Paperlinx Ltd v Ansell Ltd , Sandusky Walmsley Pty Ltd
[2006] VSC 214
•16 June 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 7964 of 2002
| PAPERLINX LTD | Plaintiff |
| v | |
| ANSELL LTD | Defendant |
| SANDUSKY WALMSLEY LTD | First Third Party |
| & | |
| INSPECTION SYSTEMS AND SERVICES INC | Second Third Party |
---
JUDGE: | Bongiorno J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 3 and 8 March 2006 | |
DATE OF JUDGMENT: | 16 June 2006 | |
CASE MAY BE CITED AS: | Ansell v Sandusky Walmsley | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 214 | |
---
Tort – Contract – Breach of statutory warranties – Contribution between wrongdoers – "Liable in respect of the same damage" – Successive wrongdoers – Section 23A, section 23B Wrongs Act 1958.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | No appearance | |
| For the Defendant | Mr G. McArthur SC | Phillips Fox |
| For the First Third Party | Mr P.G. Cawthorn | Gibbs, Abbot Stillman |
| For the Second Third Party | No appearance |
HIS HONOUR:
Paperlinx Ltd makes paper. One of the machines upon which it does so is installed at its Maryvale Mill. That machine is referred to as M2.
In August 2002 Paperlinx contracted with Ansell Ltd to re-cover one of the pressure rollers on M2 with a rubber compound. This work, which cost about $35,000, was performed by Ansell at its premises and the roller was then returned to Paperlinx and installed in M2. According to Paperlinx’s statement of claim a few months after being re-covered the roller on M2 delaminated. It came off the metal cylinder comprising its core and caused substantial damage to M2, including damage to its “MG cylinder”, a vital part of M2 which had been in use at Maryvale for about 50 years. Thus, Paperlinx suffered loss and damage for which it has sued Ansell.
The loss and damage alleged by Paperlinx, said to amount to a sum in the order of $10,000,000, includes the cost of having to have a new MG cylinder and its frame manufactured in England and transported to Maryvale together with consequential production and other losses allegedly suffered as a result of M2 being out of service for a long period. Paperlinx has framed its claim against Ansell by alleging breaches of statutory warranties implied by the Trade Practices Act 1974 (Cth), breach of contract and/or negligence.
Ansell’s defence of Paperlinx’s claim includes an allegation that by replacing the MG cylinder on M2 rather than repairing it Paperlinx has failed to mitigate its loss. In any event, says Ansell, Paperlinx has now got a much better MG cylinder than it had before and must account for the betterment which has accrued to it by reason of that fact.
Pursuant to leave granted by this Court on 23 May 2005 Ansell joined Sandusky Walmsley Ltd as a third party to the proceeding, seeking indemnity or contribution from it in respect of Paperlinx’s claim. Sandusky Walmsley is an English company which Ansell retained to examine, test and report upon the MG cylinder on M2 which was allegedly damaged as a result of the delamination of the pressure roller which had been re-covered by Ansell.
Following an examination of the MG cylinder, Sandusky Walmsley provided Paperlinx with a report and subsequent advice concerning its state. In effect it advised Paperlinx that the cylinder should be replaced and not repaired. Ansell alleges in its statement of claim in the third party proceeding that in giving this advice Sandusky Walmsley breached the Trade Practices Act 1974 (Cth), breached its contract with Paperlinx and/or was in breach of a tortious duty to Paperlinx. It claims that if Paperlinx has suffered any loss or damage arising out of the replacement of the MG cylinder as claimed by it in its statement of claim then such loss or damage was caused by Sandusky Walmsley's giving of advice to replace it rather than have the original cylinder repaired.
In its defence to the third party claim Sandusky Walmsley claims that Ansell is not entitled to indemnity or contribution from it on various grounds, including that any damage suffered by the plaintiff by reason of its alleged negligent advice is not the “same damage” as that suffered by the plaintiff by reason of the wrongful conduct of Ansell and, accordingly, contribution is not available to Ansell pursuant to Part IV of the Wrongs Act 1958.
On 22 November 2005 Sandusky Walmsley issued a summons seeking orders that the third party proceeding against it be stayed and that the third party notice against it be struck out pursuant to RSC r 23.02 and/or in the exercise of the court’s inherent jurisdiction. On 15 February 2006 Master Evans dismissed the application with costs. This judgment is concerned with Sandusky Walmsley’s appeal from Master Evans' dismissal of its application.
Part IV of the Wrongs Act 1958 provides a statutory right to indemnity or contribution between two or more persons each liable to another person in respect of the same damage.[1] That liability may arise in tort, breach of contract, breach of trust or otherwise.[2] In considering the operation of these provisions in Alexander v Perpetual Trustees WA Ltd,[3] Gleeson CJ, Gummow and Hayne JJ said:-
“Two relevant propositions are, therefore, central to the proper application of s 23B as it is to be understood in the light of s 23A. First, the party claiming contribution (the claimant) must show that it is liable in respect of damage suffered by another person (the injured plaintiff). Secondly, the claimant may recover contribution from any other person (the potential contributor) who is also liable to the injured plaintiff in respect of the same damage. The relevant inquiry is not confined to whether the damage for which each is liable can be said to be the same; both claimant and potential contributor must be liable to the injured plaintiff.”
[1]Section 23 B Wrongs Act 1958.
[2]Section 23 A Wrongs Act 1958.
[3](2003) 216 CLR 109.
For the purpose of deciding the question raised by this appeal it must be assumed that both Ansell and Sandusky Walmsley are liable to Paperlinx. Whether that assumption is correct will only be determined at a trial of the factual issues between the parties in due course, provided the third party proceeding against Sandusky Walmsley is not stayed. Thus the only question which concerns the Court at this stage is whether Paperlinx's claim against Ansell and its theoretical claim against Sandusky Walmsley would be in respect of the same damage. If it is the third party proceeding must be permitted to proceed. If it is not, then that proceeding should be terminated by being struck out or permanently stayed.
At the forefront of his argument for Sandusky Walmsley, Mr Cawthorn sought to characterise the damage suffered by Paperlinx as a consequence of Ansell’s assumed wrongdoing as being the physical damage to the MG cylinder of M2 caused by the delamination of the roller upon which Ansell had recently worked. He said it was a “physical incident” which occurred on a particular pleaded date, namely 7 April 2001. He submitted that Sandusky Walmsley could not conceivably be liable for that damage. It knew nothing of the roller, the re-covering or its subsequent delamination until a date well past the date upon which the delamination occurred. In as much as it recommended replacement of the allegedly damaged MG cylinder rather than its repair it could not have caused Paperlinx’s damage argued Mr Cawthorn. The highest it could be put, he said, is that Sandusky Walmsley could be liable to Paperlinx for the difference between the cost of replacement of the MG cylinder and the cost of its repair. In any event, as Paperlinx got a new cylinder to replace the 50 year old damaged cylinder it received full value for that difference – being the quantum of its betterment as alleged in Ansell’s defence. Mr Cawthorn submitted that this is not a case of joint wrongdoers but, if it is anything, it is a case of concurrent wrongdoers – each inflicting its own (different) damage on the plaintiff.
Before considering some of the authorities bearing on the interpretation of the relevant Wrongs Act provisions the correctness of Mr Cawthorn’s submissions as outlined might be usefully examined. The damage assumed to have been caused by Ansell and Sandusky Walmsley can then be evaluated in light of the applicable law.
Paperlinx’s claim against Ansell comprises:-
(a)the cost of having the pressure roller which delaminated re-covered again (i.e the cost of repeating Ansell’s original work);
(b)the cost of repairs to M2, including the cost of a new MG cylinder, its freight from the United Kingdom and its installation;
(c)loss of profits occasioned by the shut down of M2 until its new MG cylinder could be manufactured, transported to Australia and installed;
(d)loss of business goodwill (loss of market), particularly for certain types of paper produced on M2, caused by interruption to its production.
If it is assumed, as alleged by Ansell, that Sandusky Walmsley’s advice to Paperlinx that the damaged MG cylinder on M2 should be replaced rather than repaired was incorrect so as to give rise to a cause of action of whatever nature against it by Paperlinx, Paperlinx’s loss suffered as a result of that incorrect advice might be formulated as follows:-
(e)the difference between the cost of removing, repairing and replacing the old MG cylinder and the cost of the new MG cylinder (including removal of old cylinder, installation of new cylinder, freight etc);
(f)the difference between Paperlinx’s direct loss of profit which would have been occasioned by shutting down M2 for the period necessary to effect the removal, repair and reinstallation of its old MG cylinder and the direct loss of profit sustained due to the period for which M2 was actually shut down;
(g)loss of business goodwill (loss of market) attributable to the period for which M2 was actually shut down less the loss of goodwill which would have been sustained had M2 been shut down only for the period necessary to remove, repair and replace its old MG cylinder.
The second limb of Mr Cawthorn's argument is that each of the claims set out in paragraphs (a), (d), (e), (f) and (g) are not "damage" suffered by Paperlinx but are merely the "financial ramifications or heads of damages" flowing from the physical event which damaged the MG cylinder on M2. As Sandusky Walmsley could not be liable for the physical event itself, it could not be liable for the same damage as Ansell. Thus no contribution claim against it could be maintained. He relied upon a number of authorities including Dillingham Constructions Pty Ltd v Steel Mains[4], Binse Constructions Pty Ltd v Haiste[5], Jameson v Central Electricity Generating Board[6], Royal Brompton Hospital v Hammond[7] and Alexander v Perpetual Trustees WA Ltd[8]. However, none of these supported his argument that the claims and theoretical claims described above were not descriptions of "damage" as the law understands that term.
[4](1975) 132 CLR 232 at 327
[5][1996] 2 All ER 1 at 8
[6][1998] QB 323
[7][2002] 1 WLR 1397 at 1410
[8](2003) 216 CLR 109 at 125
Damage suffered as a result of a tort, a breach of contract or a breach of a statutory warranty is compensated for by a monetary award calculated to place the plaintiff in the same position he would have been in had the wrong not been committed. That monetary sum is commonly called damages or compensation; the latter sometimes being preferred when a statutory cause of action is relied upon. Indeed s 23A of the Wrongs Act uses the term "compensation" when referring to a sum of money which a person is entitled to recover as a result of a tort, a breach of contract, breach of trust or otherwise. The term is used in contradistinction to the word "damage" which is used in the statute to describe the actual loss suffered. That "damage" and "damages" are distinct concepts is somewhat trite. The synonym for "damage" is "harm".[9] The synonym for "damages" is "compensation".
[9]Royal Brompton Hospital v Hammond op cit.
Paperlinx's loss described in (a) above could not form any part of a claim by it against Sandusky Walmsley for the reasons advanced by Mr Cawthorn. Ansell does not suggest that it could. It need not be considered further.
Paragraphs (b), (c) and (d) describe the damage Paperlinx claims to have suffered as a result of Ansell's wrongdoing. Damages to compensate for that loss will be recoverable by Paperlinx only if the damage proved meets the criteria for recoverability found in the law relating to damages. Actual recovery may depend on the cause or causes of action proved, causation, remoteness, the intervention of other possible causes of the damage and the question of mitigation (or lack of it) by Paperlinx itself.
The theoretical claims which Ansell says Paperlinx would have against Sandusky Walmsley set out in paragraph (e), (f) and (g) describe damage solely attributable to the wrongdoing of Sandusky Walmsley. Paragraph (e) describes the loss suffered by Paperlinx if Ansell's contention that the MG cylinder on M2 should have been repaired and not replaced. Similarly (f) and (g) describe consequential losses Paperlinx has suffered predicated upon Sandusky Walmsley's having tendered actionable wrongful advice to Paperlinx upon which it relied.
Each of the losses described in (b), (c) and (d) includes the loss described in (e), (f) and (g) respectively. Are they then the same damages within the meaning of the statute?
Although the legislation being considered is unique to Victoria as far as Australia is concerned, the phrase "liable in respect of the same damage" and the concept it describes are used in contribution statutes in other Australian jurisdictions. Thus, a source of jurisprudence as to the application of the phrase in any particular factual circumstance is readily available.
In Dillingham Constructions Pty Ltd v Steel Mains Pty Ltd[10] Barwick CJ considered that s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) which provided for contribution between tortfeasors "liable in respect of the same damage" had no application where there are successive injuries, unrelated both in occasion and in cause, by tortfeasors where each is not a tortfeasor in respect of both injuries. The Court was there concerned with successive personal injuries suffered by a plaintiff who had been employed by different employers at the time of each injury and when the only connection between the injuries was that in each case they were of a like kind. That is not this case. Here, all the damage suffered by Paperlinx might be attributed to the first assumed wrongdoer, Ansell, and some of that damage might also be attributable to the second assumed wrongdoer, Sandusky Walmsley. It is not to the point that each possible wrongdoer might be liable to the plaintiff on quite different legal bases. The only question is whether they are liable to it in respect of the same damage. In Dillingham each wrongdoer was liable for the damage it inflicted. Neither was responsible for any part of the damage inflicted by the other.
[10](1975) 132 CLR 323.
In Mahony v J Kruschich (Demolitions ) Pty Ltd[11] the same New South Wales statute was being considered in the context of a plaintiff who suffered injury in the course of his employment, which injury was exacerbated by allegedly negligent medical treatment. The High Court held that concurrent tortfeasors whose negligent acts or omissions occur successively rather than simultaneously may both be liable for the same damage. This is so even if one tortfeasor is liable for only some of the damage for which the other is liable so that the damages assessed against one of them would necessarily be less than the damages assessed against the other. Although, like Dillingham, Mahony was a personal injury case, the same principles apply here and, of course, because of the width of s 23A(1) of the Wrongs Act 1958, it matters not that one or other of the wrongdoers in this case may have a real or theoretical liability in tort, breach of contract or some other cause of action.
[11](1985) 156 CLR 522.
Assuming liability to Paperlinx can be proved on the case pleaded by it against Ansell, and the case pleaded by Ansell against Sandusky Walmsley can be proved, both Ansell and Sandusky Walmsley would be liable for the same damage so as to give rise to an arguable claim in contribution by the former against the latter.
In the course of his argument Mr Cawthorn reviewed a number of English cases where various fact situations gave rise to different decisions on questions similar to that now before this Court. That review exposed some difference of opinion amongst English judges as to the application of the English equivalent of Part IV of the Wrongs Act 1958, namely the Civil Liability (Contribution) Act 1978 (UK). Those differences are now of little consequence in this jurisdiction as the High Court in Alexander[12] appears to have accepted Lord Steyn's advice in Royal Brompton NHS Trust to the effect that in determining whether two parties are each liable to another for the same damage the safest course is to apply the statutory criteria giving the words of the section their ordinary meaning. In this case, the application of the statute yields the same result as it did in Mahony[13]. Despite Mr Cawthorn's best endeavours the decision in that case, which is binding upon this Court, cannot be distinguished.
[12]Op cit.
[13]Op cit.
Mr Cawthorn accepted that to succeed in his attempt to have Ansell's third party claims summarily terminated he would have to show that they were totally without merit.[14] Not only are they not without merit, they have a sound legal basis. Whether they have any basis in fact must await the outcome of a trial.
[14]Dey v Victorian Railways Commissioners (1949) 78 CLR 62.
The third party's appeal from Master Evans dismissing its summons of 22 November 2005 will be dismissed with costs.
---
6
0