Matthews v SPI Electricity Pty Ltd (Ruling No 6)
[2012] VSC 70
•14 March 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 4788 of 2009
| CAROL ANN MATTHEWS | Plaintiff |
| V | |
| SPI ELECTRICITY PTY LTD (ACN 064 651 118) & Ors | Defendants |
| SPI ELECTRICITY PTY LTD (ACN 064 651 118) | Plaintiff by counterclaim |
| V | |
| UTILITY SERVICES CORPORATION LIMITED (ACN 060 674 580) & ORS | Defendants by counterclaim |
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JUDGE: | J FORREST J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 10 February 2012 | |
DATE OF RULING: | 14 March 2012 | |
CASE MAY BE CITED AS: | Matthews v SPI Electricity and SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 6) | |
MEDIA NEUTRAL CITATION: | [2012] VSC 70 | Amended 16 March 2012. |
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PRACTICE AND PROCEDURE – Application to amend pleadings – New claims alleged – Potential for a derivative liability under the proportionate liability provisions in Part IVAA of the Wrongs Act1958 (Vic) as a result of transfer of State liabilities – Amendments to particulars of breach – Principles relevant to an application to amend – Test for determining whether amendment futile – Meaning of ‘concurrent wrongdoer’ in section 24AH of Wrongs Act1958 (Vic) – Acts or omissions of concurrent wrongdoer must in fact have caused the relevant loss or damage – No reasonable prospects of success – Application allowed in part.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr T Tobin SC Mr L Armstrong | Maurice Blackburn Pty Ltd |
| For SPI Electricity Pty Ltd | Mr B Quinn | Freehills |
| For USC | Mr R Ray QC Ms E Brimer | Holman Fenwick Willan |
| For the State parties | Mr C Caleo SC Mr M Rush | Norton Rose |
HIS HONOUR:
Introduction
The background to this proceeding can be gleaned from my previous rulings. Four of the defendants rely upon the proportionate liability provisions of the Wrongs Act 1958[1] to limit their liability in claims involving property damage and economic loss. Several of the defendants also seek contribution from each other in relation to any potential judgment arising out of personal injuries or loss of dependency claims.
[1]Part IVAA of the Wrongs Act1958 (Vic) (“Wrongs Act”) referred to as “the proportionate liability provisions”.
In October of last year, USC[2] advised the other parties (and the Court) that it would seek to amend its pleaded defences to both the claimants’ statement of claim[3] and SPI’s counterclaim. After some discussion, the application came on before me on 10 February 2012.
[2]Utility Services Corporation Limited.
[3]The fourth amended statement of claim referred to as “the statement of claim”. The representative plaintiff, Mrs Matthews, and the group members are referred to as “the claimants”.
The substantive amendments to the defences of USC involve an allegation that SPI is liable for the negligent acts and omissions of the SEC[4] and ESV[5] from which, in practical terms, it acquired the electricity distribution network for eastern Victoria in September 1994.[6] This affects the proportionate liability defence of USC (in respect of its allegations as to SPI’s liability) and its claim for contribution against SPI. It also raises a nice point: is SPI, by reason of its acquisition of the liabilities (prospective and contingent) of SEC and ESV, a concurrent tortfeasor within the meaning of the proportionate liability provisions of the Act?
[4]State Electricity Commission of Victoria.
[5]Electricity Services Victoria Limited, which was incorporated in 1993 partly with the purpose of holding SEC assets.
[6]Given that the liability is said to arise from inheritance by SPI of SEC and ESV liabilities, I have described these amendments as “the derivative liability amendments”.
A second group of amendments concerns particularisation of the case alleged against SPI in relation to its conduct since 1994.[7]
[7]SPI acquired the assets and liabilities of SEC in Eastern Victoria in September 1994 – in this ruling, these allegations are referred to as “the post-1994 conduct” and relate to the period covering SPI’s management and control of SEC assets and business after their acquisition.
SPI opposes the application. It says that derivative liability based on the acquisition of SEC liabilities cannot be agitated as part of a defence under the proportionate liability provisions. Further, it says that both sets of amendments are not supported on the material adduced by USC and, if permitted, will re-open the discovery fight and pre-trial issues to the point of being oppressive.
I accept that the derivative liability amendments have the potential to significantly enlarge the scope of the trial and the pre-trial process. I am satisfied that the proposed amendments relevant to the contribution claim are arguable and should be allowed. In reaching this conclusion, I have determined that pre-trial management issues can be confined, given that the question of discovery of SEC documents held by SPI has already been the subject of judicial determination by an Associate Justice of this Court. I have also determined that there is no reasonable prospect of the amendments to the proportionate liability defence succeeding at trial and this part of the application should be refused. The amendments to the post-1994 claim should, in the main, be allowed. I now set out my reasons for reaching these conclusions.
This application
USC seeks leave to file and serve:
(a)an amended defence and counterclaim to the claimants’ statement of claim; and
(b)an amended defence to SPI’s amended defence and counterclaim.
It also seeks a declaration in the following terms:
That any liability (including any liability, duty and obligation, whether actual or contingent or prospective) for the claimants’ loss and damage of:
(a)the State Electricity Commission of Victoria relating to the period prior to in or around December 1993; and
(b)Electricity Services Victoria relating to the period between in or around December 1993 to in or around September 1994,
arising from the facts or matters pleaded in the proposed amendments to the pleadings referred to in Order 1, has been transferred to, and is the liability of, the First Defendant by reason of the matters pleaded in paragraph 61(d) of the draft amended defence and counterclaim to the plaintiff’s fourth amended statement of claim.
As I have said, SPI opposed the application. The claimants neither opposed nor consented to the application, but in the event of the application being successful, sought leave to amend their statement of claim to reflect USC’s amendment. The State parties neither opposed nor consented to USC’s application and, at the hearing, reserved their right to make application to seek amendment in the event of USC’s application being successful.
Background to the claims against SPI and USC and the amendments
It is common ground that the Pentadeen SWER line[8] was constructed in the mid-60s when SEC was responsible for the electricity distribution network in Victoria. As part of the line, a single conductor (or wire) was strung between poles 38 and 39 (described as the Valley span in the claimants’ statements of claim). Up until December 1993, SEC was responsible for the line, and in particular the conductor and the infrastructure on the poles supporting the line. In September 1994, SPI acquired the assets and business of the SEC network for eastern Victoria.
[8]“the line”.
The central allegation in the claim against SPI is that on Black Saturday, the Kilmore East fire commenced as a result of the collapse of the conductor near the western end of the helical fitting on pole 39.[9]
[9][18] of the Amended Statement of Claim.
The statement of claim then asserts that SPI breached both common law and statutory duties in relation to its maintenance and management of the line.[10] The claimants also allege that the fire constituted a private nuisance created by SPI.[11]
[10][19] of the Amended Statement of Claim.
[11][24] of the Amended Statement of Claim.
USC, through a business known as Utility Asset Management,[12] was the maintenance contractor engaged by SPI to conduct asset inspection services throughout its distribution network. A written agreement between the two companies was entered into in April 2007 by which USC agreed to carry out inspections of SWER lines located in the SPI distribution network. The statements of claim of both the claimants and SPI assert that an inspection by USC in February 2008 of the line was negligent[13] and that its general inspection of the line was also negligent.
[12]“UAM”.
[13][49] of the Amended Statement of Claim.
The transfer of assets and liabilities from SEC to SPI
As part of the Kennett Government’s privatisation strategy, SEC was corporatised and then disaggregated, with its assets and liabilities sold to a number of companies. These sales were underpinned by a statutory framework found in the Electricity Industry Act 1993.[14] The assets and liabilities of SEC were initially transferred in December 1993 to ESV and then in September 1994 by ESV to SPI and a number of other distribution companies.[15] It is necessary now to set out in a little detail the manner by which the transfers occurred and the relevant statutory provisions.
[14]“EI Act” – this Act underwent significant amendments in 1994 and in 2000 when its title was changed, to the Electricity (Residual Provisions) Act 1993 and many of the provisions of the existing EI Act were repealed. All references relate to the 1993 Act at various points in time and not to the Electricity Industry Act2000.
[15]SPI was originally named “Eastern Energy” and has had several changes of name but the corporate entity remains the same.
By s 3 of the EI Act, liabilities were defined follows:
Liabilities means all liabilities, duties and obligations, whether actual, contingent or prospective but, in relation to SEC, does not include financial obligations.[16] (emphasis added)
[16]Section 3 of the EI Act.
The EI Act established three statutory electricity corporations including, relevantly for this analysis, ESV.[17]
[17]Section 20 of the EI Act.
By s 62(1) of the EI Act, SEC was required to give to the treasurer and the relevant minister, “A statement approved by the Minister relating to the property rights and liabilities of the SEC” which by sub-section 2(a) “must allocate the property rights and liabilities of the SEC shown in the statements between the Electricity Corporation, SEC, companies, the State and SEC”.
Section 64 of the EI Act then provided:
All liabilities of SEC, wherever located, that are allocated under an allocation statement to an electricity corporation, wherever located, become liabilities of that corporation.
The allocation statement was executed on 23 December 2003[18] and at the commencement of the statement the following appears:
Unless the context otherwise requires, words and phrases used in this statement which are defined in the Act have the same meaning when used in this statement.
[18]“the December Allocation Statement”.
Under the heading “Litigation” the following appears:
Subject to the above allocations, all of the rights and liabilities of SEC under or in respect of any legal proceeding or cause of action (including any judgment, order or award obtained by or against SEC in relation to such legal proceeding or cause of action but excluding any legal proceedings or cause of action in relation to excluded property or financial obligations):
…
(d) otherwise in respect of an act done or omitted to be done by or to SEC or an officer, employee or agent of SEC in the performance of a particular function before the appointed day, are allocated to the electricity corporation that performs that function on and from the appointed day.
The December Allocation Statement allocated property, rights and liabilities of the SEC to the three electricity corporations: ESV was allocated “distribution and retailing of electricity”.
The next step was to provide the statutory framework for the transfer of the ESV assets and liabilities to private companies. To this end, the EI Act was amended on two occasions in 1994.[19]
[19]Electricity Industry (Amendment) Act 1994; Electricity Industry (Further Amendment) Act 1994.
Section 63C was included and reads as follows:
All liabilities of SEC, wherever located, that are allocated under an allocation statement under this Division to an electricity corporation or another person, are deemed to become liabilities of that corporation or person on 3 January 1994 or on such later as is specified in the statement.
Section 119 was substituted in the following form:
On the relevant date –
(a)all property and rights of ESV, wherever located, that are allocated under an allocation statement to a distribution company or another person, vest in that company or person; and
(b)all liabilities of ESV, wherever located, that are allocated under an allocation statement to a distribution company or another person, become liabilities of that company or person.
A further allocation statement was prepared under s 117 of the EI Act (as amended) and was executed on 29 September 1994.[20] Clause 7 reads as follows:
[20]“the September Allocation Statement”.
LITIGATION (OTHER THAN IN RELATION TO EMPLOYEES)
7.1 Specific Matters
The property of ESV in, and the rights and liabilities of ESV in relation to, any current or future claims, causes of action, judgements, orders or awards associated with the actions or circumstances described in Annexure “I” are allocated to the distribution companies as specified in that Annexure on and with effect from the relevant date.
7.2 Matters not specified
Subject to clause 7.1, the property of ESV in, and the rights and liabilities of ESV in relation to, any current or future claims, causes of action, judgments, orders or awards that are not allocated pursuant to clause 5 or become liabilities of a distribution company pursuant to section 132 of the Act:
(a)which arise from events occurring wholly within a Distribution Area are allocated on and with effect from the relevant date to the relevant distribution company;
…
(e)to which none of the previous paragraphs relate and which arises from the negligence or other actions of a person who was at that time an employee of ESV or an employee of SEC the liabilities in respect of which have been allocated to ESV, to the relevant distribution company for the Distribution Area where the employee was based at the time of the negligence or other actions.
Clause 10.1 of the September Allocation Statement read as follows:
PROPERTY, RIGHTS AND LIABILITIES NOT OTHERWISE ALLOCATED
The property, rights and liabilities of ESV other than the Retained Assets that are not otherwise allocated by this statement and that were or are acquired or incurred wholly or substantially in the course of carrying on business or discharging a function:
(a)within a Distribution Area – are allocated on and with effect from the relevant date to the relevant distribution company; or
(b)(where paragraph (a) does not apply) by a CSB – are allocated on and with effect from the relevant date to the relevant distribution company.
As with the December Allocation Statement, the September Allocation Statement (by clause 2 – the definition provision) adopted the words and phrases used in the EI Act unless the context otherwise required.
The upshot of the provisions of the two allocation statements and the EI Act is that liabilities (putting to one side, what that expression may cover) of SEC were ultimately transferred to SPI and other electricity suppliers and distributors. Arguably, the transferred liabilities included a liability for the negligence or other actions of employees of SEC or ESV; further, that liability was not confined to liabilities existing at the time of the execution of either allocation statement but extended to contingent or prospective liabilities or obligations as provided by the definition of liabilities in the EI Act.
Relevant provisions of the Wrongs Act
Much of what I set out below is well understood by the parties but it is, I think, helpful to summarise the principles within the Wrongs Act underpinning the arguments raised by SPI and USC.
The members of the class represented by Mrs Matthews are disparate as I explained in Ruling No 5.[21] Any claim for personal injury or loss of dependency will not be determined under the proportionate liability provisions, as these are not apportionable claims.[22] Rather, such claims are determined under Part IV of the Wrongs Act – the contribution provisions. In this case, a finding that a particular defendant is liable to a claimant will result in that defendant being liable for the total amount of the damage (and damages) sustained by a claimant. That defendant cannot avoid such liability, even where its level of responsibility (as judged against the degree of responsibility of other defendants) is low; its remedy is to seek contribution from the other defendants. The contribution provisions of the Wrongs Act (by Part IV) were introduced in 1985 and have been and are regularly applied in courts of all jurisdictions in this State. Sections 23B and 24 of the Act enable a defendant to recover an amount of contribution that is “just and equitable having regard to the extent of that person’s responsibility for the damage”.[23]
[21]Matthews v SPI Electricity and SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 5) [2012] VSC 66.
[22]Section 24AG of the Wrongs Act.
[23]Section 24(2) of the Wrongs Act.
The position with the claims for property damage and economic loss brought by the claimants is quite different. Provided the claim is apportionable and the defendants are “concurrent wrongdoers” the apportionment provisions apply. In this case the liability of a particular defendant, rather than being for the total amount of any damage sustained by a claimant is “limited to an amount reflecting that proportion of loss or damage claimed that the court considers just having regard to the extent of the defendant’s responsibility for the loss or damage”.[24]
[24]Section 24AI of the Wrongs Act.
Principles relevant to an application to amend
Rule 36.01(1) of the Supreme Court (General Civil Procedure) Rules 2005[25] provides:
[25](“Supreme Court Rules”).
For the purpose of—
(a)determining the real question in controversy between the parties to any proceeding; or
(b)correcting any defect or error in any proceeding; or
(c)avoiding multiplicity of proceedings—
the Court may, at any stage order that any document in the proceeding be amended or that any party have leave to amend any document in the proceeding.
Although the decision of the High Court in AON Risk Services Australia v Australian National University[26] determined that the trial judge erred in granting a party leave to make a late amendment to a pleading, it is accepted that the exposition of principle in relation to amendments to pleadings is of general application.[27]
[26](2009) 239 CLR 175 (“AON”).
[27]See Trevor Roller Shutter Service Pty Ltd v Crowe [2011] VSCA 16 [42].
Last year in Namberry Craft Pty Ltd v Watson,[28] Vickery J summarised the relevant factors to be considered, as a result of the decision in AON, as follows:
[28][2011] VSC 136.
[T]here are to be limits placed upon re-pleading. The High Court in AON referred to a range of other considerations which need to be weighed in the balance in the exercise of the discretion to grant an amendment to a pleading. The High Court made reference to the following factors:
(a)Whether there will be substantial delay caused by the amendment;
(b)The extent of wasted costs that will be incurred;
(c)Whether there is an irreparable element of unfair prejudice caused by the amendment, arising, for example, by inconvenience and stress caused to individuals or inordinate pressures placed upon corporations, which cannot be adequately compensated for, whatever costs may be awarded;
(d)Concerns of case management arising from the stage in the proceeding when the amendment is sought, including the fact that the time of the court is a publicly funded resource, and whether the grant of the amendment will result in inefficiencies arising from the vacation or adjournment of trials;
(e)Whether the grant of the amendment will lessen public confidence in the judicial system; and
(f)Whether a satisfactory explanation has been given for seeking the amendment at the stage when it is sought.[29]
[29]Ibid [38]. Equuscorp Pty Ltd and Sintfoff Pty Ltd v Acehand Pty Ltd & Ors [2010] VSC 89 [19].
His Honour also noted that the list of factors was not exhaustive. One additional factor that comes readily to mind here (and was not an issue in AON) is that of the merits or otherwise of a proposed amendment. It is well established that an amendment will not be allowed if it is “so obviously futile that it be struck out if it appeared in an original pleading”.[30] A court, on this type of application, will not engage in an examination of the merits of the case foreshadowed by the proposed amendment, but where that amendment introduces a patently hopeless issue for determination then its inclusion will be futile and that will be a significant, and probably decisive, matter in the exercise of the court’s discretion.
[30]Horton v Jones (No 2) (1939) 39 SR NSW 305, 310. See also ACN 074 971 109 & Anor v The National Mutual Life Association of Australasia Ltd [2010] VSC 186, [29]
Perhaps, given the terms of the Civil Procedure Act 2010,[31] the test is best expressed in the words of s 63 of that Act: If the amendment has no reasonable prospect of success at trial then that would be a highly relevant factor in the exercise of the discretion to refuse the application.
[31]“CPA”
Returning to the decision in AON, the focus by the High Court on principles of case management and proper utilisation of court resources is consistent with the development of statute law in this State, particularly the provisions of the CPA.[32] However, there is nothing said in AON, nor in the CPA, which detracts from a party’s fundamental right to ventilate at trial a “real question in controversy”, as provided by r 36.01[33] – this is particularly so when an amendment is sought at a time not in close proximity to the trial.
[32]See ss 47, 48 and 49.
[33]Supreme Court Rules. See also ss 1, 7, 9, 48 of the Civil Procedure Act2010: “real issues in dispute”.
As Croft J said in ACN 074 971 109 & Anor v The National Mutual Life Association of Australasia Ltd:[34]
The authorities are clear that pleadings are not an end in themselves and are, rather, a means of ensuring that real issues of controversy are raised for determination in a way that is procedurally fair, both to a plaintiff and a defendant. This allows claims and defences to be clearly articulated, granting parties an opportunity to present their case properly prepared, on clear notice of allegations and defences raised in the proceedings. On this basis, the authorities clearly establish that, absent extraordinary circumstances, leave to amend will be granted.[35]
And subsequently in Namberry Craft Pty Ltd v Watson,[36] Vickery J said:
This is not to say that the object of doing justice between the parties is to be ignored. In fact, it is quite the contrary - a just resolution of proceedings between the parties remains a critically important consideration, which will necessarily include as part of that process, a proper opportunity being given to the parties to plead and re-plead their respective cases, should that need arise and the circumstances are present to warrant the discretion being exercised in favour of the grant of the amendment. The principle that a civil trial should be conducted fairly to the parties is beyond controversy. It is a human right enshrined in s 24(1) of the Charter of Human Rights and Responsibilities Act 2006.[37]
[34][2010] VSC 186.
[35]Ibid [28].
[36][2011] VSC 136.
[37]Ibid [37].
The proposed amendments – generally
As I mentioned earlier the amendments sought by USC to its defence to the claimants’ statement of claim can be grouped into two categories. The first, concerning the post-1994 conduct, relates to SPI’s actions after acquiring part of the SEC business and assets in September 1994. The second involves the allegation that SPI is liable on a derivative basis for the acts and omissions of SEC which constructed and maintained the line between approximately 1966 and 1993, and for the acts and omissions of ESV for nine months in 1994.
The amendments sought by USC to its defence to SPI’s counterclaim mirror those amendments to the defence to the claimant’s statement of claim relating to post-1994 conduct.
The proposed amendments to the defence of USC to the claimant’s statement of claim in relation to post-1994 conduct
The amendments
Under a heading “Section F: Concurrent wrongdoing claims: Wrongs Act (Vic) Part IVAA”, the current pleading sets out the basis of SPI’s liability to the claimants. On its face, this pleading relates to the post-1994 management by SPI of the network and the line.
The first substantive amendment relates to the scope of the duty and its breach. The amendment at [67] appears to limit SPI’s duty “from in or around 1994” but then the amendment pleads that SPI:
(a) Was the successor to the electricity supply business [of SEC and ESV];
(b) Had the ultimate responsibility for:
(i) the creation and/or existence of any faulty, defective, deteriorated in condition or incorrectly assembled assets forming part of the distribution network, including the Pentadeen Spur…
A number of other proposed amendments confirm the intention to confine this part of the pleading to post-1994 conduct: [62], [68], [71] and the heading to [79].
The proposed amendments in [72] relate to the particulars of breach of the asserted statutory duty and common law duty owed by SPI to the claimants. To understand these amendments in context, I set out below the whole of the proposed particulars with amendments underlined:
Particulars of breach
Asset management system failures
(ia)failing to conduct adequate due diligence to ensure that the SWER installations were free from any faulty, defective, deteriorated in condition or incorrectly assembled assets either at the time it acquired the electricity supply business or at all;
(i)failing to have or implement adequate systems to determining risk factors affecting the likelihood of failures of SWER installations and in particular conductors;
(ii)failing to keep adequate records to identify SWER installations operating in conditions presenting increased risk of damage and failure;
(iia)failing to consider and take into account the condition of the Valley Span by failing to consider and take into account the history of maintenance and inspection of the SWER installations on the Valley Span for the purpose of informing the content and frequency of inspections and maintenance;
(iib)failing to keep adequate and accessible records so that it could consider and take into account the condition of the Valley span in setting the content and frequency (sic) inspections and maintenance;
(iii)failing to take reasonable steps to identify the Valley Spur as a span subject to increased risk of installation damage and failure, being risks arising from inter alia:
a.its length of approximately 1043 metres, being one of the 16 longest spans on the SPI SWER network;
b.its time in service, being approximately 43 years;
c.its anticipated service life of at least 40 years;
d.its unknown tension;
e.its location, being strung between two hills or ridges;
f.its location in terrain defined by ENA C(b)1-2006 as Type II terrain;
g.its likely exposure to high wind;
h.its likely exposure to high-frequency low-amplitude vibration induced by wind, associated with its location;
i.its small diameter, being the smallest diameter conductor available;
j.if there was an incorrect configuration of the helical termination assembly holding the conductor in place within the Pole 39 pole top assembly and that incorrect configuration was causative of the Kilmore Fire (which is denied), the incorrect configuration of the helical termination assembly holding the conductor in place within the Pole 39 pole top assembly, being the misplacement of the helical wrap outside the groove of the thimble and its jamming between the outside edge of the thimble and the inside edge of the clevis; and
k.the absence of vibration dampers;
(iiia) failing to provide adequate instructions and/or information to its agents and/or contractors:
a.in relation to the existence of, or the risk of the existence of, any faulty, defective, deteriorated in condition or incorrectly assembled assets on or forming part of the Valley Span; and/or
b.for the purpose of identifying any faulty, defective, deteriorated in condition or incorrectly assembled assets on or forming part of the Valley Span.
either at the time it acquired the electricity supply business or at all.
(iv) failing to have any or any adequate program for scheduling replacement of SWER conductors on a precautionary basis according to an adequate assessment of the reliability of the conduct having regard to risk factors affecting the conductor;
(v) having or purporting to have a system of replacing conductors according to inspections of their condition during scheduled inspections, in circumstances where, should the content and frequency of inspections be found to be inadequate (which is not admitted), the content and frequency of scheduled inspections was inadequate, as referred to in particulars (vii) to (viii) below;
(vi) failing to replace the Valley Spur conductor prior to February 2009.
…
Engineering failures
(xxa) failing to correctly construct or configure or install the Valley Span SWER installations;
(xx) failing to fit vibration dampers to the Valley Span;
(xxi) having or purporting to have, and observing a policy of not installing the vibration dampers on existing spans;
(xxii) failing to take reasonable steps to ensure the Valley Span was tensioned in accordance with ENA guidelines to reduce the risk of damage from vibration and metal fatigue;
(xxiii) failing to install adequate circuit-breaking devices on the Valley Span;
(xxiv) installing on the Valley Span a circuit-breaking device, being an oil-operated automatic circuit recloser (OACR), programmed to “reclose” and resume transmission of electricity following a fault detection;
(xxv) failing to set the OACR to minimise the duration or electricity flow following a fault detection;
(xvi) failing to “suppress” the reclose function on the OACR at the commencement of the summer season, or at any time prior to 7 February 2009.
Should these amendments be allowed?
Each of the following matters, referred to in AON, favour the amendments being allowed:
(a)this application is made ten months prior to the trial and the other parties have been on notice since late 2011;
(b)there will be no great wasting of costs as the re-pleading exercise will be relatively confined even if the other parties seek to re-plead and follow the lead of USC;
(c)apart from the risk of the question of discovery being re-agitated (which I will deal with shortly), there will be no real disruption of the pre-trial management process;
(d)no prejudice was identified by SPI, apart from that relating to the oppressive nature of the discovery exercise if the amendments are granted; and
(e)a satisfactory explanation has been provided by Ms Wroe, the solicitor for USC[38] – essentially to the effect that until the allocation statements were obtained and the statutory provisions reviewed, it was difficult, if not impossible, to determine whether SEC or SPI were liable for any negligent acts or omissions of SEC prior to 1994.
[38]Affidavit of Elizabeth Wroe dated 31 January 2012.
SPI put three submissions in respect of these amendments:
(a)that the amendments were not supported by any evidence and essentially were speculative;
(b)that the amendments had the potential to lead to a re-opening of the discovery issues which had been resolved by Zammit AsJ after a three day hearing in August 2011; and
(c)that the amendments included allegations relating to a period prior to 1994.
The proposed amendments to the particulars of breach set out at [41] above do no more than flesh out a number of the existing particulars. In my view, the allegations contained in (ia), (iia) and (iiib) simply elaborate the particulars in (i) and (ii) – indeed, the case which SPI has to meet is now identified with more precision and one would have thought that on that count alone it should be grateful. The allegation in (iiia) does not fall within the same category but it seems to me, as a matter of common sense given the relationship between USC and SPI, to be a proper allegation which could not have possibly been subject to a strike out application if it appeared in the original particulars. Clearly, an aspect of the duty of care owed to the claimants was the role performed by USC on behalf of SPI. The allegation that a principal has not armed a contractor with sufficient information to carry out its job properly is one that is encountered regularly in the course of litigation in this State and should take no one by surprise. Contrary to the submissions of SPI, I do not think it is necessary for these allegations to be supported by evidence that would substantiate the amendment. There is no such rule of practice. A party is entitled to amend a claim to flesh it out, or to put an additional or alternative claim (unless it has no reasonable prospect of success) without putting on evidence to substantiate the amendment,[39] provided the various considerations I have referred to are satisfied. In some cases, particularly when a case is close to trial or at trial, it may be appropriate for a party to demonstrate that the amendment has substance, but that is not the case here. This submission is not persuasive
[39]See Commonwealth v Verwayen (1990) 170 CLR 394, 456.
The second submission is also not persuasive as this group of amendments will not cause any problem with pre-trial management or discovery. The question of appropriate discovery has already been resolved by Zammit AsJ as discussed in [63]-[70] below, and need not be revisited by reason of these amendments.
I do, however, have a problem with the pleading in [67] and particular of breach (xxa). Each in a different way refers to aspects of management and maintenance which pre-date 1994. I have in mind the reference in [67(b)(i)] to “responsibility for… the creation and/or existence of any faulty… assets”. Notwithstanding the apparent intention to limit the duty to a period from 1994 (see [61] and the preamble to [67]), the draftsperson then appears to have extended the duty in the context of SPI being the successor to SEC and ESV, to the “creation and existence“ of parts of the distribution network. Arguably, this may mean the duty in the context of this set of allegations pre-dates 1994. Similarly, the pleading in [72] (xxa) of SPI “failing to construct or configure or install the Valley span SWER installations” patently raises the prospect of a pre-1994 allegation of breach being included within the part of the claim relating to post-1994 conduct.
I am of the view that to avoid embarrassment (in the pleading sense) the allegations contained in this part of the pleading should clearly be identified as relating to the duty said to be owed by SPI from 1994.
In summary, I am satisfied that it is appropriate to allow the amendments as formulated by USC to [62], [67(aa)], [68], [71] and particulars of breach under [72] (ia), (iia), (iib) and (iiia). In my view, the amendments to paragraph [67(b)] and particulars of breach under [72] (xxa) should not be allowed unless their reach is clarified. I would, however, permit each of those allegations to be re-pleaded provided it was crystal clear that the allegations related to post-1994 conduct.
The amendments to the USC defence to SPI’s claim
The amendments to USC’s defence to SPI’s counterclaim mirror the amendments to the defence to the claimants’ statement of claim in relation to post-1994 conduct. My decision in relation to those amendments applies equally to the defence to the SPI counterclaim.
The derivative liability amendments
The amendments
The second category of amendments is quite different to the first. These introduce a new case for SPI to meet based upon the asserted negligence of SEC and ESV prior to SPI’s acquisition in September 1994 of SEC assets and liabilities, allied with the allegation that SPI acquired the liabilities (including those which are contingent or prospective) of SEC and ESV.
The proposed tranche of amendments commence at [61] under the heading “Concurrent Wrongdoing”:[40]
[40]See [39] above. There are a number of proposed consequential amendments that do not need reciting; [80], [82], [84], [89] and [93].
SP AusNet is and was at all material times:
(a)A corporation registered for the purposes of the Corporations Act 2001 (Cth) and capable of being sued:
(b)Carried on the electricity supply business;
(c)In carrying on the electricity supply business was:
(i)An electricity supplier; and
(ii)A network operator
within the meaning of section 3 of the ES Act;
(d)Is and was the successor to the electricity supply business carried on by:
(i)SECV until December 1993;
Particulars
Electricity Industry Act 1993 (Vic) sections 62 and 64
Electricity Industry (Residual Provisions) Act 1993 (Vic) s 63A, 63C and s 64
Electricity Industry Act 1993 Allocation Statement Section 62(1) dated 23 December 1993
(ii)ESV from December 1993 until September 1994;
Particulars
Electricity Industry (Residual Provisions) Act 1993 (Vic) Part 10
Electricity Industry Act 1993 Section 117 Allocation Statement dated 29 September 1994
and acquired
theall liabilities, duties and obligations, whether actual, contingent or prospective of SECV and ESV in accordance with the legislative scheme pursuant to the Electricity Industry Act 1993 (Vic) (Legislative Scheme).(e) Was:
(i)incorporated in or around May 1994 with the corporate name “DB One Limited”;
(ii)known from in or around August 1994 until in or around March 2000 as “Eastern Energy Limited”;
(iii)known as “TXU Electricity Limited” from in or around March 2000 and as “TXU Electricity Pty Ltd” in or around August 2004;
(iv)known as “SPI Electricity Pty Limited” from in or around August 2004.
(f)While network operator, was required to comply with an ESMS approved by ESV.
Under the heading “Prior to in or around 1994”, a claim which is said to be for the further alternative to the claim made in relation to post-1994 conduct is pleaded as follows under [79A]:
By reason of the matters set out in paragraphs [61(d), 61(e) and [90A] to [90O], SP AusNet is liable for the claimants’ loss and damage in respect of the ELPD Reasonable Care claims.
Then by a new section of the statement of claim “F4 SP AUSNET and SECV and/or ESU”, the asserted liability of SEC and ESV is set out in detail:
90A. Further and in the alternative, if:
(a)the Kilmore fire was associated with a break in the conductor caused by a faulty, defective, deteriorated in condition or incorrectly assembled asset (which is denied); and
(b)the faulty, defective, deteriorated in condition or incorrectly assembled asset was created and/or brought into existence before in or around 1994;
then;
(i)any such faulty, defective, deteriorated in condition or incorrectly assembled asset was created and/or brought into existence:
(A)in the performance of a function of the SECV alternatively ESV; and/or
(B)in respect of an act done or omitted to be done by the SECV alternatively ESV or an officer, employee or agent of the SECV alternatively ESV in the performance of a function of the SECV alternatively ESV; and/or
(C)arising from the negligence of or other actions or omissions of a person who was at the relevant time an employee of ESV or SECV; and/or
(ii)all liabilities, duties and obligations whether actual, contingent or prospective incurred in the performance of a function of the SECV alternatively ESV, in respect of an act done or omitted to be done, and/or arising from the negligence of an officer, employee or agent of the SECV or ESV, have been transferred to SP AusNet.
Particulars
UAM refers to and repeats paragraph 61(d)
The SECV
90B. At all material times before in or about 1993:
(a)the SECV was a body corporate with perpetual succession and capable in law of suing and being sued;
(b)carried on the business of the erection and construction of electric lines, cables and appliances used in connection with the distribution, use and supply of electricity throughout Victoria (SECV business).
Particulars
Sections 3 and 4 of the State Electricity Commission Act 1958 (Vic) (SECV Act).
90C. In the course of and for the purpose of the SECV business, the SECV constructed, owned, further or alternatively had the use and management of the installation comprising the Pentadeen Spur SWER line at Kilmore East in the State of Victoria, including the conductor strung between the Valley Span.
Particulars
Section 3 and section 21(1)(a) and (e) of the SECV Act. Further particulars may be provided following the completion of discovery.
SECV Duty of Care
90D. At all material times before in or about 1993 the SECV:
(a)was the owner and/or operator of the SWER line;
(b)had the ultimate responsibility for:
a.the planning, design, construction and maintenance of the electrical network, assets and installations;
b.the creation and/or existence of any faulty, defective, deteriorated in condition or incorrectly assembled assets forming part of the distribution network including the Pentadeen Spur.
Particulars
Sections 3, 20, 21 and 22 of the SECV Act
c.had the right, to the exclusion of other private persons to:
i.construct, repair, modify, inspect and operate the SWER line; or
ii.give directions as to its construction, repair, modification, inspection or operation;
d.exercised the right referred to in (c) above; and
e.in the premises, had practical control over the SWER line.
90E. At all material times before in or about 1993;
(a)SECV used the SWER line to transmit electricity at high voltage;
(c)The transmission of electricity along the SWER line created a risk of unintended discharges of electricity from the SWER line;
(d)Unintended discharges of electricity from the SWER line were capable of causing death or serious injury to persons, and damage to or loss of property; by
(iii)electric shock;
(iv)burning by electric current; further or alternatively
(v)burning by fire ignited by the discharge of electricity;
(e)In the premises set out in sub-paragraphs (a) to (c) inclusive, the transmission by SECV of electricity along the SWER line was a dangerous activity;
(f)SECV knew or, as the network operator of the SWER line, ought reasonably to have known of the matters referred to in sub-paragraphs (a) to (d) above;
(g)At all material times it was reasonably foreseeable to SECV that:
a.A break or defect in, or damage to the conductor on the SWER line could cause or allow an unintended discharge of electricity from the SWER line;
i.A discharge of electricity from the SWER line could cause a fire in the vicinity of the point of discharge;
ii.Such fire could spread over a wide geographic area;
iii.Such fire could cause death or injury to persons and loss of or damage to property within the fire area, and consequential losses including economic losses;
iv.Such fire could cause damage to property and consequential losses including economic losses within the affected areas;
v.Such fire or its consequences could:
1.disrupt or impair the income-earning activities of persons residing or carrying on business in the fire area or affected areas; or
2.impede the use or amenity of property located in the fire area or affected areas; or
3.reduce the value of property or businesses located in the fire area or affected areas;
and thereby cause economic loss to those persons, or the owners of those properties or businesses:
vi.The risks (risks) referred to in sub-paragraphs (b) to (f) above were greater during periods of high or extreme bushfire risk.
90F. At all material times, the claimants:
(a)Had no ability or no practical or effective ability, to prevent or minimise the risks; or
(b)Were vulnerable to the impact of the risks; and consequently
(c)Were to a material degree dependent on the protection of their persons and property, upon SECV ensuring the SWER line was constructed and maintained safely in the operating conditions applying to it from time to time.
(d)In the premises set out in paragraphs 90A to 90E inclusive at all material times before in or about 1993 SECV owed to the claimants a non delegable duty:
i.To take reasonable care by its officers, servants and agents; and
ii.To ensure that reasonable care was taken by an contractors engaged by it.
to ensure that all parts of the SWER line were safe and operated safely in the operating conditions that were foreseeable for the SWER line (SECV Duty).
The allegations of breach and causation are then set out at [90L] and [90M] as follows:
Causation
90L. If the Kilmore fire was associated with a break in the conductor on the Valley Span caused by a faulty, defective, deteriorated in condition or incorrectly assembled asset (which is denied), created and/or brought into existence before in or about 1994, then the Kilmore fire was caused by breaches by SECV alternatively ESV of;
(a)the SECV duty; alternatively
(b)the ESV Duty.
Particulars of Breach
Failing to correctly construct or configure or install the Valley Span SWER installations constructing the Valley Span, alternatively conducting maintenance on the Valley Span, so as to create an incorrectly configured helical termination assembly holding the conductor in place within the Pole 39 pole top assembly.
Further particulars of the failure to correctly construct or configure or install the Valley Span SWER installations will be provided after discovery and expert evidence.
90M.Further, and in the alternative to paragraphs 60-79A (regarding SP AusNet), if the plaintiff and/or any claimant has suffered loss or damage as a result of the Kilmore fire (which is not admitted) such loss and damage was caused by the breach by the SECV of the SECV Duty, alternatively by the breach by ESV of the ESV Duty.
Similar allegations of duty, breach and causation are made against ESV at [90I]-[90K] in relation to its control of the relevant part of SEC network and assets between December 1993 and September 1994.[41]
[41]Paragraphs 90(I) to 90(M) of the Amended Defence.
The allegations made under the heading “Concurrent wrongdoing claims” are repeated in a claim for contribution in relation to the personal injury and death claims. It is set out in [94] as follows:
On the grounds set out in paragraphs [60] to [79A] and/or [61D] and [90A] to [90O] above, by reasons of Part IV of the Wrongs Act, UAM is entitled to recover contribution from SP AusNet in respect of that personal injury loss and damage in such an amount as may be found by the Court to be just and equitable having regard to the extent of SP AusNet’s responsibility for the personal injury loss and damage.[42]
[42]A claim for a complete indemnity pursuant to Part IV of the Act is also made in [94(b)].
Should these amendments be allowed?
SPI put three submissions in opposition to these proposed amendments:
(a)that the amendments were not supported by any evidence and were speculative;
(b)that the amendments had the potential to lead to a re-opening of the discovery issues which had been resolved by Zammit AsJ; and
(c)that to grant the amendments was an exercise in futility in relation to the proportionate liability defence.
The considerations which I set out at [42] above in favour of permitting that group of amendments are equally applicable to the derivative liability amendments.
For the reasons I adverted to at [44], I do not accept SPI’s contention that USC was required to put on evidence to support the allegations of negligence made against SEC and ESV to justify the amendments set out at paragraphs [90A] to [90O]. It is accepted that SEC constructed and managed the line for a period of around 30 years prior to SPI acquiring its assets. It is also not in issue that SPI acquired a portion of SEC’s liabilities and assets by the transfer effected by a combination of the EI Act and the allocation statements. It is accepted by SPI that it is arguable that such liabilities may include those resulting from the negligent acts or omissions of SEC employees. The pleading of facts relevant to the existence of duty and its scope are unexceptional and raise no issues that could take SPI by surprise or cause it prejudice. None is alleged. Moreover, it could not have been challenged by SPI if contained in the original pleading.
I accept, however, that the pleading of breach at [90L] is less than ideal. However, in broad terms it spells out the type of case that SPI will need to meet, namely, that the construction and configuration of the Valley span and its infrastructure was inappropriate; and alternatively, that SEC or ESV maintenance led to an incorrect helical termination in the assembly holding the conductor in position on top of the pole. There is enough, for present purposes, in that allegation for the amendments to be allowed, however if a case is to be made out against SEC or ESV for incorrect construction, configuration or maintenance during the period up to September 1994 it will need to be spelt out sooner rather than later to enable SPI to respond. I apprehend that such particulars would, at the latest, be provided shortly after the delivery of expert reports (August 2012).
Therefore, I would not refuse the amendments on the basis of the first submission.
The second submission relates to the question of pre-trial management and, particularly, the implications for discovery if these amendments are allowed. The new allegations raise, as I have already mentioned, the question of the installation of the line and its maintenance by SEC over a period just short of 30 years. The scope of the case against SPI will be expanded markedly if the amendments are permitted. That is no basis on its own, of course, to refuse to allow the amendments, but its effect on the trial date (30 January 2013) and pre-trial management is a relevant consideration as AON and subsequent cases demonstrate.
Fortunately, the question of discovery by SPI of SEC documents has been the subject of judicial consideration, albeit when the claim was in a different form to that foreshadowed by these amendments. The position in relation to discovery by SPI (including that of SEC documents held by it) is considered in detail in the ruling of Zammit AsJ.[43] In the ruling her Honour resolved the question of the breadth of SPI’s discovery after hearing evidence from Ms Overington, a Senior Associate who has been working on this case on behalf of SPI since its inception.
[43]Matthews v SPI Electricity Pty Ltd & Ors [2011] VSC 401.
Her Honour, with a couple of minor variations, accepted SPI’s discovery proposal[44] in preference to a number of alternative suggestions submitted by other parties, including USC.
[44]“the July proposal”.
Much of the argument advanced by USC before her Honour related to discovery of documents concerning inspection and maintenance records of the line held by SPI. On this aspect of its application, her Honour ruled as follows:
In relation to the July Proposal, the evidence before the Court is that the central focus of the July Proposal is asset management. Therefore, SPI submits that the repositories most likely to hold documents responsive to the classes of documents sought by UAM are those listed. By way of example, Ms Overington in her affidavit notes that the July Proposal contemplates the:
(a)conduct of reasonable searches of the protection, control and automation share drive;
(b)conduct of reasonable searches of desktop and hard drives and hard copy files of the Asset Manager Lines and Senior Design Engineer, North Region;
(c) review of 250 archive boxes (identified as likely to be the most relevant by reference to available information concerning their contents and location prior to being archived); and
(d) production of:
(i) all available electronic information concerning the maintenance inspection activities of the Pentadeen Spur;
(ii)data regarding the assets comprising poles 38 and 39 on the Pentadeen Spur;
(iii)records of the protection settings for the protection device (otherwise known as an oil based automatic circuit reclosure).
It is implicit that there may be other repositories or that a search of all 15,700 archive boxes could reveal documents that fall within classes 1 and 2. However, I do not consider the value of earlier third party agreements concerning the inspection of assets within SPI’s electrical distribution network sufficient to warrant a wholesale search of archive boxes and additional repositories. The time and cost of such an exercise is not proportionate to the likely benefit. The same logic applies to discovery of earlier asset inspection manuals.
In relation to class 3 documents, UAM wants discovery of documents relating to the actual inspection and maintenance records of the Pentadeen Spur for the entire existence of the line, that is, some 40 years. While the state of the assets and their inspection prior to the fire on 7 February 2009 is relevant, discovery over such a period is not reasonable. I am satisfied that embarking upon such a discovery exercise would be unduly burdensome and costly.
This is not a case where documents relating to the inspection and maintenance of the Pentadeen Spur are not to be discovered. To the contrary, the repositories and searches to be conducted by SPI are directed to this issue but confined temporally. Ms Overington’s evidence was that the issue of maintenance and inspection of the Pentadeen Spur was canvassed at the VBRC and that documents on this point were provided to the VBRC and now to the parties. SPI submits that the documents evidencing prior inspections to the UAM contract may be potentially relevant to demonstrate, what was found on earlier inspections. However at the heart of this proceeding and therefore most relevant as between SPI and UAM, is the inspection of poles 38 and 39 in the Pentadeen Spur from the commencement of the UAM contract. [45] (emphasis added)
[45]Matthews v SPI Electricity & Ors [2011] VSC 401 [67]-[70].
Clearly, allowing the amendments will alter the potential breadth of the discovery obligations of SPI. However, that factor needs to be measured against the consequences of unrestrained discovery. SPI has just delivered its list of documents of the interim tranche of discovery which runs to nearly one thousand pages. That, in itself, is sufficiently daunting. As I follow the reasons of Zammit AsJ, there are some 15,700 archive boxes, a proportion of which, I assume, contain SEC documents scattered at multiple locations throughout the State. The July proposal endorsed by her Honour, with some variations, allowed for both hard copy and electronic discovery searches and also involves the review of 250 of those boxes which SPI’s solicitors are obliged to carry out in good faith in identifying the most potentially relevant to the claims against SPI.
I note that at the hearing of this application, counsel for USC contended that in the event of these amendments being allowed there should be further discovery, if only limited to identification of the locations of the various boxes. However, this was at odds with the written submissions filed by USC in support of its application:
No substantial delay would be caused by the proposed amendments. Discovery can proceed in accordance with the current timetable. Given the submissions at the discovery hearing in relation to the availability of maintenance and inspection records, it is not anticipated that SP AusNet would be able to produce further records see paragraph 14 of the Wroe affidavit.
Assuming these amendments are allowed, there is no warrant to expand the scope of discovery beyond that already ordered by Zammit AsJ. One of the overarching purposes of the CPA, by s 7, is to facilitate “the just, efficient, timely and cost effective resolution of the real issues in dispute”. Both s 55 of the CPA and O 29 of the Supreme Court Rules demonstrate the need for courts to limit the scope of discovery. In a case such as this, as her Honour noted,[46] determining a reasonable search to identify documents that either adversely affect a party’s own case or another party’s case or documents that support another party’s case involves consideration of a number of matters as posited by r 29.01.1(5) of the Supreme Court Rules:
(a)the nature and complexity of the proceeding;
(b)the number of documents involved;
(c)the ease and cost of retrieving a document;
(d)the significance of any document to be found; and
(e)any other relevant matter.
[46]Matthews v SPI Electricity & Ors [2011] VSC 401 [26].
At the moment, it could not be said to be “on the cards”,[47] or even within the deck of cards, that a search of 15,900 archival boxes would produce a document relevant to the state of the helical connection of the conductor during the years since the line was erected. Such a search would be akin to that for a needle in a haystack without knowing whether the needle was present. All the considerations identified in r 29.01.1(5) of the Supreme Court Rules point to maintaining the line drawn by the Associate Justice, if these amendments are allowed.
[47]The test for determining whether a subpoena is or is not a “fishing expedition” as described in Alister v R (1984) 154 CLR 404, 419.
In summary, provided that the current discovery protocol remains in force (as it will), there is no reason to refuse the amendments on the basis of trial management disruption. I think it is appropriate to make an order that, absent further order of the Court, no further discovery be provided by SPI other than that set out by Zammit AsJ in her orders of 30 August 2011 as varied by agreement or further order.
I pause now to deal with the amendments as they relate to the contribution claim. It is probably self-evident, but it is important to note here that SPI’s argument concerning the amendments to the proportionate liability defence does not extend to the claim for contribution as articulated in the proposed amendment to [93] of the USC defence. As I mentioned previously, s 23B(1) of the Act is expressed in different terms to that of s 24AH and s 24AI; it focuses on “liability” in respect of damage and the entitlement to contribution from another if that person has a liability in respect of the same damage. I shall return to the difference in terminology in a moment.
Therefore, for the reasons I have set out at [58]-[71] above, the amendments relating to the contribution claim should be allowed.
The third submission of SPI relates to whether SPI is a concurrent tortfeasor for the purposes of the proportionate liability provisions. To use the language I employed at [34], the question is whether SPI has demonstrated that there is no reasonable prospect of it being found to be a concurrent wrongdoer in relation to any act or omission of SEC or ESV which was a cause of the Kilmore East fire.
As the question just posed demonstrates, it is important not to lose sight of the fact that on this point the application is one to amend the defence and not a final determination of SPI’s defence based on proportionate liability. It can therefore be assumed in favour of USC that:
(a)there was a negligent act or omission on the part of an SEC or ESV employee or employees which was a cause of the Kilmore East fire; and
(b)that, by reason of the EI Act and the allocation statements, the liability for such act or omission was lawfully transmitted to SPI.
It is convenient now to set out the relevant sections of the Wrongs Act, noting that it was not in issue that the proportionate liability provisions applied to the claims in this proceeding for economic loss and property damage caused by the fire – or to put it another way – that such claims are apportionable claims:
24AF Application of Part
(1) This Part 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.
(3) A provision of this Part that gives protection from civil liability does not limit or otherwise affect any protection from liability given by any other provision of this Act or by another Act or law.
24AH Who is a concurrent wrongdoer?
(1) 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.
(2) For the purposes of this Part it does not matter that a concurrent wrongdoer is insolvent, is being wound up, has ceased to exist or has died.
24AI Proportionate liability for apportionable claims
(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.
24AP Part not to affect other liability
Nothing in this Part—
(a) prevents a person from being held vicariously liable for a proportion of any apportionable claim for which another person is liable; or
(b) prevents a person from being held jointly and severally liable for the damages awarded against another person as agent of the person; or
(c) prevents a partner from being held jointly and severally liable with another partner for that proportion of an apportionable claim for which the other partner is liable; or
(d) prevents a court from awarding exemplary or punitive damages against a defendant in a proceeding; or
(e) affects the operation of any other Act to the extent that it imposes several liability on any person in respect of what would otherwise be an apportionable claim.
SPI submits that it is futile to grant the amendments as the allegations contained in the proposed paragraphs 61 and 90A to 90M could not give rise to a claim under the proportionate liability provisions. Counsel for SPI argued that the starting and end point is that the acquisition of liabilities through the device of the allocation statements and the provisions of the EI Act does not make SPI a person “whose acts or omissions caused…the loss or damage”. SPI then says that there are no alleged acts or omissions on its part that contributed to that loss and damage – if there was any such relevant act or omission it was on the part of SEC, not SPI.
USC submits that s 24AH cannot be read in isolation and must be read in conjunction with s 24AI which requires an analysis of the liability of a defendant (from whatever source). It says that s 24AH cannot, when read in context, require factual causation but rather needs to be read more broadly so as to include acts or omissions for which a party may be legally liable. Alternatively, it contends that SPI is potentially a concurrent wrongdoer under s 24AH for its own acts or omissions between 1994 and 2009, and that is sufficient to engage (at least at this stage) the proportionate liability provisions. Accordingly, so the argument runs, any determination of SPI’s liability under s 24AI is at large (and may include derivative liability for the acts of SEC or ESV) provided it is established that SPI is a concurrent wrongdoer. It also contends that s 24AP(e) is engaged by reason of the EI Act and that the several liability of SEC was transferred to SPI, therefore avoiding any defence under the proportionate liability provisions. Finally, it argues that it is appropriate to let these issues go to trial and await a final determination of liability under Part IVAA.
The background to the proportionate liability legislation enacted in all Australian jurisdictions was set out by Finkelstein J in BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2)[48] and need not be repeated here. The end result was the incorporation of the proportionate liability provisions within the Act in 2003.[49] The purpose of the proportionate liability provisions was identified by Nettle JA (with whom Mandie JA and Beach AJA agreed) in St George Bank Ltd v Quinerts Pty Ltd.[50] His Honour initially referred to what was said by Palmer J in Yates v Mobile Marine Repairs Pty Ltd & Anor:[51]
[48][2008] FCA 1656 [4]-[5].
[49]Wrongs and Limitation of Actions Act (Insurance Reform) Act 2003.
[50](2009) 25 VR 666 (“Quinerts”).
[51][2007] NSWSC 1463; Quinerts, 57.
[The Part] is designed to alleviate this perceived injustice [of the previous law as to contribution]. It is intended to visit on each concurrent wrongdoer only that amount of liability which the Court considers ‘just’, having regard to the comparative responsibilities of all wrongdoers for the plaintiff’s loss. How the Court is to assess what is ‘just’ is not explained. The Court must exercise a large discretionary judgment founded upon the facts proved in each particular case. The principles upon which the Court will exercise this discretionary judgment will come to be developed on a case-by-case basis. However, it seems clear enough that the policy of [the Part] is that a wrongdoer who is, in a real and pragmatic sense, more to blame for the loss than another wrongdoer should bear more of the liability. This calls for the exercise of the same kind of judgment as the Court exercises in apportioning responsibility as between a defendant sued in tort for negligence and a plaintiff who, by his or her own negligence, has been partly responsible for the injury.[52]
Nettle JA then went on to say of the statutory intention underlying the provisions:
It is important to keep in mind, however, that the proportionate liability provisions were not designed to do any more than that. As Besanko J observed in Shrimp v Landmark Operations Ltd, concerning the comparable provisions of Part VIA of the Trade Practices Act1974 (Cth):
The above references [to extrinsic materials] suggest that the mischief to which the amendments were directed was a plaintiff being able to recover 100% of his damages from any one of several wrongdoer’s when that wrongdoer’s ‘fault’, when compared with the other wrongdoers, was less or far less than that. In other words, the amendment was directed to what were considered to be the undesirable consequences of the joint and several liability rule. There is no suggestion that the mischief the amendments were designed to remedy was any wider than that. The definition of concurrent wrongdoer seems to be the critical subsection and, in my opinion, the word ‘caused’ in s 87CB(3) should be read as meaning such as to give rise to a liability in the concurrent wrongdoer to the plaintiff or applicant.
In particular, there is no suggestion in Part IVAA that it was intended to do more by way of apportionment than in theory could previously be achieved by contribution under s 23B of the Act. As appears from the Second Reading Speech on the Commonwealth Proportionate Liability Bill, the object of the apportionment legislation was to put a defendant in exactly the position it would have been if all other concurrent wrongdoers liable to make contribution under the Commonwealth equivalent to s 23B were before the court and of sufficient means to meet their obligations to make contribution according to their respective responsibilities for the loss and damage suffered by the plaintiff.[53] (emphasis original)
[52]Ibid [93]-[94].
[53]Quinerts [58]-[59].
With that background in mind, I return to the proposed amendments. I am of the opinion that the amendments to the proportionate liability aspect of the USC defence should not be allowed. I think that this is a matter that can be determined at this point rather than at trial as it involves a question of construction; I am satisfied that there is no reasonable prospect of the derivative liability argument based on the acquisition by SPI of SEC and ESV liabilities being made out at trial. My reasoning is now set out.
First, the plain language of s 24AH: Section 24AI cannot be engaged unless the defendant is a concurrent wrongdoer. Section 24AH defines concurrent wrongdoer in clear and unequivocal terms which require the relevant acts or omissions leading to the damage to be caused by the alleged concurrent wrongdoer i.e. direct causation. A claim based upon liability inherited from another party does not fall within this definition. There is nothing in decisions in this State or other jurisdictions that suggest that the plain words of s 24AH are to be given greater effect than their natural meaning.
In Ucak v Avante Developments,[54] Hammerschlag J identified the elements of a claim under the comparable provisions of the New South Wales Civil Liability Act 2002 as follows:
[54][2007] NSWSC 367.
In order for a person to be a concurrent wrongdoer he must be one whose acts or omissions caused the damage or loss that is the subject of the claim.
It follows in my view, that for a defendant to assert that there is a person who is a current wrongdoer the defendant must plead the necessary elements which result in the asserted conclusion. Those elements are:
a the existence of a particular person;
b the occurrence of an act or omission by that particular person; and
c a causal connection between that occurrence and the loss that is the subject of the claim.
What the defendant in this case has done is to assert a conclusion without the material facts upon which that conclusion depends. This is a course which is not permissible.
Here the material facts would have to be the identification of the particular person, the identification of the act or omission of that particular person and the facts which if proven at trial would establish that that act or omission caused the loss or damage that is the subject of the claim.[55] (emphasis added)
[55]Ibid [34]-[37].
Last year in Perpetual Trustees Australia Ltd v Paladin Wholesale Funding Pty Ltd and Another,[56] Emmett J said:
On one view, therefore, for a defendant to assert that there is a person who is a current wrongdoer, the defendant must plead the necessary elements that result in the asserted conclusion. Those elements are the existence of a particular person, the occurrence of an act or omission by that particular person and a causal connection between that occurrence and the loss that is the subject of the claim. The question is whether one needs to go beyond asserting the existence of a particular person, and whether there must be an assertion of the identity of the concurrent wrongdoer.[57] (emphasis added)
[56](2011) 83 ACJR 410.
[57]Ibid [48].
These decisions demonstrate, I suggest, the necessity for the acts or omissions to be those of the alleged concurrent wrongdoer - unless the WrongsAct (by s 24AP) extends the ambit of the circumstances which can bring that person within the scope of the statutory definition
Returning to Quinerts, it is now established in this State that a concurrent wrongdoer must not only have caused the loss or damage but also have a legal liability for that loss.[58] That conclusion was reached by Nettle JA after an analysis of the Part IV provisions of the Wrongs Act, as well as the terms of s 24AH and s 24AI. Accordingly, I accept that there is authority for the proposition advanced by USC that s 24AH cannot be read in isolation from s 24AI. However, Quinerts is also authority for the proposition that s 24AH is not to be interpreted broadly but in a manner consistent with the legislative intention.
[58]Quinerts [64]. See also Shrimp v Landmark Operations Ltd (2007) 163 FCR 510 [59]-[62].
Whilst the reasoning of Nettle JA illustrates the context (including that of Part IV of the Act), in which the proportionate liability provisions were enacted, it does not deal directly with the issue that arises in this application. Notwithstanding what was said by Besanko J in Shrimp (in a different context), I do not understand Quinerts to remove the need to satisfy the test set out in s 24AH: there must be a causal connection between the act or omission of the wrongdoer and the loss or damage sustained.
I reject the argument of USC that the plain words of s 24AH should be interpreted as meaning that references to “defendants”’ in s 24AI(1) and(3), the expressions “liability of the defendant” in s 24AI(1) and (2) and “responsibility” in s 24AI(3) in some way expand the meaning of the words used in s 24AH to result in s 24AH being read as meaning “a person whose acts or omissions (including those of another resulting in that person being liable for those acts or omissions) caused the loss or damage”.
In my opinion, the proportionate liability provisions establish a scheme to deal with claims which are potentially apportionable. The claim must be apportionable, as required by s 24AF. The alleged wrongdoer must be a concurrent wrongdoer as defined in s 24AH and s 24AP. If those provisions are engaged then the task of determining the apportionment is governed by s 24AI[59] If s 24AI determines the question posed by s 24AH, then that is to permit the tail to wag the dog.
[59]See Mitchell Morgan Nominees Pty Ltd & Anor v Vella & Ors [2011] NSWCA 390 [83].
I conclude that the law as it stands requires that to be a concurrent wrongdoer the acts or omissions of the wrongdoer must in fact be a cause of the relevant loss or damage. The acts or omissions of third parties are irrelevant to this determination. Quinerts then requires those acts or omissions to be accompanied by a legal liability for that loss or damage.
Second, s 24AP extends the ambit of the relevant acts or omissions of a concurrent wrongdoer beyond those identified in s 24AH, to include other specific circumstances such as that of the vicarious liability of an employer for the acts or omissions of an employee (s 24AP(a)) and the liability of one partner for the actions of a another (s 24AP(c)). The purpose of these provisions, presumably, was to ensure that the plain words of s 24AH did not exclude circumstances where the legislature considered the proportionate liability concept should extend beyond the direct acts or omissions of the wrongdoer. If the Victorian legislature had wished to extend the liability to other circumstances, such as transferred liability, it could have done so with words to that effect. It chose not to. This is to be contrasted to the position in South Australia in which the relevant legislation included the following provisions within that State’s equivalent to the proportionate liability provisions in the Wrongs Act.
“wrongdoer” means—
(a) a person who commits an act, or makes an omission, that causes or contributes to harm (including a person whose act or omission contributes to his or her own harm); or
(b)a person who has a derivative liability for harm resulting from the act or omission of someone else;
“derivative liability” means—
(a) a vicarious liability (including a partner's liability for the act or omission of another member of the partnership); or
(b) a liability of a person who is subject to a non-delegable duty of care for the act or omission of another that places the person in breach of the non-delegable duty; or
(c) if an insurer or indemnifier is directly liable to a person who has suffered harm for the act or omission of a person who is insured or indemnified against the risk of causing the harm—the liability of the insurer or indemnifier; or
(d)a liability as nominal defendant under a statutory scheme of third-party motor vehicle insurance;
“wrongdoing” means an act or omission that causes or contributes to harm (including such an act or omission on the part of the person who suffers the harm); and a reference to the wrongdoing of a wrongdoer (or a defendant) is to be understood as a reference to wrongdoing for which that person is directly liable or for which that person has a derivative liability.[60] (emphasis added)
[60]Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (S.A.) ss 3 and 4.
The South Australian Parliament provided for a specific category of “derivative liability” as an additional basis (to that of the equivalent of s 24AH) for determining that a person was a concurrent wrongdoer. Such circumstances include (relevant but not identical to this situation) that of a person assuming a relevant legal liability for the acts or omissions of a third person who is, in fact, the wrongdoer.
Third, there is the apparent intentional decision made by the legislature not to adopt the breadth of the wording of Part IV of the Act (s 23A(1) and s 23B(d) in particular) which make “liability” for the “same damage” the precondition for recovery. The wording of s 24AH stands in contrast; on its face, demanding direct causation. If the draftsperson had wished to do so, the language of s 23B could have been applied in the proportionate liability provisions. In particular, compare the breadth of s 23A(1):
For the purposes of this Part a person is liable in respect of any damage if the person who suffered that damage, or anyone representing the estate or dependents of that person, is entitled to recover compensation from the first-mentioned person in respect of that damage whatever the legal basis of liability, whether tort, breach of contract, breach of trust or otherwise. (emphasis added)
with the narrower definition contained in s 24AH.
Fourth, I do not accept the argument of USC that if at trial it is determined that SPI’s own acts or omissions were a cause of the fire then it is a concurrent wrongdoer under s 24AH and its liability under s 24AI is to be determined by reference to its responsibility for the loss and damage which includes consideration of its derivative liability for the acts or omissions of SEC and ESV – if so found.
In Reinhold v New South Wales Lotteries Corporation (No 2),[61] Barrett J said:
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’.[62] (emphasis added)
[61][2008] NSWSC 187 (“Reinhold”).
[62]Ibid [19]-[20]. Cited with approval by Ashley JA (with whom Nettle and Neave JJA agreed) in Godfrey Spowers (Victoria) Pty Ltd v Lincolne Scott Australia Pty Ltd and Ors (2008) 21 VR 84 [107]-[109].
For reasons I have explained, for s 24AH to work harmoniously with s 24AI, a concurrent wrongdoer’s liability under s 24AI is limited to the relevant acts or omissions identified in s 24AH which are productive of the damage. As Reinhold demonstrates, if it is in contention, an examination of those acts or omissions will also enable identification of the claim which is to be the subject of the apportionment exercise carried out under s 24AI.
USC called upon s 24AF to assist in its suggested construction of s 24AH. However, that section deals with a different issue: whether a particular claim is apportionable, not whether the wrongdoer is subject to the apportionment regime. It was said that s 24AF(2) could be relied upon as it refers to two or more apportionable claims. But it only does so in providing the criteria for an apportionable claim where there are multiple causes of action. It says nothing about the circumstances which determine whether a person is a concurrent wrongdoer.
Fifth, I do not think the provisions of s 24AP(e) militate against the construction I have suggested. By this sub-section, the proportionate liability provisions are inapplicable where another statute ”imposes several liability” on any person in respect of what would otherwise be an apportionable claim.
As I follow the argument of USC, it was said that the transfer of the contingent or prospective liabilities from the SEC to ESV and ultimately to SPI by reason of the allocation statement made under the EI Act satisfied this requirement. If (as USC contended) SPI’s liability was truly “several” by force of a statutory command and the subsection engaged, then a liability finding against SPI in relation to SEC or ESV conduct would render it liable for the full amount of the damage sustained by the claimants.
I do not accept this submission. Neither the EI Act (or for that matter the allocation statements made pursuant to the EI Act) “imposed several liability” on SPI. Rather, at best, the EI Act transferred unspecified liabilities (including those said to be contingent and prospective) from SEC to SPI. In my view, with sub-section s 24AP(e), Parliament had in mind a statute that, in terms, prescribed several liability as the appropriate form of liability to which a wrongdoer should be held.[63] It is not necessary to consider whether the liabilities transferred to SPI were, indeed, several.
[63]See Wealthcare Financial Planning v Financial Industry Complaints Service [2009] VSC 7 [40].
Finally, USC relied upon what was said by Barrett J in Reinhold in relation to comparable legislation in New South Wales. It argued that, by reason of this decision, determination of this point can only be resolved at the conclusion of the trial. I have already referred to part of his Honour’s decision at [93]. His Honour also said:
The need to know the outcome of the claim in order to apply Part 4 is emphasised by s 34 A. The operation of that section — and, therefore, the ambit of Part 4 as a whole — depends on the ability to know, among other things, whether a person ‘intended to cause’ or ‘fraudulently caused’ the ‘loss or damage that is the subject of the claim’. These things can be judged only after the loss or damage and its causes have been identified through a process of fact finding and analysis. Viewed in prospect and in its pending state, a claim might allege an intentional or fraudulent act or omission, but it is impossible to say, at that point, whether any loss or damage was caused and, if it was, what caused it — in particular, whether it was intentionally caused or fraudulently caused.
On this basis, the nature of a ‘claim’, for the purposes of Part 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.[64]
Later his Honour added:
The provisions of Part 4 are compulsory. They change substantive rights, so that a plaintiff’s ability to obtain an adjudication of joint and several liability is removed where the circumstances are of the type to which the alternative regime of proportionate liability is applied. A case no doubt needs to be pleaded and proved by one or more defendants so as to engage the statutory provisions. But it will be the findings ultimately made that determine whether the statutory conditions compelling the court to adopt the proportionate approach are satisfied.[65]
[64]Reinhold [21]-[22].
[65]Reinhold [32].
An immediate observation may be made. It is apparent from the judgment that his Honour was dealing with a situation where the particular acts or omissions of the alleged wrongdoer required consideration and determination of the first issue: whether the proportionate liability provisions applied in the sense of the claim being “apportionable” under s 24AF.[66] That clearly was an issue that had to be determined at trial, not on a pleading point, as it turned on findings of fact as to the alleged wrongdoing and whether, the NSW provisions applied. Here, however, the position is quite different. For the purpose of the application, it is accepted that:
(a)the claim is an apportionable claim;
(b)there were relevant acts or omissions on the part of SEC or ESV; and
(c)liability for such acts or omissions was transferred to SPI.
The question therefore is one of construction of s 24AH in the context of the proportionate liability provisions. It is not dependent on findings of fact at trial.
[66]In that case, whether the successful claims of Mr Reinhold for breach of contract and negligence against the New South Wales Lotteries Corporation and against newsagents in negligence were apportionable claims or whether the claims were governed by the NSW contribution provisions.
I have reached this conclusion, notwithstanding that I have permitted USC to plead out its case on derivative liability on the contribution claim against SPI. Despite there being the prospect of findings of fact in relation to acts or omissions of SEC or ESV, I am satisfied that this point is truly one of construction and can be addressed at this point of time.
Ultimately, I am persuaded that there is no reasonable prospect of success of the defence in relation to proportionate liability as advanced by the derivative liability amendments. I would refuse leave to USC to amend its defence on this issue.[67] It follows that I would not make the declaration sought by USC in the second part of its summons.
[67]I would have reached the same conclusion with the application of the” hopeless” or “futile” test.
Disposition of the application
(a)With the exception of the amendments sought to paragraphs 67(b) and 72(xxa) (which may be re-pleaded to clarify the position), the amendments of the USC defences in relation to SPI’s post-1994 conduct be allowed.
(b)The amendments of the USC defence to include the derivative liability allegations in the claim for contribution should be allowed
(c)The amendments of the USC defence to include the derivative liability allegations in the proportionate liability claim against SPI will be refused.
(d)USC must file and serve the amended defences by 23 March 2012.
(e)The claimants should be granted leave to file an amended statement of claim reflective of the amendments granted to USC – as should the State parties in respect of their defences (if they so wish). Such amendments must be served and filed by 6 April 2012.
(f)Out of an abundance of caution I request that such amendments not affect the current numbering of the pleadings and be enumerated in a similar way to that proposed by USC.
(g)I decline to make the declaration in the terms sought in USC’s summons.
(h)No further order will be made to enlarge the scope of discovery by SPI beyond that ordered by Zammit AsJ or as agreed by the parties.
CERTIFICATE
I certify that this and the 38 preceding pages are a true copy of the reasons for Ruling of J Forrest J of the Supreme Court of Victoria delivered on 14 March 2012.
DATED this fourteenth day of March 2012.
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