Commonwealth Bank of Australia v Witherow

[2006] VSCA 45

SUPREME COURT OF VICTORIA

COURT OF APPEAL

No. 3730  of 2005

COMMONWEALTH BANK OF AUSTRALIA
	Appellant
v.
NORMAN LEON WITHEROW	Respondent

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JUDGES:	MAXWELL, P., BUCHANAN, J.A. and REDLICH, A.J.A.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	17 February 2006
DATE OF JUDGMENT:	17 February 2006
MEDIUM NEUTRAL CITATION:	[2006] VSCA 45

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Apportionment of liability – Wrongs Act 1958 Part IVAA – Action on guarantee – No defence to claim – Guarantor makes third party claim against accountant for negligent advice – Third party claim does not make plaintiff’s claim an “apportionable claim” under Part IVAA – Guarantor and third party not “concurrent wrongdoers” – Judgment for plaintiff.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr A.C. Archibald, Q.C. with Mr A.P. Trichardt	Gadens Lawyers
For the Respondent	Mr G.R. McCormick	Goldsmiths

MAXWELL, P.:

1. This is an appeal by the Commonwealth Bank of Australia, by leave, from orders made by a Judge of the County Court on 15 April 2005.  In the proceeding, the Bank claimed against Mr Witherow, the defendant, a sum of $150,606.90, with interest, on the basis of a deed of guarantee dated 24 March 2004.  Under the guarantee, Mr Witherow guaranteed to the Bank the due payment by W.G. Jago & Sons Pty Ltd (“the company”) of all money which the company is or was liable to pay under an overdraft facility between the Bank and the company, subject to a limit of $150,000 plus the Bank's enforcement expenses.  As at 21 October 2004 the company was in breach of the overdraft facility and was in arrears in the amount of $147,204.19.  Payment of that amount was demanded, with interest accruing from that date.  Despite demand, both the company and Mr Witherow have failed to pay any amount to the Bank. 

1. The County Court proceedings were commenced by writ issued 21 December 2004.  The Bank issued a summons for summary judgment on 31 March 2005, seeking an amount of $159,595.76 which was said to be the amount due and owing plus interest, plus enforcement expenses.  The application for summary judgment came on for hearing on 15 April 2005.   The learned Judge dismissed the summons, giving Mr Witherow leave to defend and leave to join the company and one Lois Dennington as second and third defendants respectively and as third parties to the proceeding within 28 days.  The Judge ordered that costs be in the cause.

1. The Bank filed an application in this Court for leave to appeal on 29 April and on 3 June last year the then President and Buchanan, J.A. granted leave to appeal and ordered that the costs of the application be the Bank's costs in the appeal.  In the meantime, Mr Witherow joined the company and Dennington, his own accountant, as second and third defendants respectively and filed an amended notice of defence on 10 May last. 

1. On the hearing of the application for summary judgment before the Judge, Mr Witherow did not dispute the amount owing, but raised two contentions.  He argued first that, in accordance with Part IVAA of the Wrongs Act 1958, a proportionate liability regime was applicable so as to reduce his liability to the Bank. Secondly, he argued that his liability was in any event limited to $150,000 plus enforcement costs, and the Bank was claiming more than $150,000.

1. According to the summary provided by the parties for the purposes of this appeal, his Honour said that the applicability of Part IVAA in the circumstances was novel and should not be decided in application for summary judgment but only at the trial of the proceeding.  The circumstances identified by his Honour were said to be that Mr Witherow wished, first, to join his own accountant, Dennington, to seek apportionment of his liability for the Bank's claim under the guarantee, and to bring third party proceedings against Dennington in respect of that liability because of her alleged failure to give him proper advice about the company's financial position before he executed the guarantee; and, secondly, that Mr Witherow wanted to join the company to seek a contribution from it towards his liability to the Bank on the guarantee. 

1. At all relevant times Mr Witherow was a director of the company.  In his affidavit sworn 15 April 2005, he says that in late 2003 he was asked to obtain a loan from the Bank in order to assist the company with the timing of the receipt of payment from its debtors.  He says in that affidavit that he engaged Dennington in December 2003 to advise him on the solvency of the company and whether or not he should obtain a loan from the Bank to assist the company.  It is unnecessary for the purposes of this judgment to do more than record that Mr Witherow says that he received incorrect advice about the financial position of the company, on the basis of which he proceeded to arrange the overdraft facility and executed the guarantee.  He says that, contrary to what his accountant advised him, the company was in fact in a poor financial position. 

1. In my opinion, the appeal must succeed.  I deal first with the question in relation to Part IVAA of the Wrongs Act.

Part IVAA of the Wrongs Act 1958

1. Part IVAA was inserted into the Wrongs Act 1958 by the Wrongs and Limitation of Actions Acts (Insurance Reform) Act (No.60 of 2003).  In my opinion, Part IVAA has no application to the claim brought by the Bank, essentially for the reasons advanced by the Bank in its submissions, as follows.

1. Under s.24AE in Part IVAA, the term “apportionable claim” is defined to mean “a claim to which this Part applies”.  In turn, sub-s.24AF(1) relevantly provides that –

“(1)     This Part applies to –

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

1. The Bank’s claim is not a claim in an action for damages.  It is a claim in an action for a sum certain, namely – as set out in the statement of claim –  $150,606.90.

1. Less still is the Bank’s claim made “in an action for damages ... arising from a failure to take reasonable care”.  The Bank sues on a guarantee.  It seeks, in effect, specific performance of the contract of guarantee.  No question of failure to take reasonable care arises in that claim, or could possibly arise.  It is understandable that Mr Witherow has wanted to join, and has now joined, his accountant, Dennington, as a third party, on the ground that her negligence - as he says it was - in failing to advise him accurately of the financial position of the borrower company has resulted in his exposure to loss pursuant to the calling up of the guarantee.  But for present purposes, the proposed seeking by Mr Witherow of contribution from Dennington is wholly irrelevant. 

1. True it is that the third party claim would be founded – and properly founded – on an allegation that Mr Witherow has suffered damage because of the accountant's failure to take reasonable care.  It hardly need be pointed out, however, that the duty of care on which Mr Witherow will rely is a duty owed to him.  There is no suggestion - nor could there be on these facts - that Dennington owed any duty of care to the Bank nor, therefore, that the Bank had any cause of action against Dennington.

1. It seems to me to be perfectly clear what Part IVAA was intended to achieve.  Where an action for damages is brought based on an alleged failure by the defendant to take reasonable care, and there are concurrent wrongdoers (that is, “two or more persons whose acts or omissions cause, independently of each other or jointly, the loss or damage that is the subject of the claim”), then the liability of a defendant who is one of those concurrent wrongdoers is, in the language of paragraph 24I(1)(a) –

“limited to an amount reflecting that proportion of the loss or damage claimed that the Court considers just having regard to the extent of the defendant’s responsibility for the loss or damage.”

1. Obviously enough, that is not this case.  It would, of course, be impossible to make an apportionment between, on the one hand, Mr Witherow’s liability in contract to the Bank and, on the other, the liability of Dennington in tort to Mr Witherow.  Plainly, Parliament did not have in mind when it enacted Part IVAA that the Court could be asked to take into account in an action such as this, on a contract of guarantee, the fact that the guarantor has a claim in negligence against a third party on whose advice he relied in giving the guarantee.

1. So far as the submissions for the respondent relied on the former provisions of s.131 of the Building Act, it seems to me that the provisions of Part IVAA adopt precisely the same basic approach to apportionment of liability as did that section, save that Part IVAA is not confined to apportionment between parties to a proceeding.  As to what implications Part IVAA may have for claims arising in relation to building work, no occasion arises on this appeal to say anything at all.

1. So far as interest is concerned, there is no contractual entitlement to interest under the guarantee, and the Bank conceded as much. The Bank does, however, have an entitlement to interest under s.58(1) of the Supreme Court Act.  In my opinion, there has been no “good cause shown to the contrary.”

1. Accordingly, in my opinion, the appeal should be allowed.  I would order as follows: 

1.The orders made by the County Court on 15 April 2005 be set aside and in lieu thereof it be ordered that -

(a)there be judgment for the plaintiff in the sum of $150,606.90 plus interest of $20,037.48 calculated at the statutory rate pursuant to s.58 of the Supreme Court Act, from 21 December 2004 to 17 February 2006.

(b)the defendant pay the plaintiff's costs of the proceeding, including reserved costs.

2.The respondent pay the appellant's costs of the appeal.

3.The respondent be granted a certificate under the Appeal Costs Act.

BUCHANAN, J.A.: 

1. I agree.

REDLICH, A.J.A.:

1. I agree, for the reasons given by the President, that the appellant's claim in the proceedings is not an apportionment claim for the purposes of Part IVAA and that neither the company or Dennington  is a concurrent wrongdoer for the purposes of Part IVAA.  I would allow the appeal and make the orders proposed.

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