Minproc Ltd v Killinger
[2001] WASCA 213
•25 JULY 2001
MINPROC LTD -v- KILLINGER & ORS [2001] WASCA 213
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2001] WASCA 213 | |
| THE FULL COURT (WA) | |||
| Case No: | FUL:61/2001 | 21 JUNE 2001 | |
| Coram: | STEYTLER J TEMPLEMAN J PIDGEON AUJ | 25/07/01 | |
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Application for leave to appeal dismissed | ||
| PDF Version |
| Parties: | MINPROC LTD (ACN 008 992 694) WILLIAM FREDERICK KILLINGER ROBERT JOHN WILDE JESSE KAVANAUGH TAYLOR NEVILLE THOMAS CLEARY JOHN ROBERT CAVILL PETER FRANCIS ANDERTON |
Catchwords: | Practice and procedure Joinder of parties Turns on own facts |
Legislation: | Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947, s 7(1)(c) Rules of the Supreme Court 1971, O 19 r 2 |
Case References: | Esso Petroleum Co Ltd v Mardon [1976] QB 801 The World Beauty [1970] P 144 CA Western Australia v Bond Corporation Holdings Ltd (1991) 5 WAR 40 Wilson v Metaxas [1989] WAR 285 Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 AMP Fire & General Insurance Co Ltd v Dixon [1982] VR 833 Astley v Austrust Ltd (1999) 197 CLR 1 Barclays Bank v Tom [1923] 1 KB 221 Daniels v AWA Ltd (1995) 37 NSWLR 438 Edwards v Edwards [1913] VLR 30 House v The King (1936) 55 CLR 499 Morrell v Mercantile Mutual Insurance (Australia) Ltd (1999) 21 WAR 451 Permanent Building Society v Wheeler (1993) 11 WAR 187 Pioneer Concrete (NT) Pty Ltd v Watkins Ltd (1983) 48 ALR 365 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : MINPROC LTD -v- KILLINGER & ORS [2001] WASCA 213 CORAM : STEYTLER J
- TEMPLEMAN J
PIDGEON AUJ
- Appellant (Plaintiff)
AND
WILLIAM FREDERICK KILLINGER
First Respondent (First Defendant)
ROBERT JOHN WILDE
Second Respondent (Third Defendant)
JESSE KAVANAUGH TAYLOR
Third Respondent (Fourth Defendant)
NEVILLE THOMAS CLEARY
Fourth Respondent (Fifth Defendant)
JOHN ROBERT CAVILL
Fifth Respondent (Second Defendant)
PETER FRANCIS ANDERTON
Sixth Respondent (Third Party)
(Page 2)
Catchwords:
Practice and procedure - Joinder of parties - Turns on own facts
Legislation:
Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947, s 7(1)(c)
Rules of the Supreme Court 1971, O 19 r 2
Result:
Application for leave to appeal dismissed
Representation:
Counsel:
Appellant (Plaintiff) : Mr M L Bennett
- First Respondent (First Defendant) : Mr W S Martin QC &
Mr A W Willinge
- Second Respondent (Third Defendant) : Mr K J Martin QC &
Ms S J Unwin
- Third Respondent (Fourth Defendant) : Mr K J Martin QC &
Ms S J Unwin
Fourth Respondent (Fifth Defendant) : Mr K J Martin QC &
Ms S J Unwin
Fifth Respondent (Second Defendant) : No appearance
Sixth Respondent (Third Party) : No appearance
Appellant (Plaintiff) : Bennett & Co
First Respondent (First Defendant) : Blake Dawson Waldron
Second Respondent (Third Defendant) : Pullinger Readhead Stewart
Third Respondent (Fourth Defendant) : Pullinger Readhead Stewart
Fourth Respondent (Fifth Defendant) : Pullinger Readhead Stewart
Fifth Respondent (Second Defendant) : No appearance
Sixth Respondent (Third Party) : No appearance
(Page 3)
Case(s) referred to in judgment(s):
Esso Petroleum Co Ltd v Mardon [1976] QB 801
The World Beauty [1970] P 144 CA
Western Australia v Bond Corporation Holdings Ltd (1991) 5 WAR 40
Wilson v Metaxas [1989] WAR 285
Case(s) also cited:
Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170
AMP Fire & General Insurance Co Ltd v Dixon [1982] VR 833
Astley v Austrust Ltd (1999) 197 CLR 1
Barclays Bank v Tom [1923] 1 KB 221
Daniels v AWA Ltd (1995) 37 NSWLR 438
Edwards v Edwards [1913] VLR 30
House v The King (1936) 55 CLR 499
Morrell v Mercantile Mutual Insurance (Australia) Ltd (1999) 21 WAR 451
Permanent Building Society v Wheeler (1993) 11 WAR 187
Pioneer Concrete (NT) Pty Ltd v Watkins Ltd (1983) 48 ALR 365
(Page 4)
1 JUDGMENT OF THE COURT: This is an application for leave to appeal against the decision of a Judge of this Court, given in interlocutory proceedings. At the conclusion of argument on the application we unanimously dismissed the application for leave to appeal and said that we would later give our reasons for doing so. These are those reasons.
2 The applicant ("Minproc") was, from 1994, a publicly listed company. It carried on the business of a consulting engineer. The first respondent, Mr William Killinger, was its managing director. The fifth respondent, Mr John Cavill, was its company secretary. The second, third and fourth respondents were non-executive directors of Minproc.
3 In 1994 Minproc incorporated a subsidiary, MEL Investments Inc. This company acquired a 25 per cent interest in a limited partnership operated by a company, Mincorp Limited ("Mincorp"), in the United States of America.
4 Minproc has pleaded, in its statement of claim filed in these proceedings, that in September 1994, at a meeting of its directors, it considered whether or not it should provide a guarantee, limited to an amount of US$4.3 million, in respect of Minproc's performance of two contracts. This guarantee, if given, would be given, in return for a fee of US$500,000, in respect of an engineering and construction agreement ("the engineering contract") and an equipment supply agreement ("the supply contract") then proposed to be entered into by Mincorp relating to the construction of a nitrate plant at Taltal in Chile. The plant was to be constructed on behalf of a company incorporated in Chile and known as Minera Yolanda SA. The supply contract was one for US$30,250,000 and the engineering contract was one for US$16,000,000. Each contract was to be substantially performed in Chile or at the office of Mincorp in the United States.
5 The board resolved to give the guarantee. Minproc alleges that, in so doing, it acted negligently. It alleges that the board failed to obtain legal advice or to verify the accuracy of the materials and costs estimates and pricing and contingency allowances made by Mincorp in respect of the two contracts and that it failed to confirm that the contract prices contained sufficient allowances for contingencies to enable each contract to be performed. It also alleges that the board failed to verify that the technical design for the construction of the plant was adequate, that Mincorp was financially able to carry out the project and that Mincorp had personnel with the requisite expertise.
(Page 5)
6 Delays struck the nitrate plant project and the financial position of Mincorp deteriorated. Minproc alleges that, in February 1995, its directors (other than Mr Cavill) resolved to allow Mincorp to pay the guarantee fee in progressive payments. It also alleges that Mr Killinger, in March 1995, advised the board that Mincorp was in dire financial difficulties. It alleges that, in April 1995, Mr Killinger wrote to the board members advising that it would be very difficult for him to recommend that the company should sign the guarantee. It alleges that, at a board meeting held in August 1995, Mr Peter Anderton (the sixth respondent), Minproc's other executive director, advised the board of Minproc that, in the light of his examination of Mincorp and its personnel, he had severe concerns as to that company's ability to meet its obligations in respect of the nitrate plant project. He is alleged to have said that he estimated that there was a significant risk involved in providing the guarantee. Minproc alleges that the board then resolved to review the position of Mincorp and to consider whether or not to provide the guarantee after its review of the project position was finalised.
7 Next, Minproc alleges, on 25 August 1995 Mr Killinger and Mr Cavill, without any further consideration by the board, executed the guarantee in favour of Minera Yolanda SA, thereby guaranteeing performance of the supply contract by Mincorp and of the engineering contract by Mincorp's Chilean subsidiary, Mincorp Chile Limitada ("Mincorp Chile"). Minera Yolanda SA then entered into the supply contract with Mincorp and the engineering contract with Mincorp Chile.
8 Minproc alleges that the execution of the guarantee by Messrs Killinger and Cavill was unauthorised and in breach of their statutory and common law duties to exercise reasonable care and skill. It also alleges that Minproc's board, including the first, second, third and fourth respondents, but not Mr Cavill, held a meeting on 16 October 1995 at which it ratified the application of the Minproc seal to the executed Minera Yolanda guarantee. It alleges that this ratification, too, was in breach of the duties to exercise reasonable care and skill.
9 Minproc next alleges that, as a consequence of the breaches of duty by the respondents other than Mr Cavill, it has suffered loss and damage. It pleads, in this respect, that by March 1996 it had become apparent that Mincorp was "technically insolvent" and that Minproc's likely exposure under its guarantee was between US$1.57 million and US$3.92 million. It also says that it was then apparent that Mincorp was in breach, or likely to be in breach, of a clause of the supply contract and that Mincorp Chile
(Page 6)
- was in breach, or likely to be in breach, of a clause of the engineering contract.
10 Next, it pleads that, in order to mitigate Minproc's anticipated loss, the first, second, third, fourth and sixth respondents resolved that Minproc should seek an assignment of the engineering contract from Mincorp Chile and of the supply contract from Mincorp. These assignments were effected on 28 March 1996. However, Minproc pleads, various events occurred which had the consequence that these assignments proved to be disastrous for it. It ended up suffering losses totalling AUS$22,650,000.
11 So far as Mr Cavill is concerned, Minproc pleads that the execution by him of the guarantee was in breach of duties owed by him to Minproc, including those already mentioned and a duty to disclose relevant information known to him. It pleads that his breaches of duty resulted in the same loss and damage as that to which we have earlier referred.
12 The first, second, third, fourth and fifth respondents deny much of what has been pleaded by Minproc. While they admit that the guarantee was entered into on 25 August 1995, they deny that Minproc has suffered any loss and damage at all.
13 Against this background, the second, third and fourth respondents brought an application for leave to commence third party proceedings against two men, Mr Phillip Earley and Mr Brettney Fogarty. A similar application was brought by Mr Killinger.
14 Messrs Earley and Fogarty joined Minproc's board on 20 May 1996, after the guarantee had been executed and after the resolution had been passed that Minproc should seek assignments of the two contracts to which we have referred. However, each of the first, second, third and fourth respondents alleges that Messrs Fogarty, Earley and the sixth respondent, Mr Anderton, acted negligently and in breach of their duty of care as directors of Minproc in the course of making decisions relating to the nitrate plant project after these events had occurred. They allege that this negligence caused Minproc to suffer loss and damage. The second, third and fourth respondents plead, in their statement of claim against Messrs Earley and Fogarty (par 38), that if, which is denied, their alleged breaches of duty caused or contributed to the loss and damage claimed by Minproc, then the breaches of duty on the part of Messrs Fogarty, Earley and Anderton (against whom there is a separate statement of claim) "also caused or substantially contributed to that same loss and damage". A
(Page 7)
- similar plea is made by Mr Killinger in par 36 of his statement of claim against Messrs Fogarty and Earley.
15 Minproc objected to the proposed joinder of Messrs Earley and Fogarty as third parties.
16 That joinder was proposed pursuant to the Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 ("the Act"). Section 7(1)(c) of that Act relevantly provides that:
"Where damage is suffered by any person as a result of a tort:
...
(c) any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is or would if sued have been liable in respect of the same damage whether as a joint tortfeasor or otherwise ... ."
17 The short point of the objection was that it was not possible for the proposed third parties to have been liable in respect of the same damage as that for which the first, second, third, fourth and fifth respondents were liable, with the consequence that s 7(1)(c) of the Act has no application . That, counsel for Minproc contends, is because Minproc either acted reasonably, in taking the steps to which we have referred in order to mitigate its damage, or it did not. If it did act reasonably in doing so, he submits, then it is entitled to recover the additional loss or damage which, as matters turned out, it suffered as a consequence of taking those steps. That is because it is implicit, in the principle that losses and expenses reasonably incurred in an effort to mitigate damage are recoverable, that, if mitigating steps are reasonably taken and additional loss or damage results from them, then that loss or damage will be recoverable in addition to the damages which are otherwise recoverable. (See The World Beauty [1970] P 144 CA at 156 and Esso Petroleum Co Ltd v Mardon [1976] QB 801 at 812, 829 and 833). However, the fact that Minproc acted reasonably, he contends, necessarily means that the third parties could not be liable for that additional loss or damage as the notion of reasonableness in taking steps to mitigate is inconsistent with that of negligence on their part in making the decisions to take those steps on Minproc's behalf. If, on the other hand, Minproc did not act reasonably in taking the steps which led to its increased loss, because the third parties were negligent in making, on its behalf, the decisions to take those steps, then, he submitted, the increased loss will not, in any event, be recoverable against the first, second, third, fourth and fifth respondents upon ordinary principles
(Page 8)
- relating to recoverability of damages and there is consequently no need for any contribution proceedings against Messrs Earley and Fogarty.
18 This submission, while described as "very attractive" by the Judge below, did not persuade him to refuse the application for leave to join the proposed third parties. His Honour said, in the course of his ex tempore reasons, that the issues of causation would involve a considerable investigation of factual matters and that there was no benefit in refusing leave to join the third parties as that would necessitate the institution of separate proceedings against them, resulting in a duplication of time, effort and expenditure.
19 As will be apparent, Minproc now contends that his Honour erred in arriving at that decision and that he should have found that the first, second, third and fourth respondents have no cause of action against either of Messrs Earley and Fogarty for a contribution or indemnity under the Act.
20 Those four respondents did not require the leave of the court in order to bring separate contribution proceedings against the third parties. The only issue for the court below was, consequently, that of whether or not the proceedings against Messrs Earley and Fogarty should be brought by way of third party proceedings in the action against the first to fifth respondents or whether they should be separately commenced. Leave was required, if the former course was to be adopted, because the third party proceedings against Messrs Earley and Fogarty were commenced after defences had been filed in the principal proceedings against the first to fifth respondents.
21 It remains open to Messrs Earley and Fogarty, should they be advised to take that course, to apply to strike out the third party proceedings against them upon the basis that they disclose no cause of action. They had, by the date of the hearing before us, had no opportunity to make any application of that kind, the application for leave to commence the third party proceedings against them having been made ex parte pursuant to the provisions of O 19 r 2 of the Rules of the Supreme Court 1971. Consequently, the only prejudice to Minproc, if the proceedings against these two men are to be commenced by way of third party proceedings as proposed by the first, second, third and fourth respondents, is that this issue, if it is to be aired, will have to be aired in the existing proceedings rather than in separate proceedings, perhaps resulting in some delay. We should add, in this respect, that similar contribution proceedings have already been commenced by way of third
(Page 9)
party proceedings against the sixth respondent who has, as yet, raised no objection to his joinder as a third party.
- 22 We were not persuaded that any limited prejudice of the kind to which we have referred was sufficient to result in any substantial injustice if the decision of the Judge below was left unreversed (as to which see Wilson v Metaxas [1989] WAR 285 at 294 and Western Australia v Bond Corporation Holdings Ltd (1991) 5 WAR 40 at 54 - 57).
23 Nor, for that matter, did we doubt the correctness of his Honour's decision. If there is no substance to the third party proceedings they will, we assume, be struck out pursuant to applications which should not, as we have foreshadowed, unduly delay the principal proceedings, or cause any significant prejudice to the applicant. If, on the other hand, the first to fourth respondents are able to persuade the trial Judge, or whoever else might hear any such applications, that there is sufficient in the third party proceedings to justify them going forward (and we consider it inappropriate to express any view in that respect at this stage), or if no such applications should be brought, then it appears to us to be probable that there will be a very substantial overlap between the issues arising in the principal proceedings (in which the applicant will have to establish that it acted reasonably in taking the steps in mitigation to which we have referred) and those arising in the third party proceedings (in which the first to fourth respondents will have to establish that the third parties were negligent in causing the applicant to take those steps, or some of them). In these circumstances it seemed to us undoubtedly to have been open to the trial Judge to have exercised his discretion in such a way as to permit the contribution proceedings against Messrs Earley and Fogarty to be commenced by way of third party proceedings.
24 We consequently dismissed the application for leave to appeal.
9
2