Smith v. Rynne [2005] NSWCA 77

CATCHWORDS: CONTRACTS - PROCEDURE - Whether contractual right joint or several - Where breach of contractual duty to two persons jointly causes damage to only one of them - Necessary parties - LIMITATION OF ACTIONS - Cause of action founded on a deed - Cause of action founded on breach of duty for damages for personal injury - Whether in latter case personal injury must be caused by the breach of duty.

LEGISLATION CITED: Limitation Act 1969 (NSW) ss.11, 13, 14, 16, 18A

Australian Securities Ltd. v. Western Australia Insurance Co. Ltd. (1929) 29 SR(NSW) 571 CASES CITED: Churchill v. Connolly [2004] NSWCA 212

Raymond David Smith - appellant PARTIES: David Colin Rynne - respondent

Mr. B.J. Gross QC for the claimant COUNSEL: Mr. B.M.J. Toomey QC with Ms. M. Holz for the opponent

McMahons National Lawyers, Sydney for appellant SOLICITORS: Diamond Peisah, Sydney for respondent

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40456/04 DC 8836/97

HODGSON JA SANTOW JA BROWNIE AJA

Monday 21 March 2005 SMITH V. RYNNE Judgment 1 HODGSON JA: On 14 May 2004, Murray AJ in the District Court made an order dismissing an application brought by the claimant that sought among other things an order dismissing proceedings that the opponent had brought against the claimant, and also made associated orders including an order that the claimant pay the opponent's costs of the application. 2 The claimant seeks leave to appeal. The leave application has been argued on the basis that, if leave is granted, the appeal will be disposed of without further argument.

CIRCUMSTANCES 3 The proceedings arose out of an accident that allegedly occurred on 2 June 1992, when the opponent allegedly fell to the bottom of an excavation when the edge of the excavation gave way, and thereby suffered injury. 4 On 22 August 1997, the opponent filed a Statement of Claim seeking damages for personal injury. The Statement of Claim alleged causes of action in negligence, breach of agreement and breach of statutory duty. The agreement in question was a deed dated 5 February 1992, whereby the opponent and his wife, as owners of certain land, granted the claimant as a miner rights to mine for sapphires on that land. This deed included the following provisions: 2) The Miner shall … iii) At all time and in all respects comply with all the requirements of the mining laws of the State of New South Wales the Acts and Regulations thereunder and the terms of the mining lease.

iv) Conduct his mining operations in such a manner as not to cause any danger to persons or stock and provide and maintain adequate protection over or around each shaft hole or excavation opened up or used by him.

v) Compensate the Owners for loss or damage suffered by them as a result of any failure on the part of the Miner to comply with the provisions of the mining laws as aforesaid the Acts or Regulations thereunder or the terms of this Deed or as a result of any act or omission by the Miner his servants or agents.

vi) Indemnify and keep indemnified the Owners from and against all loss and damage whatsoever and howsoever arising out of any act or omission of the Miner his servants or workmen. 5 The claimant in his Defence alleged that the claim was statute-barred under s.18A of the Limitation Act 1969; and on 1 May 2000, the opponent filed a Notice of Motion seeking an extension of time under that Act. That application was dismissed on 21 December 2001, and subsequently the claimant brought an application to strike out the Statement of Claim and to dismiss the proceedings as being statute-barred; and it is against the dismissal of that application that this application for leave is brought.

STATUTORY PROVISIONS 6 The relevant provisions of the Limitation Act 1969, as in force prior to the 2002 amendments, are the definition of "breach of duty" in s.11(1), s.13, s.14(1), s.16 and s.18A. Those provisions are as follows: Breach of duty , when used in relation to a cause of action for damages for personal injury, extends to the breach of any duty (whether arising by statute, contract or otherwise) and includes trespass to the person.

13 More than one bar Where, under each of two or more provisions of this Part, an action is not maintainable if brought after a specified time, the action is not maintainable if brought after the earlier or earliest of those times.

14 General (1) An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims: (a) a cause of action founded on contract (including quasi contract) not being a cause of action founded on a deed, (b) a cause of action founded on tort, including a cause of action for damages for breach of statutory duty, (c) a cause of action to enforce a recognizance, (d) a cause of action to recover money recoverable by virtue of an enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture.

16 Deed An action on a cause of action founded on a deed is not maintainable if brought after the expiration of a limitation period of twelve years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims.

18A Personal injury (1) This section applies to a cause of action, founded on negligence, nuisance or breach of duty, for damages for personal injury, but does not apply to: (a) a cause of action arising under the Compensation to Relatives Act 1897, or (b) a cause of action that accrued before 1 September 1990. (2) An action on a cause of action to which this section applies is not maintainable if brought after the expiration of a limitation period of 3 years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims.

THE STATEMENT OF CLAIM 7 Relevantly, the Statement of Claim made the following allegations: 1. At all times material to this action:- (a) The Plaintiff was the owner, together with his wife, Joan Doris Rynne, of certain land known as "Braemar", Elsmore Inverell in the State of New South Wales; (b) There was within the boundaries of this land, an area contained in Mining Lease No. 881; and (c) The Plaintiff and his wife had entered into an agreement with the Defendant which gave the Defendant sole and exclusive right to mine the Mining Lease subject to certain terms and conditions. At the trial of this action, the Plaintiff will rely on the terms of this said agreement for their full effect and meaning. 2. Pursuant to the agreement pleaded in paragraph 1(c) the Defendant had carried out substantial workings on the said Mining Lease prior to the 2nd June 1992, which workings had, interalia, left an open excavation approximately 4 metres deep.

3. On the 2nd June 1992 while 'the Plaintiff was walking in the vicinity of the excavation pleaded in paragraph 2 hereof, the edge of the excavation gave way and the Plaintiff fell to the bottom of the said excavation.

4. By reason of his fall, the Plaintiff sustained severe injuries.

5. The Plaintiff's injuries were occasioned by the negligence of the defendant or, in the alternative, by the Defendant's breach of the agreement pleaded in paragraph 1(c) and of the statute. PARTICULARS OF NEGLIGENCE (a) Exposing the Plaintiff to a risk of injury which could have been avoided by the exercise of reasonable care; (b) Failure to warn the Plaintiff of the dangers to which he was exposed; and (c) Failure to instruct the Plaintiff as to the safe margin to leave between himself and the excavation while walking in the vicinity of the excavation. PARTICULARS OF THE BREACH OF THE AGREEMENT (a) Failure to provide and maintain adequate protection over and around the excavation; (b) Failure to conduct the mining operation in a manner which would not cause danger to the Plaintiff; (c) Failure to comply with the mining laws of New South Wales in all respects; (d) Failure to take normal security precautions. PARTICULARS OF THE BREACH OF STATUTORY DUTY Failure to properly secure the excavation by fence gate or covering.

6. By reason of such breaches, the Plaintiff suffered the injury, loss and damage hereinbefore referred to.

PRIMARY JUDGE'S DECISION 8 The primary judge held that, in so far as the opponent's proceedings included causes of action for negligence and breach of statutory duty, they were barred by s.18A of the Limitation Act, combined with s.13. However, he held that s.18A did not apply to the cause of action in contract, because the cause of action did not involve any allegation of breach of an implied term to take care, but rather was based purely on breach of the deed. 9 Accordingly, he dismissed the application for an order dismissing the proceedings, but ordered that the opponent's case on hearing be restricted to an action based on breach of the terms of the deed.

GROUNDS OF APPEAL 10 The claimant seeks leave to appeal on the following grounds: 1. His Honour erred in law in failing to apply s13 of the Limitation Act because the Respondent/Plaintiff relied on the express terms of a Deed or contract. 2. His Honour erred in law by failing to hold that the Respondent's/Plaintiff's alleged causes of action, whether pleaded in negligence, breach of Statute, breach of a Deed or breach of contract were statute barred under the Limitation Act; and 3. His Honour erred in law by failing to hold that the whole of the proceedings should be dismissed as statute barred under the Limitation Act.

SUBMISSIONS 11 Mr. Gross QC for the claimant submitted that s.18A applied to the action in contract in these proceedings, because that action was founded on breach of contractual duty, namely breach of the terms of the deed; and was for damages for personal injury. Accordingly, he submitted, s.13 had the effect that the relevant limitation period was three years. 12 Mr. Toomey QC for the opponent submitted that it was no part of the opponent's cause of action that there had been fault by the claimant. The deed provided that the claimant should pay money to the opponent in certain events, and the proceedings were simply to obtain payment of that money. No breach of duty was involved, any more than would be the case if the claim had been one brought against an insurance company for an indemnity under an accident policy, where the insurance company's promise was to make payments in the event of personal injury occurring by accident to the insured. Proceedings to enforce such a claim would not be within s.18A, and neither were the subject proceedings in so far as they were based on the deed.

DECISION 13 Although a deed is not necessarily a contract, a deed can be and often is a contract; and the Limitation Act plainly recognises that a deed may be a contract, for example in s.14(1)(a). In my opinion, the deed in this case is a contract, and the provisions of the deed relied on by the opponent as founding his cause of action are contractual provisions. 14 The question then arises whether the provisions, the breach of which is alleged in the Statement of Claim, are such that breach of them is a breach of duty within the definition of that expression in s.11(1). The breaches alleged in the Statement of Claim are in substance breaches of cl.2(iii) and (iv); and in my opinion these are clearly breaches of duty within the definition in s.11(1). It does not matter that they may occur without fault: the same is true of breaches of statutory duty, which are also referred to in the definition in s.11(1). 15 In my opinion also, in so far as the proceedings are founded on a breach of these terms, it is an action on a cause of action, founded on a breach of duty, for damages for personal injury; and thus is within s.18A. In my opinion, the primary judge was wrong to decide otherwise. Since no other cause of action based on the deed is alleged in the Statement of Claim, the Statement of Claim is liable to be struck out; and subject to what I say below, the proceedings should be dismissed. 16 However, an order for dismissal should not be granted unless proceedings must fail. It is appropriate to consider whether, if the Statement of Claim were to be amended to make a different claim based on the deed, in particular a claim based on cl.2(v) and/or (vi), it must still fail. In so far as cl.2(v) of the deed gives a claim for compensation for damage resulting from failure to comply with mining laws or the terms of the deed, it would appear to raise the same questions as a claim made for breach of cl.2(iii) or cl.2(iv). However, cl.2(v) also contains a promise to compensate the owners for loss or damage suffered by them as a result of any act or omission by the miner; and cl.2(vi) is a promise to indemnify the owners against all loss or damage arising out of any act or omission of the miner. 17 This gives rise to three questions: first, would both the opponent and his wife need to be plaintiffs; second, can the circumstances alleged in this case engage these promises; and third, if so, is an action based on them within s.18A of the Limitation Act? The parties provided supplementary written submissions on the first and second of these questions. 18 On the first question, the promises in question are promises to compensate or indemnify the owners, so both the opponent and his wife are explicitly made the promisees; and so, unless the promises can be interpreted as made to each of them severally, both should be parties to proceedings to enforce them: see District Court Rules, Pt.7 r.3. 19 On the question of interpretation, it would seem that one covenant cannot, as regards two covenantees, be both joint and several: Dicey, Parties To An Action (Maxwell, 1870) pp.110-111. So unless each of the covenants in question here can be taken to be two covenants, one joint and one several, they must be either joint or several. The words used can make it clear whether the covenant is joint or several; but otherwise regard will be had to whether the interests of the covenantees are joint or several: Dicey at pp.113-114, Australian Securities Ltd. v. Western Australia Insurance Co. Ltd. (1929) 29 SR(NSW) 571. In my opinion, it would be relevant to this question whether each of the covenantees provided separate consideration, and whether a breach would necessarily affect both covenantees, or could affect only one of them. In the present case, the words tend to suggest joint entitlement, though not unmistakeably so; the consideration was provided jointly; and although loss or damage could be caused to one covenantee and not the other, the clause certainly, and perhaps primarily, relates to loss or damage to the property and thus to both jointly. In my opinion, these are covenants in favour of the opponent and his wife jointly. 20 There may be a question whether failure to join both is fatal: see Pt.7 r.7, Churchill v. Connolly [2004] NSWCA 212 at [30]-[36]. It may be sufficient to add the opponent's wife as a defendant. If this Court's decision is not to dismiss the proceedings, it will be necessary for the opponent to seek leave to amend the Statement of Claim to introduce a new cause of action, and possibly to add a party, and this will raise questions under the District Court Rules Pt.17 r.4, because the twelve-year period has now expired. These questions would have to be addressed by the District Court. 21 The two provisions of the deed under consideration each contemplate loss or damage for or from which the owners are to be compensated or indemnified, caused by "any act or omission" by the miner or his servants or agents or workmen. It seems likely that this would be limited to any act or omission which has to do with the exercise of the rights granted by the deed; but even with that limitation, if it be the case that the miner dug the hole into which the opponent fell, the miner's act in digging the hole (for example) could possibly be regarded as an action causing the opponent's injury, even if no fault were identified concerning the manner in which the hole was dug or in which its opening was fenced or otherwise supported or protected. 22 In those circumstances, would the consequent injury to the opponent have the effect that the provisions in question apply so as to require the miner to pay the opponent (or the opponent and his wife) an amount calculated so as to compensate for the damage caused to the opponent by this injury? In my opinion, the words of the provision are apt to have this effect. although it is arguable that the provisions are directed towards loss or damage to both of them, as owners of the property on which mining operations are to be carried on, in my opinion the words are wide enough to cover loss or damage to one of them by reason of personal injury. If there were loss of stock owned by them in unequal shares, or even owned by one and not the other, this would in my opinion be covered; so the same would apply to personal injury to one of them. 23 On that approach, the digging of the hole would not itself be a breach of duty: it is permitted by the deed. The only possible breach of duty would be the failure of the miner to compensate or indemnify. The questions then would arise, would the opponent's cause of action then be (1) founded on breach of duty, and (2) for damages for personal injury? And in my opinion, there would be a third question under s.18A, namely whether the cause of action must depend on the breach of duty causing the injury. 24 As regards the first question, the claim is a common law claim, not a claim for specific performance, so it is a claim founded on breach of contract; and having regard to the way breach of duty is defined in s.11(1), I think the claim must be regarded as one for breach of duty. As regards the second question, in my opinion the claim is in substance one for damages for personal injury. Accordingly, in my opinion s.18A would apply, unless it can be said that it only applies where the cause of action is based on the allegation that the breach of duty caused the personal injury, which is not the case if the only relevant breach of duty is a breach of duty to compensate or to indemnify. 25 The analogy suggested by Mr. Toomey of a claim under an insurance policy has some relevance. If the claim is for a sum specified in the policy, by way of income relief or contribution to expenses, that would not in my opinion be a claim for damages for personal injury, so would not in any event fall within s.18A. However, if the insurance policy provided to the effect that, if the insured is injured, the insurance company will pay the insured an amount calculated so as to compensate the insured fully for the damage caused by that injury, proceedings to enforce a claim under that policy would appear to be founded on breach of duty, and also to be for damages for personal injury; and thus would fall within s.18A, unless s.18A is limited to those cases where the personal injury is caused by the relevant breach of duty. That is, the same question would arise as in the present case. 26 One argument for such a limitation would be that it is suggested by the inclusion of the words "founded on breach of duty". It can be said that any cause of action for damages for personal injury must be based on an obligation to pay those damages, and thus on a breach of that obligation; so that the words "founded on breach of duty" would be surplusage, unless they required that the personal injury for which damages are claimed was caused by the breach of duty. That argument has some support from the association of those words with "negligence" and "nuisance", because these would found the cause of action by being causative of the injury. 27 With some hesitation, I have come to the view that this argument prevails, so that s.18A applies only if the personal injury in respect of which damages are claimed was caused by the breach of duty. This means that, if the Statement of Claim in this case can be amended to seek damages for breaches of the terms of cls.(v) and (vi), the opponent would have an arguable cause of action that is not within s.18A. Whether such an amendment, which may need to include the addition of a further plaintiff, or possibly defendant, should be permitted after the expiry of twelve years, would be a matter for the District Court.

CONCLUSION 28 Accordingly, leave to appeal should be granted, and the appeal should be allowed to the extent that the Statement of Claim should be struck out, and the matter remitted to the District Court so the opponent can submit an amended Statement of Claim and seek leave to introduce it as an amendment. If such leave is not granted, the proceedings would then be dismissed. 29 This was not the remedy sought by the claimant below, so the costs below should be costs in the proceedings. The opponent should pay the costs of the appeal. 30 I propose the following orders: 1. Leave to appeal granted, Notice to Appeal to be filed within 14 days. 2. Appeal allowed. 3. Orders below set aside, and in lieu thereof: (a) Statement of Claim struck out. (b) Liberty to opponent to submit an Amended Statement of Claim and seek leave to introduce it as an amendment. (c) Costs of application to date to be costs in the proceedings. 4. Opponent to pay claimant's costs of the leave application and appeal, and to have a certificate under the Suitors' Fund Act if otherwise eligible. 31 SANTOW JA: I agree with the conclusion of Hodgson JA and with his essential reasoning. I would however wish to make one further observation in order to clarify a particular aspect. 32 The proposition that the benefit of a covenant enures to the (two) covenantees jointly can be readily reconciled with the fact that only one of the covenantees has here suffered personal injury, as would necessarily form the essential substratum of any re-pleaded claim. 33 The answer lies in the following passage in Dicey: "Parties to an Action" (Maxwell, 1870) at 114: What is a joint and what a several interest? The best answer appears to be, that the interest of parties to a contract is joint where a breach of it to one is necessarily a breach of it to all; several, where a breach of it to one is not necessarily a breach of it to all.

If X. covenant with A. and B. to pay a certain sum of money to B. the interest is joint, for the act to be done is one act, and the omission to pay the money to B. is a breach of contract to both the covenantees. So where there is a covenant with two persons to pay them one annuity the interest is joint, even though half the annuity is to be received by each. It would probably be otherwise if the covenant were to pay a separate annuity to each, in which case the interest would be several. [footnotes omitted] 34 "Norton on Deeds" (Sweet & Maxwell, 1928) at 574, consistently with that proposition states the principle and illustrates it in terms which recognise that one of two joint covenantees may have no beneficial interest in the subject matter of the covenant yet be able to sue as a survivor: A covenant with two or more, or with two or more and each and every of them, where one of them has no beneficial interest in the subject matter of the covenant, will be construed as a covenant with them jointly, and the benefit of it will survive.

Indenture of covenants between A and B, of the one part, and C, of the other part; and (inter alia) it is agreed between the parties that C shall enter into a bond to pay a certain sum to A. On an action brought by the administrator of A for breach of covenant, held, that he could not maintain it, as the benefit of the covenant survived to B: Rolls v Yate (1611), Yelv. 177; S. C. sub nom. Yate v Roules , 1 Buls. 25; sub nom. Yates v Rolles , 2 Brownl. & G. 207. 35 In the present case, breach of the covenant in either 2(v) or (vi) of the Deed, though based on personal injury suffered by one covenantee, is a breach of the covenant to both covenantees jointly. 36 BROWNIE AJA: I agree with Hodgson JA. **********

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