Gandel v Krongold Constructions (Aust) Pty Ltd
[2014] VCC 650
•23 May 2014
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted |
AT MELBOURNE
COMMERCIAL LIST
BUILDING CASES DIVISION
Case No. CI-12-05973
| TONY GANDEL and HELEN GANDEL | Plaintiffs |
| v. | |
| KRONGOLD CONSTRUCTIONS (AUST) PTY LTD and ORS | Defendants |
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JUDGE: | HIS HONOUR JUDGE ANDERSON | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 2 May 2014 | |
DATE OF JUDGMENT: | 23 May 2014 | |
CASE MAY BE CITED AS: | Gandel & Anor v Krongold Constructions (Aust) Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2014] VCC 650 | |
REASONS FOR JUDGMENT
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Catchwords: Practice and procedure – Whether contribution proceedings would be “futile” – Whether issues relating to the apportionment of the plaintiffs’ claim and the first defendant’s contribution claim must await judgment - Godfrey Spowers (Victoria) Pty Ltd v Lincolne Scott Australia Pty Ltd [2008] VSCA 208; (2008) 21 VR 84 followed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Ms D. Turner (solicitor) | Wotton & Kerney |
| For the 1st Defendant | Mr C. Viti (solicitor) | Norris Coates |
| For the 2nd to 5th Defendants | Mr K. Oliver | Moray & Agnew |
| For the 6th Defendant | Mr N. P. de Young | Minter Ellison |
| For the 7th Defendant | Mr L. Rees (solicitor) | TressCox Lawyers |
| For the 8th Defendant | No Appearance (not served) |
HIS HONOUR:
1 It is necessary to determine in the proceeding whether one set of defendants (the second to fifth) can file and serve a Notice of Contribution against three further defendants (the sixth, seventh and eighth). The issue for decision is whether:
a. as the sixth and seventh defendants submit, the proposed Notice of Contribution is futile, because all issues, as between the relevant parties, will be resolved by an appropriate apportionment of the responsibility of the various defendants for any damages awarded to the plaintiffs, or possibly in contribution proceedings by the first defendant;
b. as the second to fifth defendants submit, they should be entitled to pursue the claim for contribution as an alternative to having raised in their defence that the plaintiffs’, and the first defendant’s, claims are apportionable claims and that the other defendants are concurrent wrongdoers.
2 The issue has more than theoretical significance only as regards the seventh and eighth defendants. Apart from the proposed Notice of Contribution by the second to fifth defendants, no other parties including the plaintiffs or the first defendant seek any relief against the seventh and eighth defendants. There would therefore be no reason, other than the second to fifth defendants’ Notice of Contribution, for those two defendants to take an active part in the proceeding.
The nature of the dispute and the parties
3 The plaintiffs own a home in Melbourne. In 2007, they agreed that the first defendant would carry out extensive renovations. The renovations were designed by two architects, the sixth and seventh defendants. The sixth defendant also administered the building contract. The contract works included the supply and installation of a decorative gas log fire in the games room. It is alleged that the gas fire was unsuitable and/or not installed properly because the hearth panel in the fireplace was constructed of flammable material and was installed too close to the burner. The gas fire apparently caused a fire at the house in 2011, resulting in substantial property damage totalling more than $5 million.
4 The parties in the proceeding are:
a. the plaintiffs – the home owners;
b. the first defendant – the building contractor;
c. the second to fifth defendants – together they operated a joinery business and were sub-contracted by the builder to carry out the joinery associated with the installation of the gas fire;
d. the sixth defendant – the first architect who participated in the design of the renovations and who administered the building contract. The architect, during the administration of the building contract, issued an instruction, no. AI 73, that the custom fireplace in the games room was to be replaced with a different fireplace;
e. the seventh defendant – the second architect who participated in the design of the renovations;
f. the eighth defendant – a licensed plumber, whose plumbing work as a sub-contractor to the builder included the installation of the gas fire and associated gas fitting work and who issued a compliance certificate under the Building Act1993 (Vic).
The proceedings
5 The pleadings in the proceeding have evolved over time with the joinder of further defendants so that the various claims made in the proceeding by the plaintiffs and the first defendant might be subject to apportionment pursuant to Part IVAA of the Wrongs Act1958 (Vic).
6 The plaintiffs delivered a Further Amended Statement of Claim on 2 May 2014. The pleading makes the following claims:
a. against the first defendant, the builder, for breach of the building contract by the defective installation of the gas fire, including the flammable hearth panel in the fireplace;
b. against the second to fifth defendants, the joinery sub-contractor, for the negligent manufacture, supply and installation of the joinery surrounding the gas fire;
c. against the sixth defendant, as the architect administering the building contract pursuant to an engagement by the plaintiffs for failing to take reasonable care by issuing instruction no. AI 73, which directed the replacement of the type of fireplace and amended the games room joinery to accommodate the new fireplace.
7 The first defendant has filed the following documents:
a. a Third Party Notice dated 1 August 2013 directed to the second to fifth defendants. This included claims for contribution and for indemnity. The basis of the claims was later adopted by the plaintiffs for their claim against the second to fifth defendants, as set out in the preceding paragraph;
b. a defence dated 30 September 2013 to the plaintiffs’ claim against it, disputing the plaintiffs’ claim and alleging that, if it were liable to the plaintiffs, the second to fifth defendants were concurrent wrongdoers with the first defendant within the meaning of the apportionment provisions so that any liability by the first defendant for loss and damage to the plaintiffs should be apportioned.
8 The second to fifth defendants, by their amended defences to the plaintiffs’ Amended Statement of Claim, and to the first defendant’s Third Party Notice, asserted that:
a. they disputed the plaintiffs’ claim and, further and alternatively, said that if they had any liability to the plaintiffs, the first defendant, the sixth defendant, the seventh defendant and the eighth defendants were concurrent wrongdoers with the second to fifth defendants, and any liability by the second to fifth defendants to the plaintiffs should be apportioned;
b. in respect of the first defendant’s claim (in the third party proceeding):
i) the first defendant’s claim was disputed but “if, which is denied”, they were liable to the first defendant, the first defendant, the sixth defendant, the seventh defendant and the eighth defendant were concurrent wrongdoers with the second to fifth defendants, and any liability by the second to fifth defendants to the first defendant (in the third party proceeding) should be apportioned;
ii) if the second to fifth defendants were liable to the plaintiffs for their loss or damage (which was denied), by reason of a clause in the sub-contract and by operation of s24AJ of the Act, “The second to fifth defendants cannot be required to contribute to the damages recovered or recoverable from the first defendant in this proceeding and cannot be required to indemnify the first defendant”.
9 Leave was granted to the first defendant on 2 May 2014 to amend its defence to claim that the sixth defendant was a concurrent wrongdoer in respect of the plaintiffs’ claim against it and that any liability by the first defendant to the plaintiffs should also be apportioned in respect of that defendant.
The argument
10 Section 24AJ of the Wrongs Act provides that:
“Despite anything to the contrary in Part IV, a defendant against whom judgment is given under this part as a concurrent wrongdoer in relation to an apportionable claim –
(a) cannot be required to contribute to the damages recovered or recoverable from another concurrent wrongdoer in the same proceeding for the apportionable claim; and
(b) cannot be required to indemnify any such wrongdoer”.
11 Section 24AO of the Act provides that, “Except as provided in section 24AJ, nothing in this Part affects the operation of Part IV” (relating to “Contribution”).
12 Sixth defendant’s counsel, Mr de Young (supported by seventh defendant’s counsel, Mr Rees), submitted that there was no room for the application of the second to fifth defendants’ Notice of Contribution as all issues in the dispute would be resolved by the determination of the plaintiffs’ claim against the first, second, fifth and sixth defendants and the apportionment of the first defendant’s claim for contribution and indemnity against the second to fifth defendants.
13 Essentially, this was the same argument advanced by the second to fifth defendants in their defence to the first defendant’s third party claim. The submission assumes that both the plaintiffs’ claim and the first defendant’s third party claim are “apportionable claims”, being claims for economic loss or damage to property “arising from a failure to take reasonable care” (s24AF(1)(a)). In the case of each of these defendants, the plaintiffs’ claim is pleaded against the first and sixth defendants in contract, and the first defendant’s claim against the second to fifth defendants is also pleaded in contract. It was submitted that both claims arise “from a failure to take reasonable care”.
14 It was submitted that each of the defendants was arguably a “concurrent wrongdoer” in relation to both of the plaintiffs’ and the first defendant’s claims, being “persons whose acts or omissions caused, independently of each other or jointly, the loss or damage that is the subject of the claim” (s24AH(1)). Further, the loss and damage was said to be the same in the case of each defendant; the property damage caused to the home and contents by the fire.
15 The first defendant pleads two causes of action against the second to fifth defendants in its Statement of Claim in the third party proceeding arising from the negligent manufacture, supply and installation of the joinery surrounding the gas fire. It is alleged that the second to fifth defendants used flammable MDF lining inside the firebox rather than stainless steel, as provided for by instruction no. AI 73, in breach of:
a. the contractual obligation to carry out the works in accordance with the architect’s instruction, as part of the works to be performed pursuant to the sub-contract; and
b. the duty to take reasonable care to avoid the risk of fire at the house;
16 The second to fifth defendants’ obligations to the first defendant pursuant to the joinery sub-contract included:
a. to carry out the works in strict accordance with the architect’s drawings, specifications and schedules;
b. to warrant the works against defects in materials and workmanship;
c. an implied term, to carry out the works with all due reasonable skill and care;
d. to indemnify against any loss, damage, claims, actions or proceedings arising out of or as a consequence of any breach of the agreement.
17 In my view, as the plaintiffs’ claim and the first defendant’s third party proceeding are pleaded, the allegations against the second to fifth defendants, whether in contract or tort, are likely to be found to arise “from a failure to take reasonable care”.
18 To summarise the effect of the proceeding:
a. if the plaintiffs were to succeed on their claim:
i) the first defendant, the second to fifth defendants and the sixth defendant may be found liable; and
ii) responsibility may be apportioned between the defendants found to be liable as concurrent wrongdoers;
b. it is possible that as a result of the naming by the second to fifth defendants in their defence of the seventh and eighth defendants as “concurrent wrongdoers”, that the court might find that those defendants should bear part of the responsibility for the plaintiff’s loss and damage. This would not result in a judgment against them in the plaintiff’s favour but simply a reduction in the proportion of the loss and damage for which the other defendants who are found liable, would be responsible;
c. in relation to judgments given in the plaintiffs’ favour against the defendants, by s24AJ of the Act, a defendant cannot be required to contribute to (or indemnify in respect of) the damages recovered or recoverable from another defendant who is a concurrent wrongdoer in the same proceeding for the apportionable claim;
d. the second to fifth defendants and the sixth defendant, may be found to be concurrent wrongdoers, with the first defendant, in respect of the plaintiff’s claim. In that case, there would appear to be no scope for the first defendant’s claim for contribution and indemnity to succeed.
The decision of Godfrey Spowers
19 Mr Oliver, counsel for the second to fifth defendants, submitted that these were decisions to be made at trial and should not be made upon an interlocutory application. He submitted that s24AJ of the Act only applied when “judgment is given” under the apportionment legislation, and not before. Mr Oliver relied, in support of his submissions, upon statements by Ashley JA and the decision of the Court of Appeal in Godfrey Spowers (Victoria) Pty Ltd v Lincolne Scott Australia Pty Ltd [2008] VSCA 208; (2008) 21 VR 84 (“Godfrey Spowers”).
20 In Godfrey Spowers, the Court of Appeal set aside the entry of summary judgment in a claim for contribution and indemnity by a defendant against other persons it had alleged were “concurrent wrongdoers”, after the defendant had settled the claim made against it by the plaintiff.
21 Ashley JA delivered the main judgment. Neave JA agreed with Ashley JA’s reasons. Nettle JA delivered brief reasons reaching the same conclusions which he said Ashley JA had demonstrated were appropriate, “in his incisive analysis of the legislation” (paragraph 5).
22 Ashley JA said at paragraph 104 that, “the operation of Pt IVAA is dependent upon judgment by a plaintiff against a defendant”. At paragraph 105, he said that the application of the statutory provisions does not mean that, “once something that looks like an apportionable claim is pleaded, a defendant forthwith becomes a ‘concurrent wrongdoer’… At least absent highly unusual pleadings, determination of the critical circumstances will depend upon findings having been made”.
23 Ashley JA analysed the pleadings in the proceeding. At paragraph 102, he noted that the defence had “denied the plaintiffs’ claims” and, “only as an alternative, if its principal answer to the plaintiffs’ claim failed [had alleged] that the claim was an apportionable claim”. Accordingly, Ashley JA noted at paragraph 103 that, “no more can be said than that Spowers raised a defence, secondary to its principal denial of any liability to the plaintiffs, that their claim was an apportionable claim and that it was a concurrent wrongdoer”.
24 At paragraph 82, in circumstances that have some relationship to the present case, Ashley JA noted that:
“Nettle JA asked counsel what would occur if a plaintiff sued only two of four possible defendants to an apportionable claim, and there was judgment against each of them for 50 per cent of the plaintiff’s loss and damage. Could one of those defendants seek contribution from the other potential defendants? Counsel answered that a defendant could maintain suit for contribution in those circumstances. But then he distinguished the present case - on the basis that the respondents had been parties to the proceeding, notwithstanding that they had not been made defendants to the plaintiffs’ claim”.
25 Ashley JA at paragraphs 106 and 107 referred to a similar conclusion as he proposed, reached on the New South Wales apportionment legislation by Barrett J in Reinhold v NSW Lotteries Corporation (No 2) [2008] NSWSC 187. Barrett J said at paragraph 19 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’ as found…At that point, and not before, a person can be seen to be a ‘concurrent wrongdoer’”.
26 I am bound to follow the clear direction of the Court of Appeal in Godfrey Spowers, although the circumstances in which the issue arose in that case were factually different to the present case.
27 I have also considered the question of whether the statements in Godfrey Spowers are affected by the decision of the High Court in Hunt & Hunt v Mitchell Morgan [2013] HCA 10; (2013) 296 ALR 3 (“Hunt & Hunt”). French CJ, Hayne and Kiefel JJ, the majority of the High Court, stated at paragraph 19, that there are two questions posed by the relevant New South Wales legislation for the court to consider in apportioning liability between concurrent wrongdoers, namely, “What is the damage or loss that is the subject of the claim? Is there a person, other than the defendant, whose acts or omissions also caused that damage or loss?” Those issues were not directly relevant in Godfrey Spowers and are not presently relevant in this proceeding.
28 Hunt & Hunt was an appeal in a proceeding determined at first instance by Young CJ in Eq in Vella v Permenant Mortgages Pty Ltd [2008] NSWSC 505 (“Vella”). Young CJ in Eq had apportioned the liability of the solicitors Hunt & Hunt, with concurrent wrongdoers, Mr Flammia and Mr Caradonna. In a related proceeding, Young CJ in Eq allowed Hunt & Hunt to recover from Mr Flammia the damages (as apportioned) that Hunt & Hunt had been ordered to pay the plaintiff, Mitchell Morgan.
29 This recovery was permitted notwithstanding section 36 of the Civil Liability Act 2002 (NSW) which provides that:
“A defendant against whom judgment is given under this Part as a concurrent wrongdoer in relation to an apportionable claim:
(a) cannot be required to contribute to any damages or contribution recovered from another concurrent wrongdoer in respect of the apportionable claim (whether or not the damages or contribution are recovered in the same proceedings in which judgment is given against the defendant), and
(b) cannot be required to indemnify any such wrongdoer”.
30In Hunt & Hunt at paragraph 21, the majority in the High Court accepted that “in some cases the acts or omissions of wrongdoers may result in different damage to the same plaintiff”. This statement was made in the same paragraph as reference to section 36 of the Civil Liability Act 2002 (NSW). However, in the passages of the judgment which follow, dealing with “the damage or loss”, the majority judges in the High Court were critical of the articulation by Giles JA in the Court of Appeal’s decision upon the appeal in Vella of the difference between the “losses the subject of the claims for economic loss against Messers Caradonna and Flammia and the loss the subject of the claim for economic loss against Hunt & Hunt” (paragraph 29). However, the claim by Hunt & Hunt against Mr Flammia, for recovery of the apportioned damages it was ordered to pay the plaintiff, was not before the High Court for its determination upon the appeal.
31The focus of the decision in the High Court related to a different issue to that considered in Godfrey Spowers, and upon which I must now decide. In any event, I consider that Hunt & Hunt confirms the conclusion reached by the Court of Appeal in Godfrey Spowers that questions of whether a claim is apportionable, or another party is a “concurrent wrongdoer”, must be decided at trial. Until that happens, the rights of a party to claim contribution or indemnity under Part IV of the Wrongs Act are not affected.
32 Accordingly, the second to fifth defendants will have leave to file and serve a notice in the form of the draft dated 25 April 2014 claiming contribution from the sixth, seventh and eighth defendants.
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Certificate
I certify that these 9 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 23 May 2014.
Dated: 23 May 2014
Catherine Kusiak
Associate to His Honour Judge Anderson
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