not entitled to contend that such effect, that it should recover the identical amount from both Mr Tszyu and Sky Channel. The Court of Appeal recognised that the totality of the amount which Fightvision would be entitled to recover was the single sum of $7,310,445. [32] The present defendant has submitted that the liability of the present plaintiff to Fightvision, and the liability of the present defendant to Fightvision, are not joint and several liabilities. They are certainly not joint liabilities. But, the present defendant further submits that, since they arose out of different causes of action, and since they have arisen in consequence of separate and distinct judgments … it is not appropriate that the principles relating to contribution should be regarded as applicable to the asserted liability of Mr Tszyu to Sky Channel." 5 The learned Master then referred to the judgment of Kitto J in Albion Insurance Co Ltd v Government Insurance Office of NSW (1969) 121 CLR 342, 350 and held that the principles in that judgment were to be applied. He further said that he considered that: "[37] … it is appropriate in the instant case to describe the liability of each of the present parties to Fightvision as being a co-ordinate liability. Each of those liabilities arose out of the same factual matrix. Each of the liabilities was in an identical amount. … [38] I consider therefore that the liability of each of the present parties to Fightvision, although a several liability, is appropriately described as a co-ordinate liability." 6 The argument before me seemed to take a slightly different tack. 7 Mr Aldridge SC, who appeared for the appellant with Mr B Morris, submitted that it was significant that the judgment against the present plaintiff was in tort and the judgment against the present defendant was in contract. He submitted that where there is a tortfeasor the tortfeasor is not entitled to contribution. The tortfeasor is not entitled to contribution for three reasons:

(1) The Law Reform (Miscellaneous Provisions) Act 1946, which provides for contribution between tortfeasors as a matter of statute, does not apply because the defendant was not a tortfeasor.

(2) There is no right in a tortfeasor to obtain contribution outside the statute because of the maxim "Ex turpi causa non oritur actio". As Gummow J said in Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574, 606, this maxim appears to be "The basis of the tersely stated reasoning of Lord Kenyon LCJ" in the leading case of Merryweather v Nixan (1799) 8 Tr 186; 101 ER 1337.

(3) There has been no decided case which has ever held that there can be co-ordinate liability within the meaning of that term as used by Kitto J in the Albion Insurance case where one alleged contributor is liable in tort and the other in contract. Indeed, the contrary was held to be the position in Tennessee in JF Elkins Construction Co v Naill Bros 76 SW (2d) 326 (1934). See also McLaren Maycroft & Co v Fletcher Development Co Ltd [1973] 2 NZLR 100, 117. 8 These propositions, when Mr Aldridge SC enunciated them, seemed to me to be very attractive. I then stopped him and heard from Mr Wood for the respondent. 9 As often happens, especially when Mr Wood appears, the maxim that one argument is only good until the other side's argument is heard proved true. 10 Mr Wood submitted that it was quite wrong to analyse this case in terms of liability in tort and liability in contract. He put that the present status was that both the action in contract and the action in tort against the defendant and the plaintiff respectively had merged in judgments. There were thus two judgment debts and the plaintiff was entitled to contribution (a) under the principles in the Albion case; (b) because to hold otherwise would be to allow an unjust enrichment; or (c) that if equity so required, the principles in the Albion case should be expanded to cover situations not contemplated by it including the present case. 11 Mr Wood relied on the decision of Lee J in Trade Practices Commission v Manfal Pty Ltd (No 3) (in liq) (1991) 33 FCR 382. That case had to decide whether leave should be given to discontinue, but a decision on that point required Lee J to consider contribution between persons who might have judgments made against them in proceedings under the Trade Practices Act. Lee J said at 386: "Upon the entry of judgment, and irrespective of the grounds of liability relied upon at law to obtain the judgment, the entry of judgment will create a co-ordinate liability between Manfal and the relevant respondents in respect of the sum recoverable under the judgment on behalf of each consumer. The amount of the loss or damage in respect of which judgment is entered will be the amount of loss or damage suffered by reason of the conduct of Manfal in contravention of the Act, not by reason of the conduct of a person involved in that contravention. The right of action and the quantum of the remedy flows solely from the conduct of Manfal in contravention of the Act. It will be the same liability which gives rise to a joint judgment against Manfal and the other respondents. There will be a common interest and a common burden under such a judgment."

His Honour then went on to say at 387: "Once the co-ordinate liability of the parties has been established in a joint judgment, a new burden is created to which rights of contribution are attached. It follows that all parties to the judgment must bear the judgment equally and no one of the judgment debtors is able to profit from the discharge of that equal responsibility of another." 12 The leading modern decision on the law of contribution apart from the Albion Insurance case is the decision of Gummow J in Street v Retravision (NSW) Pty Ltd (1995) 56 FCR 588. At 597 Gummow J says: "At the outset I should note that contribution involving a tortfeasor stands in a special position. As is well known, legislation has been necessary and its scope is not altogether clear …". 13 With this disclaimer, Gummow J then analyses the question of co-ordinate liability generally. 14 His Honour then refers to BP Petroleum Development Ltd v Esso Petroleum Co Ltd [1987] SLT 345, 348 and holds: "It would be taking too narrow a view of the matter and give insufficient weight to the preference equity has for substance to form to hold there could be no common obligation if there were different 'causes of action' against the co-obligors."

His Honour noted that in Scotland the preferred phrase was a liability "of the same nature and the same extent", a phrase used by Lord Chelmsford in Caledonian Railway Co v Colt (1860) 3 MacQueen 833, 844. 15 In the BP case, the Shetland Islands Council owned a jetty which was damaged by an oil tanker owned by the defendant. By contract BP was liable to the council for the damage to the jetty and by statute Esso was liable for the same damage. BP, having paid the council, could recoup half from Esso. As Lord Ross pointed out, "The result is that each is liable to Shetland Islands Council for the whole debt, ie in solidum, but inter se each is liable for a proportionate share. 16 Street's case does not deal with the question as to whether one can have contribution between persons liable under separate judgments for the same debt, or indeed, whether obligations in tort and contract can be co-ordinate liabilities. 17 It is probably important to distinguish between two related concepts, contribution and recoupment. Caledonian Railway Co v Colt supra really was a case of recoupment. In that case Colt promised Macdonald that a clay pit Colt was leasing to Macdonald would be connected to the railway. The Caledonian Railway had a statutory duty to do this but failed to comply with its duty. When Colt was sued under the contract, he sought to have an order that the Caledonian Railway fulfil its statutory duty so that he would not be liable for further damages to Macdonald. The case was thus not one where the parties were liable for the same damage but rather one where X had an obligation to the plaintiff and Y had an obligation to indemnify X. X's action against Y is not contribution but recoupment. It might be noted that the leading books on restitution, eg Goff and Jones 5th Ed (Sweet & Maxwell, London, 1998) Chapter 13 and Mason and Carter (Butterworths, Sydney, 1995) Chapter 6, both deal with contribution and recoupment in the same chapter as being two categories of restitutionary liability. 18 In this background I need to consider three matters of principle and then I need to consider two further matters which Mr Aldridge SC raised, which I have not up to now mentioned. These matters in logical order are:

A. Is there any reported authority which deals with the question as to whether one can have a co-ordinate liability where one claim is based in tort and the other otherwise than in tort?

B. Is there any support in other decided cases for the approach taken by Lee J as to co-ordinate judgments?

C. In any event, are there co-ordinate liabilities in that the judgments are only in the same amount "by coincidence"?

E. In any event, was the application for summary judgment premature?

I will deal with these matters in turn. 19 A. The judgment of Gummow J in Street's case already referred to is ample authority that the two co-ordinate liabilities need not flow from the one cause of action. It is also clear that there is no problem if the situation be that one liability arises from statute and the other from contract; see the BP Petroleum case supra and Armstrong v Commissioner of Stamp Duties (1967) 69 SR (NSW) 38; Spika Trading Pty Ltd v Harrison (1990) 10 NSWLR 211; Hanave Pty Ltd v Lfot Pty Ltd (1999) 168 ALR 318. 20 Why, it might be asked, are liabilities in tort excluded from the general principles of contribution? First it might be noted that in Street's case Gummow J seemed deliberately to decline to enter into the matter merely saying that the question was confused. 21 I have referred to Merryweather v Nixan. The reasoning of Lord Kenyon LCJ in that case is sparse, but as I indicated earlier, it is thought that the reasoning stemmed from the view that one cannot have an action for contribution arising out of one's own wrong. It is clear that by 1926, the rule in Merryweather v Nixan had solidified into a rule that if a person was found liable for a tort that person could not sue for contribution; see Dall v The Blue Wren Taxi Co Pty Ltd [1926] VLR 365. 22 However, 19th century cases tended to take the rationale of Merryweather v Nixan at face value. In Adamson v Jarvis (1827) 4 Bing 66; 130 ER 693, the plaintiff, an auctioneer, had been found guilty of conversion because the defendant had deceived him as to the ownership of the goods. The Court of Common Pleas held that the rule in Merryweather v Nixan only applied where "The person seeking redress must be presumed to have known that he was doing an unlawful act" (Bing 73; ER 696). 23 This case was applied by the Full Court of the Supreme Court of NSW in Davenport v Commissioner for Railways (1953) 53 SR 552, see especially per Owen J at page 555. The Court considered (of course after the 1946 Act) that the rule in Merryweather v Nixan was confined to cases where there was fraud or other wilful wrongdoing, but in any event was excluded from a case where a master was sued in tort vicariously for the acts of the servant. The interesting thing is that the master was liable in tort and the servant was liable to contribute by virtue of a contract. However, it would seem that as the Full Court was dealing with a District Court appeal, it was granting the master indemnity under a contract rather than under the equitable doctrine of contribution. 24 The Merryweather v Nixan principle was also reviewed in The Englishman and The Australia [1895] P 212. At 217 Bruce J came to the view that situations such as that which existed in Adamson v Jarvis were cases where a person who had committed a tort but without doing anything illegal was entitled to recover on an implied indemnity. The principle was not one of contribution but rather of contract. He held at 218 that the rationale of Merryweather v Nixan was that there was no implied indemnity between joint tortfeasors. 25 Thus we have the situation where, despite the rule in Merryweather v Nixan it was possible for a tortfeasor at common law to sue on an implied contract for indemnity either against a servant for whose act he was vicariously liable, or for a person who really caused the loss. 26 It should be noted that many cases of the class where A, who is liable in tort wishes to sue B, who is liable in contract for the same damage, have been able to be dealt with under the Law Reform (Miscellaneous Provisions) Act 1946 because the courts have assumed that even if the person from whom contribution is sought was sued in contract, if that person could have been sued in tort then that person is a joint tortfeasor within the meaning of the statute; see eg McConnell v Lynch-Robinson [1957] NI 70 and Jones v Mortgage Acceptance Nominees Ltd (1996) 63 FCR 418, 420. It is to be noted that Davies J said at 422 that if this were not so "…there is no cogent reason why equity should not aid the identification of the tortfeasors who ought to contribute and the ascertainment of what would be a just contribution. That is precisely what equity did when, because of problems arising from procedural rules and the non-joinder of parties in common law actions, an appropriate order as to contribution could not be made by a common law court…". His Honour referred to Spence, Equitable Jurisdiction of the Court of Chancery (Stevens, London, 1846) Vol 1 page 663. 27 Before turning to the position in equity I should note that in Palmer v Wick & Pulteneytown Steam Shipping Co Ltd [1894] AC 318, Lord Hershell LC in the Scots Appeal at page 324 held that the rule in Merryweather v Nixan did not apply in Scotland and accordingly had no reason to refuse contribution between tortfeasors under the general law. It is only a short step to argue from such reasoning that now Merryweather v Nixan has virtually been suppressed by the Law Reform (Miscellaneous Provisions) Act 1946, the same result should apply in NSW. I say "NSW" because both in Victoria and in England legislation has been adopted which very much simplifies the whole problem of contribution. 28 The history of contribution in equity is well set out in Spence op cit, Vol 1, pages 661 and following and see Dering v Winchelsea (Earl) (1787) 1 Cox Eq 318; 29 ER 1184 and Wolmerhausen v Gullick [1893] 2 Ch 514 at 519 and following. There is a digest of the early cases in 1 Equity Cases Abridgment 113; 21 ER 921. None of the cases in that list concern a situation where one of the persons claiming contribution was guilty of a tort. 29 The only case that appears in that category is Philips v Biggs (1659) Hardres 164; 145 ER 433, where the Court of Exchequer seemed to consider that a case of contribution between two sheriffs who had been jointly responsible for an escape was like a case between joint obligors. However, as the reporter says, he is not too sure what actually was the result of the case. 30 All this adds up in my mind to the proposition that after the Law Reform (Miscellaneous Provisions) Act 1946, there is no reason why there cannot be co-ordinate liabilities between people if one person's liability lies in tort and the other person's lies in contract, any more than it matters that the liabilities may have come from two separate and distinct contracts or one from a statute and one from a contract. Indeed, the only reason for not adopting the proposition is that there is no precedent for it and the only case resembling a precedent, the Tennessee decision to which I have already referred, goes the other way. 31 However, it seems to me that after 1946 and in the light of the comments that Davies J made in Jones v Mortgage Acceptance Nominees (supra) the proposition should be adopted. 32 Accordingly, I hold that it does not affect the situation as to whether there are co-ordinate liabilities that one such liability arose from a cause of action in tort and the other from a cause of action in contract. 33 Thus the appeal should be dismissed as the learned Master was correct to find that the respondent was entitled to succeed on the traditional principles of contribution set out in the Albion Insurance case. I have also indicated that if these were insufficient, equity in the year 2000 should go further and extend the principles to cover this case. 34 B. If the proposition in A is right, then there is no real need to consider question B, however I will shortly do so in deference to counsel. 35 There is no support in other decided cases for the approach taken by Lee J in Trade Practices Commission v Manfal (supra). However, the fact that a cause of action merges in a judgment and that that fact may have some relevance to the law of contribution has been a proposition accepted for centuries; see eg Blois v Blois (1680) 2 Vent 347, 348; 86 ER 478, 479. 36 In my view I should follow what Lee J held in Manfal's case so that even if I were wrong under section A, there would be co-ordinate liabilities under the judgment of the Court of Appeal. 37 Once it is clear that one can ignore the fact that the judgments originated respectively in tort and contract, the judgments in this case must be co-ordinate liabilities. What was said by Kitto J in the Albion Insurance case and by Gummow J in Street's case all point in that direction. 38 A complication that was raised in argument is that the plaintiff's statement of claim says that after judgment it entered into an agreement with Fightvision and paid Fightvision a smaller sum in full discharge of the judgment. The statement of claim says: "10. On 13 December 1999 Sky Channel paid to Fightvision the sum of $7,750,000.00 to [sic] in full satisfaction of Sky Channel's liability to Fightvision pursuant to the Court of Appeal judgment. 11. The payment made by Sky Channel to Fightvision has partially discharged the Defendant's liability to Fightvision pursuant to the Court of Appeal judgment. 12. The Defendant remains liable to Fightvision for the sum of $767,269.20." 39 The defendant's answer to paragraph 10 was that he had no knowledge of any payment and any such payment was made without his knowledge or consent but he admitted paragraphs 11 and 12. 40 This state of affairs makes it virtually impossible to work out whether the judgment against the plaintiff has "drowned" in an accord and satisfaction. If there had been an accord and satisfaction of the judgment debt then it may well be that the liability of the defendant under the judgment has been released, but, if so, the fact posited in paragraph 12 of the statement of claim and admitted in the statement of defence could not be correct. On the other hand the word "satisfaction" is used in paragraph 10 whereas if the remaining facts in the statement of claim are true, the agreement between the plaintiff and Fightvision could have been no more than an agreement not to enforce the judgment (see in general Re EWA (A Debtor) [1901] 2 KB 642 and Dorgal Holdings Pty Ltd v Buckley (1996) 22 ACSR 164). 41 I just do not have enough material to find that the plaintiff's obligation under the judgment has been discharged by an accord and satisfaction. 42 The point is also relevant as to whether the amount of the judgment to which the plaintiff is entitled in this case is as the Master held $3,875,000 being half the amount actually paid by the plaintiff, or whether it should be some lesser amount to take into account the admitted fact that the defendant remains liable to Fightvision for $767,269.20, so that one should take half this latter amount away from the former. The position is complicated by the facts that (a) there is no appeal from the Master on the question of quantum; and (b) it would appear that in bankruptcy proceedings between the defendant and Fightvision, the defendant has, despite his admission in this case, argued that there is no debt at all now owed by him to Fightvision. 43 It seems to me that the lack of information I have in the case and the non-inclusion of any ground going to quantum means that I should do nothing other than order that the orders I make on this appeal not be taken out for 14 days after delivery of judgment. 44 C. Mr Aldridge SC argued that it was only a coincidence that the amount of damages awarded against the plaintiff and the defendant in Fightvision's proceedings was identical. Mr Wood says that whilst that may be the case in some actions, it was not in this particular action and it was inevitable that the amount of damages were the same. I agree with Mr Wood's submissions. 45 However, even if Mr Aldridge SC's submissions were correct on this matter, it would not affect the question of contribution except as to quantum; see Ellesmere Brewery Co v Cooper [1896] 1 QB 75; Windsor SC v Enoggera Divisional Board [1902] St R Qd 23. 46 D. As I have indicated above, Mr Wood also put his case on unjust enrichment. I have held that the appeal must be dismissed on principles of contribution. This means there is no need to deal with the arguments on unjust enrichment. However, I should briefly consider the submissions. 47 Mr Wood is correct in his submission that the leading books on restitution do include contribution as an instance of unjust enrichment and deal with it in their writings accordingly. However, in England the matter is really now a question of statutory rights. In Australia apart from Victoria which has adopted a statute, there has not been any support as yet for moving contribution from the category of equitable remedies where it has laid for the last 200 years into some new category. Moreover, the equitable defences that can be mounted to the claim (see eg Staples v Baker [1999] 1 Qd R 317, 327-8) mean that it belongs there. Apart from taking into account unjust enrichment as a factor as to why an order should be made, it does not seem to me that there is much to be gained by exploring restitution in this area as some sort of separate right. 48 E. Mr Aldridge SC said that this application for summary judgment was made prematurely. He says that at the final trial more facts would come to light which could have a bearing on the outcome. 49 Mr Wood submits that on the pleadings the questions are quite clear and that with the material facts that have been admitted, the case is a perfect one for summary judgment. 50 Apart from the issue of quantum to which I have referred and which is not the subject of any appeal, I cannot see any way in which the facts proved at the hearing could advance the parties' position one way or another. Accordingly, I find that it was proper for the Court to dispose of the application by summary judgment. 51 The upshot is that the appeal must be dismissed with costs. However, for the reasons I have given earlier I direct that this order not be formally entered for 14 days. *******************

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