Astley & Ors v Austrust Ltd

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Adelaide No A65 of 1997

B e t w e e n -
MICHAEL ASTLEY, DEAN CLAYTON, STEPHEN GERLACH, JOHN T. GREGERSON, JOHN H. MELVILLE, JEAN MATYSEK, JERRY McQUADE, ANNE ROBINSON, ROSS L. PROUD, NICHOLAS J.T. SWAN, NIGEL W. WINTER and JOHN C. TUCKER
Appellants
and
AUSTRUST LIMITED

Respondent

GLEESON CJ
McHUGH J
GUMMOW J
HAYNE J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT ADELAIDE ON TUESDAY, 11 AUGUST 1998, AT 10.17 AM

(Continued from 10/8/98)

GLEESON CJ: Yes, Mr Bennett.

MR BENNETT: If your Honours please. Your Honours, I have handed to your Honours a folder that contains at the beginning a document entitled “Appellants’ Supplementary Submissions On The Questions Asked By Members of the Bench”. It deals with the various matters raised by your Honours and matters which occurred in the course of argument yesterday. The documents attached are results of our researches overnight.

The first proposition is a short one. Your Honours asked me about the amendment. The amendment was in 1951. I have given your Honours the reference. I have also given your Honours the second reading speech. Unfortunately it is not a wonderful photocopy, but there is one interesting passage at the very beginning. My learned friend says he handed in a clearer one, so if your Honours have that it may be easier to use. It is reasonably clear. Your Honours see that Mr Rudall, the Attorney‑General, begins by saying, at the beginning of his speech:

This Bill deals with the subject of contributory negligence and proposes an important alteration in the law. It is primarily of interest to lawyers, and has no political significance. The rules which it lays down are applied only when one person has wronged another by negligence or some other civil wrong and the question of who is to pay -

So even then there is a little hint that it may go beyond negligence, but one cannot perhaps read an enormous amount into that.

There is an extensive discussion in Glanville Williams in “Joint Torts And contributory Negligence”. I am grateful to Justice Gummow for drawing that to my attention yesterday. We have given your Honours the relevant passages from that book. It is the second item in the folder. There are three areas where he discusses it. The first is in the preface on the front page at the bottom of the page where, halfway through the very last paragraph on the page, he says:

In several respects the new Acts have not been as well thought out as could have been wishes, and it is important that all relevant considerations should be brought before the courts. Although in nearly every case the desirable result is capable of being reached by judicial interpretation of the existing rules, there are some respects where legislative amendment seems to be called for.

He then has two sections in the book: one which discusses the position at common law, and one which discusses the position under the Act. The position at common law is dealt with in paragraph 59, which is on the next page of the extracts. In that passage he gives the example, on page 214 in the second‑half of the page, the paragraph beginning “But there are cases”, and the third line of that paragraph:

If a passenger in a railway carriage knows that the door is defective and yet leans upon it and falls out, it is difficult to see why the defence of contributory negligence should not be available, and this whether the action be framed in contract or in tort.

He goes on to say:

In a case like this the cause of action, if in tort, is for negligence, and if in contract, is for breach of the implied duty to take care - - -

McHUGH J: That is wrong, is it not? It is not for breach of implied duty, at all. It is for breach of the implied promise.

MR BENNETT: I would submit that what he has said there is really a shorthand way of saying what your Honour just put to me; the implied duty arising out of an implied term, or the duty arising out of an implied term. He does not use the language of The Moorcock, but in my respectful submission, he is, in a shorthand way, referring to it. He says:

in either event contributory negligence is relevant. We need not pause to enquire into the exact verbal mechanism by which a court might introduce the question of contributory negligence into a contract case: whether in terms of causation, or of implied duty on the part of the plaintiff to use care.....or of estoppel by negligence, or of the duty to mitigate damages or of contributory negligence eo nomine - - -

GLEESON CJ: It may be more of a question of a search for principle than for a verbal mechanism.

MR BENNETT: Yes, that is so, your Honour. He says:

the fact remains that whatever the language the subject of enquiry is whether the negligence of the plaintiff has concurred with that of the defendant to produce the misfortune -

He then gives examples of an innkeeper, and the paragraph after next begins:

In the foregoing instances the contractual duty is merely a duty to use care, and it does not sound too bold to assert that the defence of contributory negligence is appropriate. But it is submitted that one can go further and say that contributory negligence is appropriate where the contractual duty.....is a strict one.

Then he goes on to discuss that. I, of course, do not need to go that far.

The other place he refers to it is in discussing the statute. That is in paragraph 80 commencing at page 328. In the beginning of paragraph 80, he says:

A question of construction that may arise upon the definition clause is whether it applies to actions in contract. It has already been submitted that at common law the defence of contributory negligence applied in substance (whatever the precise language used) to actions in contract as well as to actions in tort.

McHUGH J: Can I just stop you there to say does this mean that prior to the passing of this legislation that a person would be defeated altogether by a claim in contract because that was the rule of the common law concerning contributory negligence?

MR BENNETT: No, your Honour, he does not seem to be saying that. He seems to be ‑ ‑ ‑

McHUGH J: I know, but you just cannot ignore these considerations. If this view is right, it must mean that prior to 1945 contributory negligence could defeat an action in contract, entirely.

MR BENNETT: That does not seem to be what he suggests in paragraph 59 ‑ ‑ ‑

McHUGH J: No, he just ignores it. You cannot make these things up as you go along, you know.

HAYNE J: And if that is not what he is suggesting then you encounter the difficulty of the definition of “fault”. It gives rise to the defence of contributory negligence, the notion of defeat.

MR BENNETT: Your Honour, my answer to that, as I have indicated, lies in saying that the first part of the operative provision does not govern the whole of the provision, and that the second part is capable of operating on its own, even in cases where the first part would not have applied, and that becomes a question of construction.

McHUGH J: But the real problem is not the definition, although that creates some problems for you, it is the empowering provision, 27A(3). It only gives the court the power to make a reduction that is just inequitable where the claim would have been defeated.

MR BENNETT: Your Honour, I suspect that that is not the way one needs to read it. One can read it as saying there are two consequences. The first words of subsection (3) are:

Where any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons -

That is the condition for the operation. It then says there are two rules of law which this section lays down. The first rule is:

a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage -

Let me assume for the moment that that is confined to cases of tort. It then goes on to lay down the second rule. It says:

the damages recoverable in respect thereof shall be reduced to such extent as the court thinks just and equitable -

There is no reason for reading the second part as if it was conditional on the first being necessary.

GUMMOW J: It is “in respect thereof”.

MR BENNETT: “In respect thereof” is a claim in respect of that damage, which goes back to the initial words. I am happy to have it limited by the initial words, of course. I have to bring myself within the words “Where any person suffers damage as the result partly of his own fault and partly of the fault of any other person”, but those words do not look to the cause of action. Those words look to the effect of what has happened. Then the consequence is the two consequences. The old tort rule is abolished, one, but, two, in every case the damages recoverable shall be reduced, et cetera.

McHUGH J: But there is less reason for departing from what would have been the historical understanding at the time of this enactment in relation to this legislation than in other jurisdictions, because as I pointed out to you yesterday, subsection (9) deals with the question of loss of consortium, and there the common law rule was, according to Justice Taylor in Curran v Young in this Court, that contributory negligence did not defeat the action for loss of consortium, and South Australia expressly dealt with it, and it did not defeat contract, and they do not deal with it. So, is not the only rational conclusion, given its language, given its history and the mischief at which it was aimed, that this says nothing at all about contract.

MR BENNETT: Subsection (9) is simply dealing with the relationship between the contributory negligence rule and the concurrent liability of different parties rule. It is simply providing how those are to be read together. The reference to loss of consortium in that does not necessarily mean that subsection (3) does not have the wider operation. It is simply dealing with one aspect of it.

GLEESON CJ: In one of the Canadian cases to which you referred us, Doiron, Mr Justice La Forest, referring to the argument you are now putting, said:

this interpretation would appear to be stretching a point and ignoring the antecedents of the Act. For it is generally known among the profession that the reason the statute was enacted was to avoid the injustice and rigidity of an absolutist concept of fault in negligence law.

MR BENNETT: Yes, that is certainly so, but at a time when they were not specifically conscious of the problem which has arisen in this case arising out of the development of concurrent liability and a contract in tort. It goes back, I suppose, to the roots of how one interprets a statute. But, one must add to that the major consideration in this case which we stress, that there has been - and I will show your Honours some more aspects of this in a few minutes - a very consistent and very firm trend throughout the Commonwealth to reach the conclusion, whether by the route I have indicated, or other routes, for which I contend, and even in the Ashtons Circus Case, to which I will come, the court expresses its great reluctance and indicates how much better it would have been if it could have come to the other approach, and talks about the present state of the law at this stage of development of the law, rather anticipating that there is going to be the development which has, in fact, occurred.

GLEESON CJ: I think we have understood the argument you make about the construction of the statute, but what are the other routes by which you can come to the same conclusion?

MR BENNETT: One route is to say that where one has a statute which has the degree of generality throughout the Commonwealth that this one has, and there are very few statutes in that position, which have developed the common law in an almost totally uniform way, not merely in all but one of the States of Australia, but in Canada, England and other places, in New Zealand, then one can take, and the courts can perhaps take, to such a statute an approach rather more similar to that of courts developing the common law than they can where they are dealing with a local statute which is unique and which can be easily mended.

GLEESON CJ: But as I understand what happened in Canada, they said the statute does not provide the solution to the problem, but there is a solution to the problem in the law of contract, itself. Do you contend for that proposition, that apart from statute there is a way within the law of contract of reaching the same result?

MR BENNETT: Yes, your Honour.

McHUGH J: Your problem is you did not plead it.

MR BENNETT: Your Honour, there was tort and contract pleaded against us and one comes back to ‑ ‑ ‑

McHUGH J: What, do you want to amend your pleadings at this late stage?

GLEESON CJ: You do not plead the damages, do you?

MR BENNETT: I think that is the answer, your Honour.

McHUGH J: Do not the pleading rules in this jurisdiction require that you plead any issue that might take the other side by surprise?

MR BENNETT: Your Honour, it is not a matter of taking it by surprise. The issues of law have been fairly fully thrashed out in these cases at all three levels.

GLEESON CJ: Not quite. I do not think either of the courts below had to look at the question. Having regard to the view that the judge at first instance took of the statute, the problem did not arise for him, and it did not arise in the Court of Appeal, and subject to what exactly your argument is, we would be deciding for the first time in this case whether an argument based on the law of contract produced the same result as that which the trial judge reached based on the statute. I simply direct your attention to the fact that in that Canadian case, having rejected the statute as the means of achieving that result, Mr Justice La Forest said, or appeared to say as I understand his reasoning, that you come to the same result through the law of contract. But, I have not heard yet what your argument is on the law of contract as distinct from the statute.

MR BENNETT: It would be, your Honour, basically what Glanville Williams puts in that first chapter.

GLEESON CJ: That is why the references to verbal mechanisms are a little disconcerting. We would need to know what is the principle of the law of contract on which you rely.

McHUGH J: Is it a Mackay v Dick‑type point?

MR BENNETT: The principle is the one I adumbrated yesterday, your Honour, which is, if there is to be an implied term of the type Justice Deane rejected, which says that if a professional person fails to exercise due care, that person is liable in damages for any damage suffered. Part of that implied term goes on to say “but such damages shall be reduced by any fault of the client in the same way as would apply under the law of contributory negligence”; that the implied term would simply say that. I may not have formulated that precisely, but that is ‑ ‑ ‑

McHUGH J: What sort of implied term are you talking about? There are two types of implied terms. There are terms implied by law, and there are terms implied by fact. The matter is dealt with by the House of Lords in that Liverpool case of Irwin. This area of law seems, when we are talking about implied terms, to be one that is implied by law, just the same as the sale of goods cases were implied by law. So, what are you arguing, that we now eradicate that implied term from the law of - - - ?

MR BENNETT: No, your Honour, but one modifies it. Once one is freed from the Codelfa constraints, because it is a term implied by law, there is very little difficulty in saying, as Glanville Williams does, and as Canadian courts effectively do, that the implied term that one must pay for the damage has the qualification that one reduces the damages in an analogous way to the doctrine of contributory negligence. That is all one needs to do.

GLEESON CJ: Do you put an argument, relying on what appears at pages 680 to 683, of the case which is at tab 11, an argument based on Hadley v Baxendale? You see at page 680 Mr Justice La Forest says that the rule in contract is Hadley v Baxendale, and then at the bottom of page 683 he applies that rule to produce a result which is the same as the result produced in tort by apportionment.

MR BENNETT: Yes. He gets it from the Hadley v Baxendale ‑ ‑ ‑

GLEESON CJ: The second limb; he applies the second limb of Hadley v Baxendale.

MR BENNETT: Yes, your Honour, I do, and that is an aspect of what I am - the way I put it, I would respectfully submit, is an easier way to get there.

GLEESON CJ: What I wanted to ask you was whether that represents the current law in Canada?

MR BENNETT: The latest case we have is Central Trust v Rafuse which ‑ ‑ ‑

McHUGH J: Before you go to that, can I just ask you to comment about this. I have not read Dorion, but it is a little difficult to see how you get Hadley v Baxendale into it. Hadley v Baxendale concerns remoteness of damage and it assumes that there is an otherwise unlimited liability. Hadley v Baxendale does not provide a ground of liability, it limits a liability that is already there. Have you read this case in detail? Do you agree with the analysis of it, or rely on it?

MR BENNETT: One of the alternative arguments we put puts it this way: I prefer to put it the way I put it to your Honour earlier, which is simply to say once you have the term implied by law it is a very easy matter, particularly when one looks at the trend of authority and the reasons for it, and the injustice of having any other approach, and the difficulties and inconveniences caused by the other approach, to do it by simply saying one varies the implied term. One way of doing it is to say since we now have concurrent liability in all these areas, whatever one says about the term in other areas, in the concurrent liability areas where one is dealing with a breach of an implied duty to take reasonable care, it must be part of the implied term that one will take reasonable care that the damages one will pay if one does not, are adjusted by something analogous to contributory negligence.

McHUGH J: But as I pointed out to you yesterday, this means that before the professional person is in breach, if the plaintiff has failed to take reasonable care, the professional person has a right of action to breach of contract.

MR BENNETT: No, your Honour, it does not.

McHUGH J: It must if it is a term of the contract that the person will take reasonable care.

MR BENNETT: A term of a contract can be confined to consequences. Your Honour is assuming that the term in question is one which is confined to a duty in X and a duty in Y. The term I am arguing for is a term which deals with the consequence of a breach of the duty which is implied in the professional person.

McHUGH J: Could you define, with some precision, what the term is, so I can write it down?

MR BENNETT: Yes. The term is that if the professional person - I am sorry, perhaps I should start by saying the term applies in cases where there is concurrent liability. Where a professional person is in breach of the duty to take care and the client suffers damage, the amount which the professional person is liable to pay is reduced in the same way as under the doctrine of contributory negligence where the damage occurs partly as the fault of the client. I put that, not as a term imposing a duty on the client, but as a term limiting the consequence of a breach of duty by the professional.

McHUGH J: And this is a common law term inserted as a matter of law in respect of all contracts between a person and a professional person?

MR BENNETT: Yes, your Honour, where there is a duty to take care and a concurrent duty in tort. An implied duty to take care of the concurrent duty in tort. It may be the principle can be taken further, it may be it cannot into other cases. I do not need to deal with how you deal with it where there are express terms and how you deal with it in relation to other duties. They are questions which have been answered differently and which do not arise in this case.

GLEESON CJ: Is it a bit like a qualification on what is commonly regarded as the implied term. That is to say, you make the implied terms slightly more elaborate and say the professional person promises that the client taking reasonable care for his own safety, the professional person will exercise due care and skill.

MR BENNETT: No, your Honour, because that would result in a total bar. It can only be a term which affects what would be paid in certain situations; as one has in many contracts, express terms saying if a particular breach occurs, a particular measure of damages is adopted, and subject to the law about penalties, the parties can agree on that. This is a term of that nature. It is a term dealing with the consequence of breach, not a term dealing with the existence of a duty.

McHUGH J: How does this get into the law? What is the jurisprudential concept, or value, or extra legal value or whatever it is that brings this term into the law of contract?

MR BENNETT: The same thing which brings any implied term implied by law into a contract. That is something which the courts have to define and deal with from time to time.

McHUGH J: No, I think - I may be wrong but I think most cases where terms are implied by law are cases where, over a long period of time, as a matter of fact those terms were implied and eventually the courts implied them as a matter of law, as in the case of bills of exchange, as in the case of the sale of goods legislation, but there is no history in this area.

MR BENNETT: What one has here, your Honour, is a growing uniformity in the Commonwealth, by different routes perhaps, to get to a particular result in relation to concurrent liability. Since Hedley Byrne, the law has had to rest with concurrent liability.

GLEESON CJ: What is the court of highest authority in England that has decided to the effect for which you are contending?

MR BENNETT: It has been decided by a different route by the English Court of Appeal.

McHUGH J: Not for an implied term.

MR BENNETT: No, not for an implied term, doing by construction of the statute.

McHUGH J: But so far as the dual duty, the House of Laws in Henderson v Merrett held that as a dual duty - - -

MR BENNETT: Yes; I have higher authority for concurrent liability. For reversing Groom v Crocker I have a embarras de richesse. But, for this proposition the highest I can get is the Court of Appeal in England. But I have the New Zealand Court of Appeal, I have the Supreme Court of Canada, I have the Full Court of Western Australia, on a slightly different statute, and numerous single judges.

McHUGH J: All you have in the Supreme Court of Canada is an assumption, or a failure to contradict the proposition, is it not? They held that there was no contributory negligence in that case, did they not?

MR BENNETT: Yes, your Honour, in Rafuse’s Case they did in the end.

GLEESON CJ: Is there any decision of the Supreme Court of Canada that actually applies principles of contribution in a situation such as the present?

MR BENNETT: Your Honour, I think - and I say this subject to correction, but my understanding is, that, although there is a long line of cases in provincial courts in Canada beginning with the New Brunswick Case we have given your Honours and, indeed, some earlier cases, that is the only case in the Supreme Court, but it puts that fairly firmly.

GLEESON CJ: Where is that that it puts it firmly?

MR BENNETT: It is Central Trust v Rafuse, which is case No 12 in my volume.

McHUGH J: Is that not a negligence case, an economic loss case?

MR BENNETT: This is a professional negligence case, your Honour. This was a solicitor and at page 489 of the record, in 31 DLR 4th, halfway down the page:

The question whether there can be concurrent liability in contract and in tort for negligence in the performance of professional services has been the subject of conflicting judicial opinion and a great deal of academic commentary.....Important legal consequences have turned on the differences.....The three most important areas in which these differences have been reflected.....are limitation of actions, measure of damages and apportionment of liability. Although there has been an increasing judicial disposition to apply similar rules, or at least to reach similar results, with respect to these issues under the two kinds of liability, there are likely to remain differences of result in certain cases flowing from inherent differences between contract and tort. Although an assimilation of the rules or results under the two kinds of liability has been advocated as one response to the issue of concurrent liability, the question is unlikely to be rendered wholly academic by this clearly discernible development in the law. It has been the important difference of result, particularly in the three areas referred to, that has given the question of concurrent liability its policy focus ‑

and so on. Then they continue in that vein right down page ‑ ‑ ‑

GLEESON CJ: Yes, but where do they hold that you can have apportionment on the basis of contributory negligence, where there is concurrent liability?

MR BENNETT: It is certainly assumed after the discussion at 528 where they discuss contributory negligence on the facts and found that the defence must fail, but the ‑ ‑ ‑

GLEESON CJ: I see no holding in this case that contribution applies on the basis of contributory negligence or apportionment. All I see is a holding that there was, in fact, no contributory negligence, so the question did not arise.

MR BENNETT: The conclusion on concurrent liability is in the five propositions on 521 to 523.

GLEESON CJ: There is no doubt they held there was concurrent liability.

MR BENNETT: Yes. They then deal with the question of negligence and, your Honour, all I can say is that the clear assumption they make on pages 528 and 529 is that the effect of that is that it applies.

GLEESON CJ: The point is that if they had to deal with it, they might have had to assign a reason for it, and that is what we are interested in, the reasons.

MR BENNETT: Your Honour, the best statement of reasons appears in the New Brunswick Case, in Doiron.

GLEESON CJ: That is why I was interested to know whether the analysis of Mr Justice La Forest had been approved by the Supreme Court of Canada.

MR BENNETT: Your Honour, I do not know if they refer to Doiron as one of the cases they cite. I will just have that checked, your Honour, whether they do, in fact, refer to Doiron, but the important point about Doiron is that it itself refers to a long line of cases in Canada which lead it to the conclusion to which it comes on contributory negligence and Justice La Forest, of course, ultimately went to the Supreme Court of Canada.

GLEESON CJ: Do the statutory provisions about contribution between several concurrent tortfeasors apply where the several concurrent tortfeasors are also contract brokers?

MR BENNETT: Your Honour, in a sense that is the next question after this case. The statutory provisions themselves, as I understand it, talk about tortfeasors and, therefore, it may be difficult to apply them.

GLEESON CJ: If you construe them in the same way as you would construe this statute, you would say the fact that they are contract brokers is beside the point if they are also tortfeasors.

MR BENNETT: Yes. One would have to look at the specific section. It is section 25:

Where damage is suffered by any person as a result of a tort (whether a crime or not) ‑

and presumably one could also read whether or not also a breach of contract ‑

(a) judgment recovered against any tort‑feasor liable in respect of that damage shall not be a bar to an action against any other person ‑

and then there is the various sections about contribution, a tortfeasor is liable to contribution from other tortfeasors. There seems to be no reason why that could not occur, even if the actual claim against the tortfeasor was in contract. In other words, the same reasoning that I have been putting in relation to section 27(a) ‑ ‑ ‑

GUMMOW J: Look, there is already inequity of contribution between the contract brokers. It did not need the statute.

MR BENNETT: That is so, your Honour, but ‑ ‑ ‑

GUMMOW J: What are you now saying the statute does? It produces two species of contribution because the characteristics are not the same?

MR BENNETT: Your Honour, it may not be necessary to construe the section that way because one has, as your Honour indicates, the contribution in any event, but ‑ ‑ ‑

GUMMOW J: It is not necessarily in any event because there could be equitable defences in relation to the equity of contribution that will not be available under that statute, for example.

MR BENNETT: Yes, but the point I am making is there is nothing inconsistent with section 25 in saying that it could, if one wished, be applied to a situation where a person is a tortfeasor liable, another person is the tortfeasor who is sued, but the action is framed in contract, not in tort, where there is concurrent liability. One does not need to, as I say, but there is nothing inconsistent with the statute in doing it.

GLEESON CJ: Producing the result for which you contend in the present case is not going to produce a seamless garment. There are going to be important differences between liability in tort and liability in contract in any event.

MR BENNETT: Your Honour, yes, there may be differences in relation to the law of remoteness, differences in relation to the law of limitation of actions and various other areas, although in most cases today - well, there may be differences in those areas, but those differences may well affect whether one sues in one or the other, but in relation to contributory negligence there is no reason for not endeavouring to be as seamless as one can and that, as I say, seems to be the trend.

McHUGH J: Mr Bennett, immediately before we got on to this particular subject matter, before the Chief Justice asked his question which gave rise to it, you had asserted that the uniformity of statutes around the Commonwealth required the Court to come to the conclusion for which you contend, but in Australia, at least, Interpretation Acts direct the courts in interpreting statutes to have regard for the purpose of the legislation. Having regard to the mischief with which this statute is concerned, is there any doubt that the purpose was to overcome the common law rule that an action in negligence was defeated by the contributory negligence of the plaintiff?

MR BENNETT: Your Honour, all I can say is that one can put - certainly that was the causa causans, but one can put the purpose more generally than that by saying that the purpose was to achieve a result that in cases where people were liable in tort for negligence there would be a reduction on the basis of contributory negligence, however the cause of action was framed.

Now, there is nothing inconsistent with the desire to overcome the rule to which your Honour has referred with saying that the overall purpose is to replace that rule with a different rule and for that different rule to have a slightly wider operation and if one can imagine the officious bystander saying to Parliament at the time, or to a Parliament at the time, “You realise there may be a problem which can be avoided by a pleading, but in many cases of tort courts will permit one to plead concurrently either in contract or in tort and that one might be able to avoid this rule by suing in contract”, one would have thought the answer would be, clearly, this approach to apportionment ought to apply where there is a tort of this type.

So if one applies that sort of test, one might get a different result, even looking at the mischief and the desire to cure it. Part of the mischief certainly was an unduly strict rule in tort, but part of the mischief also was the inability of courts to do what was regarded by Parliament as the fair thing, which is to have an apportionment, and the mischief could arise, whether one has a 100 per cent defence or no defence and no apportionment. Either of those would, no doubt, be regarded as a mischief and once can fit it within the words in the manner I have done there is no reason for not construing it that way.

May I just finish what I was saying to your Honours about Glanville‑Williams because what Glanville‑Williams does in paragraph 80 is give five different ways in which one can construe the section to produce the result for which he contends and he sets those five ways out on pages 329 to 331 and the first of them is he looks at the definition of “fault”. This is at page 329, and in the last paragraph on the page, at about point 7, he says:

Whether the Act applies in contract depends largely ‑

there seems to be a typographical error:

but it is submitted that wording of the definition of ‘fault’. At first sight ‑

I see, two lines have been substituted. I will start again:

Whether the Act applies in contract depends largely upon the wording of the definition of ‘fault’. At first sight the definition may appear to be limited to actions in tort, but it is submitted that where a breach of contract occurs through the negligence of the defendant, the Act will apply whether the action is framed in contract or in tort. This results from the first word in the definition, which defines ‘fault’ as (inter alia) negligence. Negligence may occur by way of negligent breach of contract as well as negligent tort. The chief difficulty in the way of this reading is the word ‘other,’ for this word may appear to indicate that the negligence to which reference is made is exclusively negligence in its tort aspect. It is, however, submitted that the word ‘negligence’ ought not to be construed as so limited. It is possible to read the definition as applying ‑

and, again, two lines have been substituted ‑

to all cases of negligence, whether giving rise to liability in tort or in contract, and also to other acts or omissions provided that they give rise to a liability in tort.

Then he gives the second argument, which he calls “another line of argument”:

Even if the interpretation just advanced is thought to be too fine‑spun, it is submitted that where the same act or omission constitutes both a tort and a breach of contract, so that in its tort aspect the case is subject to the provisions of the Act, then the case is subject to the provisions of the Act even in its contract aspect. The Act is paramount. Hence the new tort rule ought to be regarded as a matter of policy as exclusive of the old contract rule, where both issues arise in the same case ^‑

that is a harder one.

A third method of reasoning, leading to much the same result as the other two, is to say that the definition ought not to be taken as restrictive of the word ‘fault’ in its usual meaning.

And that is the argument we have put about the word “fault” being construed far more broadly, and he says:

Now the word ‘fault,’ if left undefined, would probably have included a negligent breach of contract, and the definition clause ought not to restrict this interpretation, having regard to the convenience of taking the word in its wider meaning.

Then a fourth argument is that ‑ ‑ ‑

McHUGH J: Well, that is a proposition I have some difficulty with. The definition says “fault means”, how can you read it in some sense other than the definition?

MR BENNETT: Your Honour, the way we read it is it means “negligence or other act or omission which gives rise to a liability in tort” and we just add in parentheses “whether or not it also gives rise to a liability in contract which is the one sued on”.

McHUGH J: Yes, but the author says that:

There is authority for saying that.....the definition does not necessarily prevent the court from reading the word in its usual meaning irrespective of the definition.

MR BENNETT: I would not put it as highly as that. Yes, one could not support that, your Honour, as highly as that, but one does get the result by reading it the way I have suggested. Then the fourth one:

is that the Act itself contemplates that it applies, if not to breaches of contract pure and simple, at any rate to breaches of contract that are also torts.

Then refers to various conventions and he finds an indication in some other English legislation:

that Parliament meant the scheme of the Act to apply to what may be called mixed cases of contract and tort.
A fifth argument, though not one that can be used in court ‑

although it probably can today ‑

is that the original form of the Contributory Negligence Bill provided that it should not apply to any claim arising under a contract. This was deleted and replaced by the present paragraph.....It was evidently felt that the earlier draft was a mistake.

And he says in the footnote:

This argument would presumably be regarded as inadmissible under the rule that ‘the Parliamentary history of an enactment is not admissible to explain its meaning’.

And, of course, that has now changed, but that is of interest in looking at the construction of the original English legislation. At the end of the day, your Honours, we submit the easiest way to reach the result is simply to say that the Act is talking about the situation, not about what the plaintiff chooses to sue on. It is the underlying situation which gives rise to the rule and the rule applies if one could sue in tort, not if one does. Here, of course, again, I do not need to go so far because here we were sued in tort and on at least one basis that is what occurred.

Now, returning to my additional submissions, 3 is merely a matter I note for your Honours, that I was asked by Justice Gummow yesterday about the reports. I have given the details of the two reports there. Both reports, the 1939 report and the more recent 1993 report, are discussed in Barclays Bank. We have not been able to get hold of the more recent report in the time available, but it does appear from what was said by Lord Justice Simon Brown in Barclays Bank that it gave a large number of arguments for the approach for which we contend.

Groom v Crocker I do not want to spend much time on except to say that it was not followed by the Full Court of Victoria in Macpherson & Kelley v Prunty. It has been criticised by Lord Goff in Henderson v Merrett and the other Law Lords have agreed with him. I should just very quickly remind your Honours of the remark made by Lord Browne‑Wilkinson in that case. It is tab 20 in my authorities. At page 206 in discussing the issue of concurrent liability - it is the long paragraph starting halfway down the page, beginning “In my judgment” and his Lordship says:

In my judgment, this traditional approach of equity to fiduciary duties is instructive when considering the relationship between a contract and any duty of care arising under the Hedley Byrne principle (of which fiduciary duties of care are merely an example). The existence of an underlying contract (eg as between solicitor and client) does not automatically exclude the general duty of care which the law imposes on those who voluntarily assume to act for others. But the nature and terms of the contractual relationship between the parties will be determinative of the scope of the responsibility.....If the common law is not to become again manacled by “clanking chains” (this time represented by causes, rather than forms, of action), it is in my judgment important not to exclude concepts of concurrent liability which the courts of equity have over the years handled without difficulty. I can see no good reason for holding that the existence of a contractual right is in all circumstances inconsistent with the co‑existence of another tortious right, provided that it is understood that the agreement of the parties evidenced by the contract can modify and shape the tortious duties which, in the absence of contract, would be applicable.

GUMMOW J: There has been criticism of that passage in the Law Quarterly Review.

MR BENNETT: Yes. Your Honour, what we submit is that the effect of that combined with what has happened in Victoria and what, indeed, has happened in this Court in Hawkins v Clayton and in Bryan v Maloney is that Groom v Crocker really is no longer good law on that aspect. Paragraph 5 is a matter I do not propose to take your Honours to, but simply to remind your Honours of, and that is that in Voli v Inglewood Shire Council, at the page we have referred to, Justice Windeyer, with whom the other members of the Court agreed, found concurrent liability in relation to an architect in both contract and tort.

Now, Harper v Ashtons Circus (1972) 2 NSWLR 395 I should say a little bit more about. That is in the materials I have given your Honours this morning and it is interesting to note that Justice Manning starts his judgment at page 397 by saying that:

I have read the judgment of my brother Hope in this matter. With great reluctance I have come to the conclusion that he has correctly stated the law.

Then at pages 398 and following he sets out a long passage from Glanville Williams which I have taken your Honours to and I will not repeat, of course, the references to that. At page 402C, he says:

It also seems to me that the conflict between contract and tort was also the cause of some of the trouble which was apparent in Voli v Inglewood Shire Council.
However, these views, at this stage ‑

and we stress those words ‑

cannot be supported and as a result it is possible for an astute counsel, as was done in this case, to choose to rely solely on a count in breach of contract and to abandon a count of negligence to obtain a real advantage. I think this permits a battle of wits to be waged and the result may depend, not upon the truth and justice of the case, but upon the ability of counsel.

No doubt future writers may refer to the ironies arising out of that from what your Honour Justice McHugh said yesterday about it, but he says at the end:

However, I think the views expressed by Hope JA are correct, at least at this stage of the development of this branch of the law.

So it is important to note that Justice Manning was taking the view, was really anticipating what we now know has occurred in this area since 1972 and he expresses dissatisfaction with the result in a number of ways and even Justice Hope says that at 404F where he says:

It would, no doubt, be desirable if, in those situations where actions both in contract and in tort lie in respect of the same damage and there are no circumstances justifying some differentiation, the result to the parties did not vary according to the form in which the action was brought.

And at page 405D he says it is not necessary to resolve certain aspects of it in the present case.

GLEESON CJ: What is he talking about between F and G on page 404 in the sentence beginning with the word “However”?

MR BENNETT: Yes, that there are some cases where a difference is justified. That passage, your Honour? One assumes he is referring to contractual terms which vary the duty otherwise owed and, when he says “the law of contract is not so intractable”, he may be picking up on some of what Glanville Williams has said but ‑ ‑ ‑

GLEESON CJ: In this case it was actually held that there was no contributory negligence, was it not?

MR BENNETT: That is so, your Honour, yes.

GLEESON CJ: So what was said on the question of principle we are looking at was dicta?

MR BENNETT: Yes, your Honour.

GLEESON CJ: Did the President of the Court of Appeal agree with what Justice Hope said?

MR BENNETT: He agreed with Justice Hope, yes, your Honour.

GLEESON CJ: Is that so?

MR BENNETT: Yes. That appears at page 397, your Honour.

GLEESON CJ: Is that right?

McHUGH J: But there was a finding of contributory negligence in the case, was there not? The jury found contributory negligence.

MR BENNETT: Yes.

GLEESON CJ: I am reading paragraph (3) on page 396:

there was no evidence to support a finding by the jury on this issue in favour of the defendant. Therefore, the jury’s finding that the plaintiff was guilty of contributory negligence could not stand.

You were saying that Justice Jacobs agreed with these dicta of Justice Hope.

MR BENNETT: All he says is:

I have read the reasons prepared by Hope JA. I agree with his conclusions ‑ ‑ ‑

GLEESON CJ: That is my point.

MR BENNETT: Yes, I am sorry, your Honour.

McHUGH J: That is a form of judgment writing that was criticised in Heyman’s Case.

MR BENNETT: Yes. I notice that Justice Manning puts it a little differently. Yes, he says “he has correctly stated the law”, which is, I suppose, a broader degree of approval. We also point out that Justice Manning referred to the views of Justice McInerney in James v Duncan, which were effectively overruled in Macpherson & Kelley, and Justice Smart in the case which I referred to yesterday at tab 19, Baines Harding, discusses in some detail reasons why he regards that as no longer good law and he relies to some extent on decisions in this Court to reach that conclusion.

There is one other very recent case which we found last night which is unreported but referred to in an article in the Australian Law Journal. We have given your Honours a single page which has that on it. It has “Recent Cases” at the top and the heading “Contributory negligence and bailment” and it refers to the decision of Justice Hodgson, the Chief Judge in Equity in New South Wales in Bowden v Lo of 19 May 1998 where, in a case involving goods left by a tenant on the landlord’s property at the end of the lease, the court found, in effect, negligence and contributory negligence, so in relation to the law of bailor and bailee contributory negligence was found as a defence, but we do not have the full judgment. There is a discussion of the case in that passage I have given your Honours. It is another example of the very clear trend.

Now, those are my submissions then in relation to that aspect of the case. May I just return briefly to the other aspects. On page 2 at the bottom I have dealt with the liability of beneficiaries to indemnify trustees ‑ ‑ ‑

McHUGH J: Well, that statement is not accurate, is it:

Beneficiaries are liable to indemnify the trustee in relation to liabilities properly incurred irrespective of whether they expressly authorised them.

Is not the rule that it is only when there is a sole beneficiary who is sui generis?

MR BENNETT: No, your Honour. The articles and cases I have given to your Honours here refer to that suggestion and reject it.

GUMMOW J: Well, Buckle certainly does not refer to it.

MR BENNETT: No, they do not all do it, your Honour. They are referred to for different purposes.

GUMMOW J: Well, why put them in if they do not refer to it? Hardoon v Belilios certainly do not refer to it because it was a sole beneficiary case. Broomhead v Broomhead does but it at least requires that as between them they collectively have been entitled absolutely and we still do not have the trust instrument, so we do not know.

MR BENNETT: Broomhead v Broomhead (1985) VR 891, which I have not given to your Honours ‑ ‑ ‑

GUMMOW J: Yes. The particular passage is at page 937 under the heading “Absolute owners”.

MR BENNETT: Yes, and he says at line 15, his conclusion after going through the authorities is:

I consider that the general principle in Hardoon v Belilios applies where there are several beneficiaries.

GUMMOW J: That is not an accurate summation of what follows. The first sentence is:

It was argued that the beneficiaries under the deed are not between them the absolute beneficial owners of the trust fund. I consider that they are.

That is the starting point of it all.

MR BENNETT: Yes, your Honour.

GUMMOW J: We still do not have this trust deed either.

MR BENNETT: The trust deed is, of course, in evidence.

GUMMOW J: Well, it might be.

MR BENNETT: It is one of the problems of abbreviated appeal books. I will come back to that.

GUMMOW J: I hope it was but it is nevertheless not here.

MR BENNETT: Yes, I will come back to that, if I may, your Honour, in a moment. We have also referred to a number of cases which have approved of Hardoon v Belilios and they include Hurst v Bryk in the Court of Appeal and it is referred ‑ ‑ ‑

GUMMOW J: There is no doubt about Hardoon v Belilios, but it stands for that limited proposition as is apparent from pages 123 and 124 of (1901) AC, as Justice McHugh was putting to you.

MR BENNETT: Well, your Honour, I have not given your Honours all the articles. There were four of them which discuss the principle. In the Hughes’ article, which I have given your Honours, the article by Dr Hughes at page 575, he says that:

Whilst the judgments discussed present an unsatisfactory elaboration of the basis of the beneficiaries’ personal indemnity, certain points are clear for the purposes of the present discussion. None of the authorities discussed here suggests that there is any basis for differentiation between the position of trusts with a sole beneficiary and those with multiple beneficiaries assuming that they are beneficiaries sui juris and absolutely entitled.

GUMMOW J: Exactly, collectively between them they own the lot.

MR BENNETT: Yes.

GUMMOW J: That is the sort of consideration that Lord Lindley was talking about in Hardoon v Belilios.

MR BENNETT: Yes. Well, your Honour, the trustee ‑ ‑ ‑

GUMMOW J: We just do not know what the situation was in this case. What Lord Lindley said was:

The plainest principles of justice require that the cestui que trust who gets all the benefit of the property should bear its burden.

That is the rationale of it all.

McHUGH J: The new trusts are far removed from this situation.

MR BENNETT: Your Honour, what the trust deed says, and I will have copies made available to your Honours, it is in the appeal book before the Full Court, paragraph 3(2) is the usual clause which says, “The trustee shall retain the fund vested in it as trustee for the registered holders entitled thereto upon the terms of this deed”. Then, that seems to be the only - it says:

The investments will be held by the trustee in its own name.

There are provisions about investment and voting and so on, but I do not - my recollection is that there is nothing - yes, there were units created:

The beneficial interests in the trust fund shall be divided into units.

This is 16(2).

Every unit shall control an equal interest in the trust fund which .....confirm any interest in any particular part of the fund or in any authorised investment. The only such interest in the fund as is conferred on a unit under this deed.

Then, just the usual remaining detailed provisions. So, we would submit that under a deed of that type, under a standard unit trust deed, one simply has unit holders absolutely entitled, and the two specific ‑ ‑ ‑

GUMMOW J: What, enable to call for it immediately? Able to call for the caucas immediately. I bet they cannot do that. Put an end to it.

MR BENNETT: They would have to go through the procedures ‑ ‑ ‑

GUMMOW J: Put an end to the trust.

MR BENNETT: Well, there is the procedures under which they can have meetings and decide various - I think they do have power to wind it up, vote at a meeting. I can have that checked. But they can certainly - the usual provisions about removing the trustee, the manager and so on. The entitlement of which one is talking in Hardoon v Belilios is the total entitlement to the beneficial interest and that is what beneficiaries in the unit trust of this type clearly have.

GUMMOW J: How does this creditor get this right? Justice Hayne was asking yesterday.

MR BENNETT: The creditor only gets it by subrogation, I accept that.

GUMMOW J: Exactly.

MR BENNETT: But the right of ‑ ‑ ‑

McHUGH J: It is an equitable right, it is not a legal right.

MR BENNETT: Yes, but the right of the trustee to indemnity is a right which it gets under the law as laid down in cases like Hardoon v Belilios.

McHUGH J: Yes, that was I was saying to you. The trustee’s right is an equitable remedy.

MR BENNETT: Yes, your Honour.

McHUGH J: So how does the creditor get a right of subrogation in respect of the equitable remedy?

MR BENNETT: I have not brought the cases on the subrogation, but the ‑ ‑ ‑

GUMMOW J: There is no direct right of law against the right of credit against these people as you were suggesting to us yesterday.

MR BENNETT: No, your Honour, it is not a direct right, but it is a practical right in the sense that one, I suppose, could wind up the trustee and have the liquidator bring the action. There are various ways one could do it but what is much more important for the purposes of this case is not the issue I raised yesterday about whether the creditors could have direct action against the beneficiaries. The important issue is that the trustee would, but for its conduct, have had a right of indemnity against the beneficiaries for the amounts which it claims against us in these proceedings. It has lost that because of its negligence. That is one respect in which its negligence has contributed to its loss and that is the only point we make out of that.

McHUGH J: Not that has contributed to its loss; that it has prevented it from getting reimbursement for its own negligence in bringing about the loss.

MR BENNETT: Yes, it depends on the degree of generality with which one puts the result, but when one looks at the loss it has suffered, the loss it has suffered is having to pay money and not having any recourse. That is why it has suffered a loss. If it had had recourse, it would have suffered a lesser loss or no loss.

McHUGH J: Yes, but it suffered a loss. It suffers a loss when it is unable or has to pay the external creditors . It no longer has funds sufficient to do so.

MR BENNETT: But suffers a loss then, your Honour, yes.

McHUGH J: Yes, that is the only relevant loss in this context when we are talking about contributory negligence.

MR BENNETT: Your Honour, in my submission, the contributory negligence can also - one can also describe the loss in a slightly more general way, as being having to pay that money without having any recourse, because there is a very substantial difference between paying money where one has a recourse and paying money where one does not have a recourse. If ones own negligence causes that, that is negligence which contributes to the damage suffered, the damage being the payment of money without recourse. We would put it that way. It is an alternative argument, it is not the primary argument.

The other matter which I mentioned to your Honour, which I referred to only very briefly yesterday, is paragraph 8. I do not think it is controversial but the proposition that the Chapman v Hearse approach of looking to consequences of the same general type rather than the exact way in which the loss occurred, applies to contributory negligence and we have given your Honours the reference to Fleming and to a Queensland case which leads to that result called Hanly v Berlin.

In relation to the very risk argument, your Honour Justice Gummow asked me yesterday about the restatement. My learned junior has looked at the restatement of contract and tort and found nothing dealing with this problem. I mentioned yesterday three Kansas cases and I have given the references to them there. They are not of enormous assistance but they are subsequent to the cases discussed by Justice Rogers.

Finally, let me say this: the primary submission we make in this appeal on causation is a very simple one and the absence of time spent on it should not detract from its simplicity or clear correctness. That is that on a commonsense view, the failures of the respondent were causative of its loss.

Had it not made it an improvident bargain, it is unlikely that there would have been a deficiency rendering it liable to the mortgagees or the creditors. One does not answer that proposition by saying that it would have been possible, as the Full Court does and as my learned friend does in his submissions, for that result to have occurred even if it had not made an improvident bargain.

Certainly, pig futures might have dropped to nothing, without it being negligent, and the farm may have become worth nothing, and then it would have been liable solely because of our negligence. Certainly that might have happened although then it would have had a right to indemnity. But that does not answer the commonsense causation approach and that really is the central very, very short point in the appeal.

The other matter is that the Chapman v Hearse approach which finds foreseeability through the ultimate effect of liability to beneficiaries and the eight steps referred to, is an alternative, but we would put that alternative more in terms of loss of the right of indemnity than in any other way. For those reasons, we would submit that the appeal should be allowed.

GLEESON CJ: Thank you, Mr Bennett. Yes, Mr McAlary.

MR McALARY: Your Honour, yesterday your Honour raised the question of the very risk argument and there was some discussion concerning it. It seemed to me at the time that the discussion was misdirected. May I explain where that concept comes from? It arises in connection with the criteria which may assist in deciding whether there is a causal connection between events. Where the issue of causation is in the physical field, then it is simply a matter often of looking at the actual facts. When I say the facts, looking at the operation of the facts in terms of the laws of physics.

But, your Honours may remember, and I unfortunately could not put my fingers on the case last night, that some time in the early twenties or thirties there was an English lord who enunciated the principle that where causation ran through the voluntary act of an independent person, that terminated the causal chain. That caused considerable difficulty for a period of time in the early fifties when one was concerned with cases where there was a warning or lack of a warning and there was, subsequently, an event which arose from the act of the ‑ ‑ ‑

McHUGH J: Was it Lord Sumner in Weld-Blundell v Stephens?

MR McALARY: I thought it was in Weld-Blundell v Stephens and I just cannot put my - I asked my junior but I could not find it. I was actually trying to read it while my friend was talking but I thought I had better pay more attention to him. I did think it was Weld-Blundell v Stephens. Now, the answer that ultimately came, as your Honours will recall, in the decision in Dorsett Yacht v Home Office, because this issue was raised in connection with whether or not the damage which the Borstal boys did to the yacht could be traced back to the decision not to subject them to any restraint during the period they are on the relevant island. I have forgotten the island.

The argument that was strongly put that no causation could be established because here you had boys who were independent persons and they did this thing and that terminated any causal linkage back to the decision to allow them their liberty. That was rejected by Lord Reid and he formulated a test that if the damage which subsequently resulted was the very type of damage, or the very kind of damage, or you struck the very kind of risk that was to be anticipated if the warning was given or not given, then the causal chain was not thereby terminated.

May I just add to assist your Honours, that this view of the matter was accepted by this Court in Caterson v Commissioner for Railways. I have not put that on the list of authorities because this issue only came up yesterday. The decision is reported in (1973) 128 CLR 99 and since it is not an important case, may I just remind your Honours what the relevant facts were?

Mr Caterson, who was the pubkeeper at Bangalow went to the Lismore railway to place his aged mother in a carriage and place her baggage in the luggage racks. The allegation was that without warning the train started. He ran from the carriage and jumped from the train. It was said that his voluntary act of jumping from the train terminated any negligence flowing from the failure to blow the whistle. By the way, this was a pre-contributory negligence piece of litigation. So, one was faced with the problem of causation arising out of the fact that he jumped ‑ ‑ ‑

McHUGH J: I am not sure, what did you mean by pre-contributory negligence?

MR McALARY: It was at a time when contributory negligence was a complete defence.

McHUGH J: You mean before 1965 in New South Wales?

MR McALARY: Yes, back in the early sixties, your Honour. I am sorry if I did not make that clear. Now, that issue that I am actually addressing was discussed by Mr Justice Gibbs and the passage is at pages 109 and 110:

The next question for consideration is whether the jury was entitled to find that the negligence of the respondent had caused the appellant’s injuries. On behalf of the respondent it was submitted that the voluntary act of the appellant in jumping from the train broke the chain of causation between the respondent’s negligent acts and omissions and the appellant’s injuries. It is no answer to this submission to say that the appellant’s act was foreseeable : Chapman v Hearse and McKew v Holland. In the latter case Lord Reid said that “it is often easy to foresee unreasonable conduct or some other novus actus interveniens as being quite likely. But that does not mean that the defender must pay for damage caused by the novus actus”. On the other hand, the intervention of the voluntary action of the appellant did not in itself necessarily have the result that his injuries were not caused by the respondent’s negligence. In Summers v Salford Corporation Lord Wright said that
“if a plaintiff suffers damage by the defendant’s default, the damage may be directly due to that default and recoverable even though the accident and damage would not have happened but for some action of the plaintiff, so long as his action was in the ordinary course of things and, at least generally speaking, was not blameworthy.”
The effect of the intervening action of a third party was recently discussed in Dorset Yacht Co Ltd v Home Office, and in the course of that discussion Lord Reid cited the following passage -

and he cites from Haynes v Harwood:

“If what is relied upon as novus actus interveniens is the very kind of thing which is likely to happen if the want of care which is alleged takes place, the principle embodied in the maxim is no defence.

McHUGH J: But Mr McAlay, I do not see how this passage has anything to do with this case. Mr Bennett is not saying that your negligence cut the chain of causation. He concedes his client is liable.

MR McALARY: I understand that, your Honour.

McHUGH J: The question is whether on this very risk argument, that for some reason of policy or perhaps logic, your negligence, assuming it is your negligence, ceases to be an operative cause because ‑ ‑ ‑

MR McALARY: Your Honour, this issue was raised in the Court of Appeal. That is where the reference comes from. The argument there was put that the chain of causation had been cut.

McHUGH J: Well, that is not put now.

MR McALARY: No, I understand that, but I was merely directing your Honours’ attention to this source of material as an explanation of what appears in the judgment of the Full Court. I do not know that I need to carry it any further than that. What we submit, your Honour, is that the situation is one where a causal matter, the whole of the responsibility, rests with the negligence of the solicitors. We put that, your Honour, shortly, on the basis that but for their negligence none of the ensuing events would have occurred. It is not ‑ ‑ ‑

McHUGH J: But that is ordinarily the case where there is an omission. You take the sinking of the Titanic. One could say, for example, that the ship’s designers were negligent and caused a great deal of loss of life because they failed to provide adequate lifeboats, but you would not say that the act of the master in taking the boat at excessive speed through those waters was not also a cause of the death of the people who drowned. There would have certainly been no deaths, or there may not have been many deaths if there had been adequate lifeboats. They are both operative causes.

MR McALARY: Well, your Honour, with respect, what one needs to carefully analyse is the factual situation which occurred. May I seek to put it to you? What happened was that we sought advice and failed to receive advice that we should have taken steps to obviate our personal liability. The result of that was that we signed mortgages upon which we could be sued. In signing the mortgages we were not guilty of contributory negligence. I know that my friend’s current argument does make such a suggestion but that is not sustainable. If it was to be alleged that signing these mortgages was in itself contributory negligence because as a reasonable trustee, we should have been aware of that. That was an issue that he needed to establish. The onus rested on him. He failed to prove that matter and the result was that neither the trial judge nor the Court of Appeal found that the act of signing the mortgages by us was contributory negligence.

Ergo, at that point of time, what you have is a situation where there has been negligence by the appellant; there is no contributory negligence by my client; there is damage flowing from it. That does not bring the Wrongs Act into play. To bring the Wrongs Act into play, it would be necessary to show that there was some other act or matter which contributed to the damage for which we sue. Now, your Honour, the damage for which we sue was the loss that we suffered because we were called upon to pay the money that we had to pay under the mortgages. It was not related to the collapse of the trust. That was a different matter and would have given rise to different areas of damage. No attempt was ever made to examine that.

So what you have is a situation where all the money that my client had to pay came from its own pocket and it was paid because it had a personal liability on the mortgages. The money was paid to the mortgagees and it was paid to the mortgagees solely because of the personal liability on the mortgage.

McHUGH J: But it might be put against you that your negligence lay in the fact that you mortgaged a property and borrowed moneys in circumstances where your assets were not sufficient to meet ‑ ‑ ‑

MR McALARY: But that did not cause the action against us. My friend wants to reclassify the damage so that he says the damage is the shortfall between what could be raised on the sale of “Booka” and the moneys that were owing under the mortgages. The damage was the money which was owing under the mortgages. It was not the shortfall. We were sued ‑ ‑ ‑

McHUGH J: It must be the shortfall. You received the money ‑ ‑ ‑

MR McALARY: No, we sued for the total amount owing under the mortgages.

McHUGH J: I know, but you received that, or you did not receive it?

MR McALARY: No, we did not receive it, we had to pay it out out of our own resources. Now, that is the damage and we do not contribute to that damage. The issue was not examined at the trial.

GUMMOW J: What happened to the security?

MR McALARY: The security, ultimately, was sold.

GLEESON CJ: Where did the proceeds of sale go?

MR McALARY: What occurred, your Honour, was that we had to pay the - there were two or three mortgages. We paid them out, but not completely. One of the mortgages was sold. One of the properties which was subject to a mortgage was sold by the first mortgagee.

GLEESON CJ: Right, so you got the benefit of that?

MR McALARY: No, we did not. We did in one sense, but we did not, because there was still left money owing.

GLEESON CJ: Were not the proceeds of sale credited against the debt?

MR McALARY: He appropriated the proceeds of sale.

GLEESON CJ: Yes.

MR McALARY: We did not get sued for that. What we were sued for was the balance. There was money - Mr Justice Gummow would probably remember all this much better because at least he had an involvement on the periphery of the matter when sitting in the Federal Court, but as I recall correctly, your Honour, one of the properties was sold by the first mortgagee. He was paid out. There was still money owing on a second mortgage and some part still to the first mortgagee. Ultimately, we simply paid the balance of them all out, being the moneys that we were obliged to pay under the mortgages.

GLEESON CJ: So you paid the difference between the debt and the market value of the property at the time the security was realised?

MR McALARY: Yes, I think that is correct, your Honour. We paid what could not be recovered. We paid that without reference to the date on which the security was realised but, in our submission, with respect your Honour, none of that establishes that we in any way contributed to the fact that we had to pay out.

McHUGH J: Correct me if I am wrong, but I understood the case that is put against you is that you have failed to take reasonable care to protect yourself against loss because you agreed to become trustee of this trading trust without proper investigation of its viability.

MR McALARY: Well, your Honour, with all respect, that misses the point. To become trustee does not involve you in placing yourself in a position where you are going to be subject to liabilities. If I become trustee I do not thereby incur liabilities, and we are not ‑ ‑ ‑

McHUGH J: If it is a trading trust, and that is what it is - - -

GLEESON CJ: What about if your client became, during its 90-year history, a trustee of a deceased grazier?

MR McALARY: Well, he probably ‑ ‑ ‑

GLEESON CJ: And carried on his grazing property. I do not think it did that for 90 years without becoming aware of the fact that it was liable for the debt.

MR McALARY: Your Honour, the findings are to that effect.

McHUGH J: I know they are, but the witnesses must have been very impressive witnesses.

MR McALARY: No, your Honour, with respect. If you can understand the setting: here we have an old company that has been attached to the Elders Pastoral Company for decades, the graziers are going down to this company and they are making their wills and appointing this company in the trustee, and all it ever does is proceed to run these properties.

GLEESON CJ: Sometimes during drought.

HAYNE J: And employ the shearers and everybody else without knowing it is personally liable.

MR McALARY: Without knowing it is personally liable, your Honour. Well, normally it would have a sufficient cash flow through these things to be able to pay the liabilities out of the cash which the trading trust itself was generating. But the finding was that it did now know, and the other finding was that it would not have entered into the transactions if it had known. Now, they are findings which are made in my favour and I am entitled to them to the fullest.

HAYNE J: You certainly are.

GLEESON CJ: We understand that. We congratulate you.

MR McALARY: No, you had better congratulate my learned junior rather than me. I think it was his period of penance. The trial lasted a very long time.

GUMMOW J: But there was no effort by the trustee to recoup by personal recourse any unit holder, was there?

MR McALARY: No, your Honour. May I just say this - I am just wandering around a bit but it is the better way I think - - -

GUMMOW J: Mr Bennett’s submissions assume that you had that right.

MR McALARY: Well, he starts off by pleading that we had such a right.

GUMMOW J: But, one, was that ever sought to be exercised as a matter of fact?

MR McALARY: At page 63 of the appeal book, your Honour, the pleading was:

(a) The plaintiff is a trustee of a unit trust;
(b) A trustee of a unit trust is entitled in the absence of a provision preventing recourse to unit holders to claim from unit holders an indemnity in proportion to the interests of the unit holders for all losses incurred by the trustee in acting as trustee of the trust;
(c) The plaintiff is entitled to and has failed to seek indemnity from the unit holders.

And he is entitled to claim indemnity. So, the starting point was that we were not in breach of any obligation to our unit holders. That concept surfaced later on. It had surfaced, certainly, by the time I got to the Full Court that there was a breach of fiduciary duty. But it certainly was not the start of the position. The critical question, I think, with respect your Honours, is whether or not the same damage flowed from the negligence of the solicitors and our failure in relation to the way in which we dealt with the trust. No contributory negligence could arise from the simple fact that we undertook to become a trustee, it would be a simple, normal, reasonable, rational business decision. We were not buying the property. We were not, on the face of it, imposing any liability upon ourselves. We were simply entering into a transaction out of which no liability would prima facie arise. One would, therefore, need to examine events which subsequently occurred ‑ ‑ ‑

GLEESON CJ: By prima facie you must mean out of which so far as you knew no liability would arise. I mean, prima facie, the truth was the opposite. You are entering into a transaction out of which, prima facie, liability would arise but you did not happen to know that.

MR McALARY: Yes, your Honour. Well, we were not aware that this trust was going to place any obligations upon us. We did not appreciate and did not know that we were going to be personally liable for ‑ ‑ ‑

HAYNE J: For signing the mortgage.

MR McALARY: For signing the mortgage, that is the point.

GLEESON CJ: But the finding of the trial judge, as I understand it, which led to the apportionment was that your client carelessly entered into a bad deal and the solicitors carelessly failed to point out to your client its personal liability. They were the two central findings of fact.

MR McALARY: Yes, your Honour, but there was no finding of fact that the same damage resulted from both. To enter into a foolish deal might have imposed upon us losses in relation to our unit holders. It might have given rise to problems arising out of a winding up of the trust but it did not, of itself, impose upon us an obligation to pay the moneys which we were obliged to pay under the mortgages. You have running together two sets of causal chains. One arises solely from the negligence of the solicitors. The other arises from our failure but it does not run, it is not shown to run and entered into the damage that arose out of the negligence of the solicitors.

May I just remind your Honours of a decision that I did bring along with a view to directing your Honours on the issue of causation. It is a decision of the Court of Appeal in New South Wales Barnes v Hay 12 NSWLR 337. Your Honour, the facts are very short. Mr Barnes was a well‑known solicitor in Sydney. He was approached by one Hay who had a shop in a - it is behind tab 22, your Honour. He was approached by Hay for advice. The issue was whether or not Hay should obtain a new lease of the shop which he was occupying. Barnes failed to give him the appropriate advice. Ultimately, Hay was expelled, driven out of the shop because of the desire of the real estate developer to get possession of the whole. It was in no way related to Mr Hay’s particular situation.

The question strongly argued in the Court of Appeal - I have forgotten who argued it - was that there was no causal connection. Now, Mr Justice Mahoney summarises the point at 355E:

The reason why, contrary to Mr Nicholas’ submission, the defendant’s faulty advice is the cause of the plaintiff’s loss for present purposes is different. That reason lies in the reason why (I refer only to liability in tort) the defendant had a duty of care to the plaintiff and what flowed from the breach of that duty. The reason why the defendant had the duty in this case was essentially because if the plaintiff did not do what it was the defendant’s duty to advise him to do, he was apt to suffer the very kind of loss he did in fact suffer. The reason why the law imposes liability for that loss in such a case is, not because there is, in the abstract, a group of conditions sufficient to produce the loss, but because defendants are to be held responsible for that which it was their duty to seek to avoid.

That is the situation we say, with respect, here. It was the obligation of the appellants in these proceedings to advise us in relation to this particular loss. It was their duty to ensure that advice was given which would allow us to avoid it. They failed to give that advice and therefore they are responsible for it.

GLEESON CJ: This question may have only a very remote bearing on the issue before the Court and it may be a question that really goes to the issue on which you have already won, but if at the time they signed that mortgage your clients did not think that they were liable to pay the debt, who did they think was liable to pay the debt?

MR McALARY: They probably assumed that the trust had a corporate structure. In other words, as many people tend to do today, they treated the trust as if it was a corporate entity and they saw the trust as being liable to pay it so it was the money that the trust had which was going to be the source from which payment would be made.

GUMMOW J: They were relying on their indemnity, I suppose, their right of indemnity out of the assets.

MR McALARY: That is another way of putting it, your Honour, yes, but in answer to what the Chief Justice puts to me, from what I read when I was preparing this appeal to the Court of Appeal one had the impression that they were treating the cash flow that they anticipated would come out of the trust.

GLEESON CJ: If they were relying on the indemnity out of the assets, who carried the risk of a possible shortfall between the value of the assets and the amount of the debt? The creditor or somebody else?

MR McALARY: They did not see that they were carrying it, your Honour.

GLEESON CJ: So who did they think was?

MR McALARY: The creditor, I assume, but it is not clear, your Honour. This issue is just not investigated. The issue surfaces, not at the trial but later on and it surfaces in a different line of argument to that put by my learned friend.

GLEESON CJ: But in a sense, that is the damage, is it not, the shortfall between the value of the assets and the debt?

MR McALARY: With respect, no, your Honour.

GLEESON CJ: It is because that risk came home to your client and was a risk against which they were not warned that you made out your cause of action against the defendants.

MR McALARY: Certainly, your Honour, but I say, with respect, it is not so much the shortfall that is the issue. It is the total liability. Now, your Honour, we may have been in a position where we did not need to go to the asset itself. For example, had we been the holder of a policy of insurance we might be able to go and recoup from that. Had there been a significant cash flow from some other source, we might be able to recoup from that, but our liability was the total amount under the mortgage.

GLEESON CJ: But as I understand it, the essence of the negligence found against the solicitors was that they failed to warn your client about a risk that was running.

MR McALARY: That is right. They failed to warn us that if we signed cheques and entered into obligations as a trustee we had to meet them ourselves.

GLEESON CJ: Well now, there were two aspects of the risk, were there not? There was a legal aspect and a business aspect. The legal aspect was the personal liability. The business aspect was the ‑ ‑ ‑

MR McALARY: No, there was no business aspect on that issue, your Honour. The business aspect was on the other issue. The business aspect was on the concept that we would actually purchase the property, “Booka”. That was where the business aspect was. There was no business issue in relation to the signing of the mortgages.

GLEESON CJ: The solicitors never undertook the responsibility of advising your client about whether this was a good deal.

MR McALARY: No, they did not. That is what they did not do and my friend has tended to say that but the one thing that is clear is that the solicitors never took that responsibility and, indeed, in the submissions in the court below that point was made abundantly clear, that they took no responsibility in relation to the business risk which was involved in the decision to accept a transfer of the option held by O’Dea to acquire “Booka”. Now, that was a business decision and it was that business decision which gave rise to damage but it was not the same damage as that which was suffered because we had signed the mortgage.

My learned junior points out that in the submissions of the respondent in the Full Court at page 6, at no time did Lamshed - he was the officer in Austrust - ask for or receive advice from Mr Astley with respect to the conveyance. The meeting between Astley, Wood and Lamshed did not result in Astley being given instructions in relation to the conveyance and at page 80 of the appeal book at the bottom of the page:

At no time did Mr. Lamshed ask Mr. Astley for any advice in relation to the purchase of Booka and he did not give any.

CALLINAN J: Mr McAlary, could I just ask you a question?

MR McALARY: Yes, your Honour.

CALLINAN J: I had the impression, and I just cannot find it, but there was a clause in the trust deed which entitled your client to limit personal liability. Am I right about that?

MR McALARY: I do not believe so, your Honour.

CALLINAN J: I think there was an express - am I wrong?

MR McALARY: I may be wrong. There is a volume of material.

CALLINAN J: I know. I have been looking for it and I cannot find it and I may be mistaken, Mr McAlary.

MR McALARY: I have looked at the trust deed at some stage, but not recently, but my junior, who was in this trial and in the Court of Appeal ‑ ‑ ‑

CALLINAN J: Perhaps counsel might see if there was such a provision. I think Mr Bennett may ‑ ‑ ‑

MR McALARY: I will ask him to look for it.

MR BENNETT: At page 13 it is set out in the appeal book. Page 13 line 10 of the appeal book.

CALLINAN J: What I was going to ask was whether - yes, here it is. It is the proviso, is it not, about line 14?

MR McALARY: Yes, it is 11. Page 139 is the page I ‑ ‑ ‑

CALLINAN J: Page 13 which is a pleading - page 13 of the record, Mr McAlary, about line 14. It is a proviso:

PROVIDED THAT the trustees shall not be required to accept any personal liability for such borrowing.”

MR McALARY: Yes, that is right, your Honour. I had forgotten that that is there.

CALLINAN J: Now, again, it may not be a relevant question for the reason that the Chief Justice suggested. Perhaps the question he asked you was not relevant because you have got the benefit of factual findings, but was any evidence given by Mr Wood, I think it was Mr Wood was it not, or Mr Woods, or by anybody else as to why they thought such a provision was required or what they thought of such a provision?

MR McALARY: I hate answering questions like that, your Honour, because I have an obligation to be accurate and in the great volume of material it is very difficult to be sure that you are accurate but my memory is that there was no evidence given directed to that. There was evidence given ‑ ‑ ‑

CALLINAN J: I do not think there is any finding in relation to that either, I might say. I cannot remember one.

MR McALARY: My memory was that Mr Wood gave evidence, and he was accepted, that he did not know that he would be liable and I think, also, he gave evidence that he would not have entered into the transaction had he been aware of it, but one would need to check back through the transcript.

CALLINAN J: The findings are in your favour in both regards.

MR McALARY: I was relying on the findings without going to the primary evidence, your Honour, and I have the finding, of course, that he did not advise, but, your Honour, the simple point we make on this aspect of the appeal can be summed up by saying that the damage which would have arisen if we made an improvident purchase is damage of a different type. It is damage not related to what we have to pay pursuant to our commitments under the mortgages but it is damages which would arise because an improvident purchase may require the borrowing of money, extra interest liabilities on that. You may have to employ people to deal with the improvident purchase liabilities there.

There is a whole variety of consequences which may arise out of an improvident purchase but one of the things that did not arise out of the improvident purchase was the obligation to pay the mortgage. That obligation arose simply because we had signed the mortgage and that is the only source of that obligation and you cannot say, therefore, that you have - in other words, your Honour, what I am seeking to say is that the section cannot be brought into play because what we have here is one damage - that is the obligation to pay the mortgage - that is caused by the fault of one person, the solicitors. That does not bring section 27 into play.

There is also another damage, that is the damage which arises out of the improvident purchase. That is a damage which we suffered and for which we were responsible and for which my friend is not responsible. Now the way in which I initially saw his case was that he sought to have that damage apportioned and applied in reduction of the damage that he was liable to pay. That was my first reading of his submissions but whatever way you look at it the situation is you do not have this Act brought into play because you have different sets of damage and neither of them have the fault of two parties causative of them. The fault of the solicitors was causative of the damage which we sued for. Any other damage which we bore to other people we would be responsible for and we alone.

I do not know that I can say all that again, your Honour. I will tend to bore you if I do. Can I then say something about the notice of contention. Your Honour, during the period when I was involved in AWA, that stretched for months and months. All these cases that my learned friend has been putting were read and reread.

GLEESON CJ: Did the Court of Appeal not have to deal with this issue?

MR McALARY: Yes. I got around it, your Honour, in the end by basically establishing that the fault for which we were responsible was not a contractual fault. The contract was a more limited contract and what happened was that the Court of Appeal and, indeed, the trial judge superimposed on the contract a common law duty which had not previously existed and, indeed, it would seem to me to be very difficult to impose because it was almost contrary to the terms of the contract.

The obligations of solicitors pursuant to the guidance manuals and other things required them, if they became aware of a particular matter, to report. The report was to be made to the operating head. We did that but it was held that we should have, in these circumstances, reported to the board. That was held to be not an implied term of the contract but an obligation which arose from our relationship in the setting. If it was so sourced then it was not a contractual issue, it was a tortious liability, and if it was a tortious liability then contributory negligence was clearly available in relation to it.

In the end, the Court of Appeal did not deal with it because of the way the argument developed there. You will find that actually in the end Mr Bathurst, who appeared on behalf of AWA, who were the clients, did not seek to argue it so it passed by. That is perhaps the shortest - it is very difficult to analyse AWA because of the complexity and the twists and turns that took place but that, I think, is the best explanation I can offer you as to why the Court of Appeal did not deal with it.

Your Honour, when I was looking at all those cases what I discovered was that what she received was a very detailed history of the attempts by different judges to warp the construction of the legislation and as you go through the cases one after another you will find that each case recites everything that has gone on before so you are getting a very good and very detailed history of all the attempts by various judges, whether they be in Canada, New Brunswick or whether they are in New Zealand or in England or here, as to what everyone else has said previously but there was little attempt to analyse the actual terms of the legislation. I believe that there are three authorities where one will get assistance because you do find an attempt to analyse the legislation.

I refer, initially, to the decision of Mr Justice McInerney in A.S. James (1970) VR. The other case of use in terms of making an attempt to analyse the terms of the Act and what they mean is the decision of the Court of Appeal in Vesta v Butcher (1989) AC 852.

GLEESON CJ: Did you say the Court of Appeal?

MR McALARY: It is in the Court of Appeal, your Honour.

GLEESON CJ: In (1989) AC?

MR McALARY: No, I am right. I am sorry, your Honour. Actually, the Court of Appeal is reported in the appeal cases immediately before the House of Lords ‑ ‑ ‑

GLEESON CJ: I understand.

GUMMOW J: They did not deal with this particular issue in the House of Lords.

MR McALARY: No, House of Lords does not deal with this. The only people who do deal with it are Mr Justice O’Connor, if I recall correctly, and Sir Roger Ormrod. You will find a valuable discussion as to the meaning to be given to the different words involved in the sections there. Your Honour, the third authority to which I refer is the decision discussed this morning, that is Harper v Ashtons Circus. I have read all the rest of them and I think you will get nothing more than the history from them. I will come back to these cases in a moment. Let me start where I submit that I should start, that is with the Wrongs Act itself.

Your Honour, the importance of the Wrongs Act is that the first issue that one needs to address is what was the intention of the legislature. Prima facie, one is to derive that intention from going to the words of the legislation. If you go to the legislation, that is the Wrongs Act 1936, you will find that it is headed “An Act to consolidate certain Acts relating to wrongs”. That is on page 2 of the reprint at the top of the page, your Honour. Then if you turn back a page or two you will find a summary of the provisions. May I just take your Honours to those so you can see the - is your Honour Justice McHugh having trouble with where I am?

McHUGH J: Yes, I am.

MR McALARY: Have you got the same Wrongs Act as I have? It should be behind tab 1 I am told, your Honour.

McHUGH J: Yes.

GLEESON CJ: What is behind tab 1 is only a sheet or two. I think you are referring to a document or Reprint No 8.

MR McALARY: That is right. I have got two more of Reprint No 8 so I will hand your Honour Justice McHugh one of them which may help. I regret that, your Honour.

McHUGH J: Justice Hayne and I will share this one.

CALLINAN J: I do not think I have got one, Mr McAlary.

MR McALARY: You have not got the appropriate one.

CALLINAN J: I do not think so. I am just checking it, Mr McAlary. No, I do not.

MR McALARY: No. Well, your Honour, you really need to have this document before you can see what the legislation is about and could I go to the second page of that where you get the summary of the provisions. You will see that Part 1 deals with defamation which is a civil wrong. Part 1A is liability in respect of animals. Part 1B is occupiers liability. Then we go to wrongful acts causing death in Part 2. The general provisions are in Part 3 and they are subheaded “Proceedings against and Contributions between Tort‑Feasors”. If you turn to the third page of the reprint under the heading ‑ ‑ ‑

GLEESON CJ: Are those subheadings part of the Act?

MR McALARY: I believe so, your Honour, but I will have to check that but, in any event, I am really just taking you to what you ultimately find as part of the Act. You find there “Apportionment for liability in cases of contributory negligence”. Turning over three pages, your Honour, at the top of page 2 you will see it is “An Act to consolidate certain Acts relating to wrongs” and then turning over another page you come to Part 1 which deals with defamation. I do not need to do anything more than point it out to your Honour but that is the subject matter of the legislation.

Part 1A deals with liability for animals. Then Part 1B is occupiers liability. Part 2 is “Wrongful Acts or Neglect Causing Death”. The general provisions are to be found at page 14. Section 25 deals with “Proceedings against and contribution between joint and several tort‑feasors” and 27A is the legislation with which we are concerned.

GUMMOW J: When did that go in, 27A?

McHUGH J: 1951.

MR McALARY: 1951. Yes, your Honour. You can pick that up - I will take your Honour in a moment to the ‑ ‑ ‑

GUMMOW J: Act No 50 of 1951.

MR McALARY: Yes. Your Honour, we handed up this morning the second reading speech of the Attorney-General ‑ ‑ ‑

GUMMOW J: Yes, I have it.

MR McALARY: ‑ ‑ ‑ and the amending Act at that time. Continuing with the legislation one finds in section 27C “Rights as between employer and employee”. 28 deals with mental and nervous shock and then there are remedies against certain shipowners in 29. There is the abolition of the common law rule of common employment in section 30 and there is actions in tort between husband and wife in 32 onwards and motor accidents are then dealt with in 35A.

GLEESON CJ: We can see the expression “contributory negligence” used in a heading and in a side note and you are going to look at whether they are part of the Act but is the expression “contributory negligence” used anywhere in the provision itself?

McHUGH J: In the definition of “fault”.

MR McALARY: It is used in the definition in 27, your Honour.

GLEESON CJ: By the way, it has a small (a) after the number 27 in the reprint of the 1951 Act and it has a capital A in the Reprint No 8. Which of those is correct?

MR McALARY: I do not know.

GUMMOW J: Well, we went down this track last year.

HAYNE J: We decided both were, I think, did we not?

GUMMOW J: We decided that they got rid of little (a) and put in capital A in some process of reprinting the South Australian statutes.

MR McALARY: I tried to go down the track and ran into a complete cul de sac. I have no idea why.

GLEESON CJ: So if in the judgment we write capital A we will get it right?

MR McALARY: I presume so, your Honour.

GUMMOW J: Yes, that is right and we dealt with that in Chakravarti.

MR McALARY: The reference to contributory negligence, however, your Honour can find in 27A(1) in the definition of “fault”. It is distinctly referred to there. What I would wish to say is that going through this there is not one hint that this Act is in any way concerned with the assessment of damages at common law. It does not purport in any way to deal with damages at common law and what the result of my friend’s submissions amounts to is a forced construction of the Act to force it to enact a totally new provision relating to the way in which damages for breach of contract at common law are to be assessed.

It is the failure to find anything in the legislation directed to how one assesses damages for breach of contract that must deny any basis for my friend’s submission. It is a very forced submission based upon the words of the Act but, where one finds that the legislation is dealing with the very matter that the submission is dealing with, then there is a greater justification for looking up the submission and saying this is legislation dealing with this subject matter and this is the way these words are to be utilised and understood. But if you find that the subject matter of the legislation never deals with the matter that my friend seeks to get out of it, then you simply cannot accept the submission to that effect. Now, that is my primary position in relation to this issue. We say the Court cannot accept any of the submissions which seek to make this legislation apply to contract.

If I could then take your Honours to the speech, one would see that that supports what I have been putting. The Attorney‑General says at page 1082 of Hansard:

This Bill deals with the subject of contributory negligence and proposes an important alteration in the law. It is primarily of interest to lawyers, and has no political significance. The rules which it lays down are applied only when one person has wronged another by negligence or some other civil wrong -

Now that is clearly confining it to ‑ ‑ ‑

GLEESON CJ: A breach of contract is not a civil wrong, is it?

MR McALARY: No, it could not possibly be. A contract arises from ‑ ‑ ‑

McHUGH J: Well, I think it is, is it not? It was so held in Rookes v Barnard for the purpose of intimidation that a breach of contract was a civil wrong.

MR McALARY: Well, there may be some esoteric possibilities of putting it that way, your Honour, but the contract arises from a consensus reached by the parties. It is an agreement under which they enter into a voluntary relationship, and ‑ ‑ ‑

McHUGH J: I think I am wrong. I think the House of Lords said that a breach of contract was an unlawful act.

MR McALARY: Your memory is far better than mine, your Honour. I would have been prepared to defer and suggest you were right. But all I am really trying to say is: we are now talking about the Attorney‑General and what he is talking about is civil wrongs and by civil wrongs he means tort. He means liability which the law imposes because of the relationship between the parties. That does not encompass contract:

the question of who is to pay for the damage, and to what extent, is to be determined. Although the subject of contributory negligence has given rise to legal questions of considerable difficulty and complexity the general principle can be stated simply and briefly. By the common law of England a person who causes damage to another by negligence is guilty of a tort or wrong and, in general, liable to pay damages to the injured person. But if the injured person has contributed to his injury by his own negligence, or by want of proper care for his own safety, he is said to be guilty of contributory negligence and cannot recover damages from the other negligent party. He must bear the whole of his loss -

With respect, your Honour, we suggest that that identifies the mischief to which the Act is directed. I will just read on:

He must bear the whole of his loss even though his fault was relatively small and that of the other party great. These rules of the common law were altered by statute in England in 1945, but they are still a law of South Australia.

The Attorney‑General then goes on to discuss the shipping cases and says that really what they are seeking to do is to introduce into the law of collisions on land the same ‑ ‑ ‑

GLEESON CJ: As a matter of principle, to what extent do you get assistance from reading a speech of the Attorney‑General of South Australia introducing legislation which substantially copies legislation that has previously been introduced in England and in other countries and other jurisdictions?

MR McALARY: There is a degree of logic to that question which makes it hard to answer. But, technically, we are dealing with a piece of South Australian legislation. If this is the way the Attorney‑General saw that legislation, this was the intent that he understood the words meant, then that is to be taken in aid in the construction of the words.

GLEESON CJ: Suppose you had a similar speech by the Attorney‑General of New South Wales at about the same time who said, “This will also have some important consequences in relation to the law of contract”.

MR McALARY: May I say, with respect, your Honours, I understand the law at the moment. While you could look at the speech of the Attorney‑General for the State in which the statute is enacted, you cannot look at speeches of Attorney‑Generals in other States. So if we are construing the South Australian statute; we are not going to look at the speeches in New South Wales.

HAYNE J: But would it be permissible to go back to the Law Council report that is referred to in column 2 on page 1083, which seems to be the genesis in Australia of this?

MR McALARY: Yes, I think it would. I do not dispute that, your Honour, particularly as it is almost incorporated into the speech. I do not know that I would assist your Honours in just reading the material.

GLEESON CJ: Did that Law Council report deal with this issue that we are worried about?

MR McALARY: I am not sure, your Honour, now that you have mentioned it to me. I did not get to that ‑ ‑ ‑

GLEESON CJ: Perhaps your junior could have a look at that and could let us have a note.

MR McALARY: Yes I shall, your Honour. Your Honour, may I say that this matter came before the House on two occasions. The material at page 1082 of Hansard deals with the second reading. As your Honours can see, it is the second reading. The Bill was read a first time. If your Honours turn over to page 1170, there seems to be a second debate upon it. A Mr Cudmore speaks upon it. I do not know that anything in particular arises out of it, but I should for the sake of completeness draw your Honours’ attention to it.

That, your Honours, brings me to the position where I can actually turn to the legislation itself. Your Honours, there are two very significant provisions in the legislation: The first is the definition of the word “fault” in 27A. Since the decision in Vesta v Butcher, it seems to be accepted that the word “fault” contains two limbs. The first limb is applicable to the fault of the defendant, and the second limb is applicable to the fault of the plaintiff in the action. For a period of time there was some dispute as to the meaning of the word “negligence” where it appears in the first limb of the definition, but the judgment in Vesta v Butcher makes it clear - and it appears to have been accepted everywhere since - that the word “negligence” there now means the tort of negligence at common law, that is, an obligation imposed upon the parties by law in consequence of their relationship, is a strict civil wrong tort. Breach of fiduciary duty is clear enough, and any other act or omission which gives rise to a liability in tort is also clear enough. So the first limb deals solely with liability in tort.

The second limb deals with a situation under which there may be a liability in tort. In other words, in the failure to take reasonable care for your own safety, there may be a breach of a duty that you had to other persons. As the former Chief Justice Sir Garfield Barwick observed, the duties of users of the road are mutual. So, while the plaintiff suing the defendant for the defendant’s negligence may also be liable to the defendant if his own behaviour has meant a breach of duty to the defendant, so the second limb of the definition clearly allows both a liability situation and a failure to take reasonable care. That position seems to be well established now. For many years there was considerable discussion, as your Honours will see from looking at Glanville Williams, about what was the meaning of the word “negligence”, but I assume for the purpose of my submissions that that position is clear.

The critical point is, of course, the point that your Honour Justice McHugh identified yesterday. The words in question are to be found in subsection (3) of the operative provision. They are in the second line:

a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage -

Now, your Honours, that is, in our submission, an identification of mischief which the Act is directed to rectifying. And the mischief which it rectifies is that a claim - this is a case of a person who suffers fault - who

suffers damage as the result partly of his own fault.....a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage -

If that identifies the mischief, that clearly limits and defines the ambit of the section itself.

GLEESON CJ: Well, it identifies is the common law principle which the legislature aims to modify.

MR McALARY: Well, the legislature passages that I have just read to your Honour indicate that that is the very issue to which the legislation is directed to rectifying. And I submit, with respect, one cannot reach a clearer position than that. I attempted in my submissions to analyse how ‑ ‑ ‑

GUMMOW J: The phrase in subsection (3):

a claim in respect of that damage shall not be defeated by reason of the fault -

and you then read the definition of “fault” in, and that explains contributory negligence.

MR McALARY: That is right. It is quite clear, with respect to your Honour. What is identified is that the legislation says that where there is damage which amounts to contributory negligence, the claim shall not be defeated because of the contributory negligence. Read the definition in and there can be no doubt that this is the correct construction to be applied. I would therefore submit, your Honours, that my friend’s argument fails because it simply cannot surmount the difficulties which the legislation imposes upon it, if I can just summarise it. The legislation does not purport to deal with a question of the assessment of loss or damage in contract.

GLEESON CJ: Then what is the measure of damages in contract for breach of a contractual obligation to take reasonable care for the safety of the other party to the contract?

MR McALARY: Well, your Honour, I have not thought of a contract which could say that is a contract term.

GLEESON CJ: Well, take a contract to carry out work of some kind on somebody else’s property.

MR McALARY: Well, your Honour, the contract ‑ ‑ ‑

GLEESON CJ: Obliging the contractor to exercise reasonable care and skill in carrying out the contract works. What is the measure of damages in the contract for breach of that stipulation?

MR McALARY: Well, it would be a rectification of the work that was done defectively. That would be prima facie the measure.

GLEESON CJ: Well, it has been suggested in one of the cases that the principle, as explained in Hadley v Baxendale ‑ ‑ ‑

MR McALARY: Yes, Hadley v Baxendale or Victoria Laundry.

GLEESON CJ: So you ask: what harm flowed naturally from the breach ‑ ‑ ‑

MR McALARY: What are the natural probable consequences.

GLEESON CJ: Or what was in the reasonable contemplation of the parties.

HAYNE J: And thus, if the building is constructed in such a way as to require its demolition through want of care on the part of the contractor, does the plaintiff get the profit it would have made from resale of that building or does it get only its out-of-pockets?

MR McALARY: That is a very difficult question, your Honour, because it would depend upon whether or not one can invoke the second rule in Hadley v Baxendale.

HAYNE J: Assume the contractor well knew that this was a spec property that was being erected for purpose of immediate resale.

MR McALARY: Then I would submit, with respect, the second rule applies, and one would therefore look to see what would have been the situation if the contract had been fulfilled in accordance with its contractual terms.

HAYNE J: But the concurrent liability in tort may perhaps, on one view of it, be limited to recompensing for the out-of-pockets only with no element of ‑ ‑ ‑

MR McALARY: Your Honour, we have two different sets of situations. Liability in tort is generally some form of restitutio in integrum situation. I know that is a bad word taken from a Chancery source, but it picks up the thing that I am trying to say. Generally you have to provide, by way of damage, funds which place the injured person or the plaintiff in the position he would have been if the injury had not occurred. That gives rise to quite different considerations as to how the damage is assessed. But in contract, you have expectation damages, you have damages for loss of profit, you have damages for loss of opportunity. You have a totally different area.

The second point that I sought to make in my submissions was that these words here do not offer any way in which one can understand how these two areas of damage assessment are to be married. You have a situation built up in relation to tort, and you have criteria in relation to tort which are quite different from the criteria which apply in relation to contract. How are they to be married? There is no indication. In other words, on my friend’s submission, what he has done is simply take the total law relating to tort as set out in section 27 of the Wrongs Act and picked it up and plonked it on top of the contract case.

GLEESON CJ: Does the builder in that case have two obligations to be careful, or only one?

MR McALARY: Which case, your Honour?

GLEESON CJ: The example of the builder who stipulates that he will carry out his building work with due care and skill. He has one obligation to be careful, but two sources: one in contract and one in tort.

MR McALARY: That’s right, your Honour. I do not dispute that there can be collateral liability ‑ ‑ ‑

GUMMOW J: But that one obligation may give rise to two distinct rights in the plaintiff against him.

MR McALARY: Yes. I do not dispute that there can be a collateral liability. That is well established now. I do not take any issue with my friend about that. But the mere fact that there is collateral liability does not mean that the liabilities are co-extensive. That is where I take issue with my friend. The collateral liabilities are not co-extensive and, as I have set out in my submissions, your Honours will see that there are differences in connection with such matters as the limitation provisions, when does the time run from? It runs from a different date in contract with the date in tort. Therefore, when does the limitation period expire? That is different. The principles by reference to which the damages are assessed in tort are different from the principle by which the damages are assessed in contract.

CALLINAN J: Yes, so which one do you select in any particular case?

MR McALARY: Well, I do not know. The point is, your Honour, that there is nothing that says anything about it. What my friend does, and what the discussion in all the cases do, is simply to assume that you have taken the law of tort and plonked it on top of the law of contract. And this is done to achieve, it is said, the same result. In other words, you have one set of facts and they want to get the same result. Now, your Honours, different results will flow from the different causes of action which are involved. If I sue in the one action for breach of statutory duty and for negligence, I may get a verdict on the count for breach of statutory duty of a different quantum to the one I get on the count for negligence. That is simply because there is different legal entitlements arising in relation to the particular cause of action selected. We cannot run away from that. That is the state of the law and it always has been the state of the law, and the concept that somehow or other all this is going to be swept together by construing this legislation as applying to contract just does not work.

HAYNE J: Well, if Parliament wants to sweep it all together, there is a model, perhaps not wholly satisfactory, in Part 4 of the Victorian Wrongs Act which does apply to all forms of liability, whatever their legal source.

MR McALARY: I have seen it, your Honour, but I have not read it in connection with this, so I do not claim any real knowledge, never having practised in Victoria. But can I just conclude what I was really seeking to say by saying this, that if you are seeking to try to make the legislation work - we have a case brought in contract, a cause of action brought for

breach of contract. That does not allege fault; it alleges a breach of contract. You do not have a negligent breach of contract; you have a breach of contract. So on the plaintiff’s case, there is no issue of fault arising. How does one get issues of fault, both by the plaintiff and by the defendant, giving rise to the same damage? That would involve the defendant in pleading that he was guilty of fault, negligence, which was causative of the damage for which the plaintiff sued. And then he would need to go and plead that the plaintiff was guilty of acts or omissions which, apart from the act, would give rise to a defence of contributory negligence. Now, that is a defence which is simply not available in contract. I fail to understand, therefore, how the legislation could be made to work.

Your Honours, we say that a plea of that character would just be not sustainable because it would not meet the case. And in the end the argument that my friends are putting can, I think, be summarised by saying that if you sue in both contract and in tort and damage is shown to have been caused by different acts of fault by the plaintiff and the defendant, the Act operates. That is what it comes to. You sue in both and different acts of fault can be shown by both parties, then the Act operates, and why it operates is not clear. But, with respect, that misses the critical point. The whole Act is directed solely to tort. It is not directed to contract, and the mischief is the mischief that I have indicated, so you simply cannot, as is involved in the argument, pick up the whole of the legislation which relates to tort only and simply apply it to a contract count. That is what has been done in all the cases where that view has been taken, and no reason is given for it. Those are my submissions.

GLEESON CJ: Thank you, Mr McAlary. Yes, Mr Bennett. Mr Bennett, how long do you think you will require for your reply.

MR BENNETT: About 15 minutes, your Honour. I would probably be shorter at 2.15 because I would have a two-column document for your Honours.

GLEESON CJ: That is an irresistible argument...

HAYNE J: To which you might be held.

GLEESON CJ: We will adjourn until 2.15

AT 12.43 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

GLEESON CJ: Yes, Mr McAlary.

MR McALARY: Your Honours, during the discussion this morning the question of the report of the Law Council of Australia was raised. I have been unable to obtain it in the interim. I would seek to pursue it and I trust I will have it available by next Monday, if that will be satisfactory.

GLEESON CJ: Yes, you can send us in a note and give a copy to Mr Bennett. We will now listen to Mr Bennett’s swan song.

MR McALARY: Yes.

MR BENNETT: Your Honours, I have prepared the usual document, which your Honours have. My learned friend submitted - and I am going from that document - that damage was not the shortfall but the liability on the mortgages. I am not sure if he maintained that proposition when pressed on it, but we would submit once it was clear, as he conceded, that the first mortgagee received the proceeds of sale, it follows that what the respondent had to pay was the overall shortfall, which happened to be the whole of the amount on the second mortgage, one amount to an unsecured creditor, the balance on the first mortgage.

My friend then says therefore the damage was not caused by the respondent’s improvident purchase, but we point out, first, as the central proposition, that it was the improvident purchase, not the decision to become the trustee, as one of your Honours suggested to my friend, which caused the loss. The sequence of events was that it became the trustee prior to completion and on the day before completion, or the minute before completion, it had no obligation to complete.

There was no contract binding it nor was there any contract binding -if I could put inverted commas round it - “the trust” or the person who was at the time the trustee. The only person bound was a third party who, in fact, for consideration directed the assignment to the trustee. So the loss was suffered at completion and not before. As a matter of common sense of causation we say it is clear that the shortfall was caused at least, in part, by the improvident purchase and refer to the finding at page 111.

My friend says the damage is different. I will not repeat the arguments on that, but we say the absence of co-extension, the fact that one could perhaps find a little bit of damage caused by one and not the other or the other and not the one, does not prevent contributory negligence applying. My friend referred to the non-mitigation defence at appeal book page 63. That was the defence saying that there was a failure to mitigate. Obviously that does not arise any more. What it does show is that the factual issue of the right of indemnity against beneficiaries was certainly before the court. My friend says breach of contract is not a civil wrong. We say it is, but even if it is not within the technical phrase, which we do not concede, it is certainly within the colloquial phrase as was used by the Attorney-General.

Then there were three matters arising out of matters your Honours put to me this morning. I was asked by Justice Gummow about the current position in Canada. We have given your Honours an extract from Linden on Canadian Tort Law, which sets out some of the recent cases. We have not found anything more recent than Rafuse dealing with contributory negligence. There is an interesting statement on page 423 of the passage we have given your Honours. Do your Honours have that? It is a document headed Canadian Tort Law. In the B.C. Hydro Case in the Supreme Court two of the justices, Madam Justice McLachlin and Justice La Forest, said:

Rather than attempting to establish new barriers to tort liability in contractual contexts, the law should move towards the elimination of unjustified differences between the remedial rules applicable to the two actions, thereby reducing the significance of the existence of the different forms of action and allowing a person who has suffered a wrong full access to all relevant legal remedies.

They are, I suppose, fighting words but we would submit words to be borne in mind. They certainly show the approach in Canada. It is interesting to note, of course, we were looking at the English report but, in fact, this legislation originated in Canada, not in England, and the position is - and I am reading again from Justice Linden’s book at page 441. Your Honours do not have this. But after referring to the injustice that has been referred to many times about the old contributory negligence rule, he says:

Agitation commenced in the law reviews, bar association meetings and even in judicial opinions. Several Justices of the Supreme Court of Canada in Grand Truck Pacific Ry. v Earl expressed their displeasure with the stalemate rule and turned a “wistful eye” to the more “equitable” Quebec principle of “common fault”. In one of those unfortunately rare occasions in Canadian history when common lawyers were wisely influenced by the civil law, Ontario enacted the first apportionment statute a year later in 1924. In the next few years all the other common law provinces followed suit. It took somewhat longer for the legislation to spread to the United Kingdom and Australia. After a slow start, apportionment has now invaded the United States.

And there are references to all those.

GLEESON CJ: I thought the idea of apportionment, so far as we are concerned, came not from civil law but from shipping law.

MR BENNETT: Well, that is certainly what seems to be said in Glanville Williams and in many of the areas. No doubt the Canadian innovation came partly from the civil law and partly from shipping law, but it is interesting that it is Canada which gave birth to it rather than England. I was asked some questions about the form of pleading. I simply remind your Honours that at paragraph 21 page 60 of the further amended statement of claim, the claim in contributory negligence, the defence in contributory negligence, is framed in both contract and tort. It does not put the implied term in exactly the way I have put it in argument.

HAYNE J: Or at all, does it, Mr Bennett?

MR BENNETT: Well, your Honour, I put the submission in paragraph 2. The difference is ‑ ‑ ‑

HAYNE J: Which words of that paragraph do you depend on for this submission, Mr Bennett?

CALLINAN J: What page, Mr Bennett? I am sorry I missed it.

MR BENNETT: Page 60, your Honour.

If the plaintiff has suffered loss and damage (which is not admitted) the plaintiff has caused or contributed to such loss and damage by its own breaches of the terms of the agreement.....breaches of its duty in paragraph 20 hereof -

which is an implied term alleged -

and contributory negligence.

So it is pleaded in contract and tort. It then goes on to say:

The plaintiff has caused or contributed -

and the word “caused” were added, to make the contract aspect clear and, your Honours, what we ask rhetorically is this. There is, of course, a difference in legal theory between the two ways I have put it in paragraph 2 of the submissions in reply. Of course there is a difference. But in my respectful submission, as a matter of pleading, and pleading an issue of law, it is sufficient to alert the plaintiff to all the factual matters that arise and ‑ ‑ ‑

CALLINAN J: Mr Bennett, you were only sued in contract though, were you not?

MR BENNETT: No, your Honour, sued in contract and tort.

CALLINAN J: I could not pick up the allegation in tort.

MR BENNETT: Paragraph 25 on page 39, your Honour, at the bottom of page 39, and the trial judge at page 96 of his judgment said, in the middle of the page, at line 40:

Here the duty arose in both contract and in tort and was, in my view, the same duty.

No one distinguished at any ‑ ‑ ‑

GUMMOW J: What page is that, I am sorry, Mr Bennett?

MR BENNETT: Page 96, your Honour.

GUMMOW J: Thank you.

MR BENNETT: The plaintiff never said, as Justice McHugh might have had he been advising the plaintiff in 1972 or today, “Let us drop the tort claim and sue only in contract.” The plaintiff never made that election. It never said, “I was seeking judgment in contract alone.” And were at least as entitled to say that the primary judgment was in tort as they are to say it was in contract, particularly as there was an express finding of contributory negligence. So, if your Honours were against me on the matters arising in the notice of contention, I am entitled to say there was judgment in tort and there it is and the fact that the plaintiff might have said, “I abandon the tort claim and seek judgment in contract,” might have made a difference, but it did not and that perhaps is a way of avoiding the whole of the issue in this case if your Honours were minded to do so.

But, your Honours, in my respectful submission, at the end of the day this is a case where there has been a very, very clear trend in the Commonwealth; a trend which has been perhaps led by academics, perhaps led by more adventurous judges and perhaps led by people who have not, in

many cases, analysed the concepts involved and the rationales. There are rationales given by Justice La Forest, a number of them, and rationales given by Glanville Williams in his very early work on the subject and, in my respectful submission, it would be inappropriate for this Court to say that it would reject all those rationales and take the strict literal approach with the result that it would be going in a different direction to that which seems to have been adopted really throughout the common law world. May it please the Court.

GLEESON CJ: We will reserve our decision in this matter.

AT 2.26 PM THE MATTER WAS ADJOURNED

[1998] HCATrans 278

Key Legal Topics

Areas of Law

Commercial Law

Equity & Trusts

Contract Law

Legal Concepts

Fiduciary Duty

Breach

Remedies

Damages

Reliance

Estoppel