Tesseract International Pty Ltd v Pascale Construction Pty Ltd
[2022] SASCA 107
•21 October 2022
Supreme Court of South Australia
(Court of Appeal: Civil)
TESSERACT INTERNATIONAL PTY LTD v PASCALE CONSTRUCTION PTY LTD
[2022] SASCA 107
Judgment of the Court of Appeal
(The Honourable President Livesey, the Honourable Justice Doyle and the Honourable Justice Bleby)
21 October 2022
ARBITRATION - CONDUCT OF ARBITRAL PROCEEDINGS - STATING CASE TO COURT IN COURSE OF REFERENCE - QUESTIONS OF LAW
TORTS - GENERALLY - MULTIPLE WRONGDOERS, PROPORTIONATE LIABILITY AND CONTRIBUTION
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - THE CONTRACT - CONSTRUCTION OF PARTICULAR CONTRACTS AND IMPLIED CONDITIONS - IMPLIED TERMS
ARBITRATION - CONDUCT OF ARBITRAL PROCEEDINGS - POWERS, DUTIES AND DISCRETION OF ARBITRATOR
This is an application for the determination of a question of law arising in the course of an arbitration, made under s 27J of the Commercial Arbitration Act 2011 (SA).
The arbitration concerns a contractual dispute between the applicant company and respondent building company in relation to certain engineering and consultancy services performed by the applicant for the design and construction of a warehouse building in South Australia. The respondent advances claims for breach of contract, in negligence, and for misleading and deceptive conduct contrary to s 18 of the Australian Consumer Law.
The applicant denies any liability. In the alternative, it contends that any damages payable should be reduced by reason of the respondent’s contributory negligence (under Part 2 of the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) (Law Reform Act) and Part XI of the Competition and Consumer Act 2010 (Cth) (CCA)). Further, or in the alternative, it contends that any damages should be reduced to reflect the proportionate liability of a third party concurrent wrongdoer (under Part 3 of the Law Reform Act and Part VIA of the CCA).
The respondent contends that the Arbitrator is not entitled to invoke the proportionate liability provisions in the arbitration proceedings. Accordingly, an application was made to, and granted by, the Court for leave to obtain a determination of a question of law arising in the arbitration. The question of law arising is:
Does Part 3 of the Law Reform Act and/or Part VIA of the CCA apply to this commercial arbitration proceeding conducted pursuant to the legislation and the Commercial Arbitration Act 2011 (SA)?
The applicant contends that the question should be answered in the affirmative. It relies on three strands of reasoning: first, that the proportionate liability provisions constitute applicable rules of law as part of the substantive law of South Australia; secondly, that properly construed the provisions in the Law Reform Act apply to arbitration proceedings by force of their own terms; and thirdly, that the provisions are able to be applied in the proceedings by reason of an implied term that the Arbitrator has authority to grant the parties any relief that would have been available in a court of appropriate jurisdiction.
The respondent submits that the question should be answered in the negative. It emphasises the private and consensual nature of arbitration, the incongruity inherent in binding third parties not subject to those proceedings, and that the language of the provisions tells against the application of those provisions to arbitration proceedings.
Held, per Doyle JA (Livesey P and Bleby JA agreeing), answering the question ‘No’:
1. While the proportionate liability regimes under the Law Reform Act and CCA form part of the substantive law governing the resolution of the dispute between the parties under s 28(3) of the Commercial Arbitration Act 2011 (SA), that section does not require that every substantive law within the regimes apply to the arbitration proceedings. It is therefore necessary for the provisions to apply either by force of their own terms, or by reason of an implied term in the arbitration agreement.
2. The proportionate liability provisions in the Law Reform Act and the CCA do not apply to arbitration proceedings by force of their own terms in arbitration proceedings.
3. The parties have, through the dispute resolutions provisions in the contract, impliedly conferred the arbitrator with the power to determine their dispute as though it were being determined in a court of law with appropriate jurisdiction.
4. However, this conferral of power was subject to such qualifications as required by statute. There are features of the proportionate liability regimes under both the Law Reform Act and the CCA that indicate an objective intention on the part of the relevant legislature that they not apply arbitration proceedings.
Civil Liability Act 2002 (NSW); Civil Liability Act 2002 (Tas); Civil Liability Act 2002 (Qld); Commercial Arbitration Act 1986 (SA) s 22; Commercial Arbitration Act 2011 (SA) ss 27J, 28; Competition and Consumer Act 2010 (Cth) ss 87CB, 87CC, 87CD, 87CE, 87CF, 87CG, 87CH, 87CI, 137B; Sch 2, ss 18, 236; Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) ss 3, 4, 7, 8, 9, 10, 11, referred to.
620 Collins Street Pty Ltd v Abigroup Contractors Pty Ltd (No 3) [2006] VSC 492; ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896; Alliance Petroleum Australia NL v Australian Gas Light Co (1983) 34 SASR 215; Aquagenics Pty Ltd v Break O’Day Council (No 2) [2009] TASSC 89; Aquagenics Pty Ltd v Break O’Day Council [2010] TASSFC 3; BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2) [2008] FCA 1656; Bitumen & Oil Refineries (Australia) Ltd v Commissioner for Government Transport (1955) 92 CLR 200; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; Comandate Marine Corporation v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45; Cufone v Cruse [2000] SASC 17; Cufone v Cruse [2000] SASC 304; Curtin University of Technology v Woods Bagot Pty Ltd [2012] WASC 449; Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160; Government Insurance Office of New South Wales v Atkinson-Leighton Joint Venture (1981) 146 CLR 206; IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466; Incitec Ltd v Alkimos Shipping Corporation (2004) 138 FCR 496; John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503; Kerr v Australian Executor Trustees (SA) Ltd [2019] NSWSC 1279; Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd (1993) 43 FCR 439 (1993) 43 FCR 439; Passlow v Butmac Pty Ltd [2012] NSWSC 225; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; Re Form 700 Holdings Pty Ltd [2014] VSC 385; Seeley International Pty Ltd v Electra Air Conditioning BV (2008) 246 ALR 589; Siemens Ltd v Origin Energy Uranquinty Power Pty Ltd (2011) 80 NSWLR 398; South Australian Superannuation Fund Investment Trust v Leighton Contractors Pty Ltd (1996) 66 SASR 509; Subway Systems Australia Pty Ltd v Ireland (2014) 46 VR 49; Wealthcare Financial Planning Pty Ltd v Financial Industry Complaints Service Ltd (2009) 69 ACSR 418, considered.
TESSERACT INTERNATIONAL PTY LTD v PASCALE CONSTRUCTION PTY LTD
[2022] SASCA 107Court of Appeal – Civil: Livesey P, Doyle and Bleby JJA
LIVESEY P: I agree with the reasons of Doyle JA.
DOYLE JA: The applicant seeks the determination of a question of law that has arisen in the course of an arbitration between the parties. In essence, the question is whether the proportionate liability provisions under the relevant South Australian[1] and Commonwealth[2] legislation apply to the arbitration proceedings.
[1] Part 3 of the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA).
[2] Part VIA of the Competition and Consumer Act 2010 (Cth).
Background
The applicant (Tesseract) is a company that provides engineering consultancy services. The respondent (Pascale) is a building company.
Tesseract and Pascale entered into a sub-contract dated 14 October 2015 (the Contract) by which Tesseract agreed to provide engineering consultancy services to Pascale in relation to the design and construction of a warehouse building for Bunnings Group Ltd in Windsor Gardens, South Australia. Tesseract and Pascale are referred to in the Contract as the Consultant and the Builder respectively.
A dispute has arisen between the parties as to the quality of the work undertaken by Tesseract under the Contract. Pascale alleges, inter alia, that Tesseract’s work was not performed to the standard required under the Contract and that it has thereby suffered loss and damage. Tesseract denies this allegation.
The Contract contains a process for resolving disputes under clauses 20 to 22. Under clause 20.1, if a dispute between the Builder and Consultant arises “in connection with this Contract”, then either party must deliver to the other a notice of dispute identifying and providing details of the dispute. The balance of clause 20 provides for a process of conciliation of the dispute, and, in the event that the dispute is not resolved through conciliation, clause 21 provides for a process of arbitration. Clause 22 sets out various rules applicable to the contemplated conciliation and arbitration processes.
In November 2019, Pascale sent Tesseract a notice of dispute. The dispute was subsequently referred to arbitration under clause 21 of the Contract. The Honourable Wayne Martin AC KC was appointed arbitrator (the Arbitrator). Pascale is the claimant, and Tesseract the respondent, in the arbitration proceedings.
In its statement of claim, Pascale makes a number of allegations against Tesseract. It alleges that Tesseract’s work in connection with the design and construction of the warehouse building for Bunnings, both during the tender process and following entry into the Contract, was in several respects deficient and not performed to the standard represented and required under the Contract. For the purposes of this appeal, there is no need to summarise the detail of the allegations. It is enough to observe that Pascale’s allegations include claims for breach of various terms of the Contract, for breach of a duty of care in negligence, and for misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law (ACL) (which appears in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (CCA)).[3] The relief sought by Pascale includes not only common law damages but also damages under s 236 of the ACL.
[3] And applies as a law of the Commonwealth by reason of s 131 of the CCA.
In its defence, Tesseract denies any breach of the contractual or tortious duties pleaded against it, or that it engaged in any misleading or deceptive conduct in contravention of s 18 of the ACL. In the alternative, Tesseract pleads that any damages payable by it should be reduced by reason of the contributory negligence of Pascale, under s 7 of Part 2 of the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) (the Law Reform Act) in the case of the allegations of breach of a contractual or tortious duty of care, and under s 137B of Part XI of the CCA in the case of the allegations of misleading or deceptive conduct under s 18 of the ACL.
Importantly for present purposes, Tesseract also pleads, in the alternative to its denial of liability, that any damages payable by it should be reduced by reason of the proportionate liability provisions under Part 3 of the Law Reform Act (in the case of the allegations of breach of a contractual or tortious duty of care), and Part VIA of the CCA (in the case of the allegations of misleading or deceptive conduct under s 18 of the ACL). In invoking these proportionate liability provisions, Tesseract pleads that a Mr Penhall is a wrongdoer vis-à-vis Pascale. In particular, Tesseract alleges that Mr Penhall was engaged by Pascale to assist it in preparing its tender for the design and construction of the warehouse building; that Mr Penhall owed Pascale a duty of care in carrying out that work; that Mr Penhall breached his duty of care to Pascale; and that in the event that Pascale establishes an entitlement to recover a sum in damages from Tesseract, Mr Penhall is a concurrent wrongdoer, with the result that any damages payable by Tesseract should be reduced to an amount reflecting its proportionate responsibility for the loss and damage suffered by Pascale under s 8(2) of the Law Reform Act or s 87CD of the CCA.
In its reply, Pascale denies the applicability of these proportionate liability provisions. It does so both on the basis that these provisions do not apply on the facts of the present case, and on the more fundamental basis that Tesseract is not entitled to invoke those provisions in the Arbitration proceedings. It is the issue raised by the second of these bases for Pascale’s denial that is the subject of the present application for determination by this Court of a question of law.
The Arbitrator made an order that by 10 December 2021 Tesseract shall, pursuant to s 27J of the Commercial Arbitration Act 2011 (SA), make an application to the Court for leave to obtain a determination of any question of law arising in the arbitration. That application was duly made, with the parties agreeing that the question of law be stated as follows:
Does Part 3 of [the Law Reform Act] and/or Part VIA of [the CCA] apply to this commercial arbitration proceeding conducted pursuant to the legislation and the [Commercial Arbitration Act]?
On 21 December 2021, and with the consent of Pascale, Livesey P granted Tesseract leave to make an application for the determination of this question of law.
Proportionate liability
The introduction around Australia of various proportionate liability regimes, intended to entitle a defendant to confine its liability for a plaintiff’s loss to the proportion of that loss for which it is responsible, represented a radical change from the common law approach of solidary liability.
Under the common law, any defendant wrongdoer who caused or contributed to the plaintiff’s loss was liable for the entirety of that loss, regardless of whether there were other wrongdoers who also caused or contributed to the loss, and hence regardless of the defendant’s individual share or proportion of the responsibility for that loss. Under this regime of solidary liability, it was for the defendant to join or separately sue the other wrongdoer(s), relying upon its right to contribution from the other wrongdoer(s), if it wished to confine its ultimate liability to its proportion of the responsibility for that loss. In this way, the defendant bore both the burden of joining or separately suing the other wrongdoer(s), and the risk of any shortfall in the event that another wrongdoer was uninsured or impecunious, or was otherwise unable to be located or sued for some reason.
Under a regime of proportionate liability, on the other hand, this burden and risk are transferred to the plaintiff. The defendant’s liability is limited to its share or proportion of the responsibility for the plaintiff’s loss, leaving it to the plaintiff, if it wishes to recover its full loss, to join the other wrongdoer(s) or to separately sue the other wrongdoer(s), and to bear the risk of any shortfall in recovery.
In BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2),[4] Finkelstein J summarised the background to, and impetus for, the introduction of the various proportionate liability regimes around Australia in the following terms:[5]
Proportionate liability was introduced into state and federal legislation following an inquiry into the law of joint and several liability established by the Commonwealth and the New South Wales Attorneys-General in 1994. The impetus for the inquiry was the growing number of actions against professionals, particularly auditors, who were being singled out as targets for negligence actions not because of their culpability (which might be small) but because they were insured and had the capacity to pay large damages awards. One consequence was a sharp rise in insurance premiums payable by professionals. The inquiry was conducted by Professor Davis of the Australian National University. He published stage one of his report in July 1994 and stage two in January 1995. In his report Professor Davis recommended that joint and several liability for negligence which causes property damage or economic loss be replaced by liability which is proportionate to each defendant’s degree of fault.
Draft model provisions that reflected the recommendation of the enquiry were published in July 1996 in the form of a part that could be inserted into appropriate legislation. The Commonwealth, State and Territory governments agreed to amend relevant legislation, based on the draft model provisions, to facilitate the introduction of a nationally consistent proportionate liability regime in respect of claims for economic loss or property damage. To implement its part of the agreement the Commonwealth amended the Australian Securities and Investments Commissions Act 2001 (Cth), the Corporations Act 2001 (Cth) and the Trade Practices Act so that proportionate liability applied to claims for economic loss or property damage arising from misleading and deceptive conduct. By amendments to the Wrongs Act, Victoria introduced proportionate liability in respect of claims for economic loss or property damage arising from a failure to take reasonable care.
[4] BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2) [2008] FCA 1656.
[5] BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2) [2008] FCA 1656 at [4]-[5] (Finkelstein J), being a passage cited in numerous subsequent decisions.
The present application requires consideration of the proportionate liability regimes enacted in South Australia (under Part 3 of the Law Reform Act) and by the Commonwealth (under Part VIA of the CCA). While similar in their practical operation and effect, there are differences between the terms and detail of these two regimes. There are similar differences between these regimes and the various other proportionate liability regimes that have been enacted in the other states and territories of Australia.
In Aquagenics Pty Ltd v Break O’Day Council,[6] Evans J summarised the implications of the introduction of proportionate liability, and some of the differences between the regimes implemented in the various jurisdictions around Australia:[7]
Speaking generally, where proportionate liability legislation applies, in order for a claimant to recover 100 per cent of the claimant’s loss, the claimant must sue each and every wrongdoer who contributed to that loss. No wrongdoer is liable to the claimant for more than that wrongdoer’s share of responsibility for the loss. This generalisation is, of course, subject to the terms of the proportionate liability provisions in the particular jurisdiction. For example, an important distinction to be drawn between the legislation in this jurisdiction and New South Wales, when compared with that in Victoria, is that under the Victorian legislation, a court may only have regard to the comparative responsibility of the parties before it, unless the reason for a wrongdoer not being a party is death or, if a corporation, that it has been wound up. In Tasmania and New South Wales, a court apportioning responsibility between defendants to proceedings is to have regard to the comparative responsibility of every concurrent wrongdoer, regardless of whether or not that wrongdoer is a party to the proceedings, see the Civil Liability Act (Tas), s43B(3)(b) and the Civil Liability Act 2002 (NSW), s35(4). To my mind, an important consequence of the application of the proportionate liability legislation to a claim is that it results in the claimant bearing the risk of the insolvency of any concurrent wrongdoer. See the provisions of the Civil Liability Act (Tas), already referred to, coupled with s43A(4). As to the significance of the changes made to the law by the proportionate liability legislation see McDonald B, Proportionate Liability in Australia: The Devil in the Detail (2005) 26 Australian Bar Review 29.
In view of the startling impact of these changes to the proportionate liability of wrongdoers in relation to claims covered by the legislation, it is not surprising that the relevant legislation in this jurisdiction, New South Wales and Western Australia includes a contracting out provision. There is no express provision, either way, as to contracting out in the proportionate liability legislation introduced in the Australian Capital Territory, the Northern Territory, South Australia or Victoria, nor in respect of the Commonwealth provisions contained in the Trade Practices Act 1974. Contracting out is prohibited in Queensland, see the Civil Liability Act 2003 (Qld), s7(3).
[6] Aquagenics Pty Ltd v Break O’Day Council [2010] TASFC 3.
[7] Aquagenics Pty Ltd v Break O’Day Council [2010] TASFC 3 at [11]-[12] (Evans J, Wood J agreeing).
I shall return to the potential significance of some of these differences between the various regimes later in these reasons. For the moment it is appropriate to focus upon the terms of the proportionate liability provisions in the relevant South Australian and Commonwealth legislation.
The proportionate liability provisions in South Australian legislation
Under s 4(1) of the Law Reform Act, the provisions of that Act apply to any liability in damages that arises (a) under the law of torts, (b) for breach of a contractual duty of care, or (c) under statute.
Part 2 of the Act addresses the right of a defendant who is liable in damages to seek contribution from a third person liable in damages for the same harm (s 6), and to seek a reduction in the damages payable on account of the plaintiff’s contributory negligence (s 7).
It may be observed in passing that while contribution and contributory negligence have long been an accepted feature of the Australian legal system, these statutory provisions, when first enacted, also represented radical departures from the common law.
For reasons which will become apparent when later analysing the application of the provisions of Part 3, it is relevant to set out the terms of the s 7 limit upon a defendant’s liability by reason of contributory negligence on the part of the plaintiff (referred to as the claimant):
7—Apportionment of liability in cases where the person who suffers primary harm is at fault
(1)If contributory negligence contributes to (but is not the sole cause of) the harm for which a claimant seeks damages, the claim is not to be defeated on the ground of the contributory negligence.
(2) If a claimant’s harm is caused partly by another’s negligent wrongdoing and partly by contributory negligence, the court must proceed as follows:
(a) the court must determine (and record) the amount of the damages to which the claimant would have been entitled assuming there had been no contributory negligence; and
(b) the court must then reduce the amount so determined to the extent the court thinks just and equitable having regard to the extent the contributory negligence contributed to the harm.
(3) This section applies subject to—
(a) any contractual modification, exclusion or limitation binding on the claimant or, in the case of a claim for damages for derivative harm, on the person who suffered the primary harm; and
(b) any statutory modification, exclusion or limitation.
(4) In this section, a reference to contributory negligence extends, in the case of a claim for derivative harm, to negligence on the part of the person who suffered the primary harm.
The proportionate liability provisions are contained in Part 3 of the Law Reform Act. They were enacted in 2005. Their operation is predicated upon a defendant’s liability for damages being in respect of an apportionable liability. Under s 3(2):
(2) A liability is an apportionable liability if the following conditions are satisfied:
(a) the liability is a liability for harm (but not derivative harm) consisting of—
(i) economic loss (but not economic loss consequent on personal injury); or
(ii) loss of, or damage to, property;
(b) 2 or more wrongdoers (who were not acting jointly) committed wrongdoing from which the harm arose;
(c) the liability is the liability of a wrongdoer whose wrongdoing was negligent or innocent.
Example—
A, who acts with intention to defraud, prepares a false and deceptive statement. B, who is not aware of the fraud, negligently publishes the statement to C, who relies on it and suffers financial loss in consequence. C brings an action against A and B under section 56 of the Fair Trading Act 1987. In this case, B's liability is an apportionable liability but A's is not.
The proportionate liability provisions of Part 3 are then in the following terms:
Part 3—Apportionable liability
8—Limitation of defendant’s liability in cases of apportionable liability
(1) If a defendant’s liability on a claim for damages is apportionable, the liability is limited under this section.
(2) If the limitation applies, the defendant's liability is limited to a percentage of the plaintiff's notional damages that is fair and equitable having regard to—
(a) the extent of the defendant's responsibility for the harm; and
(b) the extent of the responsibility of other wrongdoers (including wrongdoers who are not party to the proceedings) whose acts or omissions caused or contributed to the harm.
(3) For the purpose of subsection (2)—
(a) 2 or more wrongdoers who are members of the same group are to be treated as a single wrongdoer; and
(b) if the plaintiff was guilty of contributory negligence, that contributory negligence will be brought into account as wrongdoing and a percentage assigned to it; and
(c) if 2 or more wrongdoers are each entitled to the benefit of a limitation of liability under this section (for some reason other than that they are members of the same group), the aggregate percentage assigned to them cannot exceed—
(i) if there is no contributory negligence on the plaintiff’s part—100%; or
(ii) if there is contributory negligence on the plaintiff’s part—100% less a percentage representing the extent of the plaintiff’s responsibility for his or her harm.
(4) In a case involving apportionable liability, the court must proceed as follows:
(a) the court first determines the plaintiff’s notional damages;
(b) the court gives judgment against any defendant whose liability is not subject to limitation under this section for damages calculated without regard to this Part;
(c) the court determines, in relation to each defendant whose liability is limited under this section, a proportion of the plaintiff’s notional damages equivalent to the percentage representing the extent of that defendant's liability;
(d) the court then gives judgment against each such defendant based on the assessment made under paragraph (c) (but in doing so must give effect to any special limitation of liability to which any of them may be entitled).
Example—
A Ltd (which runs a forestry business) has engaged B (an independent contractor) to protect its forest from fire. C (an arsonist) sets the forest on fire. B is negligent in failing to detect and stop C’s malicious act. A Ltd sues B and C for damages. In this case, B would be entitled to a limitation of liability under this section but C would not. In working out the amounts for which judgment should be given, the court would determine first the amount of damages necessary to cover the damage caused by the fire. Judgment for that amount would be given against C. In determining the amount for which judgment should be given against B, responsibility for the damage would be divided between B and C on essentially the same basis as would formerly have been applicable to an action for contribution between them. Judgment would be given against B for an amount reflecting the proportionate responsibility assigned to B on that basis.
(5) The plaintiff is not entitled to recover, by way of damages under the judgment, more than the amount fixed as the plaintiff’s notional damages.
Example—
Suppose that A has suffered a loss of $1 000 for which B, C and D are liable. The liability of B and C is limited to 20% and 30% respectively, but D's liability is not limited. Judgment is therefore given against B for $200, against C for $300 and against D for $1 000. In this case, the court would fix $1 000 as the plaintiff's notional damages—thus limiting the damages that the plaintiff is entitled to recover under the judgment to that amount. If A proceeded first to recover in full against B and C, recovery against D would be limited to $500. Conversely, recovery in full against D would preclude recovery against B and C. But rights of contribution may arise—see section 9.
(6) However, this section does not affect the award of exemplary damages and, if such damages are awarded, they may be recovered in the ordinary way from a defendant against whom they were awarded.
9—Contribution
In a case in which the liability of one or more wrongdoers is limited under this Part, the provisions of Part 2 regarding contribution apply but subject to the following qualifications:
(a) no order for contribution between wrongdoers whose liability is limited may be made;
Exception—
Contribution will be allowed between wrongdoers who are members of the same group, in respect of the liability of the group, in the same way (and subject to the same exceptions) as apply under Part 2.
(b) no order for contribution may be made in favour of a wrongdoer whose liability is limited against a wrongdoer whose liability is not limited;
(c) no order for contribution may be made in favour of a wrongdoer whose liability is not limited (A) against a wrongdoer (B) whose liability is limited unless A has fully satisfied the judgment debt, and, if such an order is made, the amount of contribution awarded against B cannot exceed the amount of B’s liability for damages under the judgment.
10—Procedural provision
(1) If a defendant entitled to a limitation of liability under this Part has reasonable grounds to believe that a person who is not a party to the action may be liable on the plaintiff’s claim, the defendant must, as soon as practicable, provide the plaintiff with information that is in the defendant’s possession, or reasonably available to the defendant (and not equally available to the plaintiff), about—
(a) the other person’s identity and whereabouts; and
(b) the circumstances giving rise to the other person’s liability.
(2) If a defendant fails to comply with its obligation under this section, a court may order the defendant to pay costs incurred in proceedings that could have been avoided if the obligation had been carried out.
(3) A court may order that costs payable under this section be assessed on the basis of an indemnity.
11—Separate proceedings
If a plaintiff brings separate actions for the same harm against wrongdoers who are entitled to a limitation of liability under this Part, the judgment first given (or that judgment as varied on appeal) determines for the purpose of all other actions—
(a) the amount of the plaintiff’s notional damages; and
(b) the proportionate liability of each wrongdoer who was a party to the action in which the judgment was given; and
(c) whether the plaintiff was guilty of contributory negligence and, if so, the extent of that negligence.
It will be necessary to return to some of the features of this legislation in due course, but I make the following observations by way of broad overview.
The regime for proportionate liability under the Law Reform Act operates in circumstances where a defendant is liable for damages in respect of an apportionable liability (being a liability in respect of which another wrongdoer is, or wrongdoers are, also liable) (ss 3(2) and 8(1)). It operates to limit the defendant’s liability to a percentage of the plaintiff’s notional damages that is fair and equitable having regard to the responsibility of the defendant and the other wrongdoer(s) (including those not party to the proceedings) for the relevant harm (s 8(2)).
Subsections 8(3) and (4) are ancillary provisions that set out the detail of the mechanism for determining and giving effect to the limitation upon the defendant’s liability. In essence, the mechanism involves determining the plaintiff’s notional damages (less a percentage reduction for any contributory negligence on the part of the plaintiff), assigning a percentage for the responsibility of each wrongdoer, and then entering judgment against each wrongdoer for a sum that reflects the extent of that wrongdoer’s liability.
Subsection 8(5) operates to confine a plaintiff’s ultimate recovery to the amount fixed as the plaintiff’s notional damages, and s 8(6) excludes exemplary damages from the operation of the proportionate liability provisions.
Section 9 operates to ensure that a defendant’s contribution rights are adjusted so that they operate consistently with the proportionate liability provisions.
Section 10 places an obligation upon a defendant, who has reasonable grounds to believe that a non-party may also be liable on the plaintiff’s claim, to give the plaintiff certain information about that other potential wrongdoer and the circumstances giving rise to their potential liability (s 10(1)). It also exposes that defendant to consequences if it fails to comply with this obligation (ss 10(2) and (3)). Self-evidently this section is intended to assist the plaintiff to be in a position to make an informed decision whether or not to seek to join any other potential wrongdoer to its action against the defendant.
Section 11 addresses the prospect of subsequent actions by the plaintiff against other wrongdoers. As such, it plainly contemplates that, despite s 10, such wrongdoers may not have been included as parties to the original action. The section provides that the judgment first given determines for the purposes of all other actions:
(a)the amount of the plaintiff’s notional damages;
(b)the proportionate liability of each wrongdoer who was a party to the first action; and
(c)whether the plaintiff was guilty of contributory negligence and, if so, the extent of that negligence.
The proportionate liability provisions in the Commonwealth legislation
Similar proportionate liability provisions exist in Part VIA of the CCA. They are in the following terms:
Part VIA—Proportionate liability for misleading and deceptive conduct
87CB Application of Part
(1) This Part applies to a claim (an apportionable claim) if the claim is a claim for damages made under section 236 of the Australian Consumer Law for:
(a) economic loss; or
(b) damage to property;
caused by conduct that was done in a contravention of section 18 of the Australian Consumer Law.
(2) For the purposes of this Part, there is a single apportionable claim in proceedings in respect of the same loss or damage even if the claim for the loss or damage is based on more than one cause of action (whether or not of the same or a different kind).
(3) In this Part, a concurrent wrongdoer, in relation to a claim, is a person who is one of 2 or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim.
(4) For the purposes of this Part, apportionable claims are limited to those claims specified in subsection (1).
(5) For the purposes of this Part, it does not matter that a concurrent wrongdoer is insolvent, is being wound up or has ceased to exist or died.
87CC Certain concurrent wrongdoers not to have benefit of apportionment
(1) Nothing in this Part operates to exclude the liability of a concurrent wrongdoer (an excluded concurrent wrongdoer) in proceedings involving an apportionable claim if:
(a) the concurrent wrongdoer intended to cause the economic loss or damage to property that is the subject of the claim; or
(b) the concurrent wrongdoer fraudulently caused the economic loss or damage to property that is the subject of the claim.
(2) The liability of an excluded concurrent wrongdoer is to be determined in accordance with the legal rules (if any) that (apart from this Part) are relevant.
(3) The liability of any other concurrent wrongdoer who is not an excluded concurrent wrongdoer is to be determined in accordance with the provisions of this Part.
87CD Proportionate liability for apportionable claims
(1) In any proceedings 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 damage or loss claimed that the court considers just having regard to the extent of the defendant’s responsibility for the damage or loss; and
(b) the court may give judgment against the defendant for not more than that amount.
(2) If the proceedings involve 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 the provisions of 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 proceedings:
(a) the court is to exclude that proportion of the damage or loss in relation to which the plaintiff is contributorily negligent under any relevant law; and
(b) the court may have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceedings.
(4) This section applies in proceedings involving an apportionable claim whether or not all concurrent wrongdoers are parties to the proceedings.
(5) A reference in this Part to a defendant in proceedings includes any person joined as a defendant or other party in the proceedings (except as a plaintiff) whether joined under this Part, under rules of court or otherwise.
87CE Defendant to notify plaintiff of concurrent wrongdoer of whom defendant aware
(1) If:
(a) a defendant in proceedings involving an apportionable claim has reasonable grounds to believe that a particular person (the other person) may be a concurrent wrongdoer in relation to the claim; and
(b) the defendant fails to give the plaintiff, as soon as practicable, written notice of the information that the defendant has about:
(i) the identity of the other person; and
(ii) the circumstances that may make the other person a concurrent wrongdoer in relation to the claim; and
(c) the plaintiff unnecessarily incurs costs in the proceedings because the plaintiff was not aware that the other person may be a concurrent wrongdoer in relation to the claim;
the court hearing the proceedings may order that the defendant pay all or any of those costs of the plaintiff.
(2) The court may order that the costs to be paid by the defendant be assessed on an indemnity basis or otherwise.
87CF Contribution not recoverable from defendant
A defendant against whom judgment is given under this Part as a concurrent wrongdoer in relation to an apportionable claim:
(a) cannot be required to contribute to any damages or contribution recovered from another concurrent wrongdoer in respect of the apportionable claim (whether or not the damages or contribution are recovered in the same proceedings in which judgment is given against the defendant); and
(b) cannot be required to indemnify any such wrongdoer.
87CG Subsequent actions
(1) In relation to an apportionable claim, nothing in this Part or any other law prevents a plaintiff who has previously recovered judgment against a concurrent wrongdoer for an apportionable part of any damage or loss from bringing another action against any other concurrent wrongdoer for that damage or loss.
(2) However, in any proceedings in respect of any such action, the plaintiff cannot recover an amount of damages that, having regard to any damages previously recovered by the plaintiff in respect of the damage or loss, would result in the plaintiff receiving compensation for damage or loss that is greater than the damage or loss actually sustained by the plaintiff.
87CH Joining non-party concurrent wrongdoer in the action
(1) The court may give leave for any one or more persons to be joined as defendants in proceedings involving an apportionable claim.
(2) The court is not to give leave for the joinder of any person who was a party to any previously concluded proceedings in respect of the apportionable claim.
87CI Application of Part
Nothing in this Part:
(a) prevents a person being held vicariously liable for a proportion of an apportionable claim for which another person is liable; or
(b) prevents a partner from being held severally liable with another partner for that proportion of an apportionable claim for which the other partner is liable; or
(c) 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.
By way of overview, the proportionate liability provisions in the CCA apply to an apportionable claim, being a claim for damages under s 236 of the ACL for misleading or deceptive conduct in contravention of s 18 of the ACL (s 87CB(1)). They operate in circumstances where two or more persons (being concurrent wrongdoers) are liable in respect of that claim.
The provisions operate to limit the liability of a defendant who is a concurrent wrongdoer in relation to that claim to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant’s responsibility for that damage or loss (s 87CD(1)). They provide that in apportioning responsibility between the defendants, the court must exclude the proportion of the damage or loss in relation to which the plaintiff is contributorily negligent, and may have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceedings (s 87CD(3)). Subsection 87CD(4) provides that s 87CD applies in all proceedings involving an apportionable claim, regardless of whether or not all concurrent wrongdoers are parties to the proceedings.
Section 87CE provides that a defendant who has reasonable grounds to believe that another person may be a concurrent wrongdoer in relation to the plaintiff’s claim has an obligation to provide the plaintiff with certain information about that person and the circumstances that make them a potential concurrent wrongdoer. It also sets out the potential costs consequences for the defendant of failing to comply with that obligation.
Section 87CF addresses the consequences for contribution claims of the proportionate liability claims.
Section 87CG addresses subsequent actions by a plaintiff against concurrent wrongdoers. It permits a plaintiff to bring such an action, but ensures that the plaintiff cannot recover an amount of damages that, having regard to any damages previously recovered by the plaintiff in respect of that damage or loss, would result in the plaintiff receiving compensation that is greater than the damage or loss actually sustained by the plaintiff.
Section 87CH makes express provision for the court to give leave for a person or persons to be joined as defendants in proceedings involving an apportionable claim.
The parties’ arguments
In contending that the proportionate liability provisions of the Law Reform Act and the CCA apply to the arbitration proceedings between the parties, Tesseract relies upon three strands of reasoning.
1.First, the proportionate liability provisions in those Acts constitute rules of law applicable to the substance of the parties’ dispute, which the Arbitrator is bound to apply pursuant to s 28 of the Commercial Arbitration Act as part of the substantive law of South Australia.
2.Secondly, properly construed, the proportionate liability provisions in the Law Reform Act apply to arbitration proceedings; that is, they apply by force of their own terms.
3.Thirdly, the arbitration agreement in the parties’ contract requires the Arbitrator to apply the proportionate liability provisions in the Law Reform Act and the CCA. It does so by reason of an implied term of that agreement to the effect that the Arbitrator has authority to grant the parties any relief that would have been available had the claimant sued in a court of appropriate jurisdiction.
In arguing against the applicability of the proportionate liability provisions in the Law Reform Act and the CCA, Pascale contends that the parties agreed by their Contract to resolve their disputes through conciliation and arbitration, and that having selected this essentially private and consensual mechanism for resolving their disputes they ought not be subjected to a legislative regime for proportionate liability which does not in its terms apply to arbitrations, which inherently involves and affects third parties, and which was not contemplated by the parties’ agreement. In contending that there is no basis for construing the proportionate liability provisions as applicable to arbitration proceedings, or for finding any implied term in the parties’ agreement to the effect that the parties intended to confer power upon the Arbitrator to apply those provisions, Pascale relies upon the use in those provisions of terminology that is more appropriate to describe court proceedings than arbitration proceedings (such as “plaintiff”, “defendant”, “proceedings”, “action”, “damages”, “judgment” and “the court”). Pascale also emphasises that the proportionate liability provisions, and the shift in risk and burden from a defendant to the plaintiff to which they give effect, are predicated upon the capacity of a plaintiff to join any alleged third party concurrent wrongdoers to the litigation as defendants. While this course is open to a plaintiff in ordinary court proceedings, it is not available as of right in the context of an arbitration; it would, at the very least, require the consent of each of the parties and the alleged third party concurrent wrongdoer(s).
In analysing the parties’ respective contentions, I shall commence by explaining that the parties agreed to resolve their dispute in accordance with the substantive law of South Australia applicable to that dispute. While the proportionate liability provisions in the Law Reform Act and the CCA form part of the substantive law of South Australia, I do not think that is determinative of their application to the parties’ arbitration proceedings.
As to the second strand of Tesseract’s argument, I accept Pascale’s response; namely, that in accordance with the interstate authorities that have considered the issue in the context of similar interstate regimes,[8] the proportionate liability provisions in the Law Reform Act and the CCA do not apply to arbitration proceedings by force of their own terms.
[8] Aquagenics Pty Ltd v Break O’Day Council [2019] TASFC 3; Curtin University of Technology v Woods Bagot Pty Ltd [2012] WASC 449.
However, as I shall explain, that is not the end of the matter. The issue then becomes whether the parties have, through the dispute resolution provisions in their Contract, impliedly authorised the Arbitrator to determine their dispute as though it were being determined in a court of law with appropriate jurisdiction.[9] In my view, the parties did impliedly confer this power upon the Arbitrator. However, that conferral was subject to “such qualifications as relevant statute law may require”,[10] and there are features of the proportionate liability regimes under both the Law Reform Act and the CCA that indicate an intention on the part of the relevant legislatures that these regimes not apply in the context of arbitration proceedings (that is, that they not be ‘picked up’ and applied in that context by the implied general conferral of power upon an arbitrator). The features leading to this conclusion are essentially those relied upon by Pascale; namely, that the proportionate liability regimes inherently involve and affect third parties, and contemplate that the plaintiff will have the opportunity to join any third party wrongdoer(s) to their proceedings against the defendant. This opportunity of joinder, which seems to me to have been an essential aspect of the balance struck by the various legislatures when reallocating the risk and burden from the defendant to the plaintiff in certain types of multi-wrongdoer cases, would not be available in arbitration proceedings. In my view, this is not merely a “rough edge” able to be accommodated by the terms of the relevant regimes, or otherwise satisfactorily worked through in the application of the proportionate liability provisions to arbitration proceedings. Rather, it is an integral feature of the proportionate liability regimes, which because it cannot be accommodated in the context of an arbitration, is indicative of a qualification to the general implied conferral of power.
The parties’ agreement and the Commercial Arbitration Act
[9] In accordance with an implication, or implied term, of the type contemplated in Government Insurance Office of New South Wales v Atkinson-Leighton Joint Venture (1981) 146 CLR 206 at 235 (Stephen J), 246 (Mason J).
[10] Government Insurance Office of New South Wales v Atkinson-Leighton Joint Venture (1981) 146 CLR 206 at 235 (Stephen J).
The starting point for consideration of the Arbitrator’s mandate, or jurisdiction, is the parties’ Contract, and in particular the dispute resolution provisions within that agreement.
As mentioned earlier, the dispute resolution provisions in the Contract apply to any dispute between Pascale and Tesseract that arises “in connection with this Contract” (clause 20.1). In the event that it is not resolved through a process of conciliation, clause 21.1 provides for the dispute to be referred to arbitration.
Accordingly, the scope of the parties’ arbitration agreement, and hence the Arbitrator’s jurisdiction, extends to any dispute “in connection with” the Contract. As the authorities make plain, these are words of wide import, particularly when construed in a context, such as the present, where it can readily be assumed that the parties would not have intended that there be a multiplicity of proceedings, with only some aspects of any dispute between them to be addressed through the agreed arbitration process.
As to this context, French J said in Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd:[11]
When the language of the arbitration clause in question is sufficiently elastic, then the more liberal approach of the courts to which Kirby P and others have referred can have some purchase. A wide construction of such clauses can be supported on the basis advanced by Clarke JA that it is unlikely to have been the intention of the parties to artificially divide their disputes into contractual matters which could be dealt with by an arbitrator and non-contractual matters which would fall to be dealt with by the courts.
[11] Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd (1993) 43 FCR 439 at 448 (French J), referring to the reasons of Kirby P and Clarke JA in IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466.
To similar effect are the observations of Gleeson CJ in Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd:[12]
When the parties to a commercial contract agree, at the time of making the contract, and before any disputes have yet arisen, to refer to arbitration any dispute or difference arising out of the agreement, their agreement should not be construed narrowly. They are unlikely to have intended that different disputes should be resolved before different tribunals, or that the appropriate tribunal should be determined by fine shades of difference in the legal character of individual issues, or by the ingenuity of lawyers in developing points of argument.
[12] Francis Travel Marketing Pty Ltd v Virgin Atlantic Airway Ltd (1996) 39 NSWLR 160 at 165 (Gleeson CJ, Meagher and Sheller JJA agreeing).
In Comandate Marine Corporation v Pan Australia Shipping Pty Ltd[13] the Court was required to consider whether the scope of a particular arbitration clause, which authorised an arbitrator to determine disputes “arising out of the contract”, was wide enough to encompass a Trade Practices Act claim. Allsop J (Finkelstein and Finn JJ agreeing) relevantly stated:[14]
The width of the phrase ‘arising out of’ in this context and its synonymity with the expression ‘in connection with’ reflect the practical, rather than theoretical, meaning to be given to the word ‘contract’ out of which the disputes may arise. The notion of a contract can involve the practical commercial considerations of formation, extent and scope, and performance of the juridical bonds between the parties, out of which disputes may arise. In my view, there is no bright line to be drawn at the point of contract formation with all causes of action reliant on events prior to that point not being disputes arising out of the contract. It will be necessary in each case to assess the connection of the dispute with the contract – its formation, terms or performance – to see whether disputes fall within the clause, as well, of course, as the terms of the arbitration clause in the context in which they appear.
[13] Comandate Marine Corporation v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45.
[14] Comandate Marine Corporation v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45 at [175] (Allsop J, Finkelstein and Finn JJ agreeing).
Also relevant in this context is Incitec Ltd v Alkimos Shipping Corporation.[15] The Court in that case was required to consider whether claims for contribution under s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW), and for equitable contribution, fell within the scope of an arbitration clause that provided for any dispute “arising out of or in connection with the contract” to be referred to arbitration. After considering the relevant authorities, Allsop J observed that “[t]he clear tide of judicial opinion as to arbitration clauses, where the fair reading of them is not confined, is to give width, flexibility and amplitude to them”.[16]
[15] Incitec Ltd v Alkimos Shipping Corporation (2004) 138 FCR 496.
[16] Incitec Ltd v Alkimos Shipping Corporation (2004) 138 FCR 496 at [36] (Allsop J).
Similarly, in Cufone v Cruse,[17] Bleby J gave the phrase “in connection with” appearing in the arbitration agreement under consideration in that case an “extremely wide” meaning. All that was required was a “link or association” between the dispute and one of the several nominated subject matters. As one of the nominated subject matters was “matters dealt with in this agreement” between the parties, his Honour considered that the arbitration agreement would extend to claims based upon mistake or misrepresentation in relation to entry into the contract, rectification of the contract, claims in tort having a sufficient nexus with the contract, and the implication of terms in the parties’ contract.
[17] Cufone v Cruse [2000] SASC 17 at [45]-[48]; upheld on appeal in Cufone v Cruse [2000] SASC 304 at [29] (Williams J, Prior and Martin JJ agreeing).
Finally, in Aquagenics Pty Ltd v Break O’Day Council,[18] a decision considered in greater length later in these reasons, it was accepted that an arbitration clause predicated upon a dispute or difference “in connection with the Contract or the subject matter thereof” was apt to encompass the determination of a proportionate liability defence under the relevant Tasmanian legislation.[19]
[18] Aquagenics Pty Ltd v Break O’Day Council [2010] TASFC 3 at [87]-[89] (Tennent J).
[19] Although, for reasons explained later, his Honour held that those provisions had no application to the parties’ arbitration proceedings.
In the present case, the allegations made by Pascale in its statement of claim, despite extending beyond claims in contract to include claims for breach of a tortious duty of care, and for misleading and deceptive conduct, all form part of a dispute between the parties that arises “in connection with” the Contract between them. In my view, the same is true of the issue that has arisen through Tesseract’s defence as to the applicability of the proportionate liability provisions of the Law Reform Act and the CCA. The dispute in relation to the applicability of these provisions goes to the extent of Tesseract’s liability for any breach of its contractual or tortious duties, or for any misleading or deceptive conduct in which it engaged. Understood in this way, the dispute in relation to the application of these provisions is just as connected to the parties’ Contract as those allegations of liability are.
Accepting that the dispute between the parties as to the application of any regime of proportionate liability has arisen “in connection with” the Contract, such that the Arbitrator has jurisdiction to determine that dispute, it becomes necessary to consider how, and in particular, by reference to what legal system and legal principles, the dispute falls to be determined.
The starting point in this regard is s 28 of the Commercial Arbitration Act:
28—Rules applicable to substance of dispute
(1)The arbitral tribunal must decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute.
(2)Any designation of the law or legal system of a given State or Territory must be construed, unless otherwise expressed, as directly referring to the substantive law of that State or Territory and not to its conflict of laws rules.
(3)Failing any designation by the parties, the arbitral tribunal must apply the law determined by the conflict of laws rules which it considers applicable.
(4)The arbitral tribunal must decide the dispute, if the parties so agree, in accordance with such other considerations as are agreed to by the parties.
(5)In all cases, the arbitral tribunal must decide in accordance with the terms of the contract and must take into account the usages of the trade applicable to the transaction.
Note—
This section (other than subsection (4)) is substantially the same as Art 28 of the Model Law.
The parties accept that, in the present case, s 28 requires that the Arbitrator determine their dispute in accordance with the substantive laws of South Australia. While the Contract does not contain any express choice or designation of the type contemplated by s 28(1), the parties accept that, given the parties’ and the Contract’s connections with South Australia (and the absence of any equivalent connections with any other jurisdiction or legal system), South Australian law is the proper law of the Contract, and the system of law governing the determination of the dispute between the parties the subject of the Arbitration more generally (that is, the lex causae). The applicable law, for the purposes of s 28(3), is the substantive law of South Australia.
Tesseract contends that the proportionate liability provisions in the Law Reform Act and CCA are substantive rather than procedural. In John Pfeiffer Pty Ltd v Rogerson,[20] the plurality said that a guiding principle in distinguishing between substantive and procedural issues for choice of law purposes is:[21]
[M]atters that affect the existence, extent or enforceability of the rights or duties of the parties to an action are matters that, on their face, appear to be concerned with issues of substance, not with issues of procedure. Or to adopt the formulation put forward by Mason J in McKain,[22] “rules which are directed to governing or regulating the mode or conduct of court proceedings” are procedural and all other provisions or rules are to be classified as substantive.[23]
[20] John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503.
[21] John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503 at [99] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ).
[22] (1991) 174 CLR 1 at 26-27.
[23] Stevens v Head (1993) 176 CLR 433 at 445 per Mason CJ.
Their Honours later added:[24]
[A]ll questions about the kinds of damage, or amount of damages that may be recovered, would likewise be treated as substantive issues governed by the lex loci delicti.
[24] John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503 at [100] (Gleeson CJ, Gaudron, McHugh, Gumow and Hayne JJ), emphasis in original.
In Kerr v Australian Executor Trustees (SA) Ltd,[25] Stevenson J applied these passages in concluding that apportionment legislation was concerned with matters of substance rather than procedure; that it directly affected the extent of the parties’ rights or duties, as well as any amount of damages that might be payable.
[25] Kerr v Australian Executor Trustees (SA) Ltd [2019] NSWSC 1279 at [509] (Stevenson J).
I agree with this general characterisation of apportionment legislation as substantive, and that it extends to the proportionate liability regimes under the Law Reform Act and CCA under consideration in the present case.
It is possible, I suppose, that some of the particular provisions within those regimes might be regarded as merely procedural. However, in my view the regimes in Part 3 of the Law Reform Act and Part VIA of the CCA are each better seen as a single law, or set of laws, designed to regulate the outcome of certain types of multi-party (or multi-wrongdoer) disputes such that it would be artificial, and inappropriate, to treat some aspects of the regime as procedural when the overall effect of the scheme is plainly substantive. As elaborated upon in a slightly different context later in these reasons, it would seem contrary to the intention of the relevant legislatures to apply some but not all of the relevant provisions in circumstances where that would materially alter the balance intended to be struck when reallocating the burden and risk associated with multi-wrongdoer disputes from a defendant to the plaintiff.
Assuming, as I have concluded, that the proportionate liability regimes under the Law Reform Act and CCA form part of the substantive law governing the resolution of the dispute between the parties under s 28(3) of the Commercial Arbitration Act, Tesseract submits that this supports, if not requires, the application of those regimes to the parties’ arbitration proceedings.
There are two potential difficulties with this submission. The first of these arises out of the reasoning of the Full Court in South Australian Superannuation Fund Investment Trust v Leighton Contractors Pty Ltd.[26] An issue in that case was the arbitrator’s power to make certain orders in relation to compound interest and costs. The case fell to be decided under the Commercial Arbitration Act 1986 (SA) (the 1986 Act) (being the predecessor to the Commercial Arbitration Act 2011 (SA) (the 2011 Act)). Under s 22 of the 1986 Act, the Arbitrator was required to determine the dispute “according to law”:
(1)Unless otherwise agreed in writing by the parties to the arbitration agreement, any question that arises for determination in the course of proceedings under the agreement shall be determined according to law.
(2)If the parties to an arbitration agreement so agree in writing, the arbitrator or umpire may determine any question that arises for determination in the course of proceedings under the agreement by reference to considerations of general justice and fairness.
[26] South Australian Superannuation Fund Investment Trust v Leighton Contractors Pty Ltd (1996) 66 SASR 509.
The Court rejected an argument that s 22(1) conferred an arbitrator with the powers to order compound interest and costs legislatively conferred upon the Supreme Court. Matheson J (Bollen and Millhouse JJ agreeing) said that the applicant in that case did not get any assistance from s 22(1), adding:[27]
That section certainly does not authorise an arbitrator to make an order, for example, which the Supreme Court can make on a question of costs (or interest). The CAA contains sections expressly dealing with costs (and interest). In my opinion, the words “according to law” mean according to the principles of the common law.
[27] South Australian Superannuation Fund Investment Trust v Leighton Contractors Pty Ltd (1996) 66 SASR 509 at 512 (Matheson J, Bollen and Millhouse JJ agreeing).
In 620 Collins Street Pty Ltd v Abigroup Contractors Pty Ltd (No 3),[28] Osborn J appeared to have some reservations as to the correctness of the view that the words “according to law” in the equivalent legislation applicable in that case were limited to principles of common law. And in Curtin University of Technology v Woods Bagot Pty Ltd,[29] a case considered in more detail later in these reasons, Beech J expressed similar reservations, albeit ultimately applying that view in respect of the equivalent provision in the Western Australian legislation under consideration in that case.[30]
[28] 620 Collins Street Pty Ltd v Abigroup Contractors Pty Ltd (No 3) [2006] VSC 492 at [37] (Osborn J).
[29] Curtin University of Technology v Woods Bagot Pty Ltd [2012] WASC 449.
[30] Curtin University of Technology v Woods Bagot Pty Ltd [2012] WASC 449 at [64]-[71] (Beech J).
I share these reservations as to the correctness of the view expressed as to the meaning of “according to law” in s 22(1) of the 1986 Act in South Australian Superannuation Fund Investment Trust v Leighton Contractors Pty Ltd. It seems to me that the reference to a question being determined “according to law” under s 22(1) was simply in contradistinction to it being determined “by reference to considerations of general justice and fairness” under s 22(2), without any implicit limitation of the applicable law to the common law as opposed to statutory law.
Be that as it may, I do not need to express any concluded view as to the correctness of the suggested limit upon the words “according to law” under the 1986 Act. There is no direct equivalent of s 22(1) of the 1986 Act in the 2011 Act. While s 28 of the 2011 Act does use some similar language, its terms are different and, indeed, focus upon a slightly different issue. That section (particularly, ss 28(1) to (3))[31] is addressed to the choice of law issue as to the system of law that is to govern the arbitrator’s determination of the parties’ dispute. In that context, while the reference to the applicable law would be, as I have already suggested, confined to the substantive laws of the relevant system of law, I see no basis for limiting this to the common law, as opposed to statutory, manifestation of those substantive laws.
[31] Noting that s 28(4) does contemplate the arbitrator deciding the dispute in accordance with “such other consideration as are agreed to by the parties”, thus permitting some analogy with s 22(2) under the 1986 Act.
That leads me to the second potential difficulty with Tesseract’s submission to the effect that, having concluded that the proportionate liability provisions form part of the substantive law of the system of law applicable under ss 28(3) of the Commercial Arbitration Act, the Arbitrator must apply those provisions in resolving the parties’ dispute. In my view, s 28 does not go quite that far. While s 28 does operate to determine the system of law that is applicable to, or governs, the Arbitrator’s determination of the parties’ dispute, it does not operate to require that every substantive law within that system be applied. To my mind that is a separate issue that requires consideration of the other strands of Tesseract’s argument; namely, that the proportionate liability provisions under the Law Reform Act and CCA apply either by force of their own terms or, alternatively, by reason of an implied term of the parties’ arbitration agreement.
But even if I am wrong about this, I do not think it makes any practical difference. If I am wrong, and s 28 does operate to not only select the applicable system of law, but also require the application of each of the substantive laws within that system of law, I do not think this reading of s 28 could be given its full literal meaning and effect. I would read it as implicitly confined to the application of those laws that either apply by force of their own terms to arbitration proceedings or are otherwise amenable to application in arbitration proceedings. In this way, while there would no longer be any need to rely upon an implied term of the arbitration agreement as conferring authority upon the Arbitrator to apply statutory provisions such as the proportionate liability provisions under the Law Reform Act and CCA, the authority conferred under s 28 would be subject to an equivalent limitation to the one I have, later in these reasons, held is applicable to any implied term; that is, the conferral of authority would be subject to the amenability of the relevant provision(s) to application in arbitration proceedings.
For the reasons set out, I do not consider that s 28 is determinative of the question posed for this Court. It is thus appropriate to move to consideration of the second and third strands of Tesseract’s submissions.
Application by force of their own terms
It is appropriate to review in some detail the two authorities that have directly addressed the issue of whether various of the regimes for proportionate liability enacted in Australia apply to arbitration proceedings by force of their own terms: Aquagenics Pty Ltd v Break O’Day Council[32] (Aquagenics) and Curtin University of Technology v Woods Bagot Pty Ltd[33] (Curtin).
[32] Aquagenics Pty Ltd v Break O’Day Council [2010] TASFC 3.
[33] Curtin University of Technology v Woods Bagot Pty Ltd [2012] WASC 449.
However, before doing so, it is useful to commence by mentioning the decision of Cavanough J in Wealthcare Financial Planning Pty Ltd v Financial Industry Complaints Service Ltd.[34] In that case, his Honour was required to determine whether the proportionate liability provisions in Part IVAA of the Wrongs Act 1958 (Vic) applied in determining a complaint made to the Financial Industry Complaints Service (FICS). The rules to be applied by the FICS panel required it to have regard to “applicable legal rules”, and the financial planner against whom a complaint had been made argued that the norm of proportionate liability reflected in the provisions of the Victorian legislation was an applicable legal rule. Cavanough J rejected this argument, holding that the proportionate liability provisions were not an applicable legal rule required to be applied by the panel. The proportionate liability provisions in the Victorian legislation were not of universal application. They made no change to the law, or to the rights or obligations of individuals, outside the context of a claim within a proceeding involving an apportionable claim, and the whole tenor of Part IVAA suggested confinement to proceedings in court and closely comparable proceedings.
[34] Wealthcare Financial Planning Pty Ltd v Financial Industry Complaints Service Ltd (2009) 69 ACSR 418.
Given some of the similarities between the issues addressed by Cavanough J and those with which this Court is concerned, it is instructive to set out in full the relevant passage from his Honour’s reasons:[35]
Wealthcare’s essential argument is that, in Victoria at least, proportionate liability is now a fundamental legal norm. It is true that, where it applies, Part IVAA of the Wrongs Act 1958 makes fundamental changes to the law of Victoria. In Gunston v Lawley[36], on which Wealthcare relies, Byrne J said:
“The scheme of s 24AI is that any given defendant is at risk of liability and judgment for an amount limited to its proper share of the loss or damage the subject of the claim.
The effect of the proportionate liability regime, therefore, is to transform fundamentally the relationship which exists between a plaintiff and a concurrent wrongdoer … .”
However the provisions of Part IVAA are by no means of universal application. For example, they apply only in a “proceeding[37] involving an apportionable claim”. “Apportionable claim” is defined to mean a claim to which Part IVAA applies. By virtue of s 24AF(1), the limits on that concept include that the claim must either be a claim for economic loss or damage to property in an action for damages[38] arising from a failure to take reasonable care, or be a claim for damages for a contravention of s 9 of the Fair Trading Act 1999. Immediately one sees a contrast between Part IVAA and provisions such as s 9 of the Fair Trading Act 1999 itself. That section directly regulates the conduct of persons and other entities. It prohibits misleading and deceptive conduct; and it does so in respect of a vast field of activity, namely trade or commerce. It may truly be said to be a legislative reflection of a norm of conduct.[39] Part IVAA of the Wrongs Act is different. It makes no change to the law or to the rights or obligations of individuals outside the context of a “claim” within a “proceeding”. A “concurrent wrongdoer” is only defined “in relation to a claim”: s 24H. The central provision – s 24AI - is expressly directed towards the position of a “defendant”, as defined. At least insofar as Part IVAA relates to a claim arising from a failure to take reasonable care[40], the claim must be made in an “action”: s 24AF(1)(a). In its context in Part IVAA, the word “action” does not bear its popular meaning of a proceeding commenced by writ, but it does, I think, mean, in substance, a legal proceeding.[41] It will extend to a legal proceeding conducted in a tribunal (because of the definition of “court”) but the whole tenor of Part IVAA suggests confinement to proceedings in court and closely comparable proceedings. The central provision – s 24AI – is expressed to operate by reference to “the court”. “Court” may be defined to include “tribunal” and, in relation to a claim for damages (as defined), to mean “any court or tribunal by or before which the claim falls to be determined”, but, as Bennion says in relation to statutory definitions in general[42], it is “impossible to cancel the ingrained emotion of a word merely by an announcement”. Moreover, the very subject matter of Part IVAA is the distribution of liability, meaning, I think, legal liability. Part IVAA hardly seems to be directed towards the proceedings of a domestic tribunal with an essentially discretionary jurisdiction. Writing extra-judicially, Byrne J has said that the regime of Part IVAA “does not appear to apply to arbitrations …”[43]. I think that his Honour was referring there to commercial arbitrations, as distinct from industrial arbitration and like processes. I need not and do not decide the very important question whether Part IVAA applies to formal commercial arbitrations,[44] but his Honour’s comment is entirely consistent with the proposition that Part IVAA is inapplicable to a matter before a FICS panel.
Another feature of Part IVAA tends strongly in the same direction. Unsurprisingly, Part IVAA seems to proceed on the basis that, at least in the usual case, if possible, all putative “concurrent wrongdoers” should be before the court (or tribunal) in the one proceeding.[45] That principle can only happily operate in a forum which has jurisdiction over all potential defendants. Needless to say, FICS can only deal with its members and has no jurisdiction or power over anyone else.[46] Further, s 24AI(3) of the Wrongs Act prevents the court or tribunal from having 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 (being a corporation) has been wound-up. Section 24AK does contemplate the possibility of successive actions, but s 24AL(1) envisages the giving of leave for concurrent wrongdoers to be joined as defendants. Moreover, s 24AL(2) prevents the joinder of any person who was a party to any previously concluded proceeding in relation to the apportionable claim. The combination of s 24AI(1) and (3) and s 24AL(2) makes manifest the general undesirability of split proceedings in relation to apportionable claims.[47] Further, there is something to be said for the submission by FICS that even if the panel had purported to apply Part IVAA, it would necessarily have arrived at the same conclusion, because there still would have been only one “defendant” before it.[48]
None of this is meant to imply that the provisions of Part IVAA should be characterised as procedural rather than substantive where that distinction may be significant.[49] But, even regarded as substantive provisions, they are relevantly quite limited in their scope.
[35] Wealthcare Financial Planning Pty Ltd v Financial Industry Complaints Service Ltd (2009) 69 ACSR 418 at [37]-[39] (Cavanough J).
[36] [2008] VSC 97 at [59] and [60].
[37] Section 24AI(1). “Proceeding” is not defined.
[38] “Damages” is defined to include any form of monetary compensation.
[39] See Brown v Jam Factory Pty Ltd (1981) 35 ALR 79 at 86 and Travel Compensation Fund v Tambree (2005) 224 CLR 627 at 639 [28]-[29], to each of which Wealthcare referred.
[40] Compare s 24K. The word “action” is used in s 24K in a way that may indicate that no apportionable claims at all can arise except in the context of an “action”.
[41] Compare R v Day and Thomson [1985] VR 261 at 266.
[42] F. Bennion, Statutory Interpretation, 3rd edition, 434, citing Richard Robinson, Definition (1952), p 77.
[43] The Hon. Justice David Byrne, “Proportionate Liability: Some Creaking in the Superstructure”, a paper presented to the Judicial College of Victoria, Friday 19 May 2006, p 7, para [20].
[44] Counsel for FICS disclaimed any suggestion that FICS was covered by the Commercial Arbitration Act 1984: transcript 185-186.
[45] See also Byrne, op cit, p 26 [57].
[46] Thus in ABN Amro Morgans Ltd v Alders [2008] QSC 160 at [13] Jones J said that it was “undoubtedly the position” that a FICS member would not have the opportunity before a FICS panel to put forward claims against third parties.
[47] See also Byrne, op cit, p 14-17 [28]-[33].
[48] However this assumes, controversially, that it would have been proper for the panel to have imported all of the provisions of Part IVAA, including s 24AI(3), despite the panel’s inability to join other parties.
[49] Compare John Pfeiffer Pty Ltd v Rogers (2000) 203 CLR 503.
His Honour later concluded:[50]
The various considerations to which I have referred demonstrate the correctness of Wealthcare’s concession that Part IVAA did not apply directly, or of its own force, to the complaint before the panel, and also demonstrate that the FICS panel was not obliged to apply any principles of proportionate liability to the Norrises’ complaint. Accordingly, this proceeding will be dismissed.
[50] Wealthcare Financial Planning Pty Ltd v Financial Industry Complaints Service Ltd (2009) 69 ACSR 418 at [47] (Cavanough J).
Turning to the first of the two authorities that have directly addressed the application of proportionate liability provisions in arbitration proceedings by force of their own terms, Aquagenics involved a contract between the plaintiff and the first defendant Council for the design, construction and commissioning by the plaintiff of upgrading works in relation to the Council’s waste water treatment plant. The plaintiff was referred to in the contract as the Contractor. The Council had transferred its rights and liabilities in relation to the plant to the second defendant company. A dispute arose between the parties to the contract, with the Council alleging that the plaintiff was in breach of contract. The Council sought to invoke its contractual rights to take the work still to be completed out of the plaintiff’s hands. The plaintiff’s position was that the Council thereby repudiated the contract. It brought proceedings in the Supreme Court of Tasmania against the defendant Council and second defendant company, seeking a declaration that it was entitled to terminate the contract by reason of the Council’s repudiation, orders for a return of the security held by the Council under the contract, and damages for loss of profit.
The Council sought to invoke the dispute resolution provisions under the Contract, which provided for the dispute to be referred to arbitration. In support of this course, the Council sought a stay of the plaintiff’s court proceedings, in order to permit a referral to arbitration under the contract to take its course.
In contending that the court proceedings should not be stayed, the plaintiff relied upon considerations which included a submission that novel and difficult questions of law were likely to arise concerning the proportionate liability provisions in Part 9A of the Civil Liability Act 2002 (Tas), and that it was more appropriate for such questions to be determined by a judge, rather than an arbitrator.
Such a term will ordinarily be implied in an arbitration agreement, and should be implied in the arbitration agreement between the parties in the present case. In my view, this involves an implication drawn from the parties’ express referral of their disputes to an arbitrator. As such, I would regard it as a matter arising from the construction of the express terms used by the parties, or at least a term generally to be implied in an arbitration agreement, rather than an implied term of the type that requires any direct or close consideration of the BP Refinery conditions[139] for the implication of contractual terms.
[139] Conveniently listed in the passage extracted above from the reasons of Tennent J in Aquagenics Pty Ltd v Break O’Day Council [2010] TASCFC 3 at [91].
That said, even if the BP Refinery conditions require consideration, I would respectfully differ from the approach taken by Tennent J in Aquagenics.[140] I do not think that the BP Refinery conditions would fall to be considered by reference to the particular legislative provisions which the arbitrator is said to have implied authority to apply. Assuming, as I do, that the implied term is to be expressed at a general level (that is, conferring the arbitrator with authority with respect to all of the rights and relief that would have been available in a court of law), any requirement to apply the BP Refinery conditions would fall to be considered at that same level of generality. The question to be considered in applying those conditions would be whether this general authority on the part of the arbitrator is reasonable and equitable, necessary for business efficacy, obvious, able to be expressed in clear terms, and consistent with the express terms of the contract; not whether authority to apply the particular proportionate liability provisions in question may be so described. And when the question is framed in this way, it seems to me that the contemplated term would ordinarily satisfy the BP Refinery conditions.
[140] Aquagenics Pty Ltd v Break O’Day Council [2010] TASFC 3 at [92]-[93] (Tennant J).
That said, it is important to acknowledge that there will be exceptions or qualifications to the existence and extent of this implied term. These exceptions or qualifications may, it seems to me, be found in either the express terms of the parties’ contract, or in the nature and terms of the relevant legislative provisions said to be ‘picked up’ by the implied term.
As to the former, it is not difficult to imagine circumstances in which the parties might agree, and expressly provide, for their dispute to be determined by an arbitrator without reference to particular legislative provisions. Assuming the legislative provisions are ones in respect of which the parties are entitled to ‘contract out’, there would seem to be no difficulty in giving effect to this manifestation of the parties’ usual contractual freedom. Indeed, this would be consistent with the approach taken in each of the judgments in Aquagenics (with Evans and Wood JJ holding that the parties had contracted out of the proportionate liability provisions of the Tasmanian legislation, and Blow and Tennent JJ holding that they had done so partially).
As to the latter, there will be circumstances in which the nature and terms of the relevant legislative provisions will prevent their application to arbitration proceedings. The possibility of such exceptions was expressly contemplated by Stephen J in GIO. In the very passage in which his Honour identified the potential for an implied term in an arbitration agreement that confers power upon an arbitrator to grant such relief as would have been available in a court, his Honour also noted that the principles permitting this implication were “subject to such qualifications as relevant statute law may require”.[141]
[141] Government Insurance Office of New South Wales v Atkinson-Leighton Joint Venture (1981) 146 CLR 206 at 235 (Stephen J).
Most obviously, a qualification to the reach of the usual implied term might arise in circumstances where the terms of the legislative provisions in question include an express indication that they do not apply to arbitration proceedings.
However, there will also be situations where a more subtle analysis of the legislative provisions reveals that, by reason of the nature of the legislative provisions (in particular, the subject matter they address, or the terms and mechanism through which they address that subject matter), they are not apposite or amenable to application in arbitration proceedings. Put another way, this analysis may reveal that the statutory power is not able to be “moulded so that it is expressed in terms appropriate to, and capable of being exercised in, an arbitration.”[142]
[142] Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 369 (Mason J).
It seems to me that the basis for this qualification probably lies in the recognition of a limit upon the parties’ implied (objective) intention under their arbitration agreement; that the parties only intended to confer authority upon the arbitrator to determine such rights, or grant such relief, as are amenable to determination in arbitration proceedings. Alternatively, it may be the recognition of some overriding (objective) intention on the part of the relevant legislature that the relevant legislative provisions are not amenable to arbitration, and hence not to be ‘picked up’ by any general implication of the type contemplated by Stephen and Mason JJ in GIO.[143] That said, given the objective nature of both forms of analysis, and given that both ultimately turn upon the amenability of the relevant provisions to application in arbitration proceedings, there is unlikely to be any significant practical difference between these two approaches.
[143] This would be the analysis if the qualification is to be seen as a limit upon s 28 of the Commercial Arbitration Act (a possibility contemplated earlier in these reasons), as opposed to a limit upon an implied term in the parties’ arbitration agreement.
In considering what ‘amenability to application in arbitration proceedings’ entails in this context, there are several authorities of potential assistance.
In ACD Tridon Inc v Tridon Australia Pty Ltd,[144] an issue was the amenability to arbitration of claims brought under various provisions of the Corporations Act 2001 (Cth), including shareholder oppression claims. In considering this issue, Austin J referred to various decisions that have recognised the ability of the parties to an arbitration agreement to refer statutory claims to arbitration:[145]
The question for determination is whether it is competent for parties to an arbitration agreement to agree with one another, in this fashion, to empower the arbitrator to exercise the powers of a Court under the Corporations Act. The purpose of such an agreement could not and would not be to have the arbitrator’s award operate as an order of the Court. The arbitrator’s determination would be an exercise of consensual power equivalent in scope to the power of a Court under the Corporations Act, having binding effect as between the parties by force of their agreement.
[144] ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896.
[145] ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896 at [160] (Austin J), and referring at [181] in that context to IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466 and Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160.
However, his Honour then addressed what he considered to be two qualifications to, or limitations upon, this ability of an arbitrator to apply statutory provisions.[146] The first is not relevant for present purposes. His Honour described the second in the following terms:[147]
[146] ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896 at [184] (Austin J).
[147] ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896 at [189]-[194] (Austin J).
The second kind of limitation was described by MJ Mustill & SC Boyd, Law and Practice of Commercial Arbitration in England (second edition, 1989), p 149. After stating the general principle that any dispute or claim concerning legal rights which can be the subject of an enforceable award is capable of being settled by arbitration, and noting that the general principle was subject to some reservations, the authors proceeded to explain the reservations, including the following:
“Second, the types of remedies which the arbitrator can award are limited by considerations of public policy and by the fact that he is appointed by the parties and not by the state. For example, he cannot impose a fine or a term of imprisonment, commit a person for contempt or issue a writ of subpoena; nor can he make an award which is binding on third parties or affects the public at large, such as a judgment in rem against a ship, an assessment of the rateable value of land, a divorce decree, a winding-up order or a decision that an agreement is exempt from the competition rules of the EEC under Article 85 (3) of the Treaty of Rome.” [footnotes omitted]
In the Metrocall case, the Industrial Relations Commission in Court Session applied these observations to hold that a disputed claim to relief under s 106 of the Industrial Relations Act 1996 (NSW) is not capable of settlement by arbitration. The Commission drew attention to the specialist nature of the jurisdiction and powers of the Commission in Court Session (52 NSWLR at 25), and the nature of the considerations required to be taken into account. They emphasised that those considerations include matters relating to the industrial relations system and the public interest.
In A Best Floor Sanding Pty Ltd v Skyer Australia Pty Ltd [1999] VSC 170, the parties to a joint venture agreement agreed to arbitrate any dispute, difference or question touching, inter alia, the dissolution or winding up of the “association” which was their joint venture entity. Warren J declined an application for an order staying a winding up proceeding, under the Victorian commercial arbitration legislation, on the ground that the arbitration clause was null and void because it had the effect of “obviating the statutory regime for the winding up of a company” (at paragraph [18]). Her Honour’s decision was partly based on public policy considerations surrounding the process of winding up a company pursuant to court order. An additional ground seems to have been that a winding up order operates to affect the rights of third parties, not merely the rights of the parties to the arbitration clause.
In my opinion, the latter ground is a strongly persuasive one, in keeping with the general observations by Mustill & Boyd. I accept, as well, that public policy considerations operate against referring to arbitration a determination to wind up a company on the grounds upon which a court may order that a company be wound up. However, I would not regard these public policy considerations as preventing parties to a dispute from referring questions to arbitration merely because those questions arise under the Corporations Act. I see nothing special about the Corporations Act that would distinguish it, as a whole, from other legislation such as the Trade Practices Act. This seems to be the position reached by United States courts: see Dean Witter Reynolds Inc v Byrd 470 US 213 (1985); Shearson Lehman Hutton Inc v Wagoner 944 F 2d 114 (2nd Cir 1991); also Pick v Discover Financial Services Inc 2001 No.Civ.A 00-935-SLR (D) Del Sept 28, 2001.
The statutory powers of a Court under the Corporations Act are, generally speaking, comparable to the powers exercised by a court under the general law (the power to make a winding up order being an exception to this proposition). They are generally not special powers to be exercised having regard to specialist public interest criteria.
Specifically, the public policy considerations held by Warren J to be applicable to a disputed claim to wind up a company do not seem to me to prevent the parties from referring to arbitration a claim for some merely inter partes relief under the oppression provisions of the Corporations Act, or for access to corporate information under s 247A. However, the “in rem” nature of an order for rectification of the share register of a company may prevent reference of that power to an arbitrator.
In Siemens Ltd v Origin Energy Uranquinty Power Pty Ltd,[148] an issue was whether the parties’ dispute arising under s 15(2)(a)(i) of the Building and Construction Industry (Security of Payment) Act 1999 (NSW) (the SOP Act) was amenable to arbitration. In considering this issue, Ball J observed that whether or not a particular dispute was capable of determination by arbitration “depends upon the subject matter of the dispute and, in some cases, the mechanism that has been established to resolve it”.[149] After then setting out the key passage from the reasons of Stephen J in GIO,[150] Ball J said the following in relation to the principle to be derived from this passage, and the qualifications or exceptions to it:[151]
Applying this principle, courts have held that, as well as a claim for interest, an arbitrator has power to determine various statutory claims such as those arising under ss 82 and 87 of the Trade Practices Act for contraventions of s 52 of that Act (see Comandate Marine Corp and IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466) and those under ss 175, 233, 247A and 1071B of the Corporations Act 2001 (Cth) (ACDTridon v Tridon Australia [2002] NSWSC 896).
However, in certain circumstances, it may be apparent from the nature of the subject matter or the way that it is dealt with by the legislature that it is appropriate for disputes concerning that subject matter to be resolved by the courts, or specialist tribunals established for that purpose. What normally distinguishes this class of case is the existence of some legitimate public interest in seeing that disputes of the type in question are resolved by public institutions or in accordance with structures that are established by parliament rather than institutions and structures established by the parties: see Comandate Marine Corp at [200] per Allsop J. Examples include proceedings to recover fines, proceedings relating to insolvency and competition law claims: see ACD Tridon v Tridon Australia at [189]-[194] per Austin J; Comandate Marine Corp at [200] per Allsop J. In Metrocall Inc v Electronic Tracking Systems Pty Ltd [2000] NSWIRComm 136, the Full Bench of Industrial Relations Commission sitting in Court Session thought that the same approach should apply to claims under s 106 of the Industrial Relations Act 1996. In reaching that conclusion, the Full Bench pointed to the fact that jurisdiction in respect of claims under s 106 was conferred on a specialist tribunal and the matters that that tribunal is required to take into account in determining whether to grant relief under that section include matters such as whether the contract is "against the public interest".
[148] Siemens Ltd v Origin Energy Uranquinty Power Pty Ltd (2011) 80 NSWLR 398.
[149] Siemens Ltd v Origin Energy Uranquinty Power Pty Ltd (2011) 80 NSWLR 398 at [37] (Ball J).
[150] Government Insurance Office of New South Wales v Atkinson-Leighton Joint Venture (1981) 146 CLR 206 at 235 (Stephen J).
[151] Siemens Ltd v Origin Energy Uranquinty Power Pty Ltd (2011) 80 NSWLR 398 at [37]-[38] (Ball J).
Ball J concluded that there were several aspects of the SOP Act that suggested that it established a particular regime for the recovery of progress payments which could not be made the subject of arbitration; and hence that an arbitrator did not have any implied power to determine a claim under s 15(2)(a)(i) of the SOP Act.[152]
[152] Siemens Ltd v Origin Energy Uranquinty Power Pty Ltd (2011) 80 NSWLR 398 at [40]ff.
Similarly, in Re Form 700 Holdings Pty Ltd,[153] Robson J considered whether an oppression proceeding under s 233 of the Corporations Act 2001 (Cth) was amenable to arbitration. His Honour said that it was “well established by Australian authorities that an arbitration agreement may invest in an arbitrator the power to exercise statutory powers that a court would have in the same circumstances”,[154] citing not only GIO, but also IBM Australia Ltd v National Distribution Services Ltd,[155] Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd[156] and ACD Tridon Inc v Tridon Australia Pty Ltd.[157] However, his Honour then referred at length to the reasons of Austin J in the last of these cases as to the second of the limitations upon the ability of the parties to invest authority upon an arbitrator.[158] While noting that Austin J had accepted that an oppression proceeding may be amenable to arbitration, Robson J explained that whether this was so in a particular case would depend upon the terms of the relevant arbitration agreement, and the nature of the claim made and the relief sought. His Honour concluded that some of the claims made by the plaintiffs against the defendants in that case were claims between shareholders and sought relief that only affected those shareholders. These claims involved a dispute under the shareholders agreement and were amenable to resolution under the arbitration provision in that agreement.[159] However, some of the other claims were against the defendants in their capacity as directors and so fell outside the ambit of the referral to arbitration.
[153] Re Form 700 Holdings Pty Ltd [2014] VSC 385.
[154] Re Form 700 Holdings Pty Ltd [2014] VSC 385 at [74] (Robson J).
[155] IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466.
[156] Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160.
[157] ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896.
[158] Re Form 700 Holdings Pty Ltd [2014] VSC 385 at [82] (Robson J).
[159] Re Form 700 Holdings Pty Ltd [2014] VSC 385 at [96], [125]-[130] (Robson J).
Returning to the issue in the present case, it seems to me that the implied term contemplated by Stephen and Mason JJ in GIO will not extend to the substantive laws of South Australia which are not amenable to application in arbitration proceedings. To the extent that this is a question that must ultimately be framed by reference to the (implied) intention of the parties, it is nevertheless an issue that requires consideration of the subject matter of the relevant statutory provisions, and the terms and mechanisms through which they address that subject matter. There may be features of the relevant provisions (such as the policy considerations underpinning the relevant provisions, or the intervention of the rights of third parties in the relevant subject matter) that lead to a conclusion that the relevant provisions are not amenable to arbitration. There may be features of the relevant provisions which could not sensibly be given effect by an arbitrator, or which, if applied by an arbitrator, would be so changed in their operation as to warrant a conclusion that it could not have been intended that an arbitrator would have authority to apply those provisions.
There are features of the proportionate liability provisions under both the Law Reform Act and the CCA that have led me to conclude that they are not amenable to application in arbitration proceedings in the relevant sense.
The basis for this conclusion does not lie in the relevant legislature’s use of terms such as “plaintiff”, “defendant”, “proceedings”, “judgment” or even “the court”. For the reasons developed earlier, these are strong textual indicators that the legislative provisions were not intended to, and hence do not, apply to arbitrations by force of their own terms. However, I do not think that they provide a sufficient basis for excluding those provisions from any implied conferral of authority upon the Arbitrator.[160] It is noteworthy in this respect that the power to award interest under consideration in GIO was conferred upon “the court”. Consistently with this, the contributory negligence provisions in Part 2 of the Law Reform Act and Part XI of the CCA would, in my view, be ‘picked up’ by the implied conferral of authority, despite those provisions being expressed by reference to “the court”.
[160] Or from any conferral of power under s 28 of the Commercial Arbitration Act.
Rather, the basis for this conclusion lies in a broader consideration of the nature of the proportionate liability provisions in both the Law Reform Act and the CCA, and the mechanisms through which the South Australian and Commonwealth Parliaments have chosen to implement them. In the case of both, it seems to me that there are aspects of those legislative regimes that are intended to be integral to their overall operation and yet which are inapposite for (if not incapable of) application in arbitration proceedings. Any attempt to apply those provisions to arbitration proceedings would result in a materially different proportionate liability regime from the one intended by the relevant Parliament.
I accept that the key operative provision in each of the regimes would be capable of operating in arbitration proceedings; that is, the provision limiting the defendant’s liability to its share in the responsibility for the plaintiff’s harm (being s 8(2) of the Law Reform Act and s 87CD of the CCA). In the case of Part 3 of the Law Reform Act, an arbitrator could, quite sensibly, determine the extent of a party’s liability in conformity with the terms of ss 8(1) to 8(6). While those subsections use language applicable to court proceedings, they are nevertheless capable of bearing the equivalent meanings that would be applicable in the context of arbitration proceedings. The same is true of the equivalent provisions under Part VIA of the CCA.
The difficulty comes in the broader application of those two regimes for proportionate liability, and in particular the “rough edges” that I have earlier suggested would arise in an attempt to apply those regimes to arbitration proceedings.
It is true that both regimes contemplate the potential for a plaintiff’s recovery to be (proportionately) reduced by reference to the wrongdoing of a person other than the defendant without that other wrongdoer necessarily being a party to the action.[161] However, both also contemplate that this will only occur after the plaintiff has had the benefit of information from the defendant as to the identity (and whereabouts[162]) of any other wrongdoer, and as to the circumstances giving rise to that wrongdoer’s potential liability,[163] and after the plaintiff has had an opportunity to join any such wrongdoer(s) to the proceedings against the defendant.
[161] cf the proportionate liability regime applicable in Victoria, which confines consideration to those wrongdoers who are party to the proceedings.
[162] In the case of the Law Reform Act, s 10(1)(a).
[163] Law Reform Act, s 10(1); CCA, s 87CE(1).
While the regime under the CCA expressly provides for the Court to join another potential wrongdoer as a party,[164] the Law Reform Act does not. But I do not think this difference is of any significance. It is plain that the requirement that a defendant provide the plaintiff with information about any other wrongdoer is intended to facilitate an informed decision by a plaintiff as to whether to seek to join such a person to the proceedings, and the Court’s general joinder powers under the applicable rules of court would suffice for the purpose of achieving any such joinder.
[164] CCA, s 87CH(1).
While both regimes thus contemplate that the plaintiff will have the opportunity to join all wrongdoers in the one set of proceedings, this opportunity cannot be given effect in the context of arbitration proceedings. In the absence of the consent of each of the parties and the other wrongdoer(s),[165] it will not be possible for the other wrongdoer(s) to be joined to an arbitration.
[165] Or circumstances warranting the consolidation of arbitration proceedings under s 27C of the Commercial Arbitration Act.
It is true that a plaintiff who obtains an arbitration award against a defendant, which has been reduced on account of the responsibility of another wrongdoer, might subsequently bring proceedings against that other wrongdoer in order to recover the balance of its loss. While apparently geared towards encouraging the resolution of multi-wrongdoer disputes in a single set of proceedings, the proportionate liability regimes in both the Law Reform Act and the CCA nevertheless permit this to occur.
However, requiring the plaintiff to proceed in this way would inflict an additional burden and risk upon the plaintiff which both legislatures intended that the plaintiff would have an opportunity to avoid. Subsequent proceedings will burden the plaintiff with the additional time and expense associated with a second set of proceedings. And there will be at least some risk of inconsistent findings in those subsequent proceedings that may result in a shortfall in the plaintiff’s recovery.
Under the proportionate liability regime in the CCA, there would seem to be no barrier to a court in the subsequent proceedings reaching a different conclusion as to any or all of: the plaintiff’s loss; the various wrongdoers’ proportionate responsibility for that loss; and the existence and extent of any contributory negligence on the part of the plaintiff.
Under the proportionate liability regime in the Law Reform Act, there is less risk of inconsistency. By reason of s 11 of the Law Reform Act it would seem that the outcome of the initial arbitration would determine the amount of the plaintiff’s notional damages (s 11(a)), and the existence and extent of any contributory negligence on the part of the plaintiff (s 11(c)). Although that section also provides for the earlier proceedings to determine the proportionate liability of each wrongdoer, that is only so in respect of wrongdoers who were party to the original proceedings (s 11(b)). Thus, while the outcome of the original proceedings (that is, the arbitration proceedings) would determine the proportionate liability of the defendant (who was a party to the arbitration), it would not seem to determine the proportionate liability of the other wrongdoer(s) (who would not have been a party to the arbitration), at least not in circumstances where the other wrongdoer(s) establishes responsibility on the part of yet another wrongdoer or wrongdoers. There would thus remain some scope for inconsistency in outcomes that might be detrimental to a plaintiff’s recovery.
Even though the risk of inconsistency appears to be less in the context of the proportionate liability regime under the Law Reform Act, this would only be by reason of the legislation giving the outcome of the arbitration proceedings a binding effect in respect of various aspects of subsequent court proceedings. In my view, it is unlikely that Parliament would have intended that the outcome of an essentially private and consensual dispute resolution process between two parties (the plaintiff and defendant) would be determinative of the outcome in subsequent court proceedings involving another party or parties (the other wrongdoer(s) subsequently sued by the plaintiff). From the perspective of the third party wrongdoer(s), it is one thing to bind it to the outcome of public court proceedings in which it had the opportunity to participate by being joined (upon the application of the plaintiff, or indeed upon their own application). It is quite another thing to do as s 11 appears to do, and bind it to the outcome of essentially private arbitration proceedings to which it was not a party, and indeed of which it might not even have been aware.
I acknowledge that prior to the introduction of the proportionate liability provisions in the Law Reform Act, a defendant sued by a plaintiff might (by reason of an arbitration agreement between those parties) be required to participate in an arbitration and therefore not have any ability or opportunity to seek contribution from any other third party wrongdoer(s) other than through subsequent separate proceedings. Further, in this scenario, assuming the defendant was found liable in the arbitration proceedings and did subsequently separately sue a third party wrongdoer for contribution, the defendant’s liability under the arbitral award against it might constitute, or at least be probative of, the liability to which the third party wrongdoer would be required to contribute,[166] despite it being the outcome of a private arbitration between the plaintiff and defendant to which the third party wrongdoer was not a party. But none of this, in my view, detracts from the proposition that any attempt to apply the proportionate liability provisions under the Law Reform Act (or CCA) to arbitration proceedings would result in difficulties and differences not contemplated by the relevant legislatures in enacting those regimes.
[166] Bitumen & Oil Refineries (Australia) Ltd v Commissioner for Government Transport (1955) 92 CLR 200 at 212 (Dixon CJ, McTiernan, Webb, Fullagar and Taylor JJ); applied and considered in several subsequent cases in the context of claims for contribution to a defendant’s liability under a settlement agreement, including most recently in BI (Contracting) Pty Ltd v David Jones Pty Ltd [2019] SASCFC 138 at [54]-[63] (Kelly J, Kourakis CJ and Nicholson J agreeing).
In my view, these difficulties and differences in the operation of the relevant proportionate liability provisions in the context of an arbitration, as opposed to court proceedings, are not mere matters of detail that can simply be ignored. They are not merely “rough edges” in the application of those regimes to arbitration proceedings that can be ignored, or worked through in some satisfactory manner. To the contrary, I regard them as an important part of the balance struck by the relevant legislatures when reallocating the risk and burden in certain types of multi-party litigation from a defendant to a plaintiff. They are an integral aspect of the mechanisms enacted by the South Australian and Commonwealth Parliaments to achieve this balance that is not able to be given effect in the same way in the context of arbitration proceedings. To apply either of those proportionate liability regimes in arbitration proceedings would be to apply a regime that differed materially in its operation from the regime that the relevant legislature intended to enact.
For these reasons, I do not think that it would be appropriate to conclude that the parties intended to confer the Arbitrator with authority to apply these provisions in this changed way; or indeed that the relevant legislatures intended that the regimes they enacted might be ‘picked up’ and applied, in a materially changed way, by an implied term of an arbitration agreement.[167]
[167] Or pursuant to s 28 of the Commercial Arbitration Act.
To my mind, this conclusion is supported by an appreciation that it is inherent in the very nature of a regime for proportionate liability that it is designed to govern the resolution of disputes involving multiple wrongdoers, rather than the usual bipartite disputes between a plaintiff and a defendant. While a regime for proportionate liability might be said to focus upon the allocation of the risk and burden between the plaintiff and defendant, it nevertheless inherently does so in a way that potentially affects the interests of third parties (that is, the other wrongdoers), and the rights of the plaintiff and defendant vis-à-vis those third parties. The interests of third parties thus intrude in a way that they would not in resolving ordinary bipartite disputes, including in relation to issues such as contributory negligence. Given this intrusion of third party rights, it is not surprising that a proportionate liability regime might not be amenable to application in bipartite arbitration proceedings.
I do not accept that the difficulty associated with the “rough edges” I have identified in the application of the proportionate liability provision can be resolved by simply not applying those aspects of the relevant regime. Inherent in my conclusion that these aspects are integral to the balance intended to be struck by the relevant legislatures is a view that those provisions were all intended to be applied as one overall regime. To apply only some parts of that regime and not other parts would be to apply materially different regimes from the ones intended.
This is not to say, however, that the parties might not agree between themselves to permit some partial application of the relevant proportionate liability regimes in question in arbitration proceedings between them. While this would result in a different regime from the ones intended by the relevant legislatures, there would be no difficulty with this in circumstances where it is plain that that is what the parties have agreed to do.
However, in a case such as the present, where Tesseract relies upon an implied conferral of authority upon the Arbitrator, I do not think this authority can be understood as permitting some partial application of a regime for proportionate liability. As essential features of both of the regimes under consideration in the present case are not amenable to application in arbitration proceedings, I consider that the question posed for consideration by this Court must be answered in the negative.
Conclusion
The question of law to be determined by this Court is:
Does Part 3 of [the Law Reform Act] and/or Part VIA of [the CCA] apply to this commercial arbitration proceeding conducted pursuant to the legislation and the [Commercial Arbitration Act]?
For the reasons given, I would answer this question:
No.
BLEBY JA: I agree with the reasons of Doyle JA.
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