Landpower Australia Pty Ltd v Penske Power Systems Pty Ltd

1. [1]

   BELL P:

Introduction

1. [2]

   This is an application for leave to appeal from a decision of Gibson DCJ in which her Honour ordered that a first cross-claim/amended statement of cross-claim filed on 10 August 2018 (the Amended Cross-Claim) be struck out and dismissed with costs.

2. [3]

   The application raises important questions in relation to the circumstances in which a defendant who raises a proportionate liability defence within the meaning of s 87CB of the Competition and Consumer Act 2010 (Cth) (CCA) and s 35(1) of the Civil Liability Act 2002 (NSW) (CLA) and names concurrent wrongdoers may still bring cross-claims against such wrongdoers. The importance of this question, and the fact that it is still being litigated more than 15 years after the introduction of the legislative regimes giving effect to proportionate liability, warrant the grant of leave to appeal.

Background and pleadings

1. [4]

   The applicant, Landpower Australia Pty Ltd (Landpower), is the sole defendant in proceedings brought in the District Court of New South Wales by Lindsay Kenith Northcott and Faith Lorna Northcott in which the Northcotts, as plaintiffs, seek damages in contract, negligence and arising pursuant to the Trade Practices Act 1974 (Cth) (TPA) and the CCA, Sch 2 – Australian Consumer Law (ACL). The various causes of action relate to the performance of a combine harvester used by the Northcotts in their agricultural cropping business and, in particular, the adequacy of the investigation into a failure of the engine in the harvester on or about 6 November 2010 and the subsequent replacement of its engine.

2. [5]

   The essence of the Northcotts’ complaint, as set out in paragraph 18 of the second further amended statement of claim (SFASOC) is that, unbeknownst to them for almost 6 years following 18 November 2010, whilst a replacement engine was installed into the harvester, the Engine Control Unit (ECU) in the harvester was not reprogrammed with the result that the ECU could not properly control the engine and in particular its performance such that the harvester performed at materially lower levels of power and torque than it was designed to achieve.

3. [6]

   Paragraph 18H of the SFASOC provides as follows:

4. [7]

   Landpower denied the allegations in, inter alia, paragraphs 18 and 18H of its Defence to the SFASOC. Further, by paragraph 32 of that Defence, Landpower pleaded that the Northcotts’ claims were apportionable claims within the meaning of s 87CB of the CCA and the TPA and s 35(1) of the CLA.

5. [8]

   The Defence went on to plead, in paragraph 33, that Claas Global Sales GmbH (Claas), CJ & LH Wiesner Pty Ltd (Wiesner), Daimler AG/Mercedes Benz and Penske were concurrent wrongdoers within the meaning of s 87CD(1) of the CCA and the TPA and s 35(1) of the CLA. None of these entities were defendants in the proceedings, and that remains the case.

6. [9]

   The particulars to paragraph 33 of the Defence included the following:

7. [10]

   The final particular, particular (q), was to the following effect:

8. [11]

   Paragraph 34 of the Defence pleaded that Landpower’s liability, if any (and which was denied), was limited to an amount reflecting that proportion of the loss and damage claimed that the Court considered just having regard to the extent of its responsibility for the loss and damage (if any).

9. [12]

   By its Reply filed on 24 August 2018, the Northcotts denied the allegations contained in paragraphs 32 and 33 of the Defence and said that their claim was not an apportionable claim within the meaning of s 87CB of the CCA and the TPA and s 35(1) of the CLA and that none of Claas, Wiesner, Daimler AG/Mercedes Benz and Penske were concurrent wrongdoers within the meaning of that legislation.

10. [13]

    Landpower brought a cross-claim against Penske, an amended version of which was filed on 10 August 2018. This was the Amended Cross-Claim which was before the primary judge. None of the other parties that had been referred to by Landpower in paragraph 33 of the Defence to the SFASOC as concurrent wrongdoers were joined as cross-defendants. The Amended Cross-Claim took a conventional form insofar as it referred to and repeated, without admission, the allegations made in paragraphs 1-23 of the SFASOC and then pleaded out various work undertaken by Penske pursuant to an alleged contract with Landpower in relation to the combine harvester and its engine.

11. [14]

    The Amended Cross-Claim alleged that Penske entered into an agreement with Landpower to undertake work which was defined as Penske Engine Work and owed Landpower a duty to do various things and to warn Landpower of certain matters. In paragraph 14 of the Amended Cross-Claim, Landpower pleaded that:

12. [15]

    The “Alleged Failures” referred to the allegations made against Landpower by the Northcotts in the SFASOC.

13. [16]

    Paragraph 15 of the Amended Cross-Claim pleaded that:

14. [17]

    Paragraphs 17-19 of the Amended Cross-Claim were to the effect that if, as alleged in the SFASOC, the Northcotts had suffered loss or damage, then Landpower was entitled to contribution or indemnity from Penske, claiming this relief pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (LRMPA).

15. [18]

    The Amended Cross-Claim also included claims alleging misleading and deceptive conduct and negligent misrepresentation based upon a series of representations alleged to have been made by Penske to Landpower. The misleading or deceptive conduct was alleged to have been in contravention of s 52 of the TPA and/or s 18 of the ACL.

16. [19]

    The same loss and damage claimed by Landpower was said to have been occasioned by the alleged breach of contract, negligence, misleading or deceptive conduct and/or negligent misrepresentations of Penske. The particulars of that loss and damage as set out in paragraph 16 of the Amended Cross-Claim (and repeated in paragraphs 27, 33, 39, 45 and 51) were as follows:

17. [20]

    Penske filed a notice of motion on 3 September 2018 seeking orders pursuant to r 13.4 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) that the Amended Cross-Claim be dismissed and, in the alternative, an order pursuant to r 14.28 of the UCPR that the Amended Cross-Claim be struck out.

18. [21]

    Landpower conceded in the District Court that the contribution sought pursuant to s 5 of the LRMPA, set out in paragraphs 17-19 of the Amended Cross-Claim, was bound to be dismissed. As shall be seen below, that was consistent with authority and was a concession properly made. Landpower did not, however, concede that its claims based upon freestanding causes of action against Penske for breach of contract, in negligence and for contravention of the TPA and ACL stood to be dismissed.

19. [22]

    By the time the application came on for hearing, notwithstanding having denied in its Reply that its various claims against Landpower in the SFASOC were apportionable, Dr Peden, who appeared for the Northcotts at the hearing of the notice of motion before Gibson DCJ (the matter having been simultaneously listed for directions), accepted that the claims were relevantly apportionable claims. No similar concession was made with regard to the Northcotts’ denial in their Reply that Claas, Wiesner, Daimler AG/Mercedes Benz and Penske were all concurrent wrongdoers. Parenthetically it may be noted that it will scarcely be in a plaintiff’s interest to concede that there are concurrent wrongdoers, at least in circumstances where, for whatever reason or reasons, the plaintiff has not sued nominated concurrent wrongdoers directly.

The judgment

1. [23]

   The application for summary dismissal of the Amended Cross-Claim was evidently heard in a busy duty list, and the judgment was delivered ex tempore.

2. [24]

   In her reasons, the primary judge recorded that:

3. [25]

   Her Honour also referred to the decision of Ball J in Sanderson Motors Pty Ltd v Lindsay Bennelong Developments Pty Ltd [2014] NSWSC 846, and in particular the series of observations made by his Honour at [31]ff of that decision. Although not reproduced in the primary judge’s reasons, it is convenient to set out at this point in the judgment the key aspects of Ball J’s analysis:

4. [26]

   Ball J also noted the decision of McDougall J in Dymocks Book Arcade Pty Ltd v Capral Ltd [2010] NSWSC 195 (Dymocks) dealing with claims for contribution pursuant to s 5 of the LRMPA against concurrent wrongdoers, and which is considered in further detail below, given the significance that that decision played in the primary judge’s reasons. In respect of that decision, Ball J noted that:

5. [27]

   In the present case, the primary judge stated that she was unaware of any previous case where the proposed cross-defendant had not also been joined by the plaintiff as a defendant in the proceedings. Although that may be the normal position, the present case was not unique, as will be seen later in these reasons.

6. [28]

   The primary judge went on to state that the real issue in the case was whether or not there was a “direct cause of action between the defendant and the cross-claimant”. (Her Honour presumably meant between the defendant (which was the cross-claimant) and the cross-defendant). The primary judge then said, somewhat elliptically, that “the issue of concurrent wrongdoers is one which amounts to an absolving of liability for the defendant and unless some original cause of action can be identified with precision, the cross-claim must be struck out.” She went on to express the opinion that “the cross-claim does not disclose a bona fide cause of action” and that, whilst noting the caution that must be exercised on a summary dismissal application, said that:

7. [29]

   It is not, with respect to the primary judge, particularly easy to follow the judgment and what her Honour meant by various statements that I have set out above. As already noted, it was delivered ex tempore, apparently in the course of a busy duty list.

8. [30]

   Before the Court of Appeal, Ms Horvath, who appeared for Penske, sought to interpret the decision as one which went to the form of the pleading and its (the pleading’s) lack of precision, rather than as turning on any matter of principle. I do not think that this is a proper reading of the judgment and, if it was, as Mr Cheshire SC, who appeared for Landpower, submitted, the judgment would be deficient as lacking a sufficient reasoning process in relation to any pleading deficiencies. None were specifically identified or discussed and it does not seem to me that the form of the Amended Cross-Claim was defective. Nor, in fairness to the primary judge, do I think that it so appeared to her Honour.

9. [31]

   The primary judge’s reference to the decision in Dymocks in the passage I have extracted at [28] above makes it sufficiently clear that she dismissed the proceedings by reference to matters going beyond the mere form of the Amended Cross-Claim. In order properly to understand her Honour’s reasons, it is necessary to consider the judgment of McDougall J in Dymocks to which she referred in the key part of her reasoning.

Dymocks Book Arcade Pty Ltd v Capral Ltd

1. [32]

   This case involved a claim by Dymocks, as plaintiff, in respect of damage said to have been caused by water penetration through a metal roof of a building which it owned. Dymocks had relevantly sued an architect who had given it advice in relation to the roof of the building and its affixing to underlying steel rafters. The architect, in turn, filed a cross-claim which sought relief against a number of parties for contribution or indemnity pursuant to the LRMPA in respect of any amount that it might be ordered to pay to the plaintiff. One of the cross-defendants was an engineer which had given advice to the architect as to the suitability of certain roofing screws for the affixing of the roof to the rafters.

2. [33]

   The engineer contended that the plaintiff’s claim against the architect was an apportionable claim and said that the claim against it for contribution could not be maintained and must be summarily dismissed. The architect, similarly, had said in its response to Dymocks’ commercial list statement that Dymocks’ claim was apportionable, and had nominated, inter alia, the engineer as concurrent wrongdoer.

3. [34]

   The engineer based its claim for summary dismissal on s 36 of the CLA which relevantly provides that a defendant against whom judgment is given as a concurrent wrongdoer in relation to an apportionable claim cannot be required to contribute to any damages recovered from another wrongdoer in respect of the same apportionable claim, or to indemnify any such wrongdoer.

4. [35]

   In his reasons for judgment, McDougall J said as follows:

5. [36]

   As already noted at [21] above, Landpower conceded that that aspect of its Amended Cross-Claim which sought contribution or indemnity from Penske was bound to fail in accordance with Dymocks. Dymocks, however, does not stand for any broader proposition than that a cross-claim for contribution or indemnity pursuant to s 5 of the LRMPA on the basis that the cross-defendant is liable as a concurrent wrongdoer will be liable to summary dismissal for the reasons given by McDougall J. Such a claim is, effectively, redundant as the cross-claimant will not be liable for any greater damage than represents its own share of responsibility for the loss.

6. [37]

   Dymocks did not provide a basis for disposing of any issues in the present case beyond Landpower’s claim for contribution pursuant to s 5 of the LRMPA. In particular, it does not stand for any general proposition that cross-claims are not or are never permitted where there is said to be an apportionable claim. The statement by McDougall J in Dymocks at [8] that “[t]he purpose of s 36 is to bar cross-claims” did not mean that a defendant sued on what is claimed to be an apportionable claim may not ever cross-claim against a party if either the plaintiff or the defendant has nominated that entity as a concurrent wrongdoer.

7. [38]

   To the extent that the primary judge considered that the reasoning in Dymocks dictated that the Amended Cross-Claim should be dismissed, her Honour erred.

Further consideration

1. [39]

   In Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613; [2013] HCA 10 at [16], French CJ, Hayne and Kiefel JJ said:

2. [40]

   Section 34(2) of the CLA defines “concurrent wrongdoer”, in relation to a claim, as “a person who is one of two 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”. “Apportionable claim” is defined in s 34(1) as:

3. [41]

   Just because a defendant names other parties as concurrent wrongdoers (and, as Ball J pointed out in Sanderson, it will generally be a defendant rather than a plaintiff who does this), it does not follow that a plaintiff or, ultimately, the court will accept this characterisation. That may be, for example, because the court does not ultimately accept that one or more of the parties nominated as concurrent wrongdoers owed any duty of care to a plaintiff or was otherwise under any liability to the plaintiff or caused the damage or loss that is the subject of the claim.

4. [42]

   This is a matter that does not fall to be determined simply on the pleadings. But rather the question whether or not a claim is “apportionable” will generally involve a characterisation of a claim based on the evidence before the court: Reinhold v New South Wales Lotteries Corporation (No 2) (2008) 82 NSWLR 762; [2008] NSWSC 187 at [25]-[27]. Whether or not a person or entity is a concurrent wrongdoer is not usually capable of being determined on the pleadings and may be far from straightforward where, for example, a novel duty of care is alleged or a multifactorial analysis of the kind referred to by Allsop P (as he then was) in Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649; [2009] NSWCA 258 is required.

5. [43]

   Where factual inquiries of this character are potentially in play, summary dismissal of the kind that occurred in the present case is quite inappropriate: cf Spellson v George (1992) 26 NSWLR 666. In Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 at [57], the plurality said:

6. [44]

   In Dey v Victorian Railways Commissioner (1949) 78 CLR 62 at 91; [1949] HCA 1, Dixon J said that “once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process”. It might be noted that the language of “frivolous” and “vexatious” and “abuse of process” survives in r 13.4 of the UCPR pursuant to which Penske moved for dismissal of the Amended Cross-Claim in the present case.

7. [45]

   Legal and factual questions relating to a party’s status as a wrongdoer for the purposes of the definition of “concurrent wrongdoer” and to questions of causation of loss for the purposes of that definition and also for the purposes of assessing whether or not the claim for economic loss or damage arises from a failure to take care for the purposes of the definition of “apportionable claim” will frequently, if not invariably, need to go to trial. As Middleton J observed with regard to apportionable claims in Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd (2007) 164 FCR 450; [2007] FCA 1216 at [31]:

8. [46]

   By way of contrast, the reasons why cross-claims for contribution pursuant to s 5 of the LRMPA may be and frequently are dealt with summarily is that such claims are predicated on effectively the same criteria as determine proportionate liability, as McDougall J pointed out in Dymocks.

9. [47]

   If the nominated concurrent wrongdoer is not in fact found to have that character, namely of a concurrent wrongdoer, because, for example, he, she or it owed no duty to the plaintiff or did not cause or contribute to the cause of the plaintiff’s loss but the nominated wrongdoer did owe a relevant duty to the defendant and breached it or was otherwise under a liability to the defendant, the defendant will be entitled to cross-claim to recover damages from that party in the event that the breach or contravening conduct is found to have caused loss or damage to the defendant/cross-claimant. In some cases, that damage may be represented by a liability the defendant/cross-claimant has to the plaintiff. Implicit support for this conclusion may be derived from the judgment of Campbell JA in Rennie Golledge Pty Ltd v Ballard (2012) 82 NSWLR 231; [2012] NSWCA 376 at [151] who spoke in terms of a putative cross-claimant with “rights of any substance against any alleged concurrent wrongdoer”. The proportionate liability regimes in both State and federal legislation were not designed to emasculate such independent substantive rights.

10. [48]

    Another example of a case where a defendant may bring a cross-claim against an alleged concurrent wrongdoer is where the cross-claim is founded on a contract which may give rise to an express right to damages or indemnity. Perpetual Trustee Company Ltd v CTC Group Pty Ltd (No 2) [2013] NSWCA 58 (Perpetual) was such a case although, as Macfarlan JA explained at [11], the availability of such a claim was driven by s 3A(2) of the CLA which provides:

11. [49]

    Cross-claims for declaratory relief against named concurrent wrongdoers who are not joined as defendants by a plaintiff have also been permitted: see, for example, Fudlovski v JGC Accounting & Financial Services Pty Ltd (No 3) [2013] WASC 476; Lion‐Dairy & Drinks Pty Ltd v Sinclair Knight Merz Pty Ltd (No 3) [2014] FCA 386; cf. Rivercity Motorway Finance Pty Ltd (Administrators Appointed) (Received and Managers Appointed) v AECOM Australia Pty Ltd (No 2) [2014] FCA 713. In the Lion-Dairy case, it should also be noted that a cross-claim based upon a direct claim in negligence against one of the nominated concurrent wrongdoers was not opposed: see at [13].

12. [50]

    One possible way of viewing and seeking to understand the primary judge’s decision and, in particular, her statement that “the cross-claim does not disclose a bona fide cause of action”, is that her Honour may have assumed that the claim was apportionable and that Penske was a concurrent wrongdoer because Landpower had pleaded as much in its Defence and the Northcotts had accepted, at least by the time the notice of motion was heard, that the claim was apportionable. In my opinion, a defendant who in its defence nominates a party as a concurrent wrongdoer is not by reason of that fact alone precluded from bringing a cross-claim against such an entity based upon an independent cause of action it has against that entity.

13. [51]

    Such a claim may be warranted by way of what is, in effect, an alternative plea against the possibility that the cross-defendant is not found to be a concurrent wrongdoer and/or the plaintiff’s claim is not held to be apportionable. So long as the cross-claim is brought bona fide and is not demurrable, the fact that it may not ultimately succeed (wholly or in part) in the event that the cross-defendant is ultimately held on the evidence at the trial to be a concurrent wrongdoer whose want of reasonable care has contributed to the plaintiff’s loss, does not mean that the cross-claim should be summarily dismissed. The cross-claimant will be at risk of costs in this eventuality but that is a matter for it.

14. [52]

    It would be highly undesirable for a defendant who has raised but failed to establish that a particular entity was a concurrent wrongdoer should have to wait until after a case had been determined to bring separate proceedings against that entity under an independent cause of action it had. That course would be contrary to s 63 of the Supreme Court Act 1970 (NSW) which provides that:

15. [53]

    It may also be highly prejudicial to the defendant, both in terms of cost and the potential running of any limitation periods. In Perpetual, Macfarlan JA contemplated a defendant bringing a cross-claim against a nominated concurrent wrongdoer to guard against the possibility that the court might hold that the apportionment provisions of the CLA were inapplicable.

16. [54]

    In my opinion, the Amended Cross-Claim in the current case should not have been dismissed or struck out.

Orders

1. [55]

   I would make the following orders:

   1. (1)

      Leave to appeal granted.

   2. (2)

      Appeal allowed with costs.

   3. (3)

      Set aside the orders of Gibson DCJ dismissing the Amended Cross-Claim.

   4. (4)

      Order that Penske pay Landpower’s costs of the notice of motion in the District Court.

   5. (5)

      Order that Landpower pay the costs (if any) thrown away by the amendment.

2. [56]

   MACFARLAN JA: I agree with Bell P.

3. [57]

   PAYNE JA: I agree with Bell P.