Ahrens Engineering Pty Ltd v Leroy Palmer & Associates - [2010] SASC 36

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master: Civil)
AHRENS ENGINEERING PTY LTD v LEROY PALMER & ASSOCIATES & ORS
[2010] SASC 36
Judgment of The Honourable Justice Duggan
25 February 2010
TORTS - THE LAW OF TORTS GENERALLY - JOINT OR SEVERAL TORTFEASORS - CONTRIBUTION - GENERALLY - RELEVANT PRINCIPLES
Appeal against decision of Master to dismiss appellants’ application for the dismissal of contribution proceedings – respondent, a defendant in the action, settled with plaintiff and plaintiff discontinued against respondent – order by court that discontinuance of action to have same effect as a final judgment – whether, in the light of the court order, respondent could claim contribution from appellants who were also defendants – whether respondent has standing to claim contribution as a person liable in damages pursuant to s 6(1) of the Law Reform (Contributory Negligence & Apportionment of Liability) Act 2001 (SA) – held Master acted correctly in deciding that respondent had an arguable case on the construction of the legislation for claiming contribution – appeal dismissed.
Law Reform (Contributory Negligence & Apportionment of Liability) Act 2001 (SA) s 6(1); Supreme Court Civil Rules 2006 (SA) r 108; Wrongs Act 1936 (SA) s s25(1)(c); Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s 5(1)(c), referred to.
Baker v Joppich (1980) 25 SASR 468; Bitumen & Oil Refineries (Australia) Ltd v Commissioner for Government Transport (1955) 92 CLR 200; Brambles Constructions Pty Ltd v Helmers (1966) 114 CLR 213; Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574; Stott v West Yorkshire Road Car Co Ltd [1971] 2 QB 651, applied.
James Hardie & Coy Pty Ltd v Seltsam Pty Ltd (1998) 196 CLR 53, distinguished.

AHRENS ENGINEERING PTY LTD v LEROY PALMER & ASSOCIATES & ORS
[2010] SASC 36
Appeal from a Master

DUGGAN J: This appeal from the decision of a Master in interlocutory proceedings involves the construction of s 6(1) of the Law Reform (Contributory Negligence & Apportionment of Liability) Act 2001 (SA) (“the Act”) which provides for the right to contribution between tortfeasors.
The litigation arises from the collapse of two wheat silos which were constructed for AWB Ltd, a grain dealer. A principal contractor was appointed for the construction project and various subcontractors were engaged. Ahrens Engineering Pty Ltd, the plaintiff in the main action, was engaged by the principal contractor as a subcontractor to design and construct the silos.
The third defendant, Worley Parsons Services Pty Ltd (“Worley”), was retained by the principal contractor to oversee the design and construction of the silos.
The first and second defendants (“the Palmer defendants”) are engineers who were subcontracted by the plaintiff to assist with the design of the silos.
The plaintiff settled its action against Worley on terms contained in a Deed of Release and Indemnity (“the Deed”). The Deed provided for the payment of $1.4 million by Worley to the plaintiff. In accordance with the terms of settlement the plaintiff filed a Notice of Discontinuance whereby it wholly discontinued its claim against Worley. The Court then made the following order:
1.The Notice of Discontinuance filed by the plaintiff, Ahrens Engineering Pty Ltd (“Ahrens”) against the Third Defendant, Worley Parsons Services Pty Ltd (“Worley”) shall pursuant to 6R 108 Exception 2 have the same effect as a final judgment in favour of Worley against Ahrens.
Rule 108 of the Supreme Court Civil Rules 2006 (SA) provides as follows:
Subject to the following exceptions, a party who discontinues an action or a claim is not prevented from bringing a further action based on the same or substantially the same claim.
Exceptions—
1[inapplicable]
2The Court may order that the discontinuance of an action or a claim is to have the same effect as a final judgment against the party discontinuing.
There were two applications before the Master. The first was an application by Worley to amend cross-claims (contribution notices) directed against the Palmer defendants. The second was an application by the Palmer defendants seeking the dismissal of the cross‑claims against them. The application by the Palmer defendants was based on the contention that, as a result of the settlement of the plaintiff’s claim against Worley and the order that the Notice of Discontinuance was to have the same effect as a final judgment in favour of Worley against the plaintiff, Worley was not entitled to recover contribution from the Palmer defendants.
The hearing before the Master proceeded on the basis that, as the applications before him were interlocutory proceedings, his task was to decide whether Worley’s claim for contribution was arguable. He held that it was and that Worley should be permitted to amend its contribution notices. He dismissed the application by the Palmer defendants for the dismissal of the contribution proceedings against them. The appeal by the Palmer defendants is against the dismissal of their application. There is a cross-appeal by Worley which seeks the dismissal of the contribution notices filed by the Palmer defendants in the event that Worley’s contribution notices are summarily dismissed.
The right to contribution between tortfeasors is provided for in s 6(1) of the Act in the following terms:
A person who is liable in damages for harm suffered by another may recover contribution from a third person who is also liable in damages for the same harm.
According to the argument Worley is not “a person who is liable in damages for harm suffered by another”. It is conceded that when the contribution notices were issued they were appropriate. However, the Palmer defendants argue that the filing of the Notice of Discontinuance and the making of the Court order put an end to Worley’s right to claim contribution. It is said that, in these circumstances, Worley was not and could not become a party liable in damages to the plaintiff for the purposes of the Act.
Worley argues that the words “is liable” in the opening phrase in s 6(1) are temporally neutral and refer to a person who is liable at any time. Secondly, it is said that these words in the section refer not only to a finding of liability by the Court, but also to a liability acknowledged in an agreement such as the Deed of Release executed by the plaintiff and Worley.
There is some authority to support the proposition that the word “liable” where it first appears in the section extends beyond liability consequent upon judgment. Under s 25(1)(c) of the Wrongs Act 1936 (SA), the predecessor of the present legislation, the wording of the first limb was “any tort-feasor liable in respect of [damage suffered as a result of a tort]”. In Bakker v Joppich[1] Wells J said:
Both on principle and authority, I am of the opinion that, with respect to the first question, the word "liable" in the first line of par (c) of sub-s (1) of s 25 comprehends all circumstances in which a defendant becomes, under any head, legally liable to the plaintiff to pay damages on account of acknowledged or alleged negligence: liability, within the meaning of that passage, exists, inter alia, where the defendant has submitted to judgment on that account or has made an accord and satisfaction. One should bear steadily in mind that, for the purpose of answering the first of the foregoing questions, the adequacy or inadequacy of the sum ordered or agreed to be paid, is irrelevant.
[1] (1980) 25 SASR 468 at 473.
In Brambles Constructions Pty Ltd v Helmers[2] Barwick CJ, when describing the effect of s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW), paraphrased the words “any tort-feasor liable” in the first part of the section as “a tort‑feasor who has come under an enforceable obligation to pay money for the damage caused by his tortious act” (emphasis added).
[2] (1966) 114 CLR 213 at 218.
In James Hardie & Coy Pty Ltd v Seltsam Pty Ltd[3] Gaudron and Gummow JJ said:
The first step is to identify those upon whom the new statutory right is conferred and the time from which that conferral is operative. This is answered by the construction placed by authority upon the opening words of par (c) of s 5(1). The reference to the right of a tortfeasor who is “liable in respect of ... damage” to recover contribution is, as Windeyer J put it, “to a person whose liability as a tortfeasor has been ascertained, ordinarily by judgment, perhaps in some cases in some other way”[4]. The scheme of the legislation is that, as his Honour said, a “person thus found liable may seek relief from having to bear the whole burden”[5].
In Bitumen & Oil Refineries (Australia) Ltd v Commissioner for Government Transport[6], the Court said in its joint judgment that it was unnecessary to “say definitively that the ascertainment of the liability must be by judgment to the exclusion, for example, of arbitral award or of agreement itself amounting to accord and satisfaction or of an agreement amounting to accord executory followed by satisfaction”. Their Honours’ doubts as to the exclusion of other methods of ascertainment of the liability of the party now claiming contribution have been diminished by the later course of authority which admits of the sufficiency of at least some of those methods[7].
[3] (1998) 196 CLR 53 at [25]-[26].
[4]    Brambles Constructions Pty Ltd v Helmers (1966) 114 CLR 213 at 221.
[5]    Brambles Constructions (1966) 114 CLR 213 at 221.
[6] (1955) 92 CLR 200 at 212.
[7]    Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574 at 616-617.
Some of the authorities refer to reasons of policy which support a construction of the word “liable” in the first limb as extending beyond a finding of liability by the Court.[8]
[8] Stott v West Yorkshire Road Car Co. Ltd [1971] 2 QB 651 at 657.
Commenting on the Law Reform (Married Women and Tort-feasors) Act 1935 (SA) Professor Glanville Williams said:[9]
It may be remarked at the outset that the Act should apply to any tortfeasor who is in law ‘liable’ to the plaintiff; there should be no need for his liability to have been established by action. Consequently a tortfeasor who makes recompense without action should be able to claim contribution, provided of course that he proves that he was ‘liable’.[10]
…
…considerations of policy are overwhelmingly in favour of allowing a tortfeasors to settle out of court and then claim contribution, rather than go to the trouble of defending an action merely to qualify for the right of contribution.
[9] Williams, G.L., Joint Torts and Contributory Negligence (1951) at 96.
[10] See also Trindade, Cane & Lunney, The Law of Torts in Australia (4^th Ed) p 810 fn 60.
In the light of these authorities it is arguable that the word “liable” in the first limb of s 6(1) encompasses a liability arising by way of accord and satisfaction as occurred in the present case.
However, there remains the appellant’s argument which places reliance on the filing of the Notice of Discontinuance and the order of the Court that the discontinuance of the action shall have the same effect as a final judgment against the party discontinuing. According to the argument this resulted in a judgment being entered in favour of Worley with the consequence that Worley could not be said to be “liable in damages” for harm suffered by the plaintiff.
Under r 108 the prima facie situation is that a Notice of Discontinuance does not prevent the discontinuing party from bringing a further action on the same or substantially the same claim. An exception to this consequence occurs where the Court orders that the discontinuance is to have the same effect as a final judgment.
The purpose of the rule is plain enough. The filing of a Notice of Discontinuance, of itself, does not prevent a plaintiff from pursuing a defendant in fresh proceedings in relation to the same matter. It is appropriate, therefore, for the Court to be given the power in appropriate cases to prevent that occurring. The issue in the present case is whether Worley which has paid out a large sum of money to the plaintiff in settlement of the action against it no longer answers to the description in the first limb of s 6(1) because the Court has made an order which has the same effect as a final judgment.
In my view, Worley should be permitted to present the following argument. Judgment was not entered against the plaintiff as a result of the settlement reached between it and Worley, but an order was made which had the same effect as a final judgment. The purpose of this order was to prevent further proceedings in the same matter by the plaintiff. The Court is nevertheless entitled to consider whether, in all the circumstances including the payment by Worley to the plaintiff, Worley can be said to be “liable” within the meaning of that description in the first limb of s 6(1) of the Act.
It is true that the Deed states in para 10(1)(b) under the heading of “Background” that:
Worley Parsons denies that Ahrens is entitled to any of the orders which Ahrens seeks against Worley Parsons.
A similar situation arose in Stott v West Yorkshire Car Co[11] where the plaintiff was injured in a collision with a bus. He brought an action against the bus company and its driver. The bus company joined the owners of a van as a third party. It was alleged that the bus driver was forced to swerve around the van which was parked in the vicinity.
[11] [1971] 2 QB 651.
The plaintiff settled his action with the defendants. The written settlement acknowledged the receipt of £10,000 in full settlement. The settlement was expressed to be “without any admission of liability whatsoever” by the defendants. The defendants then pursued a claim for contribution against the third party. Lord Denning said:[12]
I am of opinion that the word “liable” does mean “responsible in law.” It follows that a tortfeasor is entitled to recover contribution from another tortfeasor (i) when he has been held liable in judgment; (ii) when he has admitted liability; and (iii) when he has settled the action by agreeing to make payment to the injured person, even though, in making the settlement, he has not admitted liability. But, of course, when the tortfeasor settles an action, he cannot claim contribution from the other tortfeasor unless he proves that he himself was “liable.” He must prove, therefore, that, if the claim had been fought out, he would have been held responsible in law and liable to pay in whole or in part for the damage. At that subsequent stage, therefore, he must admit liability because otherwise he does not bring himself within the section. In this particular case, therefore, the bus company will have to say to the van owners: “We settled the action because we were liable in part, and we are ready to prove it. And now we claim contribution.” On proof that they were responsible in law in part for the injury to the plaintiff, they can claim contribution.
(Emphasis added)
[12] [1971] 2 QB 651 at 656-657.
Mr Trim QC, for the Palmer defendants, placed reliance upon James Hardie & Co Pty Ltd v Seltsam Pty Ltd.[13] The plaintiff in that case claimed damages for injury caused by the inhalation of asbestos dust and fibre. He commenced action against his employer and two manufacturers of asbestos products, James Hardie & Co Pty Ltd (“James Hardie”) and Seltsam Pty Ltd (“Seltsam”). James Hardie and Seltsam exchanged contribution notices.
[13] (1998) 196 CLR 53.
During the trial the plaintiff settled his case with each defendant. Under the settlements the plaintiff was to receive $340,000 from James Hardie and $120,000 from the second defendant. However, judgment by consent was entered for the third defendant, Seltsam, against the plaintiff. The issue in the case was whether James Hardie could pursue its claim for contribution from Seltsam. This depended upon whether Seltsam’s situation came within the description in the second limb of the relevant contribution legislation[14] of a person “who is, or would if sued have been liable in respect of the same damage”.
[14] Section 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW).
The High Court held by majority that the consent judgment entered against Seltsam in favour of the plaintiff established that Seltsam was not liable to the plaintiff. In their joint judgment Gaudron and Gummow JJ said:[15]
However, in the present litigation, the order dismissing the plaintiff's action against the respondent was a final order which brought that action to an end. It would be a distortion of the text and structure of par (c) of s 5(1) to hold in those circumstances that the respondent thereafter answered the description of one yet to be sued. The plaintiff's cause of action against the respondent merged in the judgment, thereby destroying its independent existence.
[15] (1998) 196 CLR 53 at [40].
The case is distinguishable on the basis that it turned on the wording of the second limb of the New South Wales legislation and Selstam did not agree to make any payment to the plaintiff. Furthermore, judgment was entered in favour of the plaintiff so that the case did not involve the argument which Worley wishes to put forward in this case based on the relevance of the making of an order which is to have the “same effect” as final judgment.
In my view the resolution of the further argument by the Palmer defendants that res judicata or estoppel applies also depends also on the validity of Worley’s argument as to the effect of the order made consequent upon the filing of the Notice of Discontinuance. There is no need to consider that matter further in these reasons.
I have reached the conclusion that the Master acted correctly in deciding that Worley had an arguable case on the construction of the legislation.
The appeal will be dismissed. The issue in the cross-appeal does not arise in the light of the dismissal of the appeal.