CSR Ltd v Amaca Pty Ltd
[2007] NSWCA 107
•8 May 2007
NEW SOUTH WALES COURT OF APPEAL
CITATION: CSR Ltd v Amaca Pty Ltd [2007] NSWCA 107
FILE NUMBER(S):
40126/06
HEARING DATE(S): 22/03/07
JUDGMENT DATE: 8 May 2007
PARTIES:
CSR Limited (Appellant)
Amaca Pty Limited (Respondent)
JUDGMENT OF: Mason P Hodgson JA Young CJ in Eq
LOWER COURT JURISDICTION: Dust Diseases Tribunal of NSW
LOWER COURT FILE NUMBER(S): DDT 81/05
LOWER COURT JUDICIAL OFFICER: Curtis J
LOWER COURT DATE OF DECISION: 23/02/06
LOWER COURT MEDIUM NEUTRAL CITATION:
(Re Doughan); Amaca Pty Ltd v CSR Ltd [2006] NSWDDT 4
COUNSEL:
F Corsaro SC (Appellant)
D J Russell SC and J V Gooley (Respondent)
SOLICITORS:
Makinson & d'Apice (Appellant)
Holman Webb (Respondent)
CATCHWORDS:
PARTNERSHIP- Contribution- One partner settled claim of plaintiff and cross-sued for contribution from other partner- Whether partnership agreement precluded contribution- Held- "No"- Whether paying partner entitled to equal contribution to own costs in defending plaintiff's claim- Held a co-surety or co-tortfeasor may claim contribution for costs reasonably incurred in defending claim.
LEGISLATION CITED:
Dust Diseases Tribunal Act 1989, ss 10, 11, 12, 32
Law Reform (Miscellaneous Provisions) Act 1946, s 5(1)(c)
Partnership Act 1892, ss 10, 12
CASES CITED:
Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342
Amaca Pty Ltd v CSR Ltd (2001) 51 NSWLR 476
Amaca Pty Ltd v CSR Ltd [2001] NSWSC 324
Bartels v Behm (1990) 19 NSWLR 257
Bitumen and Oil Refineries (Australia) Ltd v Commissioner for Government Transport (1955) 92 CLR 200
Broom v Hall (1859) 7 CB (NS) 503; 141 ER 911
Burke v LFOT Pty Ltd (2002) 209 CLR 282
Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1
Husher v Husher (1999) 197 CLR 138
James Hardie & Coy Pty Ltd v Wyong Shire Council (2000) 48 NSWLR 679
Leigh-Mardon Pty Ltd v Wawn (1995) 17 ACSR 741
Morgan Equipment Company v Rodgers (No 2) (1993) 32 NSWLR 467
Re Linsley [1904] 2 Ch 785
Roach v Thompson (1830) M & M 486; 173 ER 1233
The Millwall [1905] P 155
Wallaby Grip (BAE) Pty Ltd v Eraring Enery (2004) 60 NSWLR 701
DECISION:
The appeal is dismissed with costs.
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40126/06
DDT 81/2005MASON P
HODGSON JA
YOUNG CJ in EQTuesday 8 May 2007
CSR LIMITED v AMACA PTY LIMITED
Judgment
MASON P: I agree with Young CJ in Eq, save that I reserve my position as to his comment at [20] (cf Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 at 350).
HODGSON JA: I agree with Young CJ in Eq.
YOUNG CJ in EQ: This is an appeal as of right from a decision of the Dust Diseases Tribunal of NSW in which the present appellant was ordered to pay one-half of the verdict and judgment that the respondent suffered in an action brought in the Dust Diseases Tribunal by a Mr Doughan, 50% of the respondent's costs of resisting that claim plus the costs of the proceedings on the repondent's cross-claim in the Dust Diseases Tribunal.
Mr Doughan sued the respondent in the Dust Diseases Tribunal for negligence and breach of statutory duty which he claimed had the result of causing him to contract mesothelioma. Mr Doughan alleged that he contracted the disease as a result of asbestos contained within K-Lite blocks used by him to insulate oil and bitumen tankers. K-Lite was produced by the respondent subject to what I am about to say with respect to a partnership between the appellant and the respondent.
By deed made 24 September 1964 (the Deed), the appellant and the respondent entered into a partnership to commence and operate from 28 September 1964. The nature of the partnership business was to manufacture in Australia and to distribute and sell in Australia and elsewhere, various products including K-Lite. Under Division 5 of the Deed, the day to day management of the partnership business was to be conducted by the respondent subject to the joint directions of the partners. Amongst the rights, obligations and powers of the manager, set out in Division 6 of the Deed, were the following:
"(i) To manage the business generally and in particular to manage the factory and manufacturing activities and the distribution of the products subject always to the provisions of this Deed."
The Deed also appointed a company which appears to have been associated with the appellant as the sole selling and distribution agent of K-Lite and other products.
The Deed recognised that there would be a sale to the partnership of the assets referred to in the First Schedule. The First Schedule contained the land on which the factory that was producing K-Lite and other products was erected.
Accordingly, the flavour of the document is that the respondent was in charge of manufacturing and production and management of the partnership business generally, and an associate of the appellant dealt with the sales and distribution.
The document is split up into various Divisions, each with a series of clauses. Division 6 headed "General Management" sets out the respondent's brief to manage and clause 4 of Division 6 is as follows:
"4. Subject to the covenant and warranty given by [the respondent] in Clause 5 of this Division the partners jointly hereby indemnify and agree to keep [the respondent] indemnified from and against all actions, suits, proceedings, claims and demands whatsoever made or brought against [the respondent] by any third party in respect of or arising out of any act by [the respondent] as managing agent."
Division 7 dealing with sales and sales policy, in clause 10, contains a similar indemnity in favour of Bradford Insulation (a company associated with the appellant).
On the day that Mr Doughan's case was fixed for hearing, he and the respondent reached a settlement. As a result of that settlement, the respondent paid Mr Doughan $1,400,000 plus his costs. It is half of that amount, plus half the costs paid to Mr Doughan, plus half the respondent's own costs before the Dust Diseases Tribunal in Mr Doughan's action, that it sought to recover in its cross-claim against the appellant.
The cross-claim came on for hearing before his Honour Judge Curtis. The cross-claim was heard in February 2006, his Honour giving judgment on 23 February 2006. He found wholly in favour of the respondent and the appellant has appealed.
The claim for contribution was made on three bases:
(1) Clause 4 of Division 6 of the Partnership Deed;
(2) Sections 10 and 12 of the Partnership Act 1892; and
(3)Section 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (the 1946 Act).
I will deal with each of those claims in turn.
The appeal is brought under s 32 of the Dust Diseases Tribunal Act 1989, which, briefly summarised, means that there is a right of appeal on a question of law provided that $20,000 or more is in issue.
There are three principal aspects of the appeal: (A) whether under any of the three heads I have set out the appellant is bound to make contribution; and (B) whether the settlement of $1.4 million was reasonable. Issue (B) may or may not be relevant, depending on the answer to issue (A). If issue (B) does become relevant, there is a problem as to whether Curtis J's decision was, if he made an error, erroneous as to fact rather than as to law.
Issue (C) is, whether the case with respect to the claim for half the costs which the respondent had to pay its own lawyers in respect of Mr Doughan's claim, raises separate considerations.
Accordingly, I will deal with the matter in the following heads.
A. (1) The claim for contribution under the indemnity;
(2) The claim for contribution under the Partnership Act;
(3)The claim for contribution under s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act.
B. The question of quantum of the claim;
C.The claim for half the respondent's own costs in the Dust Diseases Tribunal; and
D. The result of the appeal.
The appeal can be fairly simply dealt with, though there are some intellectually titillating aspects on the periphery which made the oral argument rather interesting. Unfortunately, it is not necessary to delve into these except by way of the occasional comment.
It is important to bear in mind the jurisdiction of the Dust Diseases Tribunal. Section 10(1) confers jurisdiction to hear and determine proceedings referred to in ss 11 and 12. Section 11 deals with actions for damages because of a dust-related condition. Section 11(1A) is as follows:
"Proceedings by any tort-feasor liable in respect of damages referred to in subsection (1) to recover contribution from any other tort-feasor liable in respect of that damage may be brought before the Tribunal.
Note. This subsection does not prevent those proceedings being brought in another court."
Subsection (4) confers jurisdiction in "any matter that is ancillary or related to a matter that is the subject of proceedings to be brought under subsection (1) or (1A) may also be included in those proceedings."
Accordingly, it is clear that the Tribunal has jurisdiction to deal with claims for contribution under s 5(1)(c) of the 1946 Act. It is probable that the Tribunal has jurisdiction under subsection (4) in common law claims made on a restitutionary basis or on an indebitatus count for contribution. Some of these matters are discussed in Amaca Pty Ltd v CSR Ltd (2001) 51 NSWLR 476 and Wallaby Grip (BAE) Pty Ltd v Eraring Energy (2004) 60 NSWLR 701.
In my view, it must be very doubtful as to whether the Tribunal can deal with equitable claims for contribution. However, with that comment, I can pass on.
A(1) I will deal first with the claim under the Partnership Deed for indemnity.
There is no doubt at all that the Deed was entered into. The defence to the claim was: (a) that the indemnity in the Deed only covered the claim brought against the respondent as "managing agent" and that the present claim did not fall within that category; (b) that the partnership was dissolved by deed of 26 June 1974 (the Dissolution Deed) and that that barred any such claim; (c) that the indemnity did not cover a liability arising in the course of a partnership business which was properly dealt with in accounts between the partners.
As to (a), I find it very difficult indeed to see how on the structure of the whole Deed, one can segregate out claims as a result of manufacturing K-Lite on the one hand, and claims with respect to managing the manufacturing of K-Lite on the other. Essentially, this is what was put by Mr F Corsaro SC on behalf of the appellant.
In my opinion, the Deed as a whole shows that everything except sales and distribution was under the control of the respondent; whilst it was the partnership which was doing the manufacturing, it was being managed by the respondent as the partnership's agent.
The indemnity clause is oddly phrased in that the indemnity is by the partners jointly with one of them. In the 19th century there may have been some plea of abatement if someone tried to sue on such an indemnity, but in this 21st century the meaning is plain.
Despite the earnestness with which these propositions were put by Mr Corsaro, I cannot see that the alleged distinction he draws is an answer to the claim.
(b) I turn now to the Deed of Dissolution of 26 June 1974. That deed was never put in evidence before the learned primary judge. However, there was referred to the learned primary judge a decision of Bergin J in Amaca Pty Ltd v CSR Ltd [2001] NSWSC 324 (this is a different decision to that referred to by the same name earlier in these reasons).
Bergin J, in that case, set out various provisions of the Deed of Dissolution, discussed their operation, and held that the Deed of Dissolution did not affect a bar to a claim for contribution under the 1946 Act. It would be possible for litigants to agree that facts found by a judge in another case were to be treated as facts before the judge in the then current case, but that is not what happened before Curtis J. Not only was the Deed of Dissolution not before his Honour, but there is nothing in the transcript to suggest that both the parties intended that his Honour should have cognizance of the factual matters set out in Bergin J's judgment. Indeed, before us, Mr D J Russell SC, who appeared with Mr J V Gooley for the respondent, informed us that had the matter of the Deed of Dissolution been a live one, he would have put before the primary judge and this Court, material to show why the Deed of Dissolution should not be construed as to bar the present claim.
As the Deed of Dissolution is not before the Court, nothing more need be said.
(c) It does not seem to me, for present purposes, to matter whether the claim that a partner may have against another partner might, as between the partners, only be dealt with by way of a claim in a suit for taking accounts in equity rather than in an action at law. The indemnity clause is wide enough to include all demands whatsoever subject to it being read down in the way that Bergin J most properly did in the case before her.
It follows that the claim under the indemnity must succeed.
It was conceded that the question of what is reasonable to have paid Mr Doughan in settlement does not arise where the indemnity applies. It would seem that the appellant took the view that under the 1946 Act it was up to the person seeking contribution to prove that the settlement as made is reasonable and that it submitted it had not done so, but under contract, it would be up to the person sued to show that matter and that on that basis the point did not arise. I make no comment, I merely accept the concession. This does not, however, mean that the claim by the respondent for its own costs in Mr Doughan's proceedings must be conceded, a matter I will come to in due course.
A(2) Section 10 of the Partnership Act, so far as is relevant, provides as follows:
"… where by any wrongful act or omission of any partner in a firm … acting in the ordinary course of the business of the firm … loss or injury is caused to any person not being a partner of the firm … the firm is liable therefor to the same extent as the partner so acting or omitting to act."
Section 12, so far as is relevant, reads as follows:
"Every partner in a firm … is liable jointly with the partner's co-partners and also severally for everything for which the firm while the partner is a partner therein becomes liable under either of the two last preceding sections."
There is no question but that the liability was one that was incurred by the firm or a partner of the firm in the ordinary course of its business and that a claim for contribution will lie. The principal defence appeared to be that the liability as at the date of dissolution of the firm was inchoate and that the sections of the Partnership Act to which I have referred only apply in a case where the liability is completely established as at the date of the dissolution. The submission gets no support in the authorities. What authorities there are say that it just does not matter that the liability was not complete as at the date of dissolution; see Bartels v Behm (1990) 19 NSWLR 257 and Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1, 13-14 and 51-56.
A(3) It is unnecessary in view of what I have said in A(1) and A(2) to deal with this question.
B. This question comes because in perhaps the leading case on s 5(1)(c) of the 1946 Act, Bitumen and Oil Refineries (Australia) Ltd v Commissioner for Government Transport (1955) 92 CLR 200, 213, the High Court said that there was no valid reason why the defendant to a claim for contribution "may not say to the tortfeasor making the claim, if he has improvidently agreed to pay too large an amount or by unreasonable or negligent conduct in litigation has incurred or submitted to an excessive verdict, that the excess is due to his fault and not to that of the tortfeasor resisting the claim. It would be a matter for the Court to consider under the heading of 'just and equitable'."
As I have said, it is conceded that this problem does not arise under the contractual claims.
The argument between the parties was that the appellant alleged that the respondent had settled Mr Doughan's claim for too much because Mr Doughan's claim was only worth the sort of money that the respondent paid if he could establish a case, as was contemplated in Husher v Husher (1999) 197 CLR 138, that the corporate business which he was operating was really his own business entirely and that it was fairly arguable that this was not the case.
Had it been necessary to look at this point, the appellant would have had great problems because not only are matters affecting the assessment of damages almost always questions of fact (and under s 32 of the Dust Diseases Tribunal Act this Court has no jurisdiction to interfere with determinations of fact) but even if this were not so, there are specific findings of fact by the learned trial judge such as that contained in para 20 of his Honour's judgment which would mean that he had found facts from which his finding must follow.
In any event, as Mr Russell has reminded us, when one is considering the merits of a settlement of litigation, one should not be solely guided by what a computer might produce if hard cold facts were fed into it as the probable result of the case. Lawyers negotiating a settlement need to take into account a number of forensic factors including the proclivities of the court before whom the matter is listed, assessment of the likely acceptance or non-acceptance of witnesses, the problems of actually getting witnesses to give evidence before the court as well as analysing the material which is to be presented by their own side, and if known, the other side as well.
In the present case there were two expert reports from accountants as to whether Husher v Husher was applicable. The respondent's expert, Ms Lindsay, said it was not, but any lawyer resisting Mr Doughan's claim would, at the very least, take into account the risk that Ms Lindsay's report might not have been preferred to Mr Doughan's report which says that the Husher principle did apply.
C. There is no doubt that the costs of the third party against the co-tortfeasor are recoverable; see James Hardie & Coy Pty Ltd v Wyong Shire Council (2000) 48 NSWLR 679, but the present question does not appear to have been directly addressed before.
However, in Morgan Equipment Company v Rodgers (No 2) (1993) 32 NSWLR 467, Giles J, as his Honour then was, when he was sitting in the former Commercial Division, dealt with a similar claim made between sureties. His Honour held that because the rights of sureties inter se are now substantially equitable, equitable principles directed as achieving equality of burden and benefit should be applied in the question of contribution, and accordingly, the costs of defending the third party's claim should also be apportioned between the sureties.
I am a little wary of applying equitable principles in the present case because although there is a fiduciary duty between partners, this case is really brought on the basis of contract, not on the basis of an equitable principle. However, Giles J, in his judgment, does refer to cases including cases at law at pp 483-484. Some of those cases find that, as a matter of fact, defending the claim against the third party was hopeless so that the costs should not be recovered; see eg Roach v Thompson (1830) M & M 486; 173 ER 1233. However, where it was found that the plaintiff in defending the claim of the third party had acted as a prudent and reasonable man the plaintiff got contribution to his own costs; see Broom v Hall (1859) 7 CB (NS) 503; 141 ER 911.
The claim in such a case would appear to me to be a claim on an indebitatus count for money payable by the defendant to the plaintiff for money paid by the defendant for the plaintiff at its request, there being an implied request by the co-tortfeasor to pay reasonable costs in reducing the third party's claim as this would be for the incontrovertible benefit of the other party.
Although these incontrovertible benefit cases cannot be said to be unjust enrichment unless one talks about unjust negative enrichment, they are accepted as being standard restitutionary claims under an indebitatus count; see Mason and Carter, Restitution Law in Australia, [213] and Goff and Jones, Law of Restitution, 7th ed pp 24 and following.
Hodgson J, as his Honour then was, considered the Morgan Equipment case in Leigh-Mardon Pty Ltd v Wawn (1995) 17 ACSR 741. That was a question of contribution between company directors who had allegedly traded whilst insolvent. Eventually, the claim with the plaintiff was settled and his Honour only had to deal with the claim for contribution. His Honour dealt with costs at p 753 and said that he accepted that it may be appropriate in certain circumstances to take the course taken by Giles J in the Morgan Equipment case of having one director making a contribution towards the costs of defending the plaintiff's claim. However, his Honour held that whilst the settlement with the third party was an advantageous settlement, that was not sufficient to make it appropriate for the opponent to be required to contribute towards costs of defending the creditors' action because that action had also been defended by other directors including the opponent from whom contribution was sought and Wawn was very much more to blame for what had happened than the others. Accordingly, he declined an order that there be a contribution to the claimant's costs.
It would appear that his Honour was considering the matter of contribution on an equitable basis.
I have been concerned when preparing these reasons, that traditionally, claims for contribution come in at least three forms: (a) by statute; (b) in equity; or (c) under an indebitatus count at common law. At least in the last two situations, the principles are differently expressed. For instance, in equity one pays close attention to the principle that equity usually finds it just to share the benefit and burden, whereas at common law the prime test appears to be what would be reasonable for a person to do in his or her own interest.
In Burke v LFOT Pty Ltd (2002) 209 CLR 282, 336-337, Callinan J remarked that the various tests in different types of contribution tend to produce the same results whether the claim is made at law or in equity. This is really as it should be, and explains, I think, why in some of the cases it is difficult to see whether the judge has applied equitable principles or the common law test from Broom v Hall.
I have already noted that the decision of Broom v Hall was referred to by Giles J in the Morgan Equipment case. If one traces that case through its subsequent history, further examples of the general proposition that if a co-surety or co-tortfeasor seeks to claim contribution, that the claimant is entitled not only to a fair proportion of the payment made to the third party, but also a proportion of the costs paid to the third party and also a proportion of his own costs reasonably incurred in defending the third party's claim appear in a number of cases in the 19th and 20th centuries. It is not necessary to refer to all of these, as it would appear that by the first decade of the 20th century, the principle was fully accepted.
In Re Linsley [1904] 2 Ch 785, there were two trustees, a solicitor and a doctor. The doctor, in the view of Warrington J quite reasonably, left the active management of the trust to the solicitor. The solicitor was guilty of delay, but eventually the delay got too long for the beneficiaries to bear and they sued the trustees. The doctor was held entitled to be indemnified not only against the cost he had to pay the plaintiffs, but also his own costs of defending the action.
This case, together with the whole principle laid down in Broom v Hall, was approved by the English Court of Appeal in The Millwall [1905] P 155 at 173-174.
It follows from this discussion that the judge was quite justified in ordering that the appellant pay 50% of the respondent's costs in defending the action.
I have considered whether the judge made an error of law in not giving full consideration to this particular aspect of the case. It is unfortunate that the learned judge did not make a finding of fact one way or the other that the incurring of costs in defending the Doughan action was reasonable or what a reasonable litigant would have done in his own interests or was of incontrovertible benefit to the appellant. However, it appears to be that despite the paucity of reasons of this matter, he must have assumed that the benefit was clear in a litigant at arm's length who had been sued defending itself against Mr Doughan.
D. It follows that the appeal must be dismissed with costs.
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LAST UPDATED: 8 May 2007
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