CATCHWORDS PRACTICE AND PROCEDURE - joinder of cross-respondent - whether Law Reform (Miscellaneous Provisions) Act 1946 (NSW), s. 5(1)(c), applies to claims under s. 52 of the Trade Practices Act 1974 - whether equitable contribution was available as between a respondent liable for a contravention of s. 52 and another party in contravention of the section - discretion of Court. Trade Practices Act 1974 (Cth), s. 52 Law Reform (Miscellaneous Provisions) Act 1946 (NSW), s. 5(1)(c) Dorrough v Bank of Melbourne Limited (1995) ATPR Dig. para. 46-152 Trade Practices Commission v Manfal Pty Ltd (No 3) (1991) 33 FCR 382 Re La Rosa; Ex parte Norgard v Rodpat Nominees Pty Ltd (1991) 31 FCR 83 Australia and New Zealand Banking Group Limited v Turnbull & Partners Limited (1991) 33 FCR 265 Article by Mr J.C. Campbell Q.C. "Contribution, Contributory Negligence and Section 52 of the Trade Practices Act" (1993) 67 ALJ 87 AUSTOTEL MANAGEMENT PTY LIMITED & ANOR v HUGH H. JAMIESON & ORS NG 420 of 1992 Burchett J. Sydney 20 December 1995 IN THE FEDERAL COURT OF AUSTRALIA) ) NEW SOUTH WALES DISTRICT REGISTRY) NG 420 of 1992 ) GENERAL DIVISION ) BETWEEN: AUSTOTEL MANAGEMENT PTY LIMITED First Applicant AUSTOTEL PTY LIMITED Second Applicant AND: HUGH H. JAMIESON & OTHERS Respondents CORAM: Burchett J. PLACE: Sydney DATE : 20 December 1995 ORDERS OF THE COURT THE COURT ORDERS THAT: 1. The respondents have leave to file and serve a cross-claim generally in the form attached to the notice of motion, but subject to any order in respect of particular formal objections which the Court may make at the next directions hearing, which is hereby fixed for 6 February 1996. 2. The costs of and incidental to the motion be costs in the cause. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA) ) NEW SOUTH WALES DISTRICT REGISTRY) NG 420 of 1992 ) GENERAL DIVISION ) BETWEEN: AUSTOTEL MANAGEMENT PTY LIMITED First Applicant AUSTOTEL PTY LIMITED Second Applicant AND: HUGH H. JAMIESON & OTHERS Respondents CORAM: Burchett J. PLACE: Sydney DATE : 20 December 1995 REASONS FOR JUDGMENT BURCHETT J.: Originally, this action was brought against Tooheys Limited as first respondent and the present respondents as second respondents. Over two years later, the applicants, without opposition, obtained leave to discontinue as against Tooheys Limited. This step may have taken the respondents somewhat by surprise, but within three or four months, they gave notice that they were considering seeking leave to join Tooheys Limited to the action once more, this time as cross-respondent. One matter which I infer delayed them was the applicants' refusal to provide information about the basis on which agreement to discontinue had been reached with Tooheys Limited. In an interlocutory judgment delivered on 7 June 1995, I held that the respondents were entitled to discovery of the terms of any compromise that had been reached between their former co-respondent and the applicants. In the meantime, a motion had been taken out for leave to file a cross-claim against Tooheys Limited, which is the subject of these reasons. The proposed cross-claim would seek orders for contribution in respect of any relief granted upon the applicants' claim against the respondents (the partners at relevant times in a firm of solicitors, to whom I shall refer by the appellation "Allens") for damages for negligence, breach of contract and breach of fiduciary duty, on the grounds pleaded by the amended statement of claim. In terms, this proposed cross-claim (which I shall call simply the cross-claim) has been drafted to assert (inter alia) a right to contribution or indemnity under s. 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 of New South Wales (the Law Reform Act), relying upon the paragraphs of the amended statement of claim pleaded against Tooheys Limited prior to the discontinuance. Those paragraphs include allegations of negligence under the general law and misleading conduct within the meaning of s. 52 of the Trade Practices Act 1974. They were founded on representations officers of Tooheys Limited were said to have made to the applicants to the effect that the lessees of certain hotels, ultimately acquired by the applicants, had no rights in respect of goodwill. The making of these representations, it was alleged, involved negligence and contravention of s. 52, because there was no reasonable basis for them (cf. RAIA Insurance Brokers Limited v FAI General Insurance Co Limited (1993) 41 FCR 164 at 165-7, 174-5), and because the solicitors acting for Tooheys Limited (who were Allens) had not been fully and properly instructed concerning vital facts known to their client. Further, there was an allegation that Tooheys Limited had agreed to indemnify the applicants, and an allegation of a breach of s. 42 of the Fair Trading Act 1986 (NSW). Further still, it was alleged by the amended statement of claim, as it stood before the discontinuance, that Tooheys Limited was appointed trustee for the second applicant, and as such owed fiduciary duties, of which it was in breach, in relation to the protection of the second applicant against claims by tenants for goodwill, and in various other respects related to the transaction that led to the acquisition of the hotels. Separate claims, made by the applicants against Allens in the amended statement of claim, are that they acted negligently, as solicitors for a trust of which the second applicant was beneficiary, upon the purchase of the hotels; that they were in breach of their contract of retainer; and that they continued to act in a situation of conflict of interest and fiduciary duty. In respect of these matters too, Allens seek contribution from Tooheys Limited under s. 5(1)(c) of the Law Reform Act, and claim that if they are liable for breach of fiduciary duty as alleged, Tooheys Limited is co-ordinately liable, by reason of its breaches of fiduciary duty as a trustee, and should contribute to any equitable compensation awarded to the applicants. Finally, the respondents seek, as cross-claimants, to claim that they have suffered damage, in the circumstances, by Tooheys Limited's contraventions of s. 52 of the Trade Practices Act and s. 42 of the Fair Trading Act. The joinder of Tooheys Limited by this proposed cross-claim is resisted, both on behalf of the applicants and on behalf of Tooheys Limited. They place reliance on the delay between the discontinuance of the original claim against Tooheys Limited and the taking out of the motion, and on the delay of the hearing of the action which may be a consequence of a cross-claim, as well as the protraction of that hearing. I do not think I should give much weight to the few months that elapsed before the respondents moved. They were kept in the dark about the arrangements made between the other parties and, bearing in mind the considerable complexity of the matter, the period involved was not great. Nor do I think the allowance of the cross-claim would unreasonably extend the issues at the hearing. Whether or not Tooheys Limited is a cross-respondent, the matters of which the applicants complain had their source in arrangements made by Tooheys Limited, and in representations said to have emanated from its officers. Even if these matters were not relied upon at the hearing by way of cross-claim, they would certainly have to be examined in order to determine whether the impugned actions and omissions of Allens were truly causative of the losses alleged to have been sustained by the applicants. Indeed, it is part of Allens' case that Tooheys Limited concealed from them, its own solicitors, the full facts of the transaction upon which it had asked them to act. There is nothing unusual about a cross-claim of the kind proposed, so far as the applicability of s. 5(1)(c) of the Law Reform Act to the respective allegations of negligence is concerned. It is not essential to such a claim that it should involve a complete identity, rather than an overlapping, in respect of the damages sustained: Mahony v J. Kruschich (Demolitions) Proprietary Limited (1985) 156 CLR 522 at 527. But the application of this provision to allegations made under s. 52 of the Trade Practices Act and s. 42 of the Fair Trading Act is another matter. In Australia and New Zealand Banking Group Limited v Turnbull & Partners Limited (1991) 33 FCR 265 at 276-277, Sheppard J. discussed a somewhat similar cross-claim. It appears the argument was not fully developed before his Honour, but he expressed himself in terms indicating that he thought the cross-claim would fail. However, he said he was "persuaded ... that [he] should not" strike it out on that ground. He did nevertheless make it clear he could not find in s. 87 of the Trade Practices Act any conferral of a right to claim contribution, taking in that respect a view which was also, and quite strongly, taken by French J. in Re La Rosa; Ex parte Norgard v Rodpat Nominees Pty Ltd (1991) 31 FCR 83 at 88. However, the question was re-visited by Cooper J. in Dorrough v Bank of Melbourne Limited (1995) ATPR Dig. para. 46-152. Cooper J. referred to the decisions I have mentioned, as well as to some other cases, and to an article by Mr J.C. Campbell Q.C. entitled "Contribution, Contributory Negligence and Section 52 of the Trade Practices Act" published in (1993) 67 ALJ 87, in which Mr Campbell concluded (at 108) that "a person who breaches s 52 and causes damage commits the tort of breach of statutory duty, and hence that a respondent can claim contribution from another tortfeasor who has contributed to the same damage". Cooper J. commented that Mr Campbell had developed "a substantial argument", and his Honour held: "In my view it is clearly arguable that a right of contribution can be made out on grounds other than s. 87 of the Trade Practices Act. Accordingly, joinder should not be refused solely for the reason that the Trade Practices Act provides no such remedy as between several contraveners of s. 52." So far as equitable contribution is concerned, I note that French J., in the circumstances of Re La Rosa, expressed (at 91) the view that a co-ordinate liability was arguable as the source of an obligation enforceable in contribution proceedings. In Trade Practices Commission v Manfal Pty Ltd (No 3) (1991) 33 FCR 382 at 385, Lee J. said: "The Act [i.e. the Trade Practices Act] does not provide directly that the court may apportion between the several persons who engaged in the conduct, or were involved in the contravention constituted by that conduct, degrees of culpability in respect of the occasioning of the loss or damage suffered by another, but that is not to say that a court could not entertain proceedings seeking orders of contribution based upon rights at law or in equity arising out of a co-ordinate liability imposed upon the parties by the Act. ... The categories of rights of contribution are not closed. The foundation for such a right appears to be unjust enrichment (see F. Goff and G. Jones, The Law of Restitution (3rd ed, 1986), p 272) or simply a matter of justice. (See Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 at 350, per Kitto J.) Where there is a community of interest between parties and 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." He referred to the right of defaulting trustees in breach of trust, and of defaulting directors in breach of their duties, to pursue cross-claims seeking contribution from co-trustees and co-directors also in default. In my opinion, the circumstances call for an exercise of my discretion in favour of Allens. Whether their claims are ultimately sustainable should be determined upon the evidence at a full hearing; those claims should not be rejected in limine. I should follow Dorrough v Bank of Melbourne Limited. However, during the argument, various deficiencies in the drafting of the proposed cross-claim were exposed; and it was accepted that some amendments of it would be necessary. Accordingly, the order I shall make is that the respondents have leave to file and serve a cross-claim generally in the form attached to the notice of motion, but subject to any order in respect of particular formal objections that the Court may make at the next directions hearing, which I fix for 6 February 1996. I order that the costs of and incidental to the motion be costs in the cause. I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Burchett. Associate: Date: 20 December 1995 Counsel for the Applicants: Mr A.R. Emmett Q.C. with Mr G.O. Reynolds Solicitors for the Applicants: Corrs Chambers Westgarth Counsel for the Respondents: Mr F.M. Douglas Q.C. with Mr B.J.A. Shields Solicitors for the Respondents: Ebsworth & Ebsworth Counsel for the proposed Mr T. Jucovic Q.C. Cross-Respondent: with Mr J.W. Stevenson Solicitors for the proposed Malleson Stephen Cross-Respondent: Jaques Date of hearing: 12 April 1995