Godfrey Spowers (Victoria) Pty Ltd v Lincolne Scott Australia Pty Ltd & Ors

[2008] VSC 90

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION
BUILDING CASES LIST

No. 9264 of 2004

SURROWEE PTY LTD & ANOR	Plaintiffs
and
HANSEN YUNKEN PTY LTD &  GODFREY SPOWERS (VICTORIA) PTY LTD	Defendants
and
LINCOLNE SCOTT AUSTRALIA PTY LTD	First Third Party
and
WILSMORE CONSULTING PTY LTD & ANOR	Second and Third Third Parties

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JUDGE:	Mandie J
WHERE HELD:	Melbourne
DATE OF HEARING:	14 March 2008
DATE OF JUDGMENT:	8 April 2008
CASE MAY BE CITED AS:	Godfrey Spowers (Victoria) Pty Ltd v Lincolne Scott Australia Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2008] VSC 90

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DAMAGES – settlement of proceeding between plaintiffs and second defendant - claim for contribution pursuant to s.23B Wrongs Act 1958 by second defendant against third parties – whether contribution claim disclosed cause of action where the claim against the second defendant had been an apportionable claim under Part IVAA of the Wrongs Act 1958 – whether the liability of the second defendant to the plaintiffs and the liability of the third parties to the plaintiffs was a liability “in respect of the same damage” – whether any such claim for contribution would be futile

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APPEARANCES:	Counsel	Solicitors
For the Second Defendant	Mr M Whitten	Monahan + Rowell
For the First Third Party For the Second and Third Third Parties	Mr C Juebner Mr J Dixon, SC with Mr T Horan	Minter Ellison DLA Phillips Fox

HIS HONOUR:

1. This proceeding in the Building Cases List has been settled as between the plaintiffs and the defendants but not as between the second defendant and the third parties.  The plaintiffs may be conveniently referred to as the principals in relation to an office building project in Carlton.  The first defendant was the building contractor and the second defendant (“Spowers”) was the architect.  The plaintiffs retained the second and third third parties to provide building surveying services for the project and retained the first third party as the consulting engineer for the project.

1. The third parties seek summary judgment on the claim against them by Spowers on the ground that the amended third party statement of claim discloses no cause of action by Spowers against them. 

1. The plaintiffs’ proceeding concerned alleged defects in the building (including to the stairs, fire protection and air conditioning but principally relating to alleged weatherproofing defects in windows, skylights and the like).  The plaintiffs’ claim against Spowers was based upon alleged breaches of contract and negligence by the said architect causing damage (economic loss) in the amount of some $10.7M.

1. The plaintiffs compromised the proceeding against Spowers for the sum of $3.9M.

1. Spowers’ claim against the third parties is based upon s.23B of the Wrongs Act 1958 (“the Act”) contained in Part IV of the Act which provides that “a person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage”.[1]  Spowers pleads the said settlement between the plaintiff and it in the sum of $3.9M and then alleges:

   [1]See s.23B(1) of the Act.

“34. Pursuant to [s.23B of the Act]:

(a)the architect is a person liable in respect of damage suffered by the Plaintiffs and was so liable immediately before the architect            made or agreed to make payment of the settlement sun;

(b)the architect made or agreed to make payment of the settlement sum in good faith in settlement or compromise of the Plaintiffs’ claim for loss and damage herein[2];

(c)by reason of the matters referred to in paragraphs 12 and 13[3] hereof, the engineer is also liable in respect of the same damage;

(d) by reason of the matters referred to in paragraphs 26 to 28[4] inclusive hereof, the building surveyor is also liable in respect of the same damage.

35.      In the premises, the architect is entitled to recover and hereby          claims contribution up to and including full indemnity from the          engineer and/or the building surveyor pursuant to [s.23B of the      Act] in respect of the settlement sum in such amounts as may be found by the court to be just and equitable having regard to the    extent of their respective responsibilities for the Plaintiffs’            damage.”

[2]This part of the pleading reflects the requirements as to settlement or compromise of a claim set out in s.23B(4) of the Act.

[3]These paragraphs allege that certain of the defects claimed by the plaintiffs were caused or contributed to by the engineer’s breaches of retainer and/or negligence and that the plaintiffs had suffered loss and damage as a result.

[4]These paragraphs allege that certain of the defects claimed by the plaintiffs were caused or contributed to by the building surveyor’s breaches of retainer, negligence and/or breach of statutory duty and that the plaintiffs had suffered loss and damage as a result. 

1. Spowers’ above pleading thus relies on s.23B(1) of the Act and also upon s.23B(4) which provides that, “subject to section 24(2B)”,  a person who in good faith has made or agreed to make any payment in settlement or compromise of a relevant claim shall be entitled to recover contribution.  The reference to s.24(2B) is to a provision that, if the court finds that the amount of any payment  made in settlement or compromise of a claim is “excessive”, the court in assessing the amount of the contribution recoverable from any person shall disregard any part of the payment which appears to it to have been excessive.  

1. The second and third third parties contend (supported by the first third party) that the above pleading discloses no cause of action.  They submit that they are not persons “liable in respect of the same damage” within the meaning of s.23B(1) of the Act. They further submit that, as a result of steps taken in the proceeding by Spowers under Part IVAA of the Act, it is not open to Spowers to rely upon s.23B of the Act against the third parties.

1. This submission was developed in the following way. 

1. Part IVAA of the Act deals with “proportionate liability” and applies[5], inter alia, to “a claim for economic loss in an action for damages (whether in tort, in contract, under statute or otherwise) arising from a failure to take reasonable care”. It was common ground that the plaintiffs’ claim against Spowers was such a claim and that, accordingly, Part IVAA of the Act had been and was available to Spowers. Spowers had joined the third parties to the proceeding pursuant to and in reliance upon Part IVAA[6]. As a result, s.24AI(1) was applicable – it provides as follows:

“(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.”

[5]See s.24AF(1) of the Act.

[6]Section 24AE of the Act defines “defendant” to include any person joined as a defendant “or other party” in the proceeding.

1. It was submitted that, because the liability of Spowers was limited to an amount reflecting its responsibility for the plaintiffs’ loss or damage, the third parties (assuming that they were liable at all for the plaintiffs’ loss or damage) were not liable for the same damage for which Spowers was liable.    

1. In my opinion, the foregoing submission is misconceived. It confuses the monetary amount of “damages” for which Spowers may be held liable by judgment under s.24AI(1) of the Act with the actual “loss or damage” suffered by the plaintiffs in relation to which, it must be assumed for this purpose, Spowers and the third parties were concurrently liable.[7]  To put it another way, the conduct of Spowers and the third parties gave rise to defects in the building thereby causing economic or pecuniary loss and damage to the plaintiffs.  It was that economic or pecuniary loss and damage suffered by the plaintiffs that was, on this hypothesis, concurrently caused by Spowers and the third parties.  They are therefore liable for the same damage even if the monetary extent of the liability of each may be limited as a result of the application of s.24AI(1) of the Act. The fact that a court may render Spowers and the third parties proportionately liable in damages in specified amounts does not mean that they were not nevertheless liable for the same damage.[8]

   [7]See Royal Brompton Hospital NHS Trust v Hammond [2002] 1 WLR 1397, 1401 per Lord Bingham of Cornhill, 1410 per Lord Steyn.

   [8]I think that this conclusion is supported by the approach taken to the words “same damage” both by the statutory majority  (Gleeson CJ, Gummow and Hayne JJ) and the minority (McHugh, Kirby, and Callinan  JJ) in Alexander v Perpetual Trustees WA Limited (2004) 216 CLR 109.

1. However, the second and third third parties further submitted that the amount for which Spowers had settled with the plaintiffs could only have related to Spowers’ potential liability pursuant to an assessment by the court under s.24AI(1) of the “amount reflecting that proportion of the loss or damage claimed”[9], that is, the amount for which Spowers was likely to be held liable exclusive of any responsibility of any other defendant or third party.  Accordingly, no part of that amount could be the subject of an order for contribution by the third parties as it was an amount reflecting the responsibility of  Spowers to the exclusion of the third parties. 

   [9]The words used in s.24AI(1) of the Act.

1. It seems to me that this submission is logical.  If the amount of any good faith settlement by Spowers can only reflect the amount for which it, exclusive of other defendants and third parties, was responsible, then such amount cannot be the subject of a contribution claim against such other defendant or third party by Spowers. 

1. However, Spowers placed reliance upon s.24AO of the Act which provides that:

“Except as provided in section 24AJ, nothing in this Part affects the operation of Part IV.”

1. Section 24AJ of the Act provides:

“24AJ.            Contribution not recoverable from defendant

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.”

1. In my opinion, it is a necessary consequence of s.24AI(1) of the Act that a defendant against whom judgment is entered in favour of the plaintiff for an amount for which that defendant is responsible, exclusive of the responsibility of other defendants or third parties, cannot then seek contribution against such other defendants and third parties. For the reasons already stated, I do not think that a defendant who makes a bona fide settlement with the plaintiff can be in any better position than a defendant against whom judgment has been given. It seems to me to be a necessary corollary, where judgment is entered against a defendant, that other defendants and third parties cannot seek contribution against that defendant. It would thus seem that s.24AJ of the Act merely confirms what would follow in any event from the application of s.24AI(1). Although s.24AJ does not apply to settlements but only to judgments, it would seem to necessarily follow that a defendant who settles with a plaintiff cannot be the subject of a claim for contribution by another defendant against whom the plaintiff proceeds to judgment because the latter defendant can only be held liable in an amount for which he is exclusively responsible.

1. Accordingly, it seems to me that a defendant who has settled with a plaintiff in respect of an apportionable claim cannot be in any better position than a defendant against whom a plaintiff has obtained judgment and that s.24AO cannot be interpreted so as to preclude or debar the valid contention that the contribution claims in this case must be futile and doomed to failure. To put it another way, a court would be unable to conclude under Part IV of the Act that it was “just and equitable”[10] that any amount should be recoverable by way of contribution by such a defendant and in this case would be obliged to “exempt”[11] the third parties from liability to make contribution.     

   [10]See s.24(2) of the Act.

   [11]See s.24(2) of the Act.

1. A conclusion to the contrary of the foregoing in my opinion flies in the face of the policy underlying Part IVAA.  It would mean that benefits which Parliament was intending to confer upon litigants in relation to apportionable claims would be diminished or lost if any one of them settled a claim made against it.  It is a regrettable feature of this legislation that its drafting creates many difficulties but I see it as the clear intent of the legislature to create a regime which, with respect to the claims to which it applies, provides for the separate liability of each of the defendants before the court. 

1. As I have said, I do not think that a defendant who achieves a bona fide settlement[12] of an apportionable claim by paying or agreeing to pay money to the plaintiff should be in any different position to that which would have obtained had there been a court order.  The fact of the settlement and its terms would not affect the responsibility of continuing concurrent wrongdoer defendants (if any) for the plaintiff’s loss or damage or the judgments which might be given against them; a court would be required, should there be a trial amongst other parties, to apportion responsibility for such loss or damage between all defendants before the court, including the settling defendant, and to give judgment against the other defendants accordingly.

   [12]The position of a defendant whose settlement is not “bona fide” may be no different but it is unnecessary to consider this aspect.

1. I conclude therefore that, while (having regard to the terms of s.24AO) the present claims for contribution are not rendered incompetent, they cannot succeed, so that no good purpose would be served by permitting them to go forward. For the foregoing reasons, the third parties are entitled to summary judgment against Spowers in the third party proceedings.