Demetrios v Lehmann
[2019] VSC 301
•10 May 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S CI 2017 04640
| ANDREW DEMETRIOS and DOLLY DEMETRIOS | Plaintiffs |
| v | |
| SONYA KAY LEHMANN & ORS (according to attached schedule) | Defendant |
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JUDICIAL REGISTRAR: | Matthews JR |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 13 March 2019 |
DATE OF RULING: | 10 May 2019 |
CASE MAY BE CITED AS: | Demetrios v Lehmann |
MEDIUM NEUTRAL CITATION: | [2019] VSC 301 |
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PRACTICE AND PROCEDURE – Application to dismiss or strike out defendant’s proportionate liability defence – Trespass – Whether ‘failure to take reasonable care’ has to be an element of the cause of action for the claim to be apportionable – Unsettled point of law – Inappropriate to summarily dismiss or strike out – Rules 23.01 and 23.02 of the Supreme Court (General Civil Procedure) Rules 2015 – Wrongs Act 1958 (Vic), Part IVAA – Corporations Act 2001 (Cth), s 1041L – Selig v Wealthsure Pty Ltd (2015) 255 CLR 661 – ABN AMRO Bank NV v Bathurst Council (2014) 309 ALR 445 – Perpetual Trustee Co Ltd v CTC Group Pty Ltd (No 2) [2013] NSWCA 58 – Reinhold v New South Wales Lotteries Corp (No 2) (2008) 82 NSWLR 762 – Dartberg Pty Ltd v Wealthcare Financial Planning Ltd (2007) 164 FCR 450.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | S. Stuckey QC | Adams Maguire Sier |
| For the Defendant | W. Thomas | Giannakopoulos Solicitors |
| For the Second Third Party | P. Atkin, solicitor | Colin Biggers & Paisley |
JUDICIAL REGISTRAR:
Introduction
This decision concerns an application by the plaintiffs that paragraphs 14 to 30 of the defendant’s amended defence and counterclaim dated 27 November 2018 (‘ADCC’) should be dismissed under r 23.01(2) of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’), alternatively that those paragraphs should be struck out under r 23.02 of the Rules (‘Application’).[1]
[1]The Application has been referred to me for hearing and determination pursuant to r 84.04 of the Rules, by order made on the Court’s own motion.
The plaintiffs are the registered proprietors of land which is adjacent to land owned by the defendant. In this proceeding, the plaintiffs’ claim against the defendant is one of trespass to land, in that the defendant has constructed her house partly on the plaintiffs’ land and has permitted it to intrude into the airspace. The relief sought by the plaintiffs in the proceeding is an order that the defendant remove the encroachment, engage in no further trespass, and damages.
By the ADCC, the defendant admits that part of her house is on the plaintiffs’ land, denies the alleged trespass, says that any encroachment of her house onto the plaintiffs’ land is trivial, and raises a defence of estoppel.
Further, the defendant alleges that the plaintiffs’ action for trespass in this proceeding is an apportionable claim and that the defendant’s geotechnical surveyor and structural engineer are concurrent wrongdoers within the meaning of Part IVAA of the Wrongs Act 1958 (Vic) (‘Wrongs Act’) (‘Proportionate Liability Defence’), and that the geotechnical surveyor and structural engineer breached duties they owed to the plaintiffs (‘Negligence Defence’).
Specifically, in the ADCC the defendant alleges:[2]
[2]ADCC, [14]-[30].
(a) If the plaintiffs have suffered loss or damage in respect of the claims in this proceeding (which is denied) such claims are for economic loss or damage arising from an alleged failure to take reasonable care, and are apportionable claims for the purposes of Part IVAA of the Wrongs Act;
(b) The defendant commenced construction of the house on her land in about July 2006;
(c) Before constructing the defendant’s house on her land, the defendant engaged and relied upon a geotechnical report prepared by Geocore Pty Ltd (‘Geocore’), which has now been joined to the proceeding as the first third party, and engaged and relied upon a foundation and footing design prepared by E‑Struct Pty Ltd (‘E-Struct’), which has now been joined to the proceeding as the second third party;
(d) Each of Geocore and E-Struct had contractual obligations to exercise reasonable care and skill in the performance of their duties under those contracts;
(e) Each of Geocore and E-Struct owed the defendant and the plaintiffs a duty of care to perform their respective services exercising care and skill so as not to cause them loss and damage, including economic loss;
(f) If the plaintiffs’ claims against the defendant are correct (which is denied), then Geocore and E-Struct:
(i) breached their respective contractual obligations to the defendant;
(ii) failed to exercise reasonable care and skill in the performance of their respective works, thus breaching their duty of care to the defendant and the plaintiffs; and
(iii) are liable for any economic loss and damage that the defendant will suffer as a result.
(g) Geocore and E-Struct are persons whose acts or omissions caused the alleged loss and damage that is the subject of the claims by the plaintiffs against the defendant and are concurrent wrongdoers in relation to the alleged loss and damage within the meaning of Part IVAA of the Wrongs Act, and any liability of the defendant in relation to the alleged loss and damage of the plaintiffs is limited to the amount reflecting that proportion of the loss and damage that the Court considers just having regard to the extent of the defendant’s responsibility for the loss or damage.
In the Application, the plaintiffs submit that:
(a) The Proportionate Liability Defence and the Negligence Defence are bad in law, such that the defences contained in paragraphs 14 to 30 of the ADCC ought be dismissed under r 23.01(2) of the Rules; and
(b) If the Court takes the view that these allegations are maintainable, then the pleading fails to sufficiently identify the Negligence Defence and that should be struck out under r 23.02 of the Rules.
During the course of submissions at the hearing, Counsel for the defendant conceded that amendments to the Negligence Defence ought be re-pleaded, and so there is no need for me to deal with that aspect.[3] Although I need not determine the strike out application in respect of the Negligence Defence, the provisions of r 23.02 are relevant to the consideration of the Proportionate Liability Defence.
[3]As I apprehend it, the defendant indicated that there may be amendments to the Proportionate Liability Defence as well, depending on the outcome of this application.
Counsel for the plaintiffs and for the defendant each provided written outlines of submissions, which the Court has found very helpful.
Applicable law
Rule 23.01(2) provides:
Where the defence to any claim in a proceeding is scandalous, frivolous or vexatious, the Court may give judgment in the proceeding or in relation to any claim.
Rule 23.02 provides:
Where an indorsement of claim on a writ or originating motion or a pleading or any part of an indorsement of claim or pleading –
(a) does not disclose a cause of action or defence;
(b) is scandalous, frivolous or vexations;
(c) may prejudice, embarrass or delay the fair trial of the proceeding; or
(d) is otherwise an abuse of process of the Court –
the Court may order that the whole or part of the indorsement or pleading be struck out or amended.
It is necessary to set out the relevant provisions of Part IVAA of the Wrongs Act, which is the Part of that Act which deals with proportionate liability.
Section 24AF of the Wrongs Act relevantly provides that (emphasis added):
(1) This Part [ie Part IVAA] 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; and
(b)a claim for damages for a contravention of section 18 of the Australian Consumer Law (Victoria).
(2)If a proceeding involves 2 or more apportionable claims arising out of different causes of action, liability for the apportionable claims is to be determined in accordance with this Part as if the claims were a single claim.
Section 24AH(1) of the Wrongs Act provides:
A concurrent wrongdoer, in relation to a claim, is a person who is one of 2 or more persons whose acts or omissions caused, independently of each other or jointly, the loss or damage that is the subject of the claim.
Section 24AI of the Wrongs Act provides:
(1) In any proceeding involving an apportionable claim –
(a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is 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; and
(b)judgment must not be given against the defendant for more than that amount in relation to that claim.
(2)If the proceeding involves both an apportionable claim and a claim that is not an apportionable claim –
(a)liability for the apportionable claim is to be determined in accordance with this Part; and
(b)liability for the other claim is to be determined in accordance with the legal rules, if any, that (apart from this Part) are relevant.
(3)In apportioning responsibility between defendants in the proceeding the court must not have regard to the comparative responsibility of any person who is not a party to the proceeding unless the person is not a party to the proceeding because the person is dead or, if the person is a corporation, the corporation has been wound up.
Key question in this Application
The key question in this Application is whether the plaintiffs’ claim against the defendant, being one of trespass, is an apportionable claim.
This rests heavily on s 24AF(1)(a) of the Wrongs Act and whether the plaintiffs’ claim for damages arises from a failure to take reasonable care. If it does not, then Part IVAA does not apply and it is not an apportionable claim.
It was common ground that failure to take reasonable care is not an element of the cause of action of trespass. The plaintiffs’ written outline dealt with this issue in some detail, however by the time of the hearing it was apparent that the defendant did not contend that failure to take reasonable care was an element of the tort of trespass. Therefore, I do not need to deal with that.
The plaintiffs contend that as failure to take reasonable care is not an element of trespass and since their claim in the proceeding is based solely on trespass, the Proportionate Liability Defence is bad in law as the plaintiffs’ claim is not an apportionable claim.
The defendant submitted that the question of whether a failure to take reasonable care must be a necessary element of the cause of action in order for the claim to be an apportionable claim is the subject of conflicting authority between superior courts. Essentially, the tension is between whether a failure to take reasonable care must be a necessary element of the cause of action in order for it to be an apportionable claim (‘Legal Construction’), or whether a claim is an apportionable claim if it arises in fact from a failure to take reasonable care (‘Factual Construction’). The result of the Factual Construction is that the cause of action relied upon by the plaintiffs can be ignored, and the defendant is at liberty to allege that the damage has been caused by a failure to take reasonable care such that if at the trial negligence can be shown to be a cause of the loss, then all actions for that loss are apportionable, not merely those claims based on a want of care.
The defendant submitted that this remains a debatable point of law and that the prevailing view in Victoria tends to the conclusion that the Factual Construction is available. The plaintiffs submitted that the Factual Construction is precluded by the High Court’s decision in Selig v Wealthsure Pty Ltd,[4] which concerned the proportionate liability regime in the Corporations Act 2001 (Cth) (‘Corporations Act’).
[4](2015) 255 CLR 661 (‘Selig’).
The parties’ submissions regarding this question are set out in detail below.
Plaintiffs’ submissions
The plaintiffs submit that under s 24AF(1)(a), it is the claim which must arise from a failure to take reasonable care. They say that the prima facie meaning of ‘claim’ in that section is the claim brought by a plaintiff in a proceeding, which will either have a failure to take reasonable care as a necessary element (which would need to be pleaded) or it will not. A failure to take reasonable care is not a necessary element of trespass and the plaintiffs have not pleaded their claim to include any allegation of negligence or failure to take reasonable care.
As noted above, the plaintiffs relied heavily on Selig to contend that the Factual Construction was not available. Stating the facts in that case as simply as I can, a financial advisor had recommended to the applicants that they invest in what was effectively a Ponzi scheme. Counsel for the plaintiffs helpfully summarised this case as follows:
(a) The applicants sued the advisor and the authorised representative, and joined the investment company, its directors, and a promoter. The applicants succeeded on many of their grounds and the trial judge refused to apportion the damages between the various respondents. On appeal to the Full Federal Court, apportionment had been allowed.[5]
[5]Wealthsure Pty Ltd & Anor v Selig and Ors [2014] FCAFC 64 (‘Wealthsure’).
(b) The applicants sued on the following causes of action:
(iv)Breach of the contractual retainer to advise;
(v) Breach of the respondents’ duty of care;
(vi)Breach of the prohibition on engaging in misleading or deceptive conduct in relation to a financial service or product in s 1041H of the Corporations Act;
(vii) Breach of the prohibition on engaging in misleading or deceptive conduct in trade or commerce in relation to financial services in s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (‘ASIC Act’).
(c) The loss and damage alleged to have been suffered by the applicants as a result of these causes of action was the same.
(d) The question was whether the proportionate liability regime in the Corporations Act applied so that the loss and damage was to be apportioned between the relevant respondents in respect of all of those claims, or whether it was limited to the claims based on contraventions of s 1041H of the Corporations Act.
Division 2A of Part 7.10 of the Corporations Act, proportionate liability for misleading and deceptive conduct, relevantly provides as follows:
1041L Application of Division
(1)[Apportionable claim] This Division applies to a claim (an apportionable claim) if the claim is a claim for damages made under section 1041I for:[6]
(a) economic loss;
(b) damage to property;
caused by conduct that was done in a contravention of section 1041H.
(2)[Single apportionable claim] For the purposes of this Division, there is a single apportionable claim in proceedings in respect of the same loss or damage even if the claim for the loss or damage is based on more than one cause of action (whether or not of the same or a different kind).
(3)[Concurrent wrongdoer] In this Division, a concurrent wrongdoer, in relation to a claim, is a person who is one of 2 or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim.
(4) [Limitation] For the purposes of this Division, apportionable claims are limited to those claims specified in subsection (1).
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[6]Section 1041I of the Corporations Act relevantly provides that a person who suffers loss or damage by conduct of another person in contravention of s 1041H may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.
1041NProportionate liability for apportionable claims
(1)[Liability of concurrent wrongdoer] In any proceedings involving an apportionable claim:
(a)the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant’s responsibility for the damage or loss; and
(b)the court may give judgment against the defendant for not more than that amount.
(2)[Liability where claims are mixed] If the proceedings involve both an apportionable claim and a claim that is not an apportionable claim:
(a)liability for the apportionable claim is to be determined in accordance with the provisions of this Division; and
(b)liability for the other claim is to be determined in accordance with the legal rules, if any, that (apart from this Division) are relevant.
…
The plaintiffs submit that in addressing the question I have summarised in paragraph 23(d) above, the High Court said that the answer lay in the meaning of ‘apportionable claim’, observing that:[7]
the [defendants] submitted before this court that the effect of s 1041L(2) is to disregard the legal basis for the claim, leaving any claim for the same loss and damage as the basis for apportionment. The underlying assumption to the approach for which the [defendants] contend is that the “cause[s] of action” referred to in s 1041L(2) are to be equated with “the claim for the loss or damage”. On this view each cause of action pleaded is to be treated as an apportionable claim.[8]
[7]Selig (n 4) [28].
[8]This was the approach taken by the majority in the Full Federal Court in the case on appeal: Wealthsure Pty Ltd & Anor v Selig and Ors [2014] FCAFC 64.
The High Court rejected that assumption, that is, the Factual Construction, and determined that the operation of s 1041L(2) did not incorporate causes of action other than those under s 1041H. The High Court stated:[9]
The function of s 1041L(2) is not to complete the definition of an apportionable claim. That has already been provided by s 1041L(1). Its purpose is to explain that, regardless of the number of ways in which a plaintiff seeks to substantiate a claim for damages based upon a contravention of s 1041H, so long as the loss or damage claimed is the same, apportionment is to be made on the basis that there is a single claim. Regardless of the various causes of action pleaded with respect to s 1041H, the responsibility of the defendants will be apportioned by reference to a notional single claim.
[9]Selig (n 4) [31].
The plaintiffs note that the High Court drew attention to s 1041N(2) of the Corporations Act, the equivalent of s 24AI(1) of the Wrongs Act, and rejected a ‘more universal application’ of the proportionate liability regime because the section clearly contemplated that claims for the same loss and damage and may involve apportioned and non-apportioned causes of action.[10]
[10]Selig (n 4) [32].
The High Court concluded that the terms of Division 2A of Part 7.10 of the Corporations Act are clear: an apportionable claim for the purposes of that division is ‘a claim based upon a contravention of s 1041H. The term does not extend to claims based upon conduct of a different kind.’[11]
[11]Selig (n 4) [37].
The plaintiffs submit that although Selig concerned the provisions of the Corporations Act, the High Court recognised that these provisions were part of a series of legislative provisions which involved ‘template provisions for use in more than one statute’.[12]
[12]Selig (n 4) [18]-[21], [34].
The plaintiffs submit that in light of this decision, it is not possible to contend that the term “apportionable claim” extends to causes of action that do not involve a failure to exercise reasonable care either by way of s 24AF(2) or by arguing that it is the cause of the loss and damage rather than the cause of action that determines whether a claim is apportionable. The plaintiffs say that the Factual Construction is not open unless the Wrongs Act operates in a fundamentally different way to the Corporations Act, notwithstanding their common drafting approaches.
Defendant’s submissions
Proportionate Liability Defence
The defendant submits that the Legal Construction was approved by at least one judge of the Court of Appeal of New South Wales, albeit in obiter dicta and not joined by the other members of the Court in that case.[13] However, the defendant submits that the preponderance of authority favours the Factual Construction.
[13]Perpetual Trustee Co Ltd v CTC Group Pty Ltd (No 2) [2013] NSWCA 58, [23] (Macfarlan JA); cf [42] (Barrett JA); [36] (Meagher JA, not deciding) (‘Perpetual v CTC’).
The defendant submits that even though failure to take reasonable care is not an element of the cause of action of trespass, if on the facts as determined at trial the trespass can be said to have arisen from a failure to take reasonable care, then it is an apportionable claim.
In support of the Factual Construction, the defendant relied heavily on a decision of the Supreme Court of New South Wales in Reinhold v New South Wales Lotteries Corp (No 2).[14] That decision concerned the wrongful cancellation of the plaintiff’s winning lottery ticket by a newsagent and by the NSW Lotteries Corporation. Barrett J found that both parties had breached their contracts with the plaintiff by the wrongful cancellation and he also found that both of the defendants were negligent. In that case, the plaintiff argued that the proportionate liability regime did not apply to his claims in contract, because it was not necessary for the defendants to have acted negligently in order for those claims to be established. Since the claims in contract did not include failure to take reasonable care as a necessary element of the cause of action, they did not, the plaintiff argued, arise from a failure to take reasonable care and were not apportionable.
[14](2008) 82 NSWLR 762 (‘Reinhold’).
In Reinhold, Barrett J rejected the plaintiff’s argument. His Honour considered that a claim may be an apportionable claim provided at, at the end of the trial, the evidence warrants a finding that there has been a failure to take reasonable care. Whether a claim was an apportionable claim, therefore, was to be judged in light of the findings made as opposed to the words in which it was framed.[15] In other words, Barrett J favoured the Factual Construction. In so concluding, his Honour focused upon the text of the apportionment legislation and, in particular, the use of the word “claim”:[16]
It seems to me clear that a person will be a “concurrent wrongdoer” only if the court makes findings about the existence of “loss or damage” and about which acts or omissions “caused” the loss or damage. It is only when those findings are made that it is possible to identify, as contemplated by s 34(2), each person whose acts or omissions, as found, “caused” the “loss or damage”, as found. At that point, and not before, a person can be seen to be a “concurrent wrongdoer”.
The relevant “claim” — that is, the claim in relation to which the identified person is a “concurrent wrongdoer” — can only be the claim in respect of which the findings concerning loss or damage and causation are made. That claim is, of necessity, a claim already litigated, not a pending or foreshadowed claim. Its nature and content (and, therefore, its status under s 34(1)) will be discoverable by looking at the findings that cause it to be determined as it is determined. If, on those findings, it is seen that the loss or damage (as established in “an action for damages”) arose from a failure to take reasonable care and did not arise out of personal injury, the case will be within s 34(1)(a); and if it is seen that there was a contravention of s 42 of the Fair Trading Act, the case will be within s 34(1)(b). In either such case, the already litigated “claim” will be an “apportionable claim” because of s 34(1) and, if, on the findings made, the acts or omissions of several persons “caused” the “damage or loss” as found, the persons will be “concurrent wrongdoers”.
…
On this basis, the nature of a “claim”, for the purposes of Pt 4, will be determined by what the court has decided in the case, not by what might be prayed or pleaded in an initiating process or points of claim. In short, “claim” refers to a claim as proved and established, not a claim as made or advanced.
[15]Reinhold (n 14) [30].
[16]Reinhold (n 14) [19]-[22] (emphasis added). The terms of the New South Wales apportionment legislation under consideration in this case, being Part 4 of the Civil Liability Act 2002 (NSW) (‘Civil Liability Act’), are relevantly the same as Part IVAA of the Wrongs Act.
In Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd, Middleton J of the Federal Court considered the meaning of apportionable claim for the purposes of the application of Part IVAA of the Wrongs Act:[17]
In my view, Part IVAA could apply in the circumstances of this proceeding according to its own terms. Where a claim brought by an applicant does not have as one of its necessary elements any allegation of failing to take reasonable care, an additional enquiry into the failure to take reasonable care may become relevant in the course of a trial to determine the application of Part IVAA. Even though the claims in this proceeding do not rely upon any plea of negligence or a “failure to take reasonable care” in a strict sense, a failure to take reasonable care may form part of the allegations or the evidence that is tendered in the proceedings. At the end of the trial, after hearing all the evidence, it may be found that Part IVAA applies.
[17](2007) 164 FCR 450, 458 [30] (‘Dartberg’); cited with approval in Reinhold [29].
The defendant submits that the Factual Construction favoured by Barrett J in Reinhold and Middleton J in Dartberg has been cited with approval in subsequent decisions by superior courts in Victoria. Counsel for the defendant referred to Solak v Bank of Western Australia Ltd, where Pagone J decided that a third party claim by the defendant bank against a mortgage broker for breach of contract, in connection with the negligent approval of a forged signature on a mortgage, was an apportionable claim.[18] His Honour considered that the factual pre-condition to the operation of the apportionment provisions – that is, a failure to take reasonable care – was satisfied:[19]
[T]he apportionability of claims under the State legislation all depend fundamentally upon whether the claim is one “arising from a failure to take reasonable care”. Bank West’s claim against the third parties is not pleaded as such but the factual pre-condition to the operation of the relevant statutory regimes does not depend upon how a claim is pleaded but whether the statutory precondition exists, namely whether the claim arises from a failure to take reasonable care. In Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd Middleton J said that the words “arising from a failure to take reasonable care” should be interpreted broadly. In my view the State regimes providing for apportionment of liability between concurrent wrongdoers requires a broad interpretation of the condition upon which apportionment provision [sic] depends to enable courts to determine how the claim should be apportioned between those found responsible for the damage. The policy in the legislation is to ensure that those in fact who caused the actionable loss are required to bear the portion of the loss referable to their cause. That task ought not to be frustrated by arid disputes about pleadings. Support for that conclusion may be found by the circumstance that a “failure to take reasonable care” can arise as much from an obligation in tort as in contract. In this case Bank West’s claim for indemnity based upon a failure to sight original documents (that is, a breach of contract) may aptly be described as a failure to take reasonable care for the purposes of the apportionment provisions. The views relied upon by Bank West from Commonwealth Bank of Australia v Witherow and Gunston v Lawley do not require a different conclusion. Bank West’s action is in my view one “based on an alleged failure” by the third parties to take “reasonable care”.
[18][2009] VSC 82 (‘Solak’).
[19]Solak (n 18) [35] (emphasis added) (citations omitted).
The defendant also referred to Godfrey Spowers (Victoria) Pty Ltd v Lincolne Scott Australia Pty Ltd, where Ashley JA (with whom Nettle and Neave JJA agreed) also favoured the approach of Barrett J in Reinhold to the proper construction of apportionable claim:[20]
The second reason why I do not agree with the proposition that the liability of Spowers was, as it were, immediately confined by operation of the pleadings to proportionate liability made under Part IVAA is that, in my opinion, the operation of Part IVAA is dependent upon judgment by a plaintiff against a defendant. I consider, contrary to the submission of counsel for the engineer, that it is not simply the quantum of the limitation on liability which depends upon judgment.
The definition of “apportionable claim” by s 24AE, and the description in s 24AF of circumstances in which Pt IVAA applies do not mean that, once something that looks like an apportionable claim is pleaded, a defendant forthwith becomes a “concurrent wrongdoer”. Section 24AH(1) emphasises that whether a wrongdoer is of that character depends upon the person having been one of two or more persons whose acts or omissions caused the plaintiff’s loss and damage. At least absent highly unusual pleadings, determination of the critical circumstances will depend upon findings having been made.
…
Such an analysis of similar provisions was made, as counsel for Spowers submitted, by Barrett J in Reinhold v NSW Lotteries Corporation (No 2). It is true, as counsel for the surveyors submitted, that Reinhold was a case conducted within the confines of the NSW equivalent of Pt IVAA. But in my opinion it gives lie to the idea that, without judgment, a defendant who might turn out to be a concurrent wrongdoer in an apportionable claim attains that status, and is fixed with liability under Pt IVAA — judgment merely fixing the quantum of liability.
[20](2008) 21 VR 84, 104 [104-106] (citations omitted) (‘Godfrey Spowers’).
After quoting extensively from Reinhold, Ashley JA said that he agreed with the analysis of Barrett J and that the observations of his Honour in that case ‘emphasised the importance of trial to the determination of the application of the relevant legislation’.[21]
[21]Godfrey Spowers (n 20) [108]-[109].
Finally, the defendant referred to Owners Corporation No 1 of PS613436T v LU Simon Builders Pty Ltd (Building and Property), where Judge Woodward (sitting as Vice President of the Victorian Civil and Administrative Tribunal) considered claims arising from the cladding fire at the Lacrosse building.[22] The defendant says that his Honour preferred the views expressed by Middleton and Barrett JJ as to the application of the apportionment legislation (that is, the Factual Construction) and that Reinhold and Dartberg represented the law applicable in Victoria having regard to the comments made by the Court of Appeal in Godfrey Spowers.[23]
[22][2019] VCAT 286 (‘Lacrosse’).
[23]Lacrosse (n 22) [322]. However, in my view this submission is not accurate: as set out in paragraph 51 below, Judge Woodward was not referring to the proportionate liability regime when he made those remarks.
The defendant says that I do not need to determine whether the Factual Construction is correct, as that question remains unresolved by appellate authority, save for the observations in Godfrey Spowers.
The defendant disagrees with the plaintiffs’ submission that the debate is foreclosed by Selig, as she submits that the sections of Selig relied upon by the plaintiffs do not resolve the question. The defendant says that s 1041L(1) of the Corporations Act is equivalent to s 24AF(1)(b) of the Wrongs Act, which is not relied on here, and is not equivalent to s 24AF(1)(a), which is relied on here. The defendant says that the construction of “arising from a failure to take reasonable care” does not arise in the context of the Corporations Act provisions and hence was not considered in Selig.
Rather, the defendant says that the proper construction of apportionable claim is the subject of ongoing debate and it is neither appropriate nor desirable to resolve that debate on this application. The fact that the question is the subject of debate means that the Court should not strike out the paragraphs of the ADCC which rely upon the Factual Construction adopted in the cases referred to, for the reasons I will explain in the following section. The defendant also says that the Proportionate Liability Defence is not so unsustainable that the Court should summarily dismiss those paragraphs, as she says that there is ample authority to support the legal contention underpinning those paragraphs.
Approach the Court should take to Rules 23.01(2) and 23.02 in this Application
The defendant submits that the plaintiffs bear a heavy onus under these Rules. As to r 23.01, the defendant says that the Court ought not make an order unless it is clear that the defence is unsustainable in fact or law and no proper amendment could raise a good defence.[24] As to r 23.02, the defendant says that the Court must exercise the power with caution, particularly where there is a real question to be tried. In Hoh & Ors v Frosthollow Pty Ltd & Ors, Derham AsJ said in relation to the power to strike out under r 23.02:[25]
The power to summarily strikeout or dismiss the whole or a part of a claim under rule 23.02, on the grounds that it does not disclose a cause of action, is to be exercised with caution, especially where it appears to the Court that there is a real question to be tried. Particular caution is warranted where the objections taken are technical and the boundaries of the area of law relied upon to support the pleading are still developing. The Court will not make an order under rule 23.02 where the pleading raises a debatable point of law. The power should only be exercised where, assuming the facts pleaded are established, the claim is so manifestly hopeless that a trial will be a futility. Where a pleading is struck out under rule 23.02, the affected party will generally be given leave to amend the pleading, or where the whole pleading is struck out, to serve another pleading.
[24]Annesley v Westpac [2016] VSC 323, [64]; E A Negri Pty Ltd v Technip Oceania Pty Ltd (2010) 27 VR 31, 34 [21]-[22].
[25][2014] VSC 77, [20] (emphasis added) (citations omitted).
The defendant says that save for the last sentence of the above paragraph, the observations of Derham AsJ apply with equal force to an application brought for summary dismissal under r 23.01.
The defendant also says that the Court ought to be even more reluctant to exercise the power to summarily strike out or dismiss a defence which concerns a developing area of the law. In E A Negri Pty Ltd v Technip Oceania Pty Ltd, a case which concerned a claim in restitution, the Court of Appeal said in relation to an application to summarily dismiss the claim pursuant to r 23.01:[26]
In a developing area of law, such as this, the absence of any binding authority rejecting a claim of this nature leads us to conclude that such a claim cannot be regarded as being so clearly hopeless that it cannot possibly succeed. That was the conclusion reached by Vickery J, and one with which we respectfully agree.
[26](2010) 27 VR 31, 37 [38].
The defendant says that similar observations were made with respect to the predecessor to r 23.02 in A v Ipec Australia Ltd, in which Menhennit J noted that the Court would not strike out a pleading which raised a debatable point of law:[27]
This application is on the grounds that no cause of action is disclosed and that it tends to prejudice, embarrass or delay the fair trial of the action. It therefore invokes the powers in O. 19, r. 27, and O. 25, r. 4. As to striking out under O. 19, r. 27, the position is stated in Williams Supreme Court Practice at p. 321 in the passage which reads: “The Court will not make any order under this Rule where the pleading raises a debatable point of law”, and authorities are cited in support of that statement. As to O. 25, r. 4, the rules are stated at p. 366 of Williams in these passages: “The summary procedure under this Rule can only be adopted when it can be clearly seen that a claim or answer is, on the face of it, ‘obviously unsustainable’.” Authorities are cited in support of that. It is further stated: “In order to be struck out under the Rule the action must, on the face of it, ‘be so manifestly faulty that it does not admit of argument’.” Authorities are cited in support of that proposition.
Having regard to one additional fact, to which I shall refer, I conclude that this matter raises an arguable point of law of such a kind as should not result in the pleading being struck out.
[27][1973] VR 39, 53 (emphasis added); cited by Derham AsJ in Hoh v Frosthollow Pty Ltd [2014] VSC 77, [20].
The defendant says that the proper construction of apportionable claim in s 24AF of the Wrongs Act is a debatable point of law, and relying on the submission set out above, that means summary dismissal is inappropriate in this case.
Consideration
The plaintiffs did not disagree with the submissions made by the defendant as referred to in paragraphs 43 to 46 above. I accept the defendant’s submissions in this regard, and I also accept her submission that if the point of law is debatable, then summary dismissal or a strike out of the Proportionate Liability Defence is not appropriate. That is a matter which should be left for trial.
I have carefully considered the parties’ detailed submissions and have concluded that it is arguable that the decision of the High Court in Selig does not foreclose an argument that the Factual Construction is open. In my view, the language of s 1041L(1) of the Corporations Act confines apportionable claims to those for a certain type of loss or damage caused by a contravention of s 1041H, which is very specific. It is not the same type of language as used in s 24AF of the Wrongs Act.
However, I do not need to decide which approach is preferable, and as is usually the case where summary disposal of the matter is not warranted, it is appropriate that I do not express firm views on the subject.
The only decision referred to by the parties in respect of the key question which was decided after Selig is that of Lacrosse, which does not refer to it at all. In Lacrosse, Judge Woodward’s preference for the approach of Middleton J in Dartberg and Barrett J in Reinhold, which his Honour says found favour with the Victorian Court of Appeal in Godfrey Spowers, was in respect of whether he needed to engage with the question of whether a finding that conduct arose from a failure to take reasonable care involves a factual or legal inquiry – in Lacrosse, his Honour had found that the factual and legal inquiry align and Part X of the Wrongs Act was engaged.[28] This comment was not made in respect of the proportionate liability regime. That regime was dealt with in Lacrosse, but this question was not addressed in that context: quite likely because it does not appear that the meaning of apportionable claim arose for consideration, at least in respect of the competing approaches of the Legal Construction and the Factual Construction.
[28]Lacrosse (n 22) [322].
I note that in Selig, the High Court did not refer at all to cases such as Reinhold and Dartberg. The High Court reached its decision on whether the claims other than those for a contravention of s 1041H were apportionable claims by means of construing the statute, and not by reference to the issues as analysed in Reinhold, Dartberg and the others I have referred to, which concerned the proportionate liability regimes in state statutes in New South Wales and Victoria, and not the Commonwealth statutes.
The plaintiffs submitted that these various regimes were all part of a series of legislative provisions involving template provisions for use in more than one statute, relying on Selig for that proposition.[29] However, I do not read that portion of Selig in that way: it cannot be read as meaning that all of the proportionate liability regimes conform to a template and should be interpreted in the same way.
[29]See paragraph 29 above.
The High Court noted in Selig[30] that shortly after the decision of the Full Federal Court in Wealthsure was handed down, a differently constituted Full Federal Court delivered reasons for decision in another matter, in which a view of the construction of Division 2A was expressed which was contrary to that of the majority in Wealthsure, referring to ABN AMRO Bank NV v Bathurst Regional Council.[31]
[30]Selig (n 4) [7].
[31](2014) 309 ALR 445 (‘ABN Amro’).
In ABN Amro, the relevant question was the same as that obtaining in Selig: whether the proportionate liability regime applied so that the loss and damage was to be apportioned between the relevant respondents or whether it was limited to claims based on contravention of s 1041H. The Full Federal Court in ABN Amro stated that ‘similar but different legislation has been introduced in the states and territories’ and referred specifically to Part 4 of the Civil Liability Act and Part IVAA of the Wrongs Act, stating that these two Acts ‘are in substance of similar effect’.[32] The Full Federal Court then stated that s 1041L(1) contains significant differences to the two state Acts and goes on to discuss those.[33] The Full Federal Court then stated that Reinhold and Godfrey Spowers must be considered bearing these differences in mind.[34] Further, when discussing Wealthsure and indicating that it preferred the approach of the minority in that case, the Full Federal Court stated:[35]
The cases involving State legislation such as Reinhold and Godfrey Spowers take a different approach [to that of the minority in Wealthsure], but that is because of the significant textual and contextual differences in the apportionment provisions of that legislation from that found in the Corporations Act, the ASIC Act and other Commonwealth legislation.
[32]ABN Amro (n 31) [1547]-[1548].
[33]ABN Amro (n 31) [1549]-[1551].
[34]ABN Amro (n 31) [1552].
[35]ABN Amro (n 31) [1575].
The Full Federal Court in ABN Amro went on to say that (citations omitted):[36]
[36]ABN Amro (n 31) [1584]-[1585].
Nothing stated by Middleton J in Dartberg is contrary to the views we have expressed as to the meaning and effect of the proportionate liability provisions in the Corporations Act.[37] Indeed, when referring to these in passing at [18]-[19] his Honour appears to have accepted, as we do, that the regime applies to causes of action pleaded. This gives meaning to the words ‘claim for damages made’ found in s1041L(1). This is to be distinguished from his Honour’s analysis of Pt IVAA of the Wrongs Act, which was relevantly involved. As was observed by Middleton J at [29]-[31]:
[29] As the respondents observed, in drafting the provisions of Pt VIAA of the Wrongs Act, the legislature deliberately chose to define “apportionable claim” by reference to an action for damages arising from a failure to take reasonable care. The provisions do not require that the claim itself be a claim in negligence or for a breach of duty — it only requires that the claim arise from a failure to take reasonable care. The expressions “arising from” or “arising out of” are of wide import.
[30] In my view, Pt IVAA could apply in the circumstances of this proceeding according to its own terms. Where a claim brought by an applicant does not have as one of its necessary elements any allegation of failing to take reasonable care, an additional enquiry into the failure to take reasonable care may become relevant in the course of a trial to determine the application of Pt IVAA. Even though the claims in this proceeding themselves do not rely upon any plea of negligence or a “failure to take reasonable care” in a strict sense, a failure to take reasonable care may form part of the allegations or the evidence that is tendered in the proceedings. At the end of the trial, after hearing all the evidence, it may be found that Pt IVAA applies.
[31] In these circumstances, where a respondent desires to rely upon Pt IVAA of the Wrongs Act, it will need to plead and prove each of the statutory elements, including the failure to take reasonable care. In a proceeding where the applicant does not rely upon any such failure, then the need for a particularised plea by a respondent may be particularly important for the proper case management of the proceedings. It would be desirable at an early stage of proceedings for a respondent to put forward the facts upon which it relies in support of the allocation of responsibility it contends should be ordered. If a respondent calls in aid the benefit of the limitation on liability provided for in Pt IVAA of the Wrongs Act, then the respondent has the onus of pleading and proving the required elements. The court, after hearing all the evidence, will then need to determine, as a matter of fact, whether the relevant claim brought by the applicant is a claim arising from a failure to take reasonable care.
These observations concerning the Wrongs Act have no application to the relevant provisions of the Corporations Act or the other Commonwealth legislation we have considered.
[37]That is, the view which ultimately obtained in the High Court in Selig (n 4).
Counsel for the parties indicated during the course of argument that they were not aware of cases since the High Court decision in Selig which had considered the question.
From my own research, there are a small number of cases since Selig and ABN Amro which may be relevant. Most cases referring to those decisions in respect of proportionate liability do so in the context of Commonwealth legislation and are of limited utility on this question.[38]
[38]See, for example, Williams v Pisano [2015] NSWCA 177; Latol Pty Ltd v Gersbeck [2015] NSWSC 1631; Tamaya Resources Ltd (in liq) v Deloitte Touche Tohmatsu (A Firm) [2016] FCAFC 2.
In Dunn v Hanson Australasia Pty Ltd,[39] the ACT Supreme Court dealt with proportionate liability under the ACT equivalent of Part IVA of the Wrongs Act, being the Civil Law (Wrongs) Act 2002 (ACT). In that case, Mossop J referred to the competing authorities of Perpetual v CTC and Reinhold,[40] noting that subsequent cases have not had to determine which of these approaches should be adopted.[41]
[39][2017] ACTSC 169 (‘Dunn’).
[40]Dunn (n 39) [47], referring to his Honour’s earlier decision in Owners v Koundouris [2016] ACTSC 96, [612].
[41]Dunn (n 39) [47], referring to Owners-Strata Plan No 68372 v Allianz Australia Insurance Limited [2014] NSWSC 1807, [37]; Smart v AAI Ltd [2015] NSWSC 392, [156].
In Dunn, Mossop J concluded that:[42]
the expression ‘failure to take reasonable care’ is designed to encompass actions which involve the establishment of that legal standard. It is not meant in some non-technical sense that invites a characterisation exercise so as to establish that the breach of some other legal standard involves a failure to take reasonable care.
[42]Dunn (n 39) [48].
In other words, his Honour favoured the Legal Construction. Mossop J did not refer to or rely on Selig or ABN Amro in reaching that conclusion.
In circumstances where the High Court in Selig did not refer to Reinhold, Dartberg or any other like case and where the language in the text of the Corporations Act is different to that of the Wrongs Act, and in light of discussions in appellate cases such as ABN Amro, I do not consider the question posed by the defendant to be definitively closed to her. Therefore, I have concluded that it is arguable that Selig does not foreclose an argument that the Factual Construction of cases where Part IVAA of the Wrongs Act may be applicable is open.
My conclusion is consistent with recent commentary on this question, which certainly does not regard the position as settled (at least in the context of the state based legislation), be it by an application of Selig or otherwise. There are several journal articles where the authors refer to the conflicting approaches and see the question as requiring resolution, be it by the High Court or the legislature.[43]
[43]For example, see Graeme S Clarke, ‘Proportionate Liability in Commercial Cases: Principles and Practice’ (2019) 93 ALJ 188; Richard Douglas, ‘An Apportionable Claim “Arising from a Failure to Take Reasonable Care”: Time for the Legislature to Cure the Ambiguity!’ [2018] (November) Australian Civil Liability 109; and Grant Lubofsky, ‘A Contractual Path Around Proportionate Liability’ (2018) 34 BCL 5.
Since I regard the question as arguable, it is not appropriate that the Proportionate Liability Defence be dismissed or struck out. It is not something that is appropriate to be determined in a summary application.
For the sake of completeness, I note that questions such as whether, even on a Factual Construction, it is the defendant’s failure to take reasonable care which is required rather than such a failure by other persons, were not argued before me. Nor was there argument as to the distinction between causation in fact and causation giving rise to legal liability,[44] although the plaintiffs did refer to the alleged deficiencies in the ADCC as to how the third parties were said to be liable to the plaintiffs.
[44]See, for example, the discussion in Babscay Pty Ltd v Pitcher Partners (a Firm) [2019] FCA 480, [44]-[47].
Conclusion
It follows that the plaintiffs’ application to dismiss or strike out the Proportionate Liability Defence ought be dismissed.
I will hear from the parties as to the appropriate form of orders and as to costs.
SCHEDULE OF PARTIES
BETWEEN:
ANDREW DEMETRIOS First Plaintiff / First Defendant by Counterclaim DOLLY DEMETRIOS Second Plaintiff / Second Defendant by Counterclaim - and - SONYA KAY LEHMANN Defendant / Plaintiff by Counterclaim - and - GEOCORE PTY LTD First Third Party E-STRUCT PTY LTD Second Third Party
0
11
0