Doak v GJ & BP Chard

1. [1]

   HER HONOUR: On 30 January 2015, William Doak filed a notice of motion seeking orders that the cross claim be dismissed pursuant to Rule 13.4 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”); that the cross claim be struck out pursuant to UCPR 14.28; and that the cross claim be stayed pursuant to s 67 of the Civil Procedure Act 2005 (NSW).

2. [2]

   The plaintiff is Margaret Doak. The first defendant is GJ Chard. The second defendant is BP Chard. The defendants have cross claimed against the cross defendant, William Charles Doak. Margaret Doak and William Doak are husband and wife. Likewise, GJ Chard and BP Chard are husband and wife. Margaret and William Doak are in partnership and reside at Box Moor, Bundarra, New South Wales. Without disrespect and for clarity, I shall refer to the cross defendant as William Doak, as the Chards are also in partnership, and to the Doaks’ partnership as “the Box Moor partnership”. I shall refer to the GJ and BP Chard partnership as “the Chard partnership”. However, where I reproduce some of the pleadings, I shall use the descriptors of the plaintiff, defendants, cross claimants and cross defendant.

3. [3]

   William Doak relied on two affidavits of his solicitor Andrew McQuilkin dated 30 January 2015 and 6 March 2015.

Summary judgment

1. [4]

   The test for summary judgment has a high threshold.

2. [5]

   UCPR 13.4(1) provides that the Court may dismiss proceedings generally, or in relation to any claim for relief, in three circumstances. These are, if the proceedings are frivolous or vexatious, or if no reasonable cause of action is disclosed or if the proceedings are an abuse of the process of the court.

3. [6]

   UCPR 14.28(1) provides that the Court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading firstly, discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, secondly, has a tendency to cause prejudice, embarrassment or delay in the proceedings, or thirdly, is otherwise an abuse of the process of the court.

4. [7]

   UCPR 14.28(2) provides that the court may receive evidence on the hearing of an application for an order under subrule (1).

5. [8]

   In O’Brien v Bank of Western Australia Ltd [2013] NSWCA 71 the Court of Appeal applied the High Court decision of Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118. In Spencer the High Court was concerned with s 31A(2) of the Federal Court Act 1976 (Cth), but at [3] Macfarlan JA stated that the following principles are of general application:

6. [9]

   Powers to summarily terminate proceedings must be exercised with exceptional caution (see Spencer at [55] per Hayne, Crennan, Kiefel and Bell JJ and also French CJ and Gummow J at [24]).

The pleading framework

1. [10]

   It is necessary to briefly set out the pleading framework. For the purposes of this application only, I accept the facts as those set out in the pleadings.

(A) The amended statement of claim

1. [11]

   On 27 March 2014, the Margaret Doak filed an amended statement of claim (“ASC”) against GJ Chard as first defendant and BP Chard as second defendant, seeking damages for serious personal injuries she suffered on 4 August 2010.

2. [12]

   The ASC pleads as follows.

3. [13]

   Margaret Doak resided with her husband, William Doak, at the property known as Box Moor [ASC 1]. Box Moor comprises of approximately 638 hectares and is owned by William Doak [ASC 2]. Box Moor is operated by the plaintiff in partnership with her husband as a working farm stocking Angus cattle, Merino sheep and fat lambs [ASC 3].

4. [14]

   The first and second defendants carried on, in common and with a view of profit, a business in partnership out of premises in Glenn Innes supplying and delivering hay to farms.

5. [15]

   On 1 November 2009, the plaintiff and her husband entered into a contract with the defendant for the supply and delivery of a load of wheaten hay (“the contract”) [ASC 5]. On that day, the defendants delivered a truckload of wheaten hay to Box Moor [ASC 6]. The bales were stacked in a shed at Box Moor [ASC 10]. GJ Chard unloaded the hay into a shed at Box Moor [ASC 9].

6. [16]

   The wheaten hay was in square bales. The bales were large, each bale being approximately 216cm in length, 116cm in width and 91cm in height and weighing approximately half a tonne [ASC 8]. The first defendant, using a tractor supplied by the plaintiff’s husband, unloaded the bales and stacked them in a shed [ASC 9].

7. [17]

   It was an implied terms of the contract that the defendants would exercise reasonable care in the delivery and in particular in the stacking of the wheaten hay in the shed at Box Moor [ASC 7] (the contract claim).

8. [18]

   The plaintiff also pleads that the first defendant owed her and her husband a duty of care to exercise reasonable care in the delivery and in particular the stacking of the bales in the shed at Box Moor [ASC 20] (the negligence claim). The plaintiff provides particulars of negligence. They are in relation to the contract claim.

9. [19]

   The liability of the second defendant (Mrs Chard), it is pleaded, arises from the [Chard] partnership. It is alleged that the first defendant and the second defendant had entered into a partnership and were a “firm” within the meaning of the Partnership Act 1892 (NSW) (ASC [35]).

10. [20]

    It is alleged that the first defendant was acting in the ordinary course of the business of the firm, or in the alternative, that the first defendant was acting with the authority of the second defendant.

11. [21]

    It is pleaded that the negligence of the first defendant was a wrongful act or omission within the meaning of s 10 of the Partnership Act. The plaintiff pleads that the second defendant is jointly and severally liable, to the same extent as the first defendant, for any loss or injury caused to the plaintiff by negligence of the first defendant (ASC [38] to [41]).

(B) The defence

1. [22]

   On 3 September 2014, the Chard partnership filed a defence to the ASC denying breaches of contract and negligence. It either asserts or admits that:

(C) The cross claim

1. [23]

   On 3 September 2014, the Chard partnership filed a cross claim against William Doak as the sole cross defendant. The Chard partnership seeks indemnity and contribution pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW).

2. [24]

   The cross claim pleads that:

3. [25]

   William Doak submitted that the cross claim brought against him should be dismissed for three reasons. They are firstly, because he and Margaret Doak were in a partnership, the Chard partnership cannot establish an entitlement to contribution; secondly, because the cross claim gives rise to a circuity of action and is an attempt by the Chard partnership to obtain a “double recovery” for contributory negligence attributed to the plaintiff; and finally, permitting the cross claim to proceed will result in unnecessary costs in relation to a potentially uninsured liability so as to cause distress and hardship. I shall deal with each of these issues in turn.

Partnership and entitlement to contribution

1. [26]

   In the cross claim the Chard partnership alleges that William Doak is a person who, if sued by Margaret Doak, would be liable within the meaning of s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act.

2. [27]

   Section 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act limits recovery in terms “any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is, or would if sued have been, liable in respect of the same damage.” Section 5(1)(c) further provides that no person shall recover contribution under the section from any person entitled to be indemnified by “that person in respect of the liability in respect of which the contribution is sought.”

3. [28]

   William Doak submitted that because he and Margaret Doak were in a partnership, the Chard partnership cannot establish an entitlement to contribution pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act because William Doak would not, if sued, be liable to Margaret Doak. However, the Chard partnership argued that their cross claim is concerned with the delictual duties owed personally by William Doak to Margaret Doak and is not based on or concerned with their partnership relationship.

4. [29]

   There are two ways by which William Doak could be liable to contribution, firstly, as an individual tortfeasor, as counsel for the Chard partnership termed it, “in relation to his delictual duties owed personally to Mrs Doak”; or secondly, by way of the operation the partnership. Whether or not William Doak will be found liable in relation to his delictual duties will only be ascertained once factual findings are made at trial.

5. [30]

   As to whether or not the Box Moor partnership is liable for the personal injuries suffered by Mrs Doak it is necessary to briefly refer to some of the relevant provisions of the Partnership Act.

The Partnership Act

1. [31]

   The relevant sections are 6, 9, 10 and 12. They read:

2. [32]

   I accept that pursuant to s 12(1) of the Partnership Act, every partner in a firm is liable jointly with the partner’s co-partners and also severally for everything for which the firm while the partners is a partner therein becomes liable. If at trial, there is a finding that the Box Moor partnership is liable to pay damages to Margaret Doak, the legal arguments made by William Doak will come into play.

The case law

1. [33]

   The case law on the topic of whether a partnership is liable for personal injuries suffered by a partner is scant. Both parties referred to the three authorities on this topic, but each party submitted that these authorities supported their case. The cases are Mair v Wood [1948] SC 83, Huston v Burns [1955] Tas SR 3 and Facchini v Facchini [2002] WADC 127.

Mair v Wood

1. [34]

   In Mair v Wood, a fishing venture was operated by a partnership. One of the partners removed the engine room floorboards from the vessel. Before the boards were replaced, another partner put his foot through the opening in the floor onto a revolving shaft and was injured. The injured partner brought an action against the partnership. In considering whether the action could be pursued against the partnership, Keith LJ considered the availability of actions between partners personally. At 93 Keith LJ held:

2. [35]

   Lord Keith concluded that the action could not proceed against the partnership (which, in Scots law had a separate legal identity), and it was dismissed (at 93). Importantly, there was no claim made against the negligent partner in his personal capacity.

Huston v Burns

1. [36]

   In Huston v Burns, Crisp J considered a claim by A against B and C. A, B and C were partners. A was injured by B’s negligent driving of a motor vehicle (of which C was the registered owner but not present when the accident occurred), while A and B were engaged in partnership business. B and C argued (as the cross-defendant does here) that they were not liable to A, as A had no cause of action against them as the accident occurred in the course of the partnership business. B and C contended that Mair v Wood supported their position. Crisp J considered the effect of Mair v Wood and held (at 9):

2. [37]

   Crisp J identified Mair v Wood as a case against the legal persona of the partnership, and that found that as a consequence it was not analogous to the case before him, in which the two defendants were sued personally. His Honour concluded that rather than supporting B’s (the driver’s) contention that the action could not proceed, Mair v Wood “destroyed it”. Crips J found (at 15) that B’s case suffered from the:

3. [38]

   Crisp J concluded that the fact that the wrongdoer was a partner of the plaintiff was “incidental and not the gist of the action”, and in those circumstances the wrongdoer (B) was personally liable to the plaintiff, even though the tortious conduct occurred during the conduct of partnership business.

Facchini v Facchini

1. [39]

   Facchini v Facchini, involved a summary judgment application like the situation here. The plaintiff was in partnership with the defendant owing and running as crayfishing vessel known as “Spellbound”. The defendant was the master skipper and the plaintiff was the deckhand. On 27 May 1996, the plaintiff had to gain access to the engine room and then return to deck. In order to return to the deck, the plaintiff had to climb up a ladder and pass through the hatch. The hatch was unsecured. It suddenly fell shut causing the plaintiff to let go of the edge, he slipped and fell onto his back on the engine room floor and thereby sustained personal injuries. The defendant denied liability and alleged contributory negligence. It was common ground that the plaintiff and defendant were in partnership.

2. [40]

   The plaintiff maintained that he was proceeding against the defendant as the actual tortfeasor and not against the partnership nor against the defendant in his capacity as a member of the partnership. The defendant disagreed and argued that the plaintiff’s cause of action against it was in the defendant’s capacity as a partner properly operating the partnership as a part of that business. The defendant did not accept the action was against him personally as the wrongdoer or tortfeasor. Further, the defendant’s position was that in all of the circumstances the partnership was not incidental to the plaintiff’s presence on the vessel at the time of the alleged injury.

3. [41]

   After referring to passages in Huston v Burns and Mair v Wood (quoted earlier in this judgment) his Honour concluded at [16], [17] and [18]:

4. [42]

   The result is that his Honour declined to make the strike out order and permitted the action to go to trial.

Submissions

1. [43]

   Counsel for William Doak submitted that the partnership relationship cannot be said to be incidental to the alleged conduct because the relevant conduct was undertaken “as a partner”. Here, like in Huston v Burns, it is arguable that the partnership relationship is merely the incident or occasion for the injury – i.e. the circumstance in which it occurred. The partnership relationship itself is not the “substance of the suit” nor “the gist of the action”. It is arguable that the Chard partnership’s cross claim proceeds against William Doak in his capacity as the actual tortfeasor, not because his conduct was undertaken as a partner. As previously stated, whether liability, if any, arises against William Doak either personally or as a partner depends on the findings as to the facts and circumstances in relation to liability. The cross claim should not be struck out or dismissed on this basis.

Circuity of action

1. [44]

   William Doak submitted that if the cross claim was allowed to proceed, there would be a circuity of action. His submission was that the circuity arises in two ways:

2. [45]

   In Eastern Extension, A/asia & China Telegraph Co Ltd v Federal Commissioner of Taxation (1923) 33 CLR 426 at 441, Isaacs and Rich JJ described the circuity of action principle as follows:

3. [46]

   In Idameneo (No 123) Pty Ltd v Gross (2012) 83 NSWLR 643 at [159], Hoeben JA adopted the criteria for the application of the principle set out by Young J (as his honour then was) in McCamley v Harris (1997) 8 BPR 15,683, where Young J held:

4. [47]

   William Doak submitted that in light of the structure of the proceedings, there is no real issue to be tried, of fact or law, in relation to of the allegations of contributory negligence. The thrust of William Doak’s submissions were that the cross claim is an attempt to obtain a “double recovery” for contributory negligence attributed to Margaret Doak.

5. [48]

   The Chard partnership submitted that the double recovery argument is infected by the false premise that the cross claim is a claim against the partnership and that once that premise is removed, the primary basis on which William Doak asserts circuity of action, i.e. that any amount awarded on the cross claim would be recoverable against Margaret Doak, as she is liable as partner for William Doak’s negligence, falls away.

6. [49]

   William Doak also says that has an immunity from contribution as he is “entitled to be indemnified” even where the indemnity is not fully and immediately enforceable when the relevant event occurs. In response, the Chard partnership argued that William Doak’s proposition, that he would be entitled to indemnity from the partnership, and thus Margaret Doak, for any amounts that he may be ordered to pay on the cross claim, is doubtful. Counsel for the Chard partnership referred to Mair v Wood where it was concluded that a partner has no claim against the partnership (as opposed to the negligent partner personally) for injuries suffered as a consequence of a negligent act of another partner in the course of conducting partnership business. In these circumstances, the Chard partnership submitted firstly, that there would appear to be no proper basis for the tortfeasor to claim indemnity from the partnership for any amount it is ordered to pay to the injured partner as a consequence of his or her wrongdoing; and secondly, that even if such an indemnity were available, the first limb of Young J’s criteria for the application of the circuity set out in McCamley v Harris, i.e. that two parties to the proceedings be liable to each other for “precisely the same amount of damages” can never been satisfied because there is simply no circumstance in which such a circumstance might arise.

7. [50]

   Whether there is any deduction for contributory negligence depends on the facts be ascertained at trial. But in the event there is a deduction made for contributory negligence, counsel for the Chard partnership submitted that there is no principled reason why a defendant is not entitled to avail itself of the defence of contributory negligence vis-a-vis the plaintiff, and seek contribution or indemnity from a cross-defendant. It is my view that there is no “double recovery”, because it is arguable that the defence and the cross-claim are concerned with the personal conduct of Margaret Doak on the one hand, and of William Doak on the other.

8. [51]

   Overall, William Doak submitted that the statement of cross claim discloses no reasonable cause of action or other case appropriate to the nature of the pleading, has a tendency to cause prejudice and embarrassment in the proceedings or is otherwise an abuse of the process of the Court or is untenable in the known or admitted circumstances. In response, the Chard partnership submitted that William Doak has not advanced any additional basis on which the cross-claim should be struck out pursuant to UCPR 14.28, other than the matters referred to in his argument for summary dismissal.

9. [52]

   For reasons given earlier, it is my view that it is arguable that the liability of William Doak is a personal one. As in Huston v Burns, it is arguable that the partnership relationship is merely the incident or occasion for the injury – i.e. the circumstance in which it occurred. The partnership relationship itself is not the “substance of the suit” nor “the gist of the action”. Whether the liability of William Doak (if any) arises from the partnership’s actions or his individual actions can only be determined at trial. It is only if a finding is made that his liability arises from the Box Moor partnership’s acts or omissions that these arguments of William Doak will come into play. The cross claim should not be struck out or summarily dismissed on these grounds.

Hardship

1. [53]

   Overall, William Doak submitted that permitting the cross claim to proceed will result in unnecessary costs in relation to a potentially uninsured liability so as to cause distress and hardship.

2. [54]

   William Doak says that he and Margaret Doak were insured for legal liability under a rural plan, but that the policy did not insure William Doak against the liability of a partner to another partner where the partnership is an insured under the policy. William Doak and Margaret Doak have a Farm Liability policy in place with Wesfarmers General Insurance Limited trading as WFI for the periods covering 30 December 2008 to 30 December 2009 and 30 December 2009 to 30 December 2010 respectively.

3. [55]

   In the policy under the heading “What is not Insured”, at clause 11 “Partnership” is defined as “of a partner to another partner where the partnership is an insured under this policy.” I accept that in these circumstances, this policy may not respond, but whether this is so may be subject to further legal argument at trial.

4. [56]

   William Doak further submitted that the claim for contribution against him amounts to an attempt to recover damages/indemnity/contribution from Margaret Doak, and that a failure to grant a dismissal or stay of the cross claim would work an injustice to he and Margaret Doak because of duplication of proceedings and unnecessarily incurred costs with no net advantage to the Chard partnership. I have already addressed the indemnity and contribution arguments earlier in this judgment. I do not think that there will be a duplication of proceedings and costs unnecessarily incurred with no net advantage to the Chard partnership. This is because the liability, if any, on William Doak’s part arises from the same facts and circumstances. They will be elicited at the one trial.

5. [57]

   The Chard partnership submitted that firstly, William Doak cited no authority in support of his submission, because no authority exists; secondly, the existence or not of insurance is irrelevant to whether or not proceedings may be brought, maintained and defended and as to the determination of disputes between parties: Lister v Romford Ice and Cold Storage Co [1957] 1 All ER 125; [1957] AC 555 at 576-7, Davie v New Merton Board Mills Ltd [1959] 1 All 346; [1959] AC 604 at 627; and finally, that notions of hardship have absolutely no relevance to the question of whether the relief sought in the notice of motion ought to be granted.

6. [58]

   I take into account that the insurance policy may not respond if William Doak is found liable arising from his actions as a partner and he will suffer hardship and distress, but these reasons are not sufficient to justify the cross claim being struck out or dismissed.

Stay of the cross claim

1. [59]

   Section 67 of the Civil Procedure Act reads:

2. [60]

   Section 67 gives the Court a wide discretion to grant a stay of proceedings. In New South Wales v Plaintiff A [2012] NSWCA 248, Basten JA (Beazley JA and Hoeben JA agreeing) held at [15] that:

3. [61]

   Counsel for the Chard partnership submitted that William Doak does not advance any particular reason why, if summary dismissal or a strike out or both were refused, a stay should be granted. I take into account the reasons may be hardship, expense and duress. In my view, these reasons are not, in the exercise of my discretion, sufficient to grant a stay of the cross claim

4. [62]

   The result is that the notice of motion filed 30 January 205 is dismissed.

5. [63]

   Costs are discretionary. Costs usually follow the event. The cross defendant is to pay the cross claimants’ costs as agreed or assessed on an ordinary basis.