Concurrent and Proportionate Liability. Patrick O Shea SC and Sue Brown

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1 Concurrent and Proportionate Liability Patrick O Shea SC and Sue Brown 1. There have in the last 5 years or so been wide ranging statutory changes to the law affecting concurrent and proportionate liability. We wish to identify those changes, and then point to some practical consequences. We do not refer in this paper to the changes which have affected only claims for damages for personal injury. 2. We had thought that we would be outlining to you the principles that have been adopted by the Courts in interpreting the new statutory provisions in the Trade Practices Act 1974 (Cth) 1 ( TPA ), the Civil Liability Act 2003 (Qld) 2 ( CLA ) and the Professional Standards Act 2004 (Qld). 3 Surprisingly, or perhaps not so surprisingly, it appears that none of the proportionate liability provisions have been the subject of reasons for judgment, or at least our searches have not been able to identify any. So this paper is to serve as a practical guide rather than a detailed analysis of the changes which have been the subject of previous learned writings by other members of the Bar The changes can be illustrated by reference to a (somewhat) typical claim for economic loss resulting from professional negligence. Valuers as a group have had more than their fair share of attention from the High Court over the last 10 years or so, so we will refer in particular to them. We will take the example of the incorporated firm of valuers retained by a lender to provide a valuation of land. The lender relies on the valuation to advance money on the security of the land. The valuation is wildly optimistic: the valuer gets it totally wrong. In preparing the valuation, the valuer relies on an opinion concerning title to the land given by a solicitor Section 82(1B) and ss.87cb 87CG became effective as at 26 July There are also related provisions in Corporations Act 2001 (Cth) and Australian Securities and Investments Commission Act. Section 4(3) of the CLA provides that Chapter 2, Part 2 of the CLA applies to a breach happening on or after the commencement of s.4(3). It commenced on 11 March Commenced on 1 July 2005, but there do not appear to have been any schemes approved to date.

2 2 (d) (e) The lender has retained the solicitor. Both the lender and the valuer rely on that opinion concerning title to the land given by the solicitor, who fails to pick up an easement which is registered on the title. The easement means that the use of the land, and consequently its value, is severely limited. Like all matters where things go wrong, everything goes wrong with this loan. The lender does not lend more than 80% of valuation. Unfortunately, the lender divides the valuation by 0.8 to arrive at the maximum loan, rather than multiplying by 0.8. The borrower can t believe his luck. He raises heaps of money on the security of his land to invest in this fabulous Westpoint development that his financial adviser has told him about. Whoops. He goes broke. The lender takes a pasting when it sells the land. 4. The lender seeks your advice. Who can the lender sue? What money can the lender recover? 5. Ten years ago, the advice would have been along the following lines: (d) The lender could sue the valuers for breach of contract, for breach of the implied term that the valuers would exercise that degree of care and skill which would be exercised by a reasonably competent valuer. The lender could sue the solicitor for breach of contract, for breach of the implied term that the solicitor would exercise that degree of care and skill which would be exercised by a reasonably competent solicitor. The lender could sue the valuers in tort, for negligence: a departure from the standard of care of the reasonably competent valuer. The lender could sue the solicitor in tort, for negligence: a departure from the standard of care of the reasonably competent solicitor. 4 See for example McKenna SC, The Proportionate Liability Reforms (2004, CPD 20); Applegarth SC, Causation, Contributory Negligence and Contribution under the Trade Practices Act (2004, CPD 20) in relation to the changes in the Federal sphere.

3 3 (e) (f) (g) (h) The lender could sue the valuers under s.82 of the TPA, because the lender had suffered loss by conduct of the valuer done in contravention of s.52 of that Act: the expression of an opinion by a professional usually carries the implied representation that the opinion is actually held, and there is a reasonable basis for it (or that it is the product of the application of professional expertise). 5 The lender may be able to sue the solicitor under s.82 of the TPA, on the same basis. 6 The lender could sue the valuers, in a similar fashion, under s.99 of the Fair Trading Act 1989 (FTA), relying on a contravention of s The lender could sue the solicitor, in a similar fashion, under s.99 of the FTA, relying on a contravention of s What loss could be recovered from whom? 7. In tort: The conduct of each of the tortfeasors was a cause of the loss. 8 Both could be sued for the whole of the loss. Contribution among the tortfeasors would be available pursuant to s.10 of the Law Reform Act A tortfeasor could recover contribution from another tortfeasor who was, or would, if sued, have been found liable for the same damage whether as a joint tortfeasor or otherwise. This did not in any way reduce the liability of the defendant to the plaintiff. The tortfeasors could raise contributory negligence to reduce their liability. The failure of the lender to take reasonable care of its own interests can be See for example the reasons of Lindgren J at first instance in MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313 at 355. Even thought the solicitor is not a corporation, the lender may be able to take advantage of s.6(3) of the TPA. This would often be open. The lender must establish that the loss is suffered by a consumer (s.99(4)). As to this, s.6 of the Act provides that there must be a contract, which there is here. The price of the services must be less than $40,000 (s.6(2)), which will usually be the case. March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 the same test for causation was used in the context of claims for damages pursuant to s.82 of the TPA.

4 4 8. In contract: taken into account to reduce the loss which the lender is entitled to recover, the relevant statutory provision being: 9 Where any person suffers damage as the result partly of the person s own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the court thinks just and equitable having regard to the claimant s share in the responsibility for the damage. The conduct of each of the valuers and the solicitor was a cause of the loss. Both could be sued for the whole of the loss. The question of contribution among the valuers and the solicitor would arguably be available on the basis that they would arguably be liable for the same damages as tortfeasors or would if sued have been so liable. Whether the valuers and the solicitors could raise contributory negligence was a debateable question. That question was resolved in the following way: (i) The decision of the High Court in Astley v Austrust Ltd 10 was to the effect that contributory negligence could not be raised in response to a claim for breach of contract. (ii) However, the Queensland Parliament subsequently passed legislation 11 which in effect reversed the effect of that decision, by providing that contributory negligence is available to a defendant when the loss results from an act or omission that amounts to a breach of a contractual duty of care that is concurrent and coextensive with a duty of care in tort. 12 Note that the transitional provisions 13 provided that the amendments Section 10(1) of the Law Reform Act 1995, in its form prior to the amendment made by the Law Reform (Contributory Negligence) Amendment Act At that time fault was defined in s. 5 to mean negligence, breach of statutory duty, or other act or omission which gives rise to a liability in tort or would, apart from this part, give rise to the defence of contributory negligence. (1999) 197 CLR 1. Law Reform (Contributory Negligence) Amendment Act See the definition of wrong in s 5 of the Law Reform Act 1995, as amended by the Law Reform (Contributory Negligence) Amendment Act Now contained in s 21 of the Law Reform Act 1995.

5 5 made by that legislation did not apply when legal proceedings had been started, and not finalised, before the date of commencement of the amendments, which was 7 August Under the TPA and the FTA: Probably, the conduct of each of the valuers and the solicitor was a cause of the loss. Both could be sued for the whole of the loss. Probably, there was no contribution among the valuers and the solicitor. Probably, the valuers and the solicitors could not raise contributory negligence. 10. How would that advice fare today? We set out firstly some provisions of the CLA. Section 28 provides: (1) This part applies to either or both of the following claims (apportionable claim)- a claim for economic loss or damage to property in an action for damages arising from a breach of a duty of care; a claim for economic loss or damage to property in an action for damages under the Fair Trading Act 1989 for a contravention of section 38 of that Act. (2) For this part, if more than 1 claim of a kind mentioned in subsection (1) or (1) or both provisions is based on the same loss or damage, the claims must be treated as a single apportionable claim. (3) This part does not apply to a claim- arising out of personal injury; or by a consumer. (4) Also, this part does not apply to a claim to the extent that an Act provides that liability for an amount payable in relation to the claim is joint and several. (5) A provision of this part that gives protection from civil liability does not limit or otherwise affect any protection from liability given by any other provision of this Act or by another Act or law.

6 6 11. The phrase duty of care is defined 14 to mean a duty to take reasonable care or to exercise reasonable skill (or both duties). The word duty is defined to mean: a duty of care in tort; or a duty of care under contract that is concurrent and coextensive with a duty of care in tort; or another duty under statute or otherwise that is concurrent with a duty of care mentioned in paragraph or. 12. The primary provision of interest is s.31(1) of the CLA which provides: In any proceeding involving an apportionable claim the liability of a defendant who is a concurrent wrongdoer in relation to the claim is limited to an amount reflecting that proportion of the loss or damage claimed that the court considers just and equitable having regard to the extent of the defendant s responsibility for the loss or damage; and judgment must not be given against the defendant for more than that amount in relation to the claim. 13. The advice today, so far as tort is concerned, would be along the following lines: The lender can only sue each tortfeasor for their proportionate liability. These provisions of the CLA came into effect on 1 March The CLA applies to tort and to concurrent contractual duties: see the definitions in the CLA set out above. The limitation to proportionate liability is in s.31 of the CLA. As to contribution among the tortfeasors, if the claims are apportionable claims, contribution is no longer available against a concurrent wrongdoer: s.32a of the CLA. The tortfeasors could raise contributory negligence to reduce their liability and 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: s.32g of the CLA. The relevant law, as discussed above, remains s.10 of the Law Reform Act What is the position today in contract?

7 7 Because this is a concurrent contractual duty, the solicitor and the valuer are concurrent wrongdoers and the claim is an apportionable claim pursuant to s.31 of the CLA. The lender can only sue each of them for their proportionate liability. Contribution is no longer available insofar as the claims are apportionable claims: s.32a of the CLA. Whether the valuers and the solicitors could raise contributory negligence depends on the considerations referred to above: s.32g of the CLA and s.10 of the Law Reform Act There is no longer a bar to such a matter being relied upon. 15. What is the position under the Trade Practices Act? It became well accepted that to establish liability for loss or damage resulting from a contravention of the TPA, it was not necessary to prove that the contravention was the sole cause of the loss or damage. It was enough to demonstrate that the contravention was a cause of the loss or damage. 15 The decision in I&L Securities Pty Ltd was very much on point. That case concerned the lending of money in reliance on a valuation of land, and there were two events of significance. The valuer had given a misleading and negligent valuation of the land, and the lender had failed to act prudently in that it had failed to make adequate enquiries about the borrower s capacity to pay. Both of these events contributed to the decision by the lender to make the loan. It was accepted that if the valuation had not been negligent and misleading, no loan would have been made. It was also accepted that if the lender had made adequate enquiries, no loan would have been made. Both events could be regarded as a cause of the loss which ensued when the borrower could not repay the loan, and realisation of the security did not repay In Schedule 2 to the Act. See, for example, I&L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; 210 CLR 109 at [57] per Gaudron, Gummow & Hayne JJ, and the cases cited there. While it is dangerous to attempt to describe further what a cause is, one attempt is to say that an act is legally causative if it materially contributes to the result: see Henville v Walker [2001] HCA 52 per Gaudron J at [60]; (2001) 206 CLR 459 at 480; and the cases cited there.

8 8 the amount owing. Because the lender could demonstrate that the misleading and negligent valuation was a cause of the ensuing loss, it was entitled to recover the amount of that loss under s 82 of the TPA. (d) (e) The High Court also established that it was not possible to raise contributory negligence as a defence to a cause of action under s.82 of the TPA: the TPA contained no provision similar to the provisions of the Law Reform Act 1995 (Qld), and it was not possible to construe s.82 of the TPA to achieve that result. 16 The High Court then determined in I & L Securities Pty Ltd 17 that it was not possible to make orders under the TPA which will compensate a person who has suffered loss or damage by conduct in contravention of a provision such as s 52 of the TPA for only part of that loss or damage. Neither s.82 nor s.87 of the TPA permitted such an order to be made. In other words, it was not possible to apportion part of the loss to the contravening conduct, and part of the loss to some other cause. It was also established that there was no provision for contribution in proceedings brought under the TPA, 18 and the court would have limited scope for ordering equitable contribution between the parties, which is only available if a defendant can demonstrate a co-ordinate liability or common obligation. 19 However, for causes of action arising after 26 July 2004, the answer is now different. It should be emphasised that the amendments described below are only applicable in relation to contraventions of s.52 of the TPA. Firstly, proportionate liability has now been introduced under the TPA. The equivalent of s.28 of the CLA is s.87cb, which provides: (1) This Part applies to a claim (an apportionable claim) if the claim is a claim for damages made under section 82 for: economic loss; or This was confirmed by the High Court in Henville v Walker [2001] HCA 52; (2001) 206 CLR 459. [2002] HCA 41; 210 CLR 109 at [23] and [33] per Gleeson CJ, at [61] per Gaudron, Gummow & Hayne JJ, at [69] per McHugh J, and at [211] and [220] per Callinan J. Kirby J dissented. Re La Rosa:Ex parte Norgard v Rodpat Nominees Pty Ltd (1991) 31 FCR 83. Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282. See the discussion in Nicholas Bender, Multiple wrongdoers: One for the money or something different, (2004) 12 TPLJ 66.

9 9 damage to property; caused by conduct that was done in a contravention of section 52. (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. (f) (g) (h) (i) Section 87CD(1) appears to be materially the same as s.31(1) of the CLA, although no doubt the slight differences in wording will be analysed carefully. There remain unresolved questions with these provisions, such as whether they catch a claim advanced on the basis of a contravention of a provision other than s.52 (such as s.53a) if the facts also constitute a contravention of s.52, and how (if at all) they affect the liability under s.82 of a person involved in the contravention, who would not appear to fall within the definition of concurrent wrongdoer. Secondly, there can be no contribution between the valuers and the solicitor: s.87cf of the TPA is in very similar terms to s.32a of the CLA. Thirdly, contributory negligence can now be raised in relation to a claim based on a contravention of s.52. Section 82(1B) makes provision in the following terms: 20 Despite subsection (1), if: a person (the claimant) makes a claim under subsection (1) in relation to: 20 The wording of this provision raises many questions. See the papers of McKenna SC and Applegarth SC referred to above.

10 10 (i) (ii) economic loss; or damage to property; caused by conduct of another person (the defendant) that was done in contravention of section 52; and the claimant suffered the loss or damage: (i) (ii) as a result partly of the claimant s failure to take reasonable care; and as a result partly of the conduct referred to in paragraph ; and the defendant: (i) (ii) did not intend to cause the loss or damage; and did not fraudulently cause the loss or damage; 16. Under the FTA: the damages that the claimant may recover in relation to the loss or damage are to be reduced to the extent to which the court thinks just and equitable having regard to the claimant s share in the responsibility for the loss or damage. Note: Part VIA also applies proportionate liability to a claim for damages under this section for a contravention of section 52. The decisions of the High Court concerning provisions of the TPA were in large measure equally applicable to the corresponding provisions of the FTA. What is the current position? Part 2 of Chapter 2 of the CLA is said (by s.28(1)) to apply to claims for a contravention of s.38 of the FTA (the equivalent of s.52 of the TPA), but the extent of that operation is questionable. Part 2 of Chapter 2 does not apply (s.28(3)) to a claim by a consumer, with that phrase being restricted essentially to a person entering into a domestic transaction (s.29 CLA). More importantly, s.32f of the CLA restricts the practical operation of the proportionate liability provisions of the CLA on a claim for a contravention of s.38 more fundamentally, by providing that a concurrent wrongdoer is severally liable for the damages awarded against any other concurrent wrongdoer to the apportionable claim.

11 11 (d) The result in the present circumstances is that if the valuer and the solicitors are found to be proportionately liable for (say) 60% and 40% of the loss, the valuer will be liable for its own 60%, and will also be severally liable for the 40% awarded against the solicitors. The solicitors will also be liable, in this way, for the whole amount. Further, the extent of the operation of s.32h (which preserves some rights to seek contribution) is uncertain. The policy is difficult to discern. Importantly, the position established in I&L Securities that the valuers and the solicitors could not avail themselves of any notion of contributory negligence appears to have survived in relation to claims under the FTA. The CLA makes no provision in relation to contributory negligence: s.32g simply says that any apportionment of responsibility as between concurrent wrongdoers is to exclude the loss in relation to which the plaintiff is contributorily negligent under any relevant law. As to that: (i) (ii) There has been no change to s.10 (or more accurately s.5 which defines wrong ) of the Law Reform Act It does not deal with liability under the FTA: it only deals with tort, and a duty of care under contract that is concurrent and coextensive with a duty of care in tort. There is no equivalent to the new s.82(1b) of the TPA. The FTA has not been amended. (e) This makes the FTA cause of action attractive to a plaintiff. 17. Once schemes are approved under the Professional Standards Act 2004, liability for professionals may be capped in accordance with s.22 of that Act. Those limitations will also apply to actions under the TPA: s.87ab of the TPA. 18. What does this mean in terms of evidence and your approach to an action which includes an apportionable claim? 19. From a plaintiff s point of view the introduction of proportionate liability won t alter in any significant way the evidence that will need to be obtained in order to commence

12 12 and conduct an action with one important exception. Evidence needs to be obtained to identify all potential wrongdoers as has always been the case. 20. Evidence must now also be gathered to investigate whether (and ideally prove that) those who have an ability to meet a claim have the greatest responsibility in terms of the loss suffered by the Plaintiff, or that they do not have the benefit of the proportionate liability provisions. 21 One must ensure however that the latter course of action doesn t jeopardise any available insurance in relation to the claim. The plaintiff must make a claim against all persons the claimant has reasonable grounds to believe may be liable for the loss or damage: s.32 CLA. The plaintiff is not prevented from bringing subsequent actions against other concurrent wrongdoers for an apportionable part of any loss or damage by the operation of the CLA, 22 but it needs to be remembered it is unlikely there will be any estoppel arising out of the earlier action. 23 This is significant in light of the fact that the Court can make findings in relation to concurrent wrongdoers who are not parties to the proceedings. 21. From the perspective of pleading a case on behalf of the plaintiff, the pleader should try to plead causes of action that are not subject to the proportionate liability provisions such as one arising under s.38 of the FTA. 22. From the defendant s point of view, there is now a potentially wider focus in gathering evidence so as to identify concurrent wrongdoers who have caused the loss or damage 24 the subject of the claim, whether or not the defendant would previously have been able to make any contribution claim against that party. 23. The defendant must give notice of any such concurrent wrongdoer, and information likely to help and identify that wrongdoer, to the plaintiff. The defendant must also give notice of the circumstances that make it believe that other person may be a In certain circumstances, such as fraud, wrongdoers do not have the benefit of apportionment: see s.87cc of the TPA; s.32d and s.32e of the CLA. See s.32b of the CLA. The position is the same under the TPA: s.87cg. See the discussion by B McDonald, Proportionate liability in Australia: The devil in the detail, (2005) 26 Australian Bar Review 29 at 41; J Watson, From contribution to apportioned contribution to proportionate liability, (2004) 78 ALJ 126 at 144. There is academic debate as to whether the concurrent wrongdoer must be someone against whom the Plaintiff can make a claim.

13 13 concurrent wrongdoer in relation to the claim. 25 orders being made against the defendant. Failure to do so may lead to costs 24. Importantly, under the CLA, the defendant must be careful to ensure that it complies with its obligations to provide the information concerning a concurrent wrongdoer, or it may lead to an order that the defendant is severally liable for any award of damages made, 26 or is liable for costs if the claimant joins a party to an action as a result of the information and that party is not liable to the claimant As to the question of onus, to the extent that a defendant seeks to limit its liability, it must plead and prove the case by which it seeks to minimize the extent of its own liability by reference to the responsibility of others. Although not made clear by either the TPA or CLA, the defendant will presumably carry the onus of establishing the matters on which it relies, although this will presumably be a less difficult task if the plaintiff has joined all relevant defendants. 26. The defendant does not however have to join other concurrent wrongdoers it has identified. The Court may in reaching its decision have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceedings Other matters which should be considered in light of the introduction of proportionate liability are: How will they effect settlement negotiations? They arguably will make it more difficult for the plaintiff, and place the defendant in a stronger position. What is the effect on vicarious liability? Section 32I of the CLA and s.87ci specifically provide that the legislation does not, inter alia, prevent a person from being held vicariously liable for a proportion of an apportionable claim. 29 What is the effect on contractual indemnities between concurrent wrongdoers? 30 At present, most writings consider that s.87cf of the TPA and See s.32 of the CLA; s.87ce of the TPA. See s.32(5) of the CLA. See s.32(6) of the CLA. See s.87cd(3) and (4) of the TPA; s.31(3) of the CLA. See further the discussion in Proportionate liability in Australia: The devil in the detail, supra.

14 14 s. 32A of the CLA will not prevent a wrongdoer from enforcing such an indemnity against another wrongdoer. 30 See further the discussion in From contribution to apportioned contribution to proportionate liability, supra, and Proportionate liability in Australia: The devil in the detail, supra.