CTC Group Pty Ltd ACN 105 726 065 v Perpetual Trustee Company Limited

[2013] HCATrans 248

[2013] HCATrans 248

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S79 of 2013

B e t w e e n -

CTC GROUP PTY LTD ACN 105 726 065

Applicant

and

PERPETUAL TRUSTEE COMPANY LIMITED

Respondent

Application for special leave to appeal

KIEFEL J
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 11 OCTOBER 2013, AT 11.08 AM

Copyright in the High Court of Australia

MR D.M.J. BENNETT, QC:   May it please the Court, I appear for the applicant with my learned friend, MR A.L. TOKLEY, SC.  (instructed by Gilchrist Connell)

MR J.B. SIMPKINS, SC:   If the Court pleases, I appear for the respondent.  (instructed by Gadens Lawyers)

KIEFEL J:   Yes, Mr Bennett.

MR BENNETT:   If the Court pleases.  Your Honours, the key issue in this case, the key fact in this case, is this:  that the effect of the decision of the Court of Appeal is that the apportionment provisions of the Civil Liability Act (NSW) and the corresponding interstate legislation will rarely apply to a contractual obligation, particularly one to indemnify. May I make that good first by taking your Honours briefly to the statutory provisions?

The operative provision of the statute appears under tab 5 in section 35 at page 53 of our authorities.  Your Honours see what that does, in effect, is it says, well, in the old days one had a situation where if there were multiple wrongdoers they were all liable and there may or may not be rights of contribution between them.  Now, what one says is what percentage does one attribute to each one and that one is only liable for that share and the risk of insolvency or death or winding‑up of one of the wrongdoers falls on the plaintiff rather than the other defendants.  That is the substantive effect of the legislation which is the law in every Australian State.

One then goes to a couple of definitions.  Section 34 defines “apportionable claims”.  One could summarise this by saying it is everything except personal injuries, but I will be a little more precise.  Your Honours will see it is:

a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care, but not including any . . . personal injury –

Then there are some specific ones under the Fair Trading Act.  So that is an apportionable claim.  “Damages” is defined by section 3 which appears under the previous tab on page 50 and for our purposes it includes “any form of monetary compensation” subject to some irrelevant exceptions.  Then there is the qualification which is the subject matter of this case and for that one needs to go back to page 53 – I am sorry, page 52 where the – I am sorry, I am still wrong.  It is page 50 under tab 4, section 3A, and your Honours see that subsection (2) provides that:

This Act . . . does not prevent the parties to a contract from making express –

That is the word this case is all about -

provision for their rights, obligations and liabilities under the contract with respect to any matter to which this Act applies and does not limit or otherwise affect the operation of any such express provision.

Subsection (3) makes the obvious point that applies even if the liability is one in contract.  The question is this, if you look at a normal – the archetypal situation, there will be a contract, and the contract will say, if a party commits a breach or a breach of a certain type, that party is liable to pay the damage suffered by the other party or indemnify the other party against something or pay a sum of money.  It will always, or virtually always, say just that; if an event occurs, party B is liable to party A.  That then is the apportionable liability on which the Act operates if there are other people liable for the same damage.

What is said here is, “But if the contract says party B is liable to indemnify party A, full stop”, that is inconsistent with the apportionment legislation which of course means that you pay less than the full amount, therefore such a provision, the provision which is almost always going to be the provision one is talking about, is going to exclude it.  That is the error in this case and that also is the importance of the error because it takes away a very substantial part of the effect of the legislation. 

Just to show your Honours, though I need not spend time on this, the relevant clause in this case is clause 14.3 which appears at page 124 of the application book, paragraph 9 of Justice Macfarlan’s judgment, and your Honours will see there at line 40 on page 124, “The originator” – that is us – “indemnifies” – the respondent:

against any liability or loss arising from and any costs, charges and expenses incurred in connection with:

…

(d)      any breach by –

it –

of any of its warranties or obligations –

et cetera, including lots of costs.  So it is a very simple clause saying if we commit a breach we are liable to indemnify the other party against its loss, full stop.  That is a classic provision on which the Act operates.  It is the archetypal and normal provision on which the Act operates.  If you commit a breach, you pay damages.  Now, here what is said is that is inconsistent because that says you have to pay it all and the other legislation says you apportion it.  That simply cannot be the correct interpretation and really that is the whole point.  You can get there by saying you start from the definitions and the provision such as 14.3 is the provision on which the Act operates.

It certainly is not expressly saying something contrary.  It is not saying, “Notwithstanding any statutory right to apportionment that might otherwise exist”, or anything like that.  It is just not referring to the issue of apportionment at all.  It is just creating the liability which under the Act is apportioned.  If one says what the Court of Appeal here says – and I will show your Honours exactly where it said it in a moment – one is saying the Act is never going to apply where you simply have an obligation by one party to pay damages to the other.  There is a very good analogy ‑ ‑ ‑

KEANE J:   Not damages, full indemnity.  The contract here provides for a full indemnity.  It is wrong to characterise it as just being a provision that obliges one party to pay damages to the other.

MR BENNETT:   Yes, it provides for a full indemnity, yes, your Honour.

KEANE J:   What indication is there in the Act that the parties’ freedom to contract with each on that footing is denied?

MR BENNETT:   Their freedom to contract on any footing they like is not denied.  They can exclude the Act so long as they do so expressly.  I accept the cases that say that you do not have to go so far as to say “notwithstanding the apportionment legislation” or words like that.  I accept that it does not require something as specific as that, but it does at least require something.

KEANE J: Why is section 3A(2) not a relatively clear indication of an intention not to interfere with the parties contracting to make express provision for their rights and obligations so as to exclude apportionment?

MR BENNETT:   They can, your Honour, there is no doubt of that.  But the question is whether a provision which merely says if you commit a breach and you are liable for the damages, whether you use the word “indemnify” or whatever other word you use, a mere provision to that effect is not, we would submit, something which is an express provision which contradicts it.  It is just the provision on which the Act operates.  If that excludes it, you are going to exclude virtually every contract.  Your Honour, there is a very good example ‑ ‑ ‑

KEANE J:   You are going to exclude all those contracts where the parties have agreed that if party A breaches, party A will indemnify B in respect of all its losses.

MR BENNETT:   Yes, your Honour, yes, you are.  That is the decision which we say is wrong and which is of great public importance.  May I just show your Honours a case which is a very useful analogy because it is exactly the same type of reasoning?  It is the decision of Justice Beaumont in the Federal Court in Re Gowing. It is in tab 2 of our authorities. Now, unfortunately, and I apologise for this, we have given your Honours the Australian Law Reports reference which of course is a no‑no. The correct reference should have been 11 FCR 111. I apologise for that, your Honours, it just was something that got through. If your Honours look at page 15 of the volume, the first page with the headnote, your Honours see section 194(1) of the Bankruptcy Act which says:

the meeting of creditors . . . in pursuance of an authority . . . shall be held:

“(a)    not later than 28 days after the authority is signed –

So there is a mandatory requirement that it be not later than 28 days after the signing of the authority.  Over to the top of the next page, page 16, your Honours will see at the very top of the page:

“The Registrar may‑

. . . 

(c)extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act –

So there is a general power of extension and in relation to after expiration it is subject to any express provision to the contrary.  What was argued there was there is an express provision to the contrary here because the Act says the meeting shall be held not later than 28 days after.  If the registrar extends it after that time has elapsed it is directly contrary to that provision which says it must be held within 28 days.  Therefore the registrar has no power to extend.  That argument, of course, was rejected and at line 20 on page 16 Justice Beaumont said:

In my opinion, there is nothing in the language of s 194 or elsewhere in the Act which could form a foundation for a suggestion that the general power to extend time . . . is not available for the purpose of extending the time . . . All that s 194(1) relevantly does is to fix a time limit for this purpose; it is silent on the question whether any extension of that limit should be permitted.

Although of course, stopping there, that extension denies the words of the provision itself because the provision is it shall be done by that date.

KIEFEL J: But the question here, Mr Bennett, is, is it not, whether under section 3A(2) the parties to the contract have made express provision for their rights, obligations and liabilities and express provision in that context surely simply means whether or not provision has been made within the written terms of the agreement.

MR BENNETT:   Yes, your Honour, but a provision of the simple type that says you are liable cannot on its own be that because that is the very thing on which the Act operates.

KEANE J:   But this contract does not just say, “You are liable”.  It says, “You are liable and, being liable, you will provide us with an indemnity”.

MR BENNETT:   Yes, your Honour, it says the consequence – yes, but that does not add anything to being liable, your Honour.

KIEFEL J:   Yes, it does, because it says, “The extent of your liability is the whole”, and that makes it somewhat inconsistent with the notion of apportionment.

MR BENNETT:   But it is always going to say that, your Honour.  Any contract which says, “If you commit a breach you are liable to pay the damage suffered by the other party”, is in that position because it is saying that you are paying the full damage suffered, full stop.  Now, the purpose of the apportionment legislation is to say that where you have such a liability, whether in tort or contract and so on, it is subject to apportionment and you can contract out of that expressly.  But merely to say, “You are liable for the full amount”, cannot be to contract out of it expressly.  It is just saying what is the liability on which the apportionment Act operates and your Honours, the error in the Court of ‑ ‑ ‑

KEANE J:   So what language would be necessary to contract out expressly?

MR BENNETT:   Your Honour, one could do it a number of ways.  One way might be, well, to say “notwithstanding the liability of any other parties” or “notwithstanding any right of apportionment that may exist”; it could be done that way.  It could be done ‑ ‑ ‑

KEANE J:   So you would have to expressly refer to the Act and negative its operation?

MR BENNETT:   No, your Honour, one does not need to refer to the Act.  If it just said “without apportionment”, that would do it.

KEANE J:   Why does not “indemnity” mean without apportionment?

MR BENNETT:   Well, your Honour, because it says no more than – if it said “liable for the damage suffered” why, one could ask rhetorically, does that not mean without apportionment?  It is simply stating the broad proposition before the apportionment Act gets to work on it.  As in the bankruptcy case, there is a broad proposition it must be held by a certain date.

KEANE J:   If the contract just said “Don’t breach.  You mustn’t breach or you’ll be liable”, why is that not different from a case where the contract goes on to say “and if you do breach you will indemnify”?

MR BENNETT:   Because, your Honour, as a matter of law it adds nothing.

KEANE J:   Well, why is that so?  Why in the first case would the apportionment Act not apply because there is a liability that has not been bolstered by a contractual provision that makes it non‑apportionable?

MR BENNETT:   Your Honour, in my submission, the contractual provision does not make it non‑apportionable.  It simply creates a liability and in creating that liability on its own without saying anything else, without expressly saying anything else, is simply creating the liability on which the apportionment Act operates, and that is what has happened here.  Your Honours, the error we say appears in paragraph 11 of his Honour Justice Macfarlan’s judgment at page 125 of the application book – and really the whole of the error is in that paragraph.  His Honour says:

Clause 14.3 renders CTC liable for the full amount of Perpetual’s loss resulting from a breach by CTC of a warranty ‑

et cetera.  He does not rely on the word “indemnity”, your Honours note:

It makes express provision for the rights and liabilities of ‑ ‑ ‑

KEANE J:   Well, to be fair to his Honour, he does begin the paragraph by saying, “Clause 14.3 renders CTC liable for the full amount”.

MR BENNETT:   Yes, it does, your Honour, as one would expect any clause creating liability of this type to do.  That is my point about the word “indemnity” not adding anything to that.  If I say, “I will pay any damage you suffer from my breach”, that has absolutely no difference in law from saying, “I will indemnify you against the consequences of my breach”.

KEANE J:   At line 38 he says:

If CTC’s liability were so limited –

that is, by the Act –

Perpetual would be deprived of its contractual right to full indemnity for its loss.

MR BENNETT:   Yes, he introduces the word there, yes, your Honour.  In any event, let me just read the whole thing:

It makes express provision for the rights and liabilities . . . that is inconsistent with the application of the apportionment –

liability, in exactly the same way, your Honours, that the power of the registrar to – I am sorry, the provision about the meeting must be held within 28 days created an express provision inconsistent with the application of the registrar’s power to extend:

If Part 4 applied in the manner for which CTC contends, it would limit CTC’s liability to . . . a proportion of the loss suffered –

We accept that:

If CTC’s liability were so limited, Perpetual would be deprived of its contractual right to full indemnity –

Yes, your Honours, that is what the apportionment legislation does:

Accordingly, s 3A(2) of the Act applies, as the parties to the MOD have made express provision with respect to a matter covered by Part 4.

Well, that sentence we say is simply wrong, with respect to his Honour.  It has not made express provision with respect to – the matter covered by

Part 4 is apportionment and it has not made express provision about apportionment.  All it said is, “You are liable for the amount”:

It follows that Part 4 is inapplicable –

et cetera.  As I say, your Honours, that it is the paragraph with which we take issue.  The issue is of course of considerable importance because it will affect, we would submit, a vast majority of the contractual cases to which this Act would otherwise apply.  We know from section 3A(3) that the provision in 3A(2) applies to cases involving contracts.  It is particularly important for the insurance industry where of course insurance companies frequently are dealing with defendants who are being sued under indemnities or liabilities for damages and it is of great importance there. 

Your Honours would note that in the Hunt & Hunt case which is at tab 7, Hunt & Hunt v Mitchell Morgan Nominees Pty Ltd (2013) 87 ALJR at page 89, your Honours will see that in paragraph [14] the five‑judge Bench of this Court, including your Honour Justice Kiefel said:

The background to the inquiry into the law of joint and several liability was a perceived crisis regarding the cost of liability insurance.  The fear had been expressed that such insurance would become unobtainable –

et cetera.  That is exactly the fear which would remain and would not be removed if the Act were applied in the manner that it has been construed here.

KIEFEL J:   I see the light is on, Mr Bennett.

MR BENNETT:   Yes.  Well, your Honours, for those reasons it is submitted that the decision below is clearly wrong and that there is a matter of significant public importance.  May it please the Court.

KIEFEL J:   We need not trouble you, Mr Simpkins.

Section 3A(2) of the Civil Liability Act 2002 (NSW) operates to ensure that the apportionment provisions of the Act yield to the express intention of the parties. That this should be so, as the Court of Appeal held, is hardly surprising. The contrary view would attribute to the legislature an intention to interfere with freedom of contract where it is not possible to discern in the Act any hint of an intention to do so.

The applicant’s argument is that the contractual provision on which the respondent relies, one for full indemnity, was not effectual because it did not refer expressly to any particular provisions of Part 4 of the Act.  There are insufficient prospects of success to warrant the grant of special leave to appeal.  The application for special leave is dismissed with costs.

MR BENNETT:   If the Court pleases.

AT 11.33 AM THE MATTER WAS CONCLUDED