McDIVEN v D'ARCY
[2004] WADC 196
•27 SEPTEMBER 2004
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: McDIVEN -v- D'ARCY & ORS [2004] WADC 196
CORAM: CHANEY DCJ
HEARD: 17 SEPTEMBER 2004
DELIVERED : 27 SEPTEMBER 2004
FILE NO/S: CIV 1245 of 2000
BETWEEN: JOHN EDWIN McDIVEN
Plaintiff
AND
SEAN D'ARCY
First DefendantNORMAN TIMOTHY LAVALLAN D'ARCY
Second DefendantLYNDON STATION PTY (ACN 008 667 936)
Third DefendantJABIRU AIRCRAFT PTY LTD (ABN 170 109 10077)
Third Party
Catchwords:
Third party claim - Claim as joint tortfeasors barred - Independent duty owed by third party to defendant - Defendant claims damages and indemnity - Whether defendants' loss caused by third party's alleged breach of duty
Legislation:
Nil
Result:
Decision to dismiss third party notice upheld
Appeal dismissed
Representation:
Counsel:
Plaintiff: No appearance
First Defendant : Mr I R Freeman
Second Defendant : Mr I R Freeman
Third Defendant : Mr I R Freeman
Third Party : Mr D K Barker
Solicitors:
Plaintiff: Not applicable
First Defendant : Phillips Fox
Second Defendant : Phillips Fox
Third Defendant : Phillips Fox
Third Party : Chalmers & Partners
Case(s) referred to in judgment(s):
Nil
Case(s) also cited:
ANZ Banking Group Ltd v Turnbull & Partners Ltd (1991) 33 FCR 265
Brambles Constructions Pty Ltd v Helmers (1996) 114 CLR 213
Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No 5) (1997) 18 WAR 334
Dugdale & Ors v Lovering (1875) 10 LRCP 196
George Wimpey & Co Ltd v British Overseas Airways Corporation [1955] AC 169
Hazart Pty Ltd v Rademaker (1993) 11 WAR 26
Henderson v Henderson (1843) 67 ER 313
March v E & M H Stramare Pty Ltd (1991) 171 CLR 506
Merryweather v Nixan (1799) 101 ER 1337
Minproc Ltd v Killinger & Ors [2001] WASC 347
Phonesivorabouth v Tops Services Pty Ltd (1992) 106 FLR 471
Pioneer Concrete (NT) Pty Ltd v Watkins Ltd (1983) 48 ALR 365
Port of Melbourne Authority v Anshun Pty Ltd (No 2) (1981) 147 CLR 589
Toplis v Grane (1839) 5 Bing NC 636
CHANEY DCJ: This is an appeal from a decision of Deputy Registrar Harman made on 11 June 2004 when he made orders that:
1.The defendants' application for directions in the third party proceedings be dismissed;
2.the third party proceedings be terminated;
3.the costs of the third party proceedings and the application be paid by the defendants.
In lieu of those orders, the defendants sought certain directions dealing with pleadings and discovery in the third party proceedings, providing for the third party to be at liberty to appear at the trial of the action but directing that the question of liability of the third party to indemnify the defendants be determined at a separate trial, and dealing with costs.
The essential issue at the appeal was whether the proposed claim by the defendants against the third party constituted a viable claim.
The relevant background
The third party, Jabiru Aircraft Pty Ltd, was originally named as the fourth defendant in the writ of summons which was issued on 17 May 2000. The writ was not served immediately, and on 17 May 2001 an order was made ex parte extending the validity of the writ for a further six months.
On 26 November 2001, Jabiru Aircraft Pty Ltd, as fourth defendant in the action, entered an appearance. The first, second and third defendants entered their appearances on 31 January 2002. A statement of claim was filed on 3 May 2002.
The statement of claim sought damages for personal injury allegedly suffered by the plaintiff as a result of the crash of an aircraft in which the plaintiff was a passenger on 19 May 1997. It was pleaded that the first defendant was the pilot of the aircraft at the time of the crash, the second defendant was a director of the third defendant, and the third defendant was the owner of the aircraft. It was pleaded that the fourth defendant was the manufacturer of the aircraft.
It was pleaded that the first, second and third defendants owed statutory duties in relation to the maintenance and daily inspection of the aircraft pursuant to the Civil Aviation Act 1988 and the Civil Aviation Regulations 1988. As against the fourth defendant, it was pleaded that, as manufacturer of the aircraft, it was under a statutory duty to ensure that the aircraft, and the engine in the aircraft, contained no defect, that duty being said to arise under Part VA of the Trade Practices Act 1974 (Cth).
It was also pleaded that the first defendant owed the plaintiff a duty to exercise all reasonable care for the plaintiff's safety whilst he was a passenger in the aircraft. It was pleaded that the first defendant breached that duty of care by failing to adequately maintain and inspect the aircraft in several different respects, and by commencing the flight when he knew or ought to have known that the engine was unlikely to operate correctly, and continuing the flight when certain problems should have been apparent.
In the alternative, it was pleaded that the crash was directly caused by a breach of the statutory duties of the first, second and third defendants. Those alleged breaches are particularised by reference to some of the particulars of the breach of the first defendant's duty of care. A further alternative claim is made against the second and third defendants by reason of what is pleaded to be duties owed to the plaintiff arising out of agreements made between the second and third defendants as to maintenance and inspection of the aircraft.
The statement of claim in its original form then pleaded a breach of a statutory duty alleged against the fourth defendant in that it provided an engine with defects of which the second and third defendants were not made aware, and also pleaded duties owed to the plaintiff said to flow from a maintenance agreement between the fourth defendant and the second and third defendants.
The statement of claim was amended in August 2002. The amendment altered the duties said to be owed by the first, second and third defendants, to plead what were referred to as "the maintenance and inspection duties". It also deleted references to breaches of duty by the fourth defendant under the Trade Practices Act, and instead pleaded defects in the engine within the meaning of that term in s 75AC of the Trade Practices Act 1974 for which the fourth defendant was said to be responsible, and alleged that the fourth defendant failed to advise the third defendant as to those defects. The amendment also pleaded a duty of care owed by the fourth defendant to potential passengers of the aircraft. The duty of care was said to arise in relation to the manufacture and design of the aircraft and the engine.
On 23 September 2003, a minute of consent orders signed by the solicitors for each of the fourth defendant and the plaintiff was filed pursuant to O 43 r 16 of the Rules of the Supreme Court. Those consent orders provided that the plaintiff's claim against the fourth defendant be dismissed, and the parties bear their own costs. Consequent upon that consent judgment, the statement of claim was further amended. Essentially, the claim against the first, second and third defendants was by this time based upon allegations of a failure to adequately maintain the aircraft, to properly inspect it prior to flight and on a regular basis, and pilot errors in commencing and continuing the flight in certain detailed circumstances. By this time, all reference to duties said to be owed by the plaintiff as a result of a maintenance agreement between various parties had been deleted from the statement of claim. The claim against the fourth defendant was deleted.
In December 2003, the defendants issued a chamber summons seeking leave to issue a third party notice against Jabiru Aircraft Pty Ltd. Orders were made on that summons giving leave to issue a third party notice and providing that:
"On the return of the summons for directions the determination of the issues between the defendants and the third parties be tried separately to the action between the plaintiff and defendant."
Certain other procedural orders were made. In making those orders, Deputy Registrar Hewitt ruled that the decision in James Hardie & Co Pty Ltd v Seltsam Pty Ltd (1998) 196 CLR 53 precluded the defendants from making a third party claim on the basis that Jabiru Aircraft Pty Ltd was a joint tortfeasor. The learned Deputy Registrar held however, that an alternative claim based on an independent duty of care said to be owing by the proposed third party to each of the defendants could be pursued. Because of the lateness of the application to join the third party, and the likely complexity of the issues that were said to arise, the learned Deputy Registrar made the order that the issue of liability as between the third party and the defendant should be dealt with separately from the trial of the issues between the plaintiff and the defendants.
Pursuant to the decision of Deputy Registrar Hewitt, a third party notice was issued on 3 March 2004. The third party notice alleged that the plane crash was caused by the failure of the plane's engine, which occurred as a result of defects in the design and construction of the engine. The defects were particularised. It was then pleaded that the third party thereby supplied an engine which was not fit for its purpose, and that it owed a duty to the third defendant to supply an engine which was free from defects and fit for its purpose. There was no specific plea as to a breach of that duty, although it is implicit that the supply of a defective engine (which was pleaded) amounted to a breach of the duty pleaded. The relief which the defendants claim against the third party is as follows:
"A.A declaration that the defendants are entitled to be indemnified by the third party both in respect of the plaintiff's claim and of the defendants' own costs in defending the action and the costs of the third party proceedings and any other claims arising out of the Accident;
B.Further or alternatively damages in a sum equivalent to any award that may be made against the defendants together with costs of defending these proceedings;
C.Judgment for any amount that may be found due from the defendants to the plaintiff;
D.Judgment for the amount of any costs that the defendants may be adjudged to pay to the plaintiff, and for its own costs of defending the plaintiff's claim and the costs of the third party proceedings;
E.Interest on any amount for which the defendants are entitled to be indemnified or any damages, at such rate as may from time to time be prescribed pursuant to s 32 of the Supreme Court Act 1932 (as amended)."
At the same time as dealing with the application for leave to issue a third party notice, Deputy Registrar Hewitt dealt with an application for leave on the part of the defendants to amend their defence in accordance with a minute of proposed substituted defence. That leave was granted. The substituted defence was filed in accordance with that leave on 10 March 2004. The original defence did no more than not admit or deny the various paragraphs of the statement of claim. The substituted defence denied the allegations as to a failure to maintain and check the aircraft, and positively pleaded that all required maintenance checks had been performed in accordance with the flight manual. The defence then pleaded that the crash was directly caused by defects in the engine of the aircraft. The defects alleged are those which are pleaded in the statement of claim against the third party. The approach taken in the substituted defence is therefore to deny any breach of the duty to inspect or maintain the aircraft, or any pilot error, but to set up defects in the plane's engine as the cause of the accident, presumably on the basis that those defects were not the responsibility of the defendants.
On 8 April 2004, the defendants applied for directions in the third party proceedings. That application was opposed, and on 11 June 2004, Deputy Registrar Harman declined to make directions, and made an order dismissing the application and terminating the third party proceedings pursuant to O 19 r 4(3)(c) of the Rules of the Supreme Court.
The defendants' submissions
The defendants accept that it is not open to them to bring third party proceedings on the basis of the Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947. Rather, the defendants submit that if they are found liable for causing the aircraft to crash, and thus for the plaintiff's damages, but can establish that one of the causes of the aircraft crash was the inherent faults in the engine of the aircraft, then the defendants would have suffered economic loss as a result of the inherent faults of the aircraft's engine. The defendants say that by reason of their defence, the exact cause or causes of the crash, including the question of whether or not it occurred by reason of defects in the engine, will be issues considered at trial. In that sense, it is said that the same facts will have to be considered in the third party proceedings as in the main action and that is a reason to permit the matter to be dealt with by way of third party proceedings (see Re Burford [1932] 2 Ch D 122 at 138).
The learned Deputy Registrar appears to have based his decision to dismiss the third party notice on the proposition that "an award of damages cannot constitute loss in the hands of a plaintiff for the purpose of seeking recovery from another party". He cited as authority for that proposition the decision of the House of Lords in Neville v London Express Newspaper Ltd [1919] All ER 61 thereby adopting the proposition which the third party contended was established by that decision.
Neville v London Express Newspaper Ltd concerned an action for damages for maintenance. It was established that the respondent had funded certain investors in an action to recover moneys paid by reason of a fraudulent misrepresentation by Mr Neville. Mr Neville brought an action for defamation, and also for damages for maintenance. The question arose as to the measure of damages which were recoverable in the event that the tort of maintenance were established. At first instance, it had been held that Mr Neville was entitled to recover as damages the amount of the taxed costs which he had to pay to the successful plaintiffs in the maintained actions, and for the costs incurred by him in those actions. The House of Lords concluded that, although an action for maintenance was available, only nominal damages should be awarded. In reaching that conclusion, Lord Finlay LC said (at 66):
"It cannot be regarded as damage sufficient to maintain an action that the plaintiff has had to discharge his legal obligations or that he has incurred expenses in endeavouring to evade them."
In my view, the decision in Neville cannot be taken as supporting the proposition that a loss brought about by reason of a judgment against a defendant for damages for that defendant's wrongdoing towards the plaintiff, can never be recoverable against a third party whose actions may have brought about the defendant's wrongdoing.
It is relatively commonplace, particularly in the context of claims for misleading and deceptive conduct, for a defendant to assert against a third party that its misleading conduct resulted from it having been misled by a third party, and claiming an indemnity and/or damages in any amount ordered to be paid by the defendant to the plaintiff. An example of such a case identified by the defendants in their submissions is Huntsmen Chemical Company Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242. Such claims are not confined to claims under the Trade Practices Act 1974, or Fair Trading Act, but may arise in other fields. Where a judgment is obtained against a defendant for a money sum, and that defendant can successfully assert that, but for an actionable wrong by a third party, it would not itself have wronged the plaintiff, there is no reason in principle why the measure of damages against the third party should not equal the damages payable by the defendant to the plaintiff. The judgment against the defendant, and thus its economic loss, has been caused by, in the relevant sense, the wrongdoing of the third party. The decision in Neville so far as it deals with the assessment of damages recoverable, is limited to claims for damages for the tort of maintenance. It does not follow, however, that this third party claim is sustainable.
The critical issue is whether there is a causal connection between the judgment obtained or potentially to be obtained, by a plaintiff, and the wrongdoing alleged against the third party. That causal connection is not present in this case.
The plaintiff in this action claims against the defendants for what might broadly be described as pilot error, failure to maintain and failure to inspect. There is no claim against the defendants based upon the proposition that the crash, and thus the injuries to the plaintiff, were brought about by reason of defects in the engine. If, therefore, the plaintiff succeeds in establishing pilot error, failure to maintain or failure to inspect, the cause of the award of damages that will be made against the defendants is one or more of those acts or omissions.
If the defendants succeed in establishing that there was no pilot error, or no failure to maintain or inspect, but rather the crash was caused by defects in the engine (as the defence asserts), the plaintiff will fail. The defendants will thus not suffer the loss which they seek to claim against the third party.
Because it is no part of the plaintiff's claim that the crash, and thus his injuries, were caused by a defective engine, any judgment against the defendants and thus their loss or damage, will not be "caused by" the wrong which they assert against the third party. It is for that reason that I am of the view that the third party claim cannot be sustained in this action.
The defendants contend that the causal nexus between the defective engine and their potential loss is the assertion that the defective engine caused the crash. In turn the crash caused the injury to the plaintiff which forms the foundation for the damages recovered by the plaintiff. Thus, the defendants contend, if the plaintiff succeeds in showing that one or more of the failures or errors asserted against the defendants constituted a cause of the crash, and the Court also finds that the defective engine was another contributing cause, then "the defendants would have suffered an economic loss (namely the judgment against them) as a result (in part) of the inherent faults in the aircraft's engine." It is not clear how the defendants suggest that the Court could then apportion the amount of the judgment so as to give some partial recovery to the defendants from the third party. In the absence of the operation of the Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947, I am unable to see how that outcome could be achieved. But in any event, it is not the crash which constitutes the defendants' loss for the purposes of the third party proceedings. The crash caused (it is alleged) personal injury to the plaintiff. That is the plaintiff's loss or damage. The loss for which the defendants' seek indemnity or damages is a different loss, namely the economic loss by reason of the judgment against them.
If the defendants are to suffer an economic loss by reason of having a judgment against them, it can only be on the basis that they have made one or more of the errors or omissions alleged against them by the plaintiff. Those errors or omissions are the cause of the potential loss, and it is not asserted that those errors or omissions occurred because of some conduct by the third party. In its present terms, the third party is unsustainable.
It follows that, although for different reasons than those relied upon by the learned Deputy Registrar, I would dismiss the appeal.
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