CATCHWORDS
CONTRIBUTION - respondent held liable to applicants for breach of fiduciary duty - whether the respondent may be found liable as a tort-feasor in contribution proceedings - s.5(1)(c) Law Reform (Miscellaneous Provisions) Act 1946 (NSW) -meaning of "liable" in the Act - beneficial legislation - principles of contribution at common law and equity - whether common or coordinate obligation.
OTHER ISSUES - no point of principle.
Law Reform (Miscellaneous Provisions) Act 1946 (NSW) - s.5(1)
Albion Insurance Co Ltd v Government Insurance Office of New South Wales (1969) 121 CLR 342
Austotel Management Pty Ltd v Jamieson (1996) ATPR ¶41-454
AWA Ltd v Daniels (1992) 7 ACSR 759
Baltic Shipping Company v Dillon (1993) 176 CLR 344
Brown v Sevrup Fisheries Pty Ltd (1970) Tas SR 1
Dering v Winchelsea (1787) 2 B & P 270
Dorrough v Bank of Melbourne Ltd (1995) ATPR ¶41-454
Employers' Corporate Investments Pty Ltd v Cameron (1977) 3 ACLR 120
Marsack v Webber (1860) 6 H & N 1
Merryweather v Nixon 8TR 186
R.W. Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (unreported, 9 June 1992)
Rap Industries Pty Ltd v Royal Insurance Australia Ltd (1988) 5 ANZ Ins. Cas., 60-876
Re La Rosa; Ex parte Norgard v Rodpat Nominees Pty Ltd (1991) 31 FCR 83
Smith v Cock (1911) AC 317
TAL Structural Engineers Pty Ltd v Vaughan Constructions Pty Ltd [1989] VR 545
Trade Practices Commission v Manfal Pty Ltd (No 3) 1991) 33 FCR 382
Van Win Pty Ltd v Eleventh Mirontron Pty Ltd [1986] VR 484
Warman International Ltd v Dwyer (1995) 182 CLR 544
GRIFFITH MORGAN JONES & ORS v MORTGAGE ACCEPTANCE NOMINEES LIMITED & ORS
No G 711 of 1991
Davies J.
Sydney
23 February 1996
FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No G 711 of 1991
)
GENERAL DIVISION )
BETWEEN: GRIFFITH MORGAN JONES
FREDERICK LANCE MESH
EARLE WILFRED BAILEY
THOMAS ALFRED INGLIS BRAYE
JEFFREY WALL
BRIAN DAVID THORNTON
KEVIN IAN PERKINS
PAUL EDWARD NEILSON
ANTHONY MARMADUKE CARMICHAEL
GLEN WILLIAM GREEDY
PAUL STENBERG
GORDON FRASER
JOHN HOPE GIBSON
JAMES AIRD (JNR)
DONALD LEVICK
NOLA LEVICK
JEFFREY CECIL FOSTER
MARK THOMAS SEALES
Applicants
AND: MORTGAGE ACCEPTANCE NOMINEES LIMITED
RODERICK STUART McDONALD
GREGORY ALFRED FARROW
JARPAN MANAGEMENT SERVICES PTY LTD
PETER DONE
BRIAN KING
JAMES BESTER
AUSTRALIAN BREEDERS CO-OPERATIVE SOCIETY LTD
C E HEATH CASUALTY & GENERAL INSURANCE LIMITED
Respondents
Coram: Davies J.
Date: 23 February 1996
Place: Sydney
REASONS FOR JUDGMENT
On 10 November 1995, I handed down my findings of fact in this matter and my reasons therefor. Subsequently, on 18 December 1995, I heard argument on certain outstanding issues and gave judgment on the cross-claim by Mortgage
Acceptance Nominees Limited ("MANL") against each of the investors in the syndicate including the applicants. Judgment was given on that day with a view to fixing the ongoing interest rate at the rate stated in Order 35 r9 of the Federal Court Rules for amounts outstanding under judgments of the Court.
I turn now to outstanding issues.
CONTRIBUTION
The first issue is whether contribution can be obtained by Mr Done from other respondents either under s.5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) or under the principles of equitable contribution. In my reasons of 10 November 1995, I found that Mr Done was liable to the applicants for breach of fiduciary duty but not for negligence. That followed from the way in which the claim was put in the statement of claim. In my reasons of 10 November 1995, I indicated that it was my view that, had the applicants made an appropriate claim for negligence against Mr Done based on the events which gave rise to the findings of breach of fiduciary duty on his part, I would have found him to be liable as a tort-feasor.
I should again set out s.5(1) of the Law Reform (Miscellaneous Provisions) Act which reads, inter alia:-
"5(1) Where damage is suffered by any person as a result of a tort (whether a crime or not) -
...
(c) any
tort-feasor liable in respect of that damage may recover contribution from any
other tort-feasor who is, or would if sued have been, liable in respect of the
same damage, whether as a joint tort-feasor or otherwise, so, however, that no
person shall be entitled to recover contribution under this section
from any person entitled to be indemnified by him in respect of the liability
in respect of which the contribution is sought."
Counsel for ABCOS has submitted that, as ABCOS has been held to be a tort-feasor liable in respect of the applicants' damage, it may recover contribution from Mr Done, Mr Done being a tort-feasor who, if sued, would have been held liable in respect of the same damage. Counsel for ABCOS further submitted that Mr Done could not recover contribution from ABCOS as, not having been sued by the applicants in tort, in respect of the conduct for which he was held liable as the fiduciary, Mr Done was not a "tort-feasor liable", within the meaning of s.5(1) of the Law Reform (Miscellaneous Provisions) Act.
Such an approach was rejected by Dr Glanville Williams in his work on Joint Torts and Contributory Negligence at p.129. The approach has also been consistently rejected by Judges of the Supreme Court of New South Wales. Sheppard J., while a judge of the Supreme Court of New South Wales, held to the contrary in Employers' Corporate Investments Pty Ltd v Cameron (1977) 3 ACLR 120. This view was followed by Brownie J. in Rap Industries Pty Ltd v Royal Insurance Australia Ltd (1988) 5 ANZ Ins. Cas., ¶60-876, by Giles J. in R.W. Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (unreported, 9 June 1992) and by Rogers C.J., Com. Div. in AWA Ltd v Daniels (1992) 7 ACSR 759 at 856-8. The same approach was taken in the Supreme Court of Tasmania in Brown v Sevrup Fisheries Pty Ltd (1970) Tas SR 1, the judge being Crawford J.
The substance of the view expressed in these cases was stated by Giles J. in R.W. Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd at p.225 as follows:-
"Since the defendant is claiming contribution, before an order in his favour can be made there must be an ascertained liability to the plaintiff. That explains `liable' in the requirement that the defendant be tortfeasor liable in respect of the plaintiff's loss, to be contrasted with the alternative of a cross-defendant who would if sued have been liable in respect of that loss. But s 5(1) does not say that the ascertained liability must be a liability in tort. It says that the defendant must be a tortfeasor - someone who has committed a tort against the plaintiff."
Counsel for ABCOS relied upon decisions of Full Courts of the Supreme Court of Victoria, Van Win Pty Ltd v Eleventh Mirontron Pty Ltd [1986] VR 484 and TAL Structural Engineers Pty Ltd v Vaughan Constructions Pty Ltd [1989] VR 545. However, both those decisions raised issues different from those I am now considering.
As s.5(1) of the Law Reform (Miscellaneous Provisions) Act is legislation of New South Wales, it is appropriate that I should follow the approach adopted by the judges of the Supreme Court of New South Wales. Moreover, s.5(1) of the Law Reform (Miscellaneous Provisions) Act should be given an interpretation appropriate to its character as beneficial legislation. The section was introduced to remedy what was considered to be a defect in the common law. It has been the law in New South Wales and in comparable jurisdictions for a very long time, and has been applied so as to achieve a fair apportionment between tort-feasors liable in respect of the same damage. In my opinion, the approach taken in the Supreme Court of New South Wales is the appropriate one.
The matter is not concluded by any issue of res judicata or estoppel as between the applicants and Mr Done. In these proceedings, the issue of Mr Done's negligence arising out of the facts on which the applicants' claim for breach of fiduciary duty was based, was an issue which was raised by the claims for contribution and the cross-claim of ABCOS. The reason why in R.W. Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd the claim for contribution was held to fail, namely that the relationship of proximity giving rise to a duty of care did not exist, the relationship between the parties being governed entirely by the contract, does not apply in the present case in which the circumstances gave rise, not only to the contractual engagement of Mr Done, but also to the concurrent existence of a duty of care in tort.
Reliance was placed by counsel for Mr Done upon the enunciation by the High Court of Australia of the principles of contribution at common law and in equity in Albion Insurance Co Ltd v Government Insurance Office of New South Wales (1969) 121 CLR 342. Of particular note is the judgment of Kitto J. and his examination, at 350-1, of the general doctrine of contribution and its basis in "reason, justice and law" (Marsack v Webber (1860) 6 H & N 1 at 6) being "founded on equality, and established by the law of all nations" (Dering v Winchelsea (1787) 2 B & P 270 at 274). At 351, Kitto J. summarised the principle when his Honour said:-
"The right arises at law when `one of several persons has paid more than his proper share towards discharging a common obligation': Davies v Humphreys (1840) 6 M. & W. 153, 168-169; Dimdore v Leventhal (1936) 36 S.R. (N.S.W.) 378, at p.385 ..."
If there were a gap in the operation of s.5(1) of the Law Reform (Miscellaneous Provisions) Act as counsel for ABCOS suggests, I am satisfied that both the common law and equity would, at the present date, step in to fill the gap. The injustice resulting from the submission of counsel for ABCOS is patent.
The principle of contribution as enunciated in Albion Insurance, requires that there be a common or coordinate obligation. See also Smith v Cock [1911] AC 317 at 326 and Meagher, Gummow & Lehane's Equity: Doctrines & Remedies at para 1006. In the present case, such an obligation exists for all the respondents who are liable and Mr Bester, who is liable as a cross-respondent, have been found to have contributed to the loss suffered by the applicants and for which the applicants are to receive a sum by way of damages or equitable compensation. This common or coordinate liability is not destroyed by the fact that the applicants chose to frame their claim against Mr Done by reference to his fiduciary duty rather than by reference to his duty of care or by reason of the fact that the applicants, who had originally joined Mr Bester as a respondent, discontinued against him and chose to call him as a witness. Matters such as this do not affect the essential character of the obligation.
Common law and equity earlier refused relief by way of contribution in a case such as this not because of the absence of a common or coordinate obligation but because it was considered, as a matter of principle, that such relief should not be granted to wrongdoers. In this the common law and equity followed Roman law. Spence's Equitable Jurisdiction of the Court of Chancery, American Ed. 1846 Vol. 1, pp. 663-4 put the matter thus:-
"By the Roman law no action
could be brought by one wrong doer against another, in respect of a tortious
Act, in which both had been engaged, - `Si duo dolo malo fecerint invicem de
dolo non agent' (Dig. iv. 3.36). This
doctrine was adopted by the Court of
Chancery (`Fraus non est fallere fallentem,' Cary, p.18), and it has been
considered as a sufficient answer to a claim for contribution by one wrong doer
against another Attorney-General v.
Wilson, 1 Craig & P. 28; Pearson
v. Skelton, 1 Mees & Wels. 504 and Merryweather
v. Nixon, 8 T.R. 186."
Now that the principle enunciated in the cases mentioned in that passage, particularly Merryweather v Nixon, has been abrogated by statute, and the justice of an order for contribution has been recognised, there should remain no bar to the application of the general law of contribution to a case such as the present.
Thus, if there be a technical problem with the word "liable" where it first appears in s.5(1)(c) of the Law Reform (Miscellaneous Provisions) Act, and I think there is not, there is no cogent reason why equity should not aid the identification of the tort-feasors who ought to contribute and the ascertainment of what would be a just contribution. That is precisely what equity did when, because of problems arising from procedural rules and the non-joinder of parties in common law actions, an appropriate order as to contribution could not be made by a common law court. See Spence at 663.
I was not referred to any final judgment in the Federal Court where a like issue has been considered. However, in Re La Rosa; Ex parte Norgard v Rodpat Nominees Pty Ltd (1991) 31 FCR 83, Trade Practices Commission v Manfal Pty Ltd (No 3) (1991) 33 FCR 382, Dorrough v Bank of Melbourne Ltd (1995) ATPR ¶46-152 and Austotel Management Pty Ltd v Jamieson (1996) ATPR ¶41-454, judges of the Court that the general law of contribution may apply to cases of this kind. As Lee J said in Manfal at 385:-
"The categories of rights of contribution are not closed ... Where there is a community of interest between parties in respect of a matter of liability and the delivery of a benefit to one of those parties by the enforcement of the burden of that liability against the others, a right of contribution may arise."
It follows that I am satisfied that Mr Done is entitled to an order for contribution under s.5(1) of the Law Reform (Miscellaneous Provisions) Act and that, if I were wrong in that view, Mr Done would be entitled to contribution under the principles of the common law and of equity.
ACCOUNTING FOR PROFITS
Counsel for the applicants sought as against Mr McDonald and Mr King orders that there be an account taken as to the benefits each had received. Counsel relied upon the findings that each had breached a duty of fiduciary relationship due to the investors. Counsel sought this order in addition to compensatory damages.
I indicated in my reasons delivered on 10 November 1995 that to make such an order would be to double count. If the applicants receive compensatory damages, they will be fully reimbursed. The ordinary principle is that a successful applicant must elect as between compensatory damages and an inquiry as to profits. In Warman International Ltd v Dwyer (1995) 182 CLR 544 at 559, the Court said:-
"Ordinarily a fiduciary will be ordered to render an account of the profits made within the scope and ambit of his duty. (Phipps v. Boardman, [1967] 2 A.C., at p.127, per Lord Upjohn). Of course, if the loss suffered by the plaintiff exceeds the profits made by the fiduciary, the plaintiff may elect to have a compensatory remedy against the fiduciary. That election will bind the plaintiff. (Kendall v. Marsters (1860), 2 De G.F. & J. 200 [45 E.R. 598])."
Similarly, in Baltic Shipping Company v Dillon (1993) 176 CLR 344, it was held that full compensation and complete restitution cannot be given for the same breach of contract. It should be observed, moreover, that once Mr McDonald and Mr King have contributed to the payment of the applicants' damages, it is highly unlikely that they will have any profits from the events with which we are concerned. Accordingly, the order will be refused.
SECRET COMMISSIONS
Counsel for ABCOS submitted that ABCOS had no duty of care to Mr Bailey, Mr Wall and Mr Mesh, as each had received a secret commission from Mr King, or to Mr Fraser, who had lent $60,000 to Mr McDonald and had been repaid $75,000, or to Mr Jones, whose first year's interest payment of $11,400 had been "waived" by Mr McDonald. Counsel submitted that, if ABCOS had known of these benefits, ABCOS would not have given the valuation it did, Mr Pulford having believed that the values of the horses had been arrived at in a proper arm's length transaction.
It is too late for ABCOS now to raise this matter as I have already ruled that ABCOS did come under such a duty of care. However, as I perceive I did not directly discuss this point in my reasons of 10 November 1995, it is desirable that I should do so now.
In my view, commissions or benefits were not a factor which had any relevance to Mr Pulford's valuation or for that matter to the fixing of the value of the bloodstock as between Mr McDonald and Mr King. It seems to me to have been a matter of no concern to ABCOS that one or more of the investors entered into the syndicate on terms slightly different from the others. Mr Pulford made no enquiry about and received no information about that matter. Mr Pulford was requested to make "an independent valuation for the finance company." His task was to exercise due care and skill in the making of his valuation. This he failed to do.
Mr Pulford's undertaking of the task gave rise to a duty of care to those who would be likely to be adversely affected if he were negligent. Messrs Bailey, Wall, Mesh, Fraser and Jones were among the persons who were likely to be and were adversely affected by Mr Pulford's negligence.
THE CROSS-CLAIM OF ABCOS
In my reasons of 10 November 1995, I did not deal with a cross-claim by ABCOS which claimed that Messrs McDonald, Farrow, Done, King and Bester were liable to it by reason of negligence or a breach of s.42 of the Fair Trading Act 1987 (NSW).
I do not propose to deal with this matter in any detail. If all the facts were known, it may be that there were words said by Mr King to Mr Bester and words said by Mr Bester to Mr Pulford which constituted conduct which was in breach of s.42 of the Fair Trading Act. But no such conduct was established by the evidence. No specific statement by Mr King or Mr Bester was identified during the course of the trial as conduct in breach of s.42 of the Fair Trading Act causing loss to ABCOS. My comment at p.74 of my reasons that I thought that Mr Bester had been "conned" by Mr King was not a finding that Mr King had said something to Mr Bester which was misleading and deceptive and that Mr Bester had repeated it to Mr Pulford thereby causing ABCOS to be misled or deceived.
The case as put in the submissions of counsel for ABCOS relied not upon specific statements made, but upon the general conduct of Mr McDonald, Mr Done, Mr King and Mr Bester. I shall not attempt to summarise it. To do so would be to go over the case again. I am not satisfied that there was any negligent conduct which caused damage to ABCOS or misleading or deceptive conduct which caused loss to ABCOS.
The crux of the matter lies in the claim that Mr Pulford was misled by the written information which Mr Bester supplied to him and by the invoices which came from, or for the preparation of which, Mr Done's firm was responsible. For example, there was a fax from Mr Bester to Mr Pulford of 20 June 1989 which read, inter alia:-
"... proof of invoiced purchase prices has just reached me from Peat-Marwick Hungerfords, as per this fax, on 6 of the mares."
Mr Pulford said that he was misled by these invoices, having formed the view that they represented arms-length sales on which he could rely for the purposes of his valuation.
In my opinion, there was nothing misleading in the supply by Mr Bester to Mr Pulford of whatever written documents had passed between Mr McDonald and Mr King or of the supply of the invoices which were prepared for settlement. A competent valuer would not have regarded any of the information as evidence of a concluded sale but would have understood that the sale was dependent upon the valuation which Mr Pulford was to give. The documents were not misleading insofar as that they showed the negotiated price of the bloodstock, the completion of the sale being dependent only upon the valuation which Mr Pulford undertook to do. Mr Pulford was entitled to have regard to those documents, if he wished to do so. His error lay in placing any significant weight upon them as he was engaged as an independent valuer and his task was to make an independent valuation.
I should reiterate that Mr Pulford was asked by Mr Bester to do "an independent valuation for the finance company for the package to go ahead." Mr Pulford understood that to be his task. He gave this evidence:-
"You understood the finance company wanted an independent valuation?---Yes, it wasn't one of those vendors, yes.
Yes, and was not one of those buyers?---Yes.
So the valuation was to be independent of both the syndicate and the vendors?---Yes.
In those circumstances it was obvious that you could not take into account in determining what the value of the horses was the prices set out in the so-called invoices?--- Oh, I think I could. They were asking for my opinion on those values.
Mr Pulford's error was that he gave too much weight to the invoices and
did not approach his valuation in a sound way.
He was given all the information that a competent valuer needed to make
a valuation. The information included
the invoices and the documents that had passed between the parties with respect
to the bloodstock. That material was not
misleading. It simply showed the prices
which had
been negotiated and which would be the sale prices if Mr Pulford's valuation
supported them.
Mr Pulford was an independent expert. Messrs McDonald, Farrow, Done, King and Bester owed no duty of care to ABCOS save to supply Mr Pulford with relevant particulars of the bloodstock. This was done and the particulars supplied were accurate.
I am of the view that the cross-claim should be dismissed.
Counsel should prepare short minutes dealing with all issues save the quantum of the damages to be awarded.
I certify that this and the 12 preceding pages
are a true copy of the reasons for judgment herein of
the Honourable Justice Davies.
Associate:
Date: 23 February 1996
Counsel for the 1st applicant
and the 3rd to 18th applicants: R B S MacFarlan QC
L S Einstein
Solicitors for the 1st applicant
and the 3rd to 18th applicants: Gadens Ridgeway
Counsel for the 1st respondent/cross-respondent: D E Grieve QC
M G Skinner
Solicitors for the 1st respondent/cross-respondent: R B Monteith & Co
Counsel for the 5th respondent/cross-respondent: B C Oslington QC
T D Castle
Solicitors for the 5th respondent/cross-respondent: Allen Allen & Hemsley
Counsel for the 8th respondent/cross-respondent: S D Rares SC
M Dicker
Solicitor for the 8th respondent/cross-respondent: Minter Ellison
For the 2nd & 6th respondents/cross-respondents: Appearing in person.
For the 7th cross-respondent: Appearing in person
Counsel for the 14th & 15th cross-respondents: P Taylor SC
Solicitors for the 14th & 15th cross-respondents: Phillips Fox
Dates of hearing: 6 - 10 March; 13-14 March 1995
16 - 17 March 1995
20 - 24 March 1995
27 - 31 March 1995
3 - 6 April 1995
10-11 April, 13 April 1995
5 May; 17 May & 19 May 1995
18 December 1995
7 February 1996
Date of judgment: 23 February 1996
