Consolidated Manufacturing Industries Ltd v Cold Forged Products No 1 Pty Ltd
[2001] VSC 316
•21 August 2001
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 4367 of 2000
| CONSOLIDATED MANUFACTURING INDUSTRIES LTD. | Plaintiff |
| v. | |
| COLD FORGED PRODUCTS NO. 1 PTY. LTD. | Defendant |
| v. | |
| SENIOR THERMAL ENGINEERING AUSTRALIA PTY. LTD. AND ELITE PLATING PTY. LTD. | Third Parties |
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JUDGE: | HARPER, J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 21 AUGUST 2001 | |
DATE OF RULING: | 21 AUGUST 2001 | |
CASE MAY BE CITED AS: | CONSOLIDATED MANUFACTURING INDUSTRIES LTD. v. COLD FORGED PRODUCTS NO. 1 PTY. LTD. | |
MEDIUM NEUTRAL CITATION: | [2001] VSC 316 | |
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CATCHWORDS: Ruling – Application on first day of trial by third parties to amend pleadings – Alleged breach of contract – Application to plead contributory negligence by the defendant – Wrongs Act 1958, s.25 and s.26(1) as amended by Wrongs (Amendment) Act 2000 – Application to plead incorporation of standard limitation clauses into contract – Adjournment of trial granted.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr. P. Riordan | Phillips Fox |
| For the Defendant | Mrs. S. Marks | Deacons |
| For 1st Third Party | Mr. P. Moloney | Connery & Partners |
| For 2nd Third Party | Mr. P. McCurdy | Norris Coates |
HIS HONOUR:
This proceeding was fixed for trial yesterday. When it was called on for hearing however each of the two third parties applied to amend its defence to the third party notice issued by the defendant on 18 August 2000.
The claim made by the plaintiff against the defendant is that by an agreement reached on or about 27 April 1998 the defendant agreed to manufacture and supply a consignment of bolts to be used by the Ford Motor Company Limited in the manufacture of Ford motor vehicles.
The agreement contained terms that the bolts would be of merchantable quality, would meet their description and the relevant specifications, and would be reasonably fit for the purpose for which they were intended.
The bolts or at least some of them were delivered early in 1999. According to the plaintiff they did not meet the contractual requirements. The defendant denies this while admitting the agreement, although not its terms as pleaded. At the same time the defendant (by its statement of claim in the third party proceedings) alleges that if the bolts were faulty as alleged by the defendant, then the third parties are to blame.
According to the defendant the first third party ("Thermal") entered into an agreement with the defendant on 14 January 1999 by which Thermal agreed to apply heat treatment to the bolts "to achieve the required mechanical properties of grade 10.9 high strength bolts." This was to be done "with due care and skill" after which the bolts were to be delivered to the second third party ("Elite") in merchantable quality and reasonably fit for the purpose for which they were intended. But in breach of the agreement Thermal failed "to apply the appropriate heat treatment to the ... bolts to achieve the required mechanical properties."
This however is not the only problem which the defendant postulates in its third party statement of claim. If the plaintiff makes out its case the defendant will also turn to Elite. It too, according to the defendant, was party to a relevant agreement. On 1 February 1999, or so the defendant alleges, it agreed with Elite that the latter would apply electroplating treatment to the bolts so as "to retain the required mechanical properties of grate 10.9 high strength bolts." Again, the defendant pleads that the third party was to carry out its part of the bargain with due care and skill and, at the end of all this the bolts were to be in good condition, of merchantable quality, and reasonably fit for the purpose for which they were intended.
If the bolts were not in that condition, and if that failure is in the quality of the electroplating, then (says the defendant) Elite is to blame. It "did not apply the appropriate electroplating treatment to the ... bolts to retain the required mechanical properties of grade 10.9 high strength bolts." As with its case against Thermal, the defendant also pleads a failure in Elite to exercise due care and skill.
Each third party initially filed and served a defence to the third party notice which merely denied or failed to admit the substantive allegations against that third party. Each now seeks to plead, in terms which are relevantly identical, that any loss or damage suffered by the defendant was the result of the defendant's own failure "to take reasonable care in its procedures for quality control of the bolts in accordance with AS1822 and Quality Standard 9000 under which the defendant was required to manufacture fasteners for use in the automotive industry" : See paragraph 17 of Elite's proposed amended defence dated 13 August 2001.
Particulars of this allegation are given in each defence. Some of these might, in a different context, be read as being particulars of an allegation that the defendant was itself responsible for the third party's breach of contract (or, in other words, that the defendant was responsible for the failure of the bolts to meet the contractual specifications). Essentially, however, the particulars support an allegation that the defendant was guilty of contributory negligence: that is, a "failure to meet the standard of care to which it is required to conform for its own protection and which is a legally contributing cause, together with the third party's default in bringing about its injury": Fleming The Law of Torts Ninth Edition (1998) at 302 or, as the High Court put it in Astley v. Austrust Limited (1999) 197 C.L.R. 1 at 11 per Gleeson CJ and McHugh, Gummow and Hayne JJ:
"At common law contributory negligence consisted in the failure of a plaintiff to take reasonable care for the protection of his or her person or property."
In this case there would be a real question, if the issue came up for decision, whether any of the particulars of negligence, if proved, could constitute a failure in the defendant to meet the standard of care to which it is required to conform. That, however, is not a question which I am in a position to answer. The submission I must address is whether any negligence of the defendant is or could be a legally contributing cause in bringing about the injury allegedly suffered to the bolts.
In my opinion the answer to this question must be in the negative. While it is now clear that concurrent liabilities in both contract and tort may arise in cases of professional negligence, this is not such a case. We are not here concerned with the professions. Nor are we concerned with negligence, or with an allegation that an act or omission of the defendant prevented either third party from fulfilling its contractual obligations. The third party claim is made in contract. Although a failure to exercise due care and skill is alleged, that allegation is put as a breach of a contractual term. More importantly, it is superfluous. It is enough for the defendant to prove, if it can, that the work done by the third parties on the bolts did not reach the standard required by the relevant contract. If it did not, the cause of action is made out; and it would not matter that that failure occurred despite the third parties or one or other of them taking every care in the world to ensure that such failure was avoided.
The courts have consistently held that in such cases no question of contributory negligence can arise. To quote again from the 9th Edition of Fleming: The Law of Torts at p.317:
"A growing consensus differentiates between (1) cases where liability arises from breach of a contractual provision which does not depend on failure to take reasonable care and; (2) cases where the liability for breach of contract is the same as liability in tort. To the former even for a negligent breach of an absolute contractual obligation such as a warranty of fitness incidental to sale or hire or a promise to lend a contractor a ladder contributory negligence is no defence."
The learned author refers in support of that proposition to Barclay's Bank v. Fairclough [1995] Q.B. 214.
If it is not alleged that the defendant contributed to the defects which the bolts allegedly exhibited then at worst the acts or omissions of the defendant might have resulted in a failure to mitigate the consequential damage. But that is not how the third party defences are pleaded. The point is made as a substantive defence. There is no pleading (as opposed to particulars) to the effect that any defect in the defendant's quality control resulted in or contributed to any defect in the bolts.
It was submitted on behalf of the third parties that recent amendments to the Wrongs Act relevantly alter the position as it was immediately after the judgment in Astley's case. By the Wrongs (Amendment) Act 2000 which came into force on 21 November 2000 the definition of "fault" in s.25 of the Wrongs Act 1958 has been substituted by a definition of "wrong." This now in its statutory sense means: "An act or omission that -
(a)gives rise to a liability in tort in respect of which a defence of contributory negligence is available at common law; or
(b)amounts to a breach of a contractual duty of care that is concurrent and co-extensive with a duty of care in tort."
There is also by the Wrongs Amendment Act 2000 a new s.26 of the principal Act. Sub-s.(1) of s.26 now reads:
"If a person (the claimant) suffers damage as the result partly of the claimant's failure to take reasonable care (contributory negligence) and partly of the wrong of any other person or persons -
(a)a claim in respect of the damage is not defeated by reason of the contributory negligence of the claimant; and
(b)the damages recoverable in respect of the wrong must be reduced to such extent as the court thinks just and equitable having regard to the claimant's share in the responsibility for the damage."
Here the wrong of the third parties gives rise to a claim in contract, and a defence of contributory negligence is not available at common law. In addition it amounts to a breach of a contractual duty of care that is not concurrent and coextensive with the duty of care in tort. Accordingly the Wrongs Amendment Act 2000 does not assist the third parties.
For these reasons I will not allow the third parties to amend their proposed amended defences by including in those amended defences an allegation that the defendant is guilty of contributory negligence.
There is also before me an application to amend the third parties' defences by alleging the incorporation into the relevant contract of clauses which limit the liability of the relevant third party. These amendments should I think be allowed; but the defendant is entitled to an adjournment to enable it to meet them. The length of that adjournment will depend in part upon the capacity of the court to re-arrange its fixtures so as to allow this case to come on within a reasonable time. I will discuss that with counsel in due course.
In the meantime the question of costs arises. Unless I am persuaded to the contrary, there being in my opinion no satisfactory explanation for the failure of the third parties to raise the question of exclusion clauses until a very late stage in the preparation of this case for trial, the costs of the adjournment should I think be borne by the third parties.
I will however hear counsel if they wish to be heard on that point.
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