Hofstetter v Burns Engineering Pty Ltd

[1991] TASSC 101

95/1991
List "A"

COURT:  SUPREME COURT OF TASMANIA

CITATION:              Hofstetter v Burns Engineering Pty Ltd [1991] TASSC 101; A95/1991

PARTIES:  HOFSTETTER, Sigmund
  v
  BURNS ENGINEERING PTY LTD
  COMALCO ALUMINIUM (BELL BAY) LTD
  TASMANIAN GOVERNMENT INSURANCE OFFICE

FILE NO/S:  250/1988
DELIVERED ON:  7 November 1991
JUDGMENT OF:  Underwood J

CATCHWORDS:

Practice and procedure—Third party proceedings—Defendant in personal injuries action joining insurer as third party—Whether liability of third party can be determined prior to trial of action—Separate trials of different issues only in exceptional cases.

Judgment Number:  A95/1991
Number of paragraphs:  15

Serial No 95/1991
List "A"
File No 250/1988

SIGMUND HOFSTETTER v BURNS ENGINEERING PTY LTD
and COMALCO ALUMINIUM (BELL BAY) LTD
and TASMANIAN GOVERNMENT INSURANCE BOARD

REASONS FOR JUDGMENT  UNDERWOOD J

7 November 1991

1. On 12 June 1991 the Master made the following order:

"That the liability of the third party for an indemnity to the first named defendant as claimed be tried separately and prior to the hearing of the action of the plaintiff against the defendants."

1. Pursuant to the terms of that order, the first named defendant and the third party sought an allocation of hearing time and the papers were referred to a judge. As it appeared that difficulties might arise if the above issue was tried in the manner ordered, I directed that a pre–trial conference be held. See; Rules of Court, O32A, r4A.

1. The order, made by consent, arises out of the following circumstances. The plaintiff was a boilermaker/welder employed by the first defendant, Burns Engineering Pty Ltd (Burns). Burns entered into a contract with the second defendant, Comalco Aluminium (Bell Bay) Ltd (Comalco) to repair a fume tower at Comalco's premises. On 25 September 1987 the plaintiff was injured in an accident whilst repairing the fume tower. He brought proceedings for damages for negligence and/or breach of duty and/or breach of contract of employment against Burns and for damages for negligence against Comalco. By the defences, the defendants joined issue with the plaintiff's allegations and Comalco pleaded contributory negligence. In addition, Comalco commenced third party proceedings against Burns by way of notice between co–defendants (O18, r67). Comalco claimed an indemnity or contribution from Burns with respect to any sum that the plaintiff might recover against it in the principal proceedings. The basis of the claim was threefold. Firstly, it was based on the provisions of the Tortfeasors and Contributory Negligence Act 1954, s3. Secondly, it was based on an alleged breach of a duty of care Burns owed Comalco to properly supervise the work of the plaintiff. Thirdly, it was based on an alleged term of the agreement between Burns and Comalco pursuant to which the repair work was being done. In these proceedings between defendants it was alleged by Comalco that it was a term of the agreement to do the repair work that, in effect, Burns would indemnify Comalco in respect of its liability for claims such as that made by the plaintiff.

1. The Tasmanian Government Insurance Office (TGIO) was at all material times Burns' insurer. The policy of insurance complied with the provisions of the Workers Compensation Act 1927, s34(1). Ordinarily of course, TGIO would have taken over conduct of the proceedings on behalf of its insured, Burns. However in this case it has not done so because it claims that it is not obliged to indemnify Burns with respect to any liability Burns might incur to indemnify Comalco by reason of a breach of a term of the contract to repair the fume tower. TGIO expressly concedes that it is obliged to indemnify Burns against any judgment the plaintiff might recover against it and also any judgment Comalco might recover against it other than one which is grounded solely on a finding that Burns was in breach of a term of its contract with Comalco.

1. Accordingly, Burns commenced third party proceedings against Comalco. In these proceedings it sought (inter alia):

"A declaration that [Burns] is entitled to be indemnified in respect of any liability to indemnify [Comalco] arising from the alleged term of the agreement for work."

The statement of claim pleads entitlement to that declaration on the basis that, upon a proper interpretation of the policy of insurance, TGIO is obliged to indemnify Burns against any judgment Comalco obtains against it, however such judgment is grounded.

1. Not surprisingly, both TGIO and Burns want to try and resolve their dispute before the plaintiff's litigation proceeds any further. Resolution of this dispute will determine who is to conduct Burns' defence in the principal proceedings and settle all disputed matters between Burns and its insurer; hence the application made by consent for the order set out at the beginning of these reasons.

1. Since the passage of the Judicature Act an order for separate trials of separate issues is only made in exceptional circumstances. See Emma Silver Mining Co v Grant (1879) 11 Ch D 918; Piercy v Young (1880) 15 Ch D 475. Generally, it is beneficial that all the issues be tried at the same time for, apart from any question of saving expense, this procedure avoids the possibility of inconsistent findings on the same facts: Benecke v Frost (1876) 1 QBD 419 at p422. The House of Lords has strongly criticised the practice of ordering the trial of preliminary points of law before the facts have been found, observing that it adds to the difficulties of courts of appeal and tends to increase the cost and time of legal proceedings. See Tilling v Whiteman [1980] AC 1; Attorney General v Nissan [1970] AC 179.

1. In Swift Australian Co Pty Ltd v South British Insurance Co Ltd [1970] VR 368 the Full Court of Victoria said at p369:

"It is established by a long line of authority that the courts will not advise parties to actions upon their rights under a hypothetical state of facts, or give to them advisory opinions, or give hypothetical decisions the effectiveness of which depends on varied states of facts which remain to be determined in the future: see Glasgow Navigation Co v Iron Ore Co [1910] AC 293; Sumner v William Henderson & Sons, [1963] 2 All ER 712, and Hole v Insurance Commissioner [1962] VR 394."

1. The whole question of the exercise of the discretion to order separate trials was the subject of careful scrutiny by the Full Court of the Supreme Court of Victoria in AMP Fire and General Insurance Co Ltd v Dixon & Anor [1982] VR 833. The court was there considering the same question as I am on this pre–trial conference viz, the appropriateness of an order that there be a trial of a claim for declaratory relief on third party proceedings before the trial of the issues between the plaintiff and the defendant. The court noted that an order to try any issue between a defendant and a third party before determination of the principal proceedings must, of necessity, involve a hypothetical question and, "there is a long line of authority that the courts will not decide hypothetical questions or give advisory opinions" (p837). The court went on to observe that the grant of declaratory relief involves the careful and cautious exercise of a

1. judicial discretion and is not an order to which a successful party is entitled as of right. In the present proceedings, if all the issues are tried at the same time, it is unlikely the court would exercise its discretion in favour of making any declaratory order for such an order would be otiose. The only issue is whether, in certain circumstances, Burns is entitled to recover from its insurer an amount of money Burns has been ordered to pay Comalco in the proceedings between defendants.

1. No issue between Burns and its insurer will arise until:

1The plaintiff obtains a judgment against Comalco.

2A finding is made that there was a contract between Comalco and Burns and that, one of its terms was, to the effect that Burns would indemnify Comalco in respect of the liability Comalco has pursuant to the plaintiff's judgment. According to the pleadings between Comalco and Burns, this contract was partly in writing and partly oral.

3A finding is made that Comalco is entitled to recover from Burns all or part of the judgment the plaintiff has recovered against it by reason of the terms of the contract between them.

1. At the trial of the principal proceedings, Comalco may not succeed in establishing the existence of either the contract itself or the term it relies upon as one of the grounds for claiming contribution or indemnity from Burns. At the trial of the principal proceedings Comalco may be unable to adduce any evidence on this issue or, it may choose not to adduce any evidence and rely upon the provisions of the Tortfeasors and Contributory Negligence Act to ground its claim for indemnity and/or contribution.

1. Bearing these matters in mind, I venture to set out below (references omitted) the headnote to the report of AMP Fire and General v Dixon (supra) for it accurately summarises the judgment:

"(1)Save in the most exceptional cases the liability of a third party to a defendant should not be determined before the defendant has been found liable to the plaintiff.

(2)It is only in exceptional circumstances that the power to order separate trials of the plaintiff's claim against the defendant and the defendant's claim against the third party should be exercised.

(3)If it is ever appropriate to grant a declaration of the liability of a third party to the defendant before the liability of the defendant to the plaintiff is established, it can only be in the most exceptional circumstances. No declaration should be made on a hypothetical question."

1. Application of those principles to the facts of the present matter clearly demonstrates that the order that the liability of the third party for an indemnity to the first named defendant as claimed be tried separately and prior to the hearing of the action of the plaintiff against the defendants should be set aside.

1. Orders for separate trials of separate issues should not be made by consent. Each application requires scrutiny to ensure that any order is only made after the proper exercise of a judicial discretion. The order of the Master made on 12 June 1991 is set aside. The further hearing of the pre–trial conference is adjourned sine die.