Supreme Court New South Wales Medium Neutral Citation: ASF Resources Ltd v Clarke [2014] NSWSC 252 Hearing dates: 8 November and 13 December 2013 Decision date: 13 March 2014 Jurisdiction: Equity Division Before: Kunc J Decision: Motion to strike out dismissed; leave to amend defence granted Catchwords: PRACTICE - Pleadings - Strike out - Whether statutory defence adequately pleaded - Whether "apportionable claim" where negligence not part of plaintiffs' case - Cheques Act 1986 (Cth), s 95(1) - Civil Liability Act 2002 (NSW), s 34(1) Legislation Cited: Cheques Act 1986 (Cth) Civil Liability Act 2002 (NSW) Civil Procedure Act 2005 (NSW) Cases Cited: Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 Commissioners of Taxation v English, Scottish & Australian Bank Ltd [1920] AC 683 Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd [2007] FCA 1216; (2007) 164 FCR 450 General Steel Industries Inc v Commission for Railways (NSW) (1964) 112 CLR 125 Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (No 2) [2013] HCA 23; (2013) 247 CLR 656 Oris Funds Management Ltd v National Australia Bank Ltd [2005] VSCA 148; (2005) 14 VR 189 Perpetual Trustee Co Ltd v CTC Group Pty Ltd (No 2) [2013] NSWCA 58 Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187; (2008) 82 NSWLR 762 Wickstead v Browne (1992) 30 NSWLR 1 Texts Cited: L Warnick, "Proportionate Liability in the High Court" (2013) 87 ALJ 864 Category: Interlocutory applications Parties: ASF Resources Ltd (First Plaintiff) ASF Kaili Resource Pty Ltd (Second Plaintiff) ASF Energy Pty Ltd (Third Plaintiff) Justin Douglas Clarke (First Defendant) Nicole Voychack Harcourt (Second Defendant) Diverse Invest Group Pty Ltd (Third Defendant) Noonkanbah Pty Ltd (Fourth Defendant) EHSIS Investment Pty Ltd (Fifth Defendant) National Australia Bank Limited (Sixth Defendant) Representation: Counsel: - Plaintiff A J McInerney SC D J Barnett - Sixth Defendant P W Taylor SC G Lucarelli Solicitors: - Plaintiff McLachlan Thorpe Partners - Sixth Defendant DibbsBarker Lawyers File Number(s): 2013/127680 Publication restriction: None Judgment 1The plaintiff ("ASF") is the victim of the fraud of one of its consultants, Mr Clarke. ASF sues the sixth defendant, National Australia Bank (the "Bank") in respect of ASF's cheques that Mr Clarke presented to the Bank, but which the Bank paid into accounts of persons other than the named payee of the cheque. 2The motions before the court raise two questions. First, has the Bank adequately pleaded a defence under s 95(1) of the Cheques Act 1986 (Cth) (the "CA")? Second, should the Bank be summarily foreclosed from relying upon the proportionate liability provisions in Part 4 of the Civil Liability Act 2002 (NSW) (the "CLA")? Those questions should be answered "yes" and "no" respectively. The course of the hearing 3ASF's claim is set out in an Amended Statement of Claim (the "ASC") filed on 28 May 2013. The Bank filed a defence on 2 August 2013 (the "Defence"). Paragraph 197 of the Defence alleged: In further answer to the whole of the Claim NAB says that it is entitled to rely on s 95(1) of the Cheques Act, 1986; Particulars At all times NAB acted in good faith and without negligence when it collected the cheques. 4Paragraphs 198 to 207 of the Defence set out the Bank's claim for apportionment of liability under the CLA. 5ASF filed a notice of motion for an order that paragraphs 198 to 207 of the Bank's Defence be struck out. When the matter first came on for hearing before me, ASF was permitted to file without objection an amended notice of motion seeking this order: Pursuant to Rule 14.28, an order that paragraphs 197 and 198-207 of the defence of the Sixth Defendant filed 2 August 2013 be struck out. 6The addition of paragraph 197 was understandable. It pleaded the Bank's reliance on the defence under s 95(1) of the CA. The existence of that defence was the foundation of the Bank's argument that it was entitled to the benefit of the proportionate liability provisions of the CLA. 7At the same time, the Bank recognised that there was force in some of the pleading points that had been taken by ASF. At the beginning of the hearing, the Bank was permitted to file its own notice of motion seeking orders including: 1. The Sixth Defendant/Cross-Claimant be granted leave to file the amended defence annexed and marked "A". 2. The Sixth Defendant/Cross-Claimant be granted leave to file the amended cross-claim annexed and marked "B". 8The argument before me proceeded by reference to the amended defence attached to the Bank's notice of motion. However, as the argument proceeded it became apparent that the Bank wished to propound a further version of its amended defence. The present applications could not be determined until that further version became available. The hearing was therefore adjourned for approximately one month to enable that further version to be circulated. The argument was then conducted and concluded before me by reference to the form of amended defence which was marked "A1" in the applications before me. These reasons refer to that document, to which I will refer as the "proposed amended defence". The background to the proceedings 9I gratefully adopt ASF's summary of the proceedings provided in its submissions: These proceedings arise out of the fraudulent conduct of a consultant of the plaintiffs (Clarke). Clarke fraudulently created invoices purporting to be from suppliers of the plaintiffs and caused them to be presented for payment by the plaintiffs' accounts department. The plaintiffs issued the cheques made out to the name of the relevant supplier. Clarke obtained possession of cheques and presented them to the National Australia Bank (Bank), the sixth defendant. In each case, the National Australia Bank collected the cheques and paid them into the bank account of a person other than the named payee of the cheque, being one of Clarke or the third to fifth defendants. The Court's power 10ASF invokes UCPR Part 14 r 14.28: (1) 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: (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or (c) is otherwise an abuse of the process of the court. (2) The court may receive evidence on the hearing of an application for an order under subrule (1). 11The Bank's amendment application relied upon s 64 of the Civil Procedure Act 2005 (NSW) (the "CPA"): (1) At any stage of proceedings, the court may order: (a) that any document in the proceedings be amended, or (b) that leave be granted to a party to amend any document in the proceedings. (2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings. ... 12Both provisions are discretionary, although the discretion in relation to amendment is slightly more confined if the Court is satisfied that the proposed amendment is a "necessary" amendment within the meaning of s 64(2) of the CPA. Moreover, in exercising any of the Court's powers invoked by the parties in their respective applications, the Court must exercise its discretion in such a way as to give effect to the overriding purpose of facilitating the just, quick and cheap resolution of the real issues in the proceedings (s 56(2) of the CPA). The applicable principles 13The parties were agreed on the principles which inform the disposition of the present application. These can be found in the joint judgment in Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 at [57] (noting the passage was also quoted with approval in Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 at [46]): It is, of course, well accepted that a court whose jurisdiction is regularly invoked ... should not decide the issues raised in those proceedings in a summary way except in the clearest of cases. Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way. 14The High Court's reference to the "various ways" in which the test has been expressed include the oft-cited discussion by Barwick CJ in General Steel Industries Inc v Commission for Railways (NSW) (1964) 112 CLR 125 at 129-130: It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; "so obviously untenable that it can· not possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow them" (the pleadings) "to stand would involve useless expense ". At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or "so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument"; "so to speak apparent at a glance". As I have said, some of these expressions occur in cases in which the inherent jurisdiction was invoked and others in cases founded on statutory rules of court but although the material available to the court in either type of case may be different the need for exceptional caution in exercising the power whether it be inherent or under statutory rules is the same. Dixon J. (as he then was) sums up a number of authorities in Dey v. Victorian Railways Commissioners [(1949) 78 C.L.R. 62].where he says [at 91]: "A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But 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." Although I can agree with Latham C.J. in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings [at p. 84], in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed. 15In approaching the present applications I have been particularly mindful of the Chief Justice's admonition that extensive argument may be necessary to demonstrate that the relevant test has been satisfied. ASF's Claim 16ASF's Claim against the Bank alleges causes of action in conversion and for money had and received: Claims against the sixth defendant 236. The NAB collected the proceeds of the First Plaintiff's Cheques, the Second Plaintiff's Cheques and the Third Plaintiff's Cheques and placed those proceeds to the credit of the Clarke Account, the Diverse Invest Account, the Noonkanbah Account and the EHSIS Investment Account as pleaded above. Particulars Paragraphs 18 to 184 above. 237. In the premises, the NAB: a. converted the First Plaintiff's Cheques and wrongfully deprived the first plaintiff of them; b. converted the Second Plaintiff's Cheques and wrongfully deprived the second plaintiff of them; and c. converted the Third Plaintiff's Cheques and wrongfully deprived the third plaintiff of them. 238. By reason of the NAB's conversion, the first plaintiff has suffered loss and damage. Particulars The amount of $1,500,114.48 or alternatively $1,205,402.67 as particularised in further detail in Schedule A to this pleading. 239. In the alternative, the NAB has had and received the sum of $1,500,114.48 or alternatively $1,205,402.67 to the use of the first plaintiff and is liable to repay that amount to the first plaintiff. 240. By reason of the NAB's conversion, the second plaintiff has suffered loss and damage. Particulars The amount of $216,848.50 as particularised in further detail in Schedule B to this pleading. 241. In the alternative, the NAB has had and received the sum of $216,848.50 to the use of the second plaintiff and is liable to repay that amount to the second plaintiff. 242. By reason of the NAB's conversion, the third plaintiff has suffered loss and damage. Particulars The amount of $265,653.374 [sic] or alternatively $264,599.94 as particularised in further detail in Schedule C to this pleading. 243. In the alternative, the NAB has had and received the sum of $265,653.37 or alternatively $264,599.94 to the use of the third plaintiff and is liable to repay that amount to the third plaintiff. 17The Bank wishes to rely on s 95(1) of the CA: Protection of institution collecting cheque for customer or another institution (1) Where: (a) a financial institution (the collecting institution ), in good faith and without negligence: (i) receives payment of a cheque for a customer; or (ii) receives payment of a cheque and, before or after receiving payment, credits a customer's account with the sum ordered to be paid by the cheque; and (b) the customer has no title, or has a defective title, to the cheque; the collecting institution does not incur any liability to the true owner by reason only of having received payment of the cheque. Adequacy of the pleading of the defence under s 95(1) of the CA 18Because the Bank's intention to rely upon s 95(1) of the CA provides the entry point for its argument in relation to proportionate liability, it is logical to deal first with that part of the proposed amended defence, being paragraphs 197 to 206 of that document. 19Paragraph 197 of the proposed amended defence pleads material facts for a defence under s 95(1) of the CA insofar as it requires the Bank to show it acted "in good faith": If, which is not admitted, any of first, third, fourth or fifth defendant [sic] had defective title to any cheques as alleged by the plaintiffs, and in further answer to the whole of the Claim, and, NAB says (a) It is a financial institution for the purposes of section 95 of the Cheques Act; (b) It was, in relation to each cheque the subject of these proceedings, the "collecting institution" within the meaning of that term in section 95 of the Cheques Act; and (c) It received payment for each cheque that is the subject of these proceedings and credited the proceeds of each of those cheques to one or other of the customer accounts operated by the first, third, fourth or fifth defendants (d) It did not know that the customer to whose account it credited the payment did not have good title to any such cheque (e) When it received payment for each cheque, and credited each of the customer accounts, it acted honestly (f) When it acted honestly, NAB also acted "in good faith" within the meaning of that term for the purposes of ss 3(2) & 95 of the Cheques Act. 20Paragraphs 198 to 206 of the proposed defence set out in detail how, in relation to various categories of the cheques the subject of the proceedings, the Bank says it acted without negligence. It is sufficient for present purposes to give one example of such a pleading: 198. With respect to the cheques numbered 114, 115, 124, 125, 133, 134 and 138 drawn by the third plaintiff in favour of various creditors: (a) NAB did not know the first plaintiff had drawn the cheques other than for the genuine and proper conduct of its business; (b) nothing on the face of the cheque conveyed, and NAB did not know, that ASF Resources had drawn the cheque other than for the genuine and proper conduct of its business; (c) none of the cheques was marked "Account Payee Only"; (d) each cheque bore a signed endorsement "Please pay J Clarke"; (e) The first defendant ("Clarke") presented the cheques, during ordinary business hours, to telling counter staff at the NAB House, 255 George Street Branch, for deposit into the Clarke Account (f) Clarke deposited each cheque with other cheques to which he appeared to have good title (g) At the time of the deposit of each cheque the NAB had no information that Clarke had presented for collection, or was a person who was a risk of presenting for collection, cheques to which he was not entitled (h) NAB received payment of each cheque in the period between September 2010 and February 2011 (i) NAB did not know (and does not admit) Clarke had a defective title to any of the plaintiffs' cheques 21ASF's attack on this part of the proposed amended defence divided the cheques into two categories, those which bore a "signed endorsement 'please pay J Clarke'" (the "Notated Cheques") and those which did not have such a "signed endorsement" but were deposited into the accounts of companies which were "similar" to a named payee (the "Other Cheques"). ASF submitted: (1)The defence in relation to the Notated Cheques was doomed to fail, in the relevant sense, such that the amendment (in paragraphs 198, 199, 200 and 201 of the proposed amended defence) should not be permitted and the existing defence should be summarily dismissed; (2)Although ASF conceded this was less clear, the defence in relation to the Other Cheques (being paragraphs 202, 203, 204, 205 and 206) as pleaded was sufficiently contrary to the established facts as to be unarguable. 22ASF's submissions proceeded by reference to a detailed examination of what ASF contended were facts established from material which included documents produced on subpoena by the Bank, including a document described as "NAB Third Party Cheques Policy" (the "Bank's Policy"). 23Turning first to ASF's submissions in relation to the Notated Cheques, with no disrespect to the detailed way in which those submissions were put, they may be reduced to two essential propositions. The first is that the Bank did not follow its own procedures as set out in the Bank's Policy. While ASF accepted that the failure to comply with the Bank's Policy may not be a complete answer, such non-compliance was always significant and had to be overcome by some other pleaded matter. ASF submitted that the Bank had not pleaded anything which might overcome its apparent failure to comply with the Bank's Policy. Second, building on the first submission, ASF submitted that looking at the pleading more generally, it did not disclose sufficient facts to demonstrate that the Bank had acted "without negligence". 24The parties were agreed as to the applicable legal principles governing s 95(1) of the CA. A convenient summary was accepted as being found in the judgment of Chernov JA (Vincent and Eames JJA agreeing) in Oris Funds Management Ltd v National Australia Bank Ltd [2005] VSCA 148; (2005) 14 VR 189 at [30] (citations omitted): 30 In considering if the bank had established that its was not negligent for the purposes of s.95(1) of the Cheques Act, it should be borne in mind that, in this context, "negligence" is equivalent to "carelessness".As is explained in Weaver and Craigie, Banker and Customer, the concept of "negligence" in the context of s.95(1) is not the same as that which underlies the tort of negligence. More particularly, they state: Negligence in the sense used here is not the independent tort of negligence but, rather, is a descriptive epithet which, up to the present time, has been used to describe the overall impression formed in relation to the acts and omission of the collecting bank in a particular factual situation. The test for determining if a banker was negligent in the collection of a cheque has been formulated by reference to the ordinary practice of bankers. Thus, for example, Lord Dunedin, after quoting with approval the decision of Isaacs J in Commissioner of State Savings Bank of Victoria v. Permewan, Wright & Co, said, in Commissioners of Taxation v English, Scottish & Australian Bank Ltd: ... the test of negligence is whether the transaction of paying in any given cheque was so out of the ordinary course that it ought to have aroused doubts in the bankers' mind, and caused them to make enquiry. The reference to the "ordinary course" in this passage is a reference to the ordinary practice of bankers, which plays a key role in determining whether a banker has acted negligently in collecting a cheque. It is not just the procedure of the individual bank or banker to which regard must be had, but to the practice of the banking industry as a whole, although mere concurrence with banking practice does not establish lack of negligence on the part of the bank. As Lord Dunedin cautioned in the ES & A case, since the question whether a bank has acted negligently in collecting a cheque is a question of fact, "[it] is rarely possible to lay down rules or statements which will determine what is negligent and what is not." His Lordship's test, however, was effectively adopted by Isaacs and Rich JJ in London Bank of Australia Ltd v Kendall, where their Honours said: The only guiding principle is that, where doubt is once aroused as to the nature and true ownership of the cheque, the nature and extent of the inquiry proper to allay it must be measured by what, in the circumstances, a fair-minded banker, paying due regard to the reasonable exigencies of banking business in relation to the person depositing the cheque, would consider it prudent to do in order to protect the interests of the true owner whoever he might be. 25While that statement is accepted by the parties as correct, I also accept the Bank's submission that the quotation from Lord Dunedin's speech in Commissioners of Taxation v English, Scottish & Australian Bank Ltd [1920] AC 683 at 688 needs to be completed by adding to it the sentence which follows the passage quoted: If there be inserted after the words "given cheque" the words "coupled with the circumstances antecedent and present," their Lordships think this is an accurate statement of the law. 26That addition only fortifies the fundamental proposition that the question of whether the Bank acted "without negligence" for the purposes of s 95(1) of the CA is an intensely factual one. I have no doubt that the parts of the proposed amended defence in relation to the Notated Cheques fulfil the fundamental purpose of putting ASF on notice of the case which the Bank wishes to make. Those parts of the proposed amended defence clearly raise a triable issue. I do not accept that there is a fatal flaw because facts are not pleaded to "overcome" the alleged non-compliance with the Bank's Policy. While I have no view as to the ultimate outcome, I am not at all satisfied to the high standard referred to in the authorities that this part of the Bank's proposed defence is doomed to failure. It would be contrary to the principles to which I have referred, including the fundamental obligation to do justice between the parties, to foreclose summarily the detailed factual inquiry which will be the essential prerequisite for the Court to determine whether the Bank has made out its defence. 27ASF (correctly) accepted that its argument in relation to the Other Cheques was "less clear" than the submissions which it advanced in relation to the Notated Cheques. In particular, ASF submitted, by reference to one piece of evidence, that the pleading in relation to the Other Cheques was factually incorrect. The observations which I made in the preceding paragraph apply a fortiori to ASF's submissions in relation to the Other Cheques. Again, while I have no view as to the ultimate outcome, I am not at all satisfied to the requisite standard that the proposed amended defence in relation to the Other Cheques is so clearly factually wrong as to make the Bank's case unarguable. This is a classic example of where the facts must be fully investigated at trial. 28The Bank will have leave to file its proposed amended defence in relation to s 95(1) of the CA. Proportionate liability 29Insofar as the Bank wishes to rely upon the provisions of the CLA, the proposed amended defence pleads: 207. Each plaintiff claims damages for economic loss. 208. The economic loss claimed by each plaintiff was caused by (a) the allegedly fraudulent conduct of Clarke (b) in relation to the cheque proceeds credited to their accounts, the fraudulent conduct of the third, fourth and fifth defendants (c) the actions of the NAB in the collection of the cheque proceeds and their crediting to the respective defendants. 209. If, which is not admitted, NAB did not assume, or ought not reasonably have collected and credited the endorsed cheques without first satisfying itself, that each of the endorsed cheques had been duly endorsed on behalf of the payee named on the cheque as drawn, then NAB failed to act with reasonable care in collecting payment of the cheque and crediting its customer accounts. 210. If, which is not admitted, NAB did not assume, or it was not reasonable in all the circumstances for NAB to have assumed that the customer to which it credited the payment was the person intended by the drawer to be the cheque payee, then NAB failed to act with reasonable care in collecting payment of the cheque and crediting its customer accounts. 211. If, which NAB does not admit, NAB failed to act with reasonable care in relation to any cheque, then (a) the loss claimed by the plaintiffs arose from that failure by NAB to take reasonable care, and (b) in those circumstances, NAB, the first, third, fourth and the fifth defendants, are all persons whose acts or omissions caused the plaintiffs economic loss, and (c) in those circumstances alleged, NAB's liability in relation to the claims of each plaintiff is limited to the amount the court considers just having regard to the extent of NAB's responsibility for the damage or loss. 212. In the event NAB is found liable for any or all of the amount claimed NAB says that the alleged loss or damage suffered by any one or more of the plaintiffs is an apportionable claim within the meaning of Part 4 of the Civil Liability Act 2002 and the NAB's liability is limited to an amount reflecting that proportion of the damages or loss claim which the court considers just having regard to the extent of NAB's responsibility for the loss or damage (if any). 30The argument between the parties commenced with three points of agreement: (1)Proof of negligence or acting without reasonable care was no part of the causes of action alleged by ASF against the Bank in conversion or for monies had and received; (2)Section 95(1) of the CA made a defence available to the Bank which would require the Bank to prove it had acted without negligence in the sense of "carelessness" or "without want of reasonable care"; and (3)Assuming the Bank were to be permitted (as will be the case) to rely on s 95(1) of the CA, the resolution of the Bank's liability would almost certainly involve a finding as to whether or not the Bank acted without reasonable care. 31Against that background, the debate centred on whether ASF's claims against the Bank were "apportionable claims" (and therefore subject to the proportionate liability provisions set out in Part 4 of the CLA) as defined in s 34(1)(a) of the CLA: a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care, but not including any claim arising out of personal injury 32Again, with no disrespect to the careful and detailed submissions of the parties, the essence of their respective submissions was: (1)ASF submitted that whether or not a claim was an "apportionable claim" was determined by looking at the claim brought by the plaintiff. If, to make out its claims, a plaintiff did not have to prove that the defendant had failed to take reasonable care, then the plaintiff's claims were not "apportionable claims" for the purposes of Part 4 of the CLA. (2)The Bank submitted that the inquiry as to whether something was an "apportionable claim" was not confined by the matters which the plaintiff had to prove to make out whatever cause or causes of action were sued upon. Rather, whether the plaintiff's claim was an "apportionable claim" depended not only on the elements of the plaintiff's cause of action but also what findings the court was required to make in determining the proceedings. If some other feature of the litigation (such as a defence raised) made it necessary for the court to consider whether or not a defendant had acted with or without reasonable care it would be sufficient to make the claim one "arising from a failure to take reasonable care". 33Invoking Barwick CJ's observation in General Steel as to the permissibility of "extensive argument" where necessary, ASF submitted that I should determine definitively the proper construction of s 34(1)(a) of the CLA in the way for which ASF contended, such that the Bank's intended reliance on the CLA would be demonstrated to be untenable and the relevant part of its pleading would either be struck out or not allowed (as the case may be). 34The Bank submitted that on its proper construction s 34(1)(a) of the CLA raised four threshold issues for there to be an "apportionable claim": (1)It is a claim for economic loss or damage to property; (2)It is a claim in an action; (3)The action is for damages (whether in contract, tort or otherwise); and (4)The claim (or action for damages) is one "arising from" a failure "to take reasonable care". 35The Bank submitted that, so understood, an "apportionable claim" was not limited to causes of action where the failure to take reasonable care was one of the constituent elements. The Bank submitted (correctly) that the first three of its so-called threshold issues were satisfied. The real question was whether ASF's claim was one "arising from" a failure "to take reasonable care". It was on this last point that the parties joined issue. 36Neither party was able to identify a decision (whether binding upon me or not) which definitively determined the question of construction which their argument posed. However, each pointed to a series of cases commencing with what they both accepted were obiter dicta by Middleton J in Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd [2007] FCA 1216; (2007) 164 FCR 450 (reproduced in the next paragraph). Because I have come to the view on discretionary grounds that the Court should not prevent the Bank from seeking to rely upon the CLA, it is not necessary for me to consider all the cases referred to by the parties in detail. It is sufficient to refer to what, with the utmost respect, seems to be a fundamental difference of opinion between two judges of the Court of Appeal of this Court. 37In Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187; (2008) 82 NSWLR 762, Barrett J (as his Honour then was) said: 27 The case was thus one in which each relevant "claim", as determined by the court and according to the findings actually made, was a claim in an action for damages "arising from" the failure to take reasonable care that was also at the centre of the tortious claim in negligence. This is so of both the claims in tort and the claims in contract. That, in my view, is sufficient to bring the contract claims, as well as the tort claims, within s 34(1)(a) and it makes no difference that the breaches of contract, as alleged, were not framed in terms of failure to take reasonable care. 28 It is pertinent to note that the words in s 34(1)(a) ("an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care") do not follow the pattern found in the modified Part 3 of the Law Reform (Miscellaneous Provisions) Act 1965 adopted in 2000 and dealing with contributory negligence. Following Astley v Austrust Ltd (above), that Part 3 made a plaintiff's contributory negligence relevant to the assessment of damages for "a breach of a contractual duty of care that is concurrent or co-extensive with a duty of care in tort": s 8, definition of "wrong". The description in s 34(1)(a) of the Civil Liability Act, by contrast, shows a legislative intention going beyond contractual duties existing, as it were, in parallel with duties of care in tort. 29 Again, support for the approach I consider to be correct is found in the observations of Middleton J in Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd (above). His Honour said (at [30]): Where a claim brought by an applicant does not have as one of its necessary elements any allegation of failing to take reasonable care, an additional enquiry into the failure to take reasonable care may become relevant in the course of a trial to determine the application of Pt IVAA. Even though the claims in this proceeding themselves do not rely upon any plea of negligence or a "failure to take reasonable care" in a strict sense, a failure to take reasonable care may form part of the allegations or the evidence that is tendered in the proceedings. At the end of the trial, after hearing all the evidence, it may be found that Pt IVAA applies. 30 I respectfully agree that a claim may properly be regarded as one "arising from a failure to take reasonable care" if, "at the end of the trial", the evidence warrants a finding to that effect and regardless of the absence of "any plea of negligence or a 'failure to take reasonable care'". The nature of the claim, for the purposes of Part 4, is to be judged in the light of the findings made and is not determined by the words in which it is framed. 31 There is good reason in policy to take this approach. The clear objective of Part 3 is to abolish "solidary liability" under which all defendants found guilty of relevant breach are jointly and severally required to meet an undissected verdict. The provisions reflect legislative views about allocation of risk as between plaintiffs and defendants. The New South Wales Attorney-General in office at the time of the enactment of Part 3 made this clear when he said of the new provisions: [I]n cases of negligence not involving personal injury, considerations of prejudice to plaintiffs weigh less strongly than the value of limiting liability of defendants according to their share of responsibility, and as a consequence the CLA(PR) Bill proposes in Part 4 the introduction of proportionate liability in the context of economic loss and property damage. (The Honourable Robert Debus MP, "Tort Law Reform in New South Wales: State and Federal Interactions" (2002) 8 UNSW L Rev 13). 32 The provisions of Part 4 are compulsory. They change substantive rights, so that a plaintiff's ability to obtain an adjudication of joint and several liability is removed where the circumstances are of the type to which the alternative regime of proportionate liability is applied. A case no doubt needs to be pleaded and proved by one or more defendants so as to engage the statutory provisions. But it will be the findings ultimately made that determine whether the statutory conditions compelling the court to adopt the proportionate approach are satisfied. 38After joining the Court of Appeal, Barrett JA had occasion to revisit the construction of s 34(1)(a) of the CLA in Perpetual Trustee Co Ltd v CTC Group Pty Ltd (No 2) [2013] NSWCA 58. That case concerned a defendant's attempt to rely upon the apportionment provisions of the CLA notwithstanding the provisions of a strict contractual indemnity. The Court of Appeal held that the indemnity precluded the apportionment provisions from applying. Nevertheless, and therefore by way of obiter dicta, both Barrett JA and Macfarlan JA expressed their views on the proper interpretation of s 34 of the CLA. The third member of the Court, Meagher JA, expressly declined to express any view on the matter. 39Macfarlan JA said: 22 For a successful action for damages to have arisen from a failure to take reasonable care, it is in my view necessary that the absence of reasonable care was an element of the, or a, cause of action upon which the plaintiff succeeded. As observed by Professors McDonald and Carter in "The Lottery of Contractual Risk Allocation and Proportionate Liability" (2009) 26 Journal of Contract Law 1 at 18, the contrary view would produce the absurd result that a party to a contract who failed to perform a strict contractual obligation would benefit from being found to have acted negligently rather than "innocently". If claims could be apportioned where negligence is not an element of the successful cause of action, but merely arises from the facts, a plaintiff could lose his or her contractual right to full damages from a party whose breach of a contractual provision of strict liability happened to stem from a failure to take reasonable care. 23 My view accords with that which I reached in relation to the similarly worded, and in my view relevantly indistinguishable, provision in s 5A of the Act which renders Part 1A applicable only to a "claim for damages for harm resulting from negligence" (Perpetual Trustee v Milanex at [87]; see also Monaghan Surveyors Pty Ltd v Stratford Glen-Avon Pty Ltd [2012] NSWCA 94 at [76] and [77]). It appears to differ from that expressed by Barrett J (as his Honour then was) in Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 at [20] - [30] and in other first instance decisions to which his Honour referred. Unless his Honour was simply saying that it is necessary to examine the court's findings to identify the cause, or causes, of action upon which the plaintiff succeeded, I cannot, with respect, agree with his Honour that the "nature of the claim, for the purposes of Pt 4, is to be judged in the light of the findings made and is not determined by the words in which it is framed" (at [30]). In my view the application of Part 4 turns not on the facts that happen to be found but on the essential character of the plaintiff's successful cause of action. Subject to cases that are conducted without regard to the pleadings, if negligence is an essential element of that cause of action, it will have been pleaded in the Statement of Claim. If it is not, it will not have been pleaded. It would be curious indeed if, to attract Part 4 of the Act, the defendant pleaded and proved his or her own negligence when that was not alleged by the plaintiff. The text of s 34(1) does not, in my view, contemplate that occurring. The natural meaning of the words used indicates that a failure to take reasonable care must be part of, and therefore an element of, the plaintiff's successful cause of action. 40Barrett JA restated the points he had made in his previous decision, supplemented by reference to an intervening decision of the Victorian Court of Appeal: 37 Whether a particular "claim" is an "apportionable claim" within s 34(1)(a) of the Civil Liability Act 2002 depends on whether the "claim" is a "claim" for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care. 38 The point made in Reinhold v NSW Lotteries Corporation (No 2) [2008] NSWSC 187 at [19] - [30] is that the nature or quality of a "claim" for these purposes cannot be determined without taking into account the court's decision on the claim. First and foremost, of course, regard will be had to the words in which the claim is framed but, as Ashley JA said (with the concurrence of Nettle and Neave JJA) in Godfrey Spowers (Victoria) Pty Ltd v Lincoln Scott Australia Pty Ltd [2008] VSCA 208; (2008) 21 VR 84 at [105], the equivalent Victorian statutory provisions: " . . do not mean that, once something that looks like an apportionable claim is pleaded, a defendant forthwith becomes a 'concurrent wrongdoer'." 39 His Honour continued: "Section 24AH(1) [NSW s 34(1)] emphasises that whether a wrongdoer is of that character depends upon the person having been one of two or more persons whose acts or omissions caused the plaintiff's loss and damage. At least absent highly unusual pleadings, determination of the critical circumstances will depend upon findings having been made. Section 24AI(1) [NSW s 35(1)] is consistent with such an analysis. It limits the liability of a concurrent wrongdoer to an amount reflecting the proportion of the plaintiff's loss or damage claimed which the Court considers just in all the circumstances, the Court being obliged to take into account the responsibility of other concurrent wrongdoers who are parties to the proceeding, but ordinarily not others. The importance of the Court's adjudication is emphasised by this provision, as it is by s 24AJ [NSW s 36], which naturally flows from it. The same may be said of s 24AK(1) [NSW s 37], which takes as its starting point judgment against a concurrent wrongdoer." 40 After noting that this analysis corresponded with that in Reinhold v NSW Lotteries Corporation (No 2) and setting out paragraphs [19] - [22], [30] and [32] of the judgment in that case, Ashley JA said (at [108]: "Those observations emphasised the importance of trial to the determination of the application of the relevant legislation." 41 At [109], Ashley JA expressed agreement with the analysis in the quoted paragraphs of the judgment in Reinhold v NSW Lotteries Corporation (No 2). 42 It cannot be suggested (nor do I think it has been suggested in any decided case) that the nature or quality of a "claim" is, for relevant purposes, to be determined solely by looking at the court's decision in relation to it. Nor is the nature or quality of a "claim" to be determined solely by looking at the terms in which it is framed. Rather, it is a combination of the terms in which the claim is framed (or pleaded) and relevant findings of the court in relation to it that must be assessed in order to decide whether it is a claim "in an action for damages . . . arising from a failure to take reasonable care" and has the other attributes of an "apportionable claim" under s 34(1)(a). 43 I agree with the conclusions reached by Macfarlan JA and, subject to the foregoing, with his Honour's reasons. I also agree that the orders proposed by Macfarlan JA should be made. 41The parties before me, with some ingenuity, sought to harmonise the views of Macfarlan and Barrett JJA either completely or at least as to the essentials, or suggested that it was unnecessary in this case for me to resolve the difference between their Honours. However, it is plain from their respective reasons that there is a difference of approach as to the operation of s 34(1)(a). In my respectful opinion Barrett JA correctly recognised that in making the express reservation set out in paragraph [43] of his reasons where he otherwise agrees with the reasons of Macfarlan JA. 42I do not propose to attempt to resolve the difference between their Honours. Rather, for present purposes and in the absence of any authority binding upon me, I take from their Honours' reasons the point that there is much to be said for both sides of the argument on what is a serious and difficult question of construction. As I will now explain, that conclusion has a significant impact on how the Court is to exercise its discretion in the present applications. 43In the exercise of its relevant discretions, the Court will allow the proposed amended defence in relation to the CLA and dismiss ASF's motion in so far as it seeks to strike out so much of the Bank's case. There are three reasons for this conclusion. 44First, given that the Bank's defence under s 95(1) of the CA will form part of the ultimate hearing of these proceedings, to allow the proportionate liability defence to go forward will add only to the legal argument in the case rather than expand it in terms of the evidence sought to be adduced. Insofar as I assume the Bank will contend at the final hearing that the factual findings can attract the operation of the CLA, those factual findings will be made by reference to the issues raised by the Bank's defence under s 95(1) of the CA. If such findings are made, then the way will be open for the Bank to argue that, on the proper construction of s 34(1)(a) of the CLA, ASF's claim was an apportionable claim. Similarly, ASF's response to this will be legal rather than requiring ASF to adduce any evidence over and above that which it deploys in answer to the Bank's defence under s 95(1) of the CA. 45Although he was in the minority on this particular issue, I respectfully adopt what was said by Kirby P in Wickstead v Browne (1992) 30 NSWLR 1 at 5: But as the trial must now proceed, there is merit (as it seems to me) in permitting the appellant to present his case in various ways. The marginal utility to the respondent of preventing the appellant from proceeding upon the alternative cause of action in negligence is minimal. But the marginal cost of doing so would be very great if, subsequently, the trial was concluded, limited by the orders proposed, and it was then held, either by this Court or by the High Court of Australia, that the appellant's cause of action in negligence was viable... 46Adopting the learned President's dictum to the circumstances of this case, as the defence under s 95(1) of the CA will proceed, there is merit in permitting the Bank to present its case in various ways, particularly where the additional way in question will only involve additional legal argument. The marginal utility to ASF in preventing the Bank from raising the question of proportionate liability is minimal but the marginal cost of doing so would be very great if, subsequently, the trial is concluded without that issue being able to be raised, and it was then held, either by the Court of Appeal or High Court of Australia, that the Bank should have been allowed to invoke the CLA. 47Second, where in a case such as the present, a party invites the resolution of a strike out application by reference to the Court construing a statute (or, for that matter, any other document) then the Court must be able to reach that construction with a high degree of certainty. That is because, to quote the High Court in Agar v Hyde (see paragraph [13] above) the test, howsoever expressed, to decide issues in a summary way requires "a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way". Based upon my own consideration of the language of s 34(1)(a) of the CLA, the parties' respective submissions as to the proper construction of that section, and taking into account the differences within the Court of Appeal referred to in paragraphs [37] to [40] above, I am well satisfied that there is much to be said for both sides of the argument. In those circumstances, I am unable to reach a view as to the proper construction of s 34(1)(a) of the CLA with what I consider to be the requisite high degree of certainty so as to warrant determining the issue now summarily against the Bank. 48Third, as a matter of policy I consider it to be undesirable, unless absolutely necessary, for a piece of legislation like the CLA to be construed outside a factual context determined after a full hearing. The CLA is a significant and groundbreaking piece of law reform. Substantial policy considerations attend its interpretation and application. The proper interpretation of the legislation has already produced a diversity of views across three levels of the judicial hierarchy of this State (see the account of the litigation culminating in the decision of the High Court in Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (No 2) [2013] HCA 23; (2013) 247 CLR 656 in L Warnick, "Proportionate Liability in the High Court" (2013) 87 ALJ 864). 49Again, I respectfully adopt another observation made by Kirby P in Wickstead v Browne (1992) 30 NSWLR 1 at 5: Common experience teaches that it is usually more efficient and just to consider the viability of a cause of action when the facts said to support it are adduced and the suggested action can be judged with a full understanding of all relevant evidence. Testimony gives colour and content to the application and development of legal principle. 50In my respectful opinion, the same considerations apply where the Court is required to consider whether a particular set of circumstances falls within a statutory provision. Statutory interpretation in a factual vacuum lacks the salutary and, in difficult cases, essential benefit of being able to be undertaken in the context of a set of actual facts as found after a contested hearing. Conclusion 51In general terms, ASF's amended notice of motion filed 8 November 2013 will be dismissed and orders will be made in terms of the Bank's notice of motion filed in Court on the same day. However, it will be necessary for me to hear the parties as to the precise form of orders, any orders as to costs and what further directions should be made to enable the proceedings to continue efficiently toward a final hearing. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 March 2014