Kim v Cole[2002] QCA 176

SUPREME COURT OF QUEENSLAND

[1] McMURDO P: I have read the reasons for judgment of McPherson JA in which the facts and issues are set out.

AppealNo 7772 of2001

[2]I agree that for the reasons given by McPherson JA there are no grounds for interfering with the learned primary judge's apportionment of the damage suffered by the plaintiffs between the appellant, Ms Cole, and first respondent, Mr Hurst, under Division 2 of Part 3 Law Reform Act 1995 (Qld).

[3]I also agree that his Honour erred in stating that for the first respondent's breach of contract to have caused the damage suffered by the appellant in contract, it must have been of near equal potency to the immediate cause. The first respondent, in recommending and then installing a manual valve rather than the "failsafe" miniset valve, breached his contract with the appellant to exercise reasonable care and skill in advising on the repair of the Blodgett pizza oven, having regard to the dangers to people and property associated with gas and gas-operated appliances. Whilst his Honour found that the appellant's act of leaving on the valve was the immediate and dominant cause of the resulting property damage, the first respondent's breach was undoubtedly "a" cause. In Simonius Vischer & Co v Holt and Thompson[1] Samuels JA, with whom Moffett P and Reynolds JA agreed on this point, stated:

"It was, of course, sufficient for the plaintiffs to establish that the defendants' breaches were a cause of the loss notwithstanding that there may have been other concurrent causes. Hence, the defendants' argument must show that the plaintiffs' lack of care was the sole cause of the loss, to the exclusion of any causative influence exerted by the defendants' breaches. I take the correct principle to be that stated in Chitty on Contracts, General Principles, 23rd ed., p 670, par 1448:

'If a breach of contract is one of two causes, both co- operating and both of equal efficacy in causing loss to the plaintiff, the party responsible for the breach is liable to the plaintiff for that loss.'

This statement is supported by the authority of Devlin J., as he then was, in Heskell v Continental Express Ltd [1950] 1 AllER 1033 at 1046-1048, and the cases there cited. In particular, I refer to what was said by Lord Wright with whom Lord Atkin agreed, in Smith Hogg & Co Ltd v Black Sea & Baltic General Insurance Co Ltd [1940] AC 1997 at 1007. His Lordship's remarks although delivered in a context different from that which obtains here, are of undoubted application. Lord Wright said: 'The sole question apart from express exception, must then be: "Was that breach of contract 'a' cause of the damage."'

It may be preferred to describe it as an effective or real or actual cause though the adjectives in my opinion in fact add nothing. If the question is answered in the affirmative the shipowner is liable though there were other co-operating causes, … ."

See also Wylie v The ANI Corporation Limited.[2]

[4] The first respondent's breach of the contract with the appellant, though not the sole or even the dominant cause of the damage suffered by the appellant and the plaintiffs, was a cause, and indeed an effective real or actual cause, of that damage. The first respondent is liable to the appellant for breach of contract.

[5] What effect does this have on the orders made at first instance? The plaintiffs brought an action for the damages they suffered against the appellant and the first respondent. The appellant issued a third party notice against the first respondent claiming damages suffered by her as a defendant in this action. She also claimed damages against the first respondent for her own injured property the quantum of which was agreed at $25,000.

[6] As McPherson JA explains, s 6(c) Law Reform Act 1995 (Qld) provides that where, as here, the plaintiffs have suffered damage as a result of a tort and both the appellant and the first respondent have been found liable in respect of that damage, then either the appellant or the first respondent may recover contribution from the other. That is not affected by Astley v Austrust[3] which held that damages for breach of contract may not be reduced under apportionment of liability legislation for contributory negligence where a plaintiff has sued in contract, even if the plaintiff has or could have also sued in tort. Astley was concerned, not with contribution between tortfeasors, but with reducing contractual damages because of a plaintiff's contributory negligence. Regardless of the first respondent's liability in contract to the appellant for the plaintiffs' damage, he is entitled to recover contribution from the appellant for 85 per cent of that damage under s 6(c) Law Reform Act 1995 (Qld).

[7] But what of the appellant's claim against the first respondent in contract for the property damage directly suffered by her? In Astley Gleeson CJ, McHugh, Gummow and Hayne JJ stated that:

"Absent some contractual stipulation to the contrary, there is no reason of justice or sound legal policy which should prevent the plaintiff in a case such as the present recovering for all the damage that is causally connected to the defendant's breach even if the plaintiff's conduct has contributed to the damage which he or she has suffered."[4]

[8] The first respondent and the appellants were not joint and several tortfeasors in respect of the property damage suffered directly by the appellant and s 6(c) Law Reform Act 1995 (Qld) does not apply to the appellant's claim in contract for that damage. The provisions of the Law Reform Act 1995 (Qld) allowing for apportionment of liability for contributory negligence[5] do not ordinarily apply to breaches of contract: Astley. The appellant is entitled to damages for breach of contract in the agreed sum of $25,000.

[9] I agree with the orders proposed by McPherson JA.

AppealNo 8074 of2001

[10] I agree with McPherson JA that for the reasons he has given, appeal no 8074 of 2001 brought by the appellant Wesfarmers Federation Insurance Ltd should be allowed. I agree with the orders proposed by McPherson JA.

[11]  McPHERSON JA: In February 1998 the plaintiffs Mr and Mrs Kim were the owners of a multi-tenanted shop building on the Gold Coast Highway at Miami. At about 5 am on Wednesday 5 February the building was destroyed by an explosion which was sufficiently severe to damage some of the neighbouring buildings as well. Investigation showed that the explosion had taken place in the premises let by the Kims to Ms Cole, who is the first defendant in the action and the appellant in proceedings now before this Court.

[12] Ms Cole conducted a pizza shop in those premises using for that purpose a Blodgett oven that was fuelled by LP gas. On the preceding Friday evening, which would have  been  31 January 1998, she found that the oven was not working properly. She called in the second defendant Mr Hurst, who carried on business as a plumber and gasfitter. Mr Hurst traced the problem to a miniset valve, which is a device controlling the flow of gas that, when ignited, fuels and heats the oven for cooking purposes. He telephoned the supplier and ordered a new miniset, but was told that it would not be available until early in the following week. That meant that Ms Cole would not be able to cook and sell pizzas until the oven was repaired, which would affect her business and was not acceptable to her.

[13] A discussion then ensued between Mr Hurst and Ms Cole, attended by a Mr Umstad, who was Ms Cole’s fiancé whom she has since married.  Mr Umstadoften helped out in the shop and was experienced in fitting gas heaters to spas. He asked if some other valve could be fitted, so that the oven could be used pending receipt of the new miniset valve. Mr Hurst then produced a quarter-turn valve which he explained was, unlike the miniset valve, not “failsafe”. It required manual operation to turn it on and off by moving a handle slightly and lighting the gas burners. Having explained what was required to use it and having seen Mr Umstad demonstrate this procedure, Mr Hurst was satisfied that Mr Umstad was proficient in its operation and he fitted the manual valve to the oven for use until the miniset valve was available.

[14] The oven was operated successfully over the next few days including Monday 3 February. On Tuesday the miniset valve arrived, and Mr Hurst offered to fit it. It was a day on which the shop was closed and Ms Cole had a social engagement which she said she could not break. Consequently, it was not fitted then. Unfortunately, on Monday night someone left the manual valve on the oven in the “open” position. The learned trial judge found that it was Ms Cole who had done so, and this finding was not challenged on appeal. The burners were not lit and, under those conditions, there was a build-up of gas which was ignited probably by an item of electrical equipment in the kitchen. In point of law, it made no difference which of Ms Cole and Mr Umstad was responsible for leaving the valve open. They were joint tortfeasors and liable as such to the plaintiff: Brooke v Bool [1928] 2 KB 578. So was Mr Hurst. Judgment was given for the plaintiffs against Ms Cole and Mr Hurst for $160,000, which represented the amount of the loss the plaintiffs had sustained as a result of the negligence of the two defendants.

[15] In respect of that judgment debt they were jointly liable. It then became a matter of apportioning the loss between them.  Ms Cole’s  claim for  indemnity against or contribution from Mr Hurst was framed in both tort and contract. Acting under s 7 of the Law Reform Act 1995, his Honour assessed their shares of responsibility for the loss at 85% to Ms Cole and 15% to Mr Hurst. That assessment apportioned the contributions to their joint liability for the damage, but it purported to do so only in tort. Division 2 of the Act, which provides for contribution between defendants, consists of ss 6 and 7. Section 6 opens with the words “When damage is suffered … as a result of a tort …”, and it is headed Proceedings against and contribution between … tortfeasors. Section 7 directs the court to assess contributions according to the extent of their responsibility for the damage, confines the jurisdiction to do so to “proceedings for contribution under this division …”. The immediate questions are whether it authorises the court to assess their shares or contributions to the damage where, as here, one of the defendants is also liable to the other under a contract, and, in doing so, to arrive at a result that is different from that reached in tort.

[16] Given the assessment of Mr Hurst’s share (15%) of the responsibility in tort for the explosion and consequent loss to the plaintiffs, his Honour considered it would “not be right for the purpose of attributing responsibility in contract to characterize Mr Hurst’s intervention as an effective cause of Ms Cole’s loss”. At this point in his reasons, the learned trial judge was in fact addressing not the issue of Mr Hurst’s contribution to the plaintiffs’ loss of $160,000, but his contribution to Ms Cole’s property loss (which was agreed at a figure of $25,000) as a result of the explosion. It was specifically with respect to that issue that his Honour held that there was no causal connection between her own loss or damage and his breach of contract, and that her contractual claim for that amount failed. Mr Hurst’s contribution of 15% toMs Cole’s own property loss of $25,000 amounts to the comparatively small figure of $3,750. As to that, it is not clear why she was not entitled to recover it, or 15% of$25,000, from Mr Hurst as damage done to her in tort. The point seems to have been overlooked in the judgment against him that followed; but, on behalf of Mr Hurst on appeal, Mr Bain QC said he had no objection to that small sum being included in a judgment in favour of Ms Cole. Her major concern is, however, not the amount of that loss, but the much greater component of her loss resulting from her having to bear 85% of the plaintiffs’ loss of $160,000 for which judgment was given against her. It is against that assessment and especially against the failure of the judge to hold Mr Hurst liable to her in contract, that she now appeals.

[17] So far as material, ss 6 and 7 of the Act are in the following terms:

“6. Where damage is recovered by any person as a result of a tort (whether a crime or not) -

“(a)    …

2. …
3. any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is, or would if sued have been, liable in respect of the same damage, whether as a joint tortfeasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by the person in respect of the liability in respect of which the contribution is sought.

7. In any proceedings for contribution under this division the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person’s responsibility for the damage; and the court shall have power to exempt any person from liability to make contributions, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity.”

The italics in s 6 are, of course, my addition.

[18] In Croston v Vaughan [1938] 1 KB 540, 565, Scott LJ remarked of the corresponding provisions in the English Act of 1935 that s 6(c) of the Act is “illogical”:

“because it assumes the joint liability of two tortfeasors, which is indeed a postulate of the proceedings for contribution; but goes on to give the Court power to exempt one of such persons from liability to make any contribution at all, or, conversely, to make the other person pay the whole”.

The power to exempt one person from, or to limit his liability to, another may, and commonly does, arise from the terms of a contract between them, just as, in the converse case of making the other person pay the whole, it ordinarily stems from the terms of a contract to indemnify. In assessing the contribution recoverable in that way, the court is under s 7 arriving at what is “just and equitable” having regard to the contractual term or terms providing for the exemption or indemnity as the case may be. In the light of the contract between them, it would hardly be just and equitable to do  otherwise.  Bringing into account  the  contractual arrangements,express or implied, of the parties that regulate the right to exemption or indemnity, wholly or in part, is something that, in any event, appears clearly enough to be contemplated by both s 6(c) and s 7.  For those provisions to operate, there must be at least two joint tortfeasors; and they must both be liable in respect of the same damage. Those are postulates as Scott LJ described them, of the court’s power to assess contribution under the legislation; but, given that they are present, it is not necessary that the liability to contribute or indemnify should be found to arise from liability in tort. It may, as s 6(c) specifically envisages, be a liability “whether as a joint tortfeasor or otherwise”; that is, one that has its origin, for example, in a contract, or perhaps a statute, or in some other way that is recognised by law.

[19] I have found only one case in which this question has been considered, which is rather surprising having regard to the length of time the legislation has been in force in various jurisdictions. In Employers Corporate Investments Pty Limited v Cameron (1977) 3 ACLR 120, the corporate plaintiff sued the defendants for breach of their contract to perform the duties of auditors with skill and care. Those defendants cross-claimed against the directors for failing to act honestly and use skill and diligence in the discharge of their duties. The directors moved to strike out the cross-claim against them on the ground that the primary action was brought against the auditors as defendants not in tort but in contract, with the result, so it was submitted, that the contribution procedure was not available under a provision corresponding to s 6(c) of the Law Reform Act 1995 in Queensland. In refusing the application to strike out, Sheppard J said (3 ACLR 120, 124-125):

“… I tend to the view that a person may avail himself of the provisions of the section notwithstanding that he is either under a liability in contract or is sued in contract if in respect of the damage for which he is sued he is also liable as a tortfeasor. It is not necessary … for me to express a final view … It is enough for me to say that I do  not think that the matters relied on by the cross-claimants have been clearly demonstrated to be unsound. Indeed, my tentative view, as I have said, is that in respect of them the cross-claimants are right.”

[20] His Honour went on to consider and to hold that the cross-claiming defendant auditors were being sued in contract but for breach of an obligation for which they might also have been sued in tort. They therefore satisfied the postulate of being a tortfeasor within the meaning of s 6(c), who would, if sued, be liable in respect of the same damage. In the present case that element is now not open to question. Both defendants were not only sued but held liable as tortfeasors in respect of the same damage to the plaintiffs. The first defendant Ms Cole then claimed against the second defendant both in tort and in contract. In tort, the learned trial judge assessed the two defendants’ contributions at 85% and 15%. In contract, he held that she was not entitled to recover anything by way of contribution. The question therefore is whether the result is or ought, as his Honour held, to be different if Mr Hurst’s liability to Ms Cole is considered as arising in or from a contract rather than in tort.

[21] His Honour decided that this relevant difference existed between the two, viz that the applicable test for determining the cause of the loss was not the same. His Honour held that, in the case of contractual liability, a breach does not qualify as a cause of loss unless it can be regarded as “of equal or close to equal potency” with other causes.  A rule to that effect is sometimes ascribed to Heskell v ContinentalExpress Ltd [1950] 1 All ER 1038, 1048, where, after  discussing  the  matter, Devlin J said:

“Whatever the true rule of causation may be, I am satisfied that if a breach of contract is one of two causes, both co-operating and both of equal efficacy, as I find in  this  case, it  is sufficient  to  carry judgment for damages.”

For my part, I am, with respect, unable to read that statement as supporting the conclusion that a breach of contract ceases to be a cause of loss because, by comparison with other causes, it is a cause of lesser efficacy than the others. His Lordship’s conclusion was not expressed in negative terms like that. What he said was that, whatever the true rule might be, a breach of contract that was (as he found it in that case to be) of an efficacy or cogency equal to others was a cause (by which he meant a legally sufficient cause) of the loss resulting from the breach of contract.

[22] Others have taken a similar view of his Lordship’s statement. See Simonius Vischer & Co v Hold & Thompson [1979] 2 NSWLR 322, 346, per Samuels JA, with whom Moffitt P and Reynolds JA agreed on this point. See also Alexander v Cambridge Credit Corporation (1987) 9 NSWLR 310, 315, where Glass JA said that the existence of another concurrent cause which combined to produce the loss was irrelevant.  McHugh JA said (9 NSWLR 310, 350) that, in the law of contract, it is sufficient that the breach “causally contributed” to the same loss, relying on Norton Australia Pty Ltd v Streets Ice Cream Pty Ltd (1968) 120 CLR 635, 643. Recent English decisions in Galoo Ltd v Bright Grahame Murray [1994] 1 WLR 1360 and County Ltd v Gironzentrale [1006] 3 All ER 834, 846, 849, on which Mr Couper QC for the appellant Ms Cole  relied,  are  to  similar  effect.  What Devlin J in Heskell v Continental Express Ltd [1950] 1 All ER 1033, 1047-1048, was concerned to do was to repel the suggestion that it was necessary to show that the breach of contract relied on should be the “dominant” cause of the loss sought to be recovered. In this respect his Lordship referred to the speech of Lord Wright in Smith Hogg & Co v Black Sea & Baltic General Insurance Co [1940] AC 907.

[23] Given the trial judge’s finding of responsibility of 15% for the loss sustained in the present case, it is to my mind difficult to view Mr Hurst’s contribution to the explosion and damage as not being a cause of the liability incurred jointly by him and Ms Cole for the total loss of $160,000 sustained by Mr and Mrs Kim, even if it was far from being the dominant cause of that loss. Indeed, his Honour found it to have been a cause in tort, but in contract not an effective cause, of Ms Cole’s loss. Before the apportionment between them, they were each jointly liable in tort for the whole amount. Without the statutory intervention in the form of s 7 of the Law Reform Act 1995, or its predecessor in Queensland, which was the Act of 1952, no apportionment of responsibility or contribution between tortfeasors was in general possible even after judgment. That was because of the common law rule laid down in Merryweather v Nixan (1799) 8 Term Rep 186; 101 ER 1337, which was based on notions of the illegality of the cause of action (ex turpi causa non oritur actio). See Glanville Williams, Joint Torts and Contributory Negligence §26, at 80-83. That rule is thought to have been abrogated in Queensland by the Act of 1952, which was re-enacted in 6(a) of the Act of 1995.

[24] In contract, the rule was different. There, the common law applied the equitable principle that co-debtors contributed in equal proportions: Dering v Earl of Winchelsea (1787) 2 Bos & Pul 270; 126 ER 1276. In discussing the principle inJoint Obligations §86, at 166, Professor Glanville Williams said it required all co-debtors to contribute in equal proportions to the sum payable. If applied in this case to the joint liability of the two defendants as co-debtors under the contract of record constituted by the judgment against them, the result would be that liability under that judgment would be  apportioned between them equally. That would satisfy Ms Cole, for whom Mr Couper QC contended on appeal that an equal apportionment of the loss of $160,000 was the very least that was appropriate.

[25] To arrive at that result by applying the principle in Dering v Lord Winchelsea would, however, run counter to Lord Halsbury’s statement in Palmer v Wick Steam Shipping Co [1894] AC 318, 334, that in England the transmutation of the cause of action into a judgment would not prevent the application of the principle of Merryweather v Nixon (1799) 8 Term Rep 186. It is, in any event, right to say that Mr Couper did not rely on the principle in Dering v Earl of Winchelsea, but simply submitted that, whether considered in tort or in contract, his Honour’s apportionment of 85% of the responsibility to his client Ms Cole involved a wrong exercise of the trial judge’s discretion under s 7 of the Act of 1995, and that a proper apportionment of the responsibility of the parties was, or should have been, at least 50% each.

[26] In making apportionments under s 7 of the Act, the approach adopted to the significance of the causal element has not been uniform. In Collins v Hertfordshire County Council [1947] 1 KB 598, 624, Hilbery J said that if the provisions of the section corresponding to s 7 had stopped at the words “just and equitable” it would have been comparatively easy to distribute the damages according to the relative degrees of negligence on the part of the tortfeasors; but that the presence of the words “having regard to the extent of that person’s responsibility for the damage” qualified those words and made it necessary to decide the extent the to which negligence of one party or the other was “causal in bringing about the damage”. It was, his Lordship said (at 624):

“difficult to conceive how anything other than causal acts resulting in the damage can show the extent of a person’s responsibility for the damage”.

In my opinion, however, an approach to apportionment that, as a matter of law, ascribes primacy to causal potency does not accord with the provisions of s 7. On the contrary, after discussing the question in James Hardie & Co Pty Ltd v Roberts (1999) 47 NSWLR 425, 433, Meagher JA accepted that “all relevant circumstances are to be taken into consideration when adjudicating upon a claim for contribution”. Sheller JA, with whom the other three judges of appeal in that case agreed, spoke (at 448) of “the need to examine the whole conduct of each party”, which he said should not be obscured by the conventional regard to culpability and causation.

[27] Among the circumstances to be considered are, in my opinion, the terms of any contract governing the rights and liabilities of the parties at the time the damage was done. Those terms may provide for a complete indemnity by one party in favour of the other as regards the damage for which they both are liable to another; or conversely, they may provide a complete exemption from or partial limit on liability for one against the other with respect to damage to be apportioned. Such an indemnity may be express, or it may result from the application of ordinary legal principles regulating contracts of that kind, as, for example, the legal liability to the buyer of a seller of defective goods, as in Mowbray v Merryweather [1895] 2 QB 640 Alternatively, there may be a complete or partial limitation of liability in favour of one of the tortfeasors arising, for example, from agreement as in Alex Kaye Pty Ltd v Fife (1966) 9 FLR 246, 252; or from a specific statutory provision, as in Unsworth v Commissioner of Railways (1958) 101 CLR 73; or, again, it may be the effect of the nature and terms of the contract between them that one of two tortfeasors should contribute a disproportionately larger share than the other to the loss or damage for which both are liable.

[28] The present case is an illustration of that kind. In claiming contribution or indemnity from Mr Hurst, Ms Cole alleged a contract between them under which he undertook to do such work and to supply and install parts and equipment as might be necessary and appropriate to cause the oven to safely operate. It was further alleged that it was an implied term of the contract that Mr Hurst would exercise such skill and care in advising Ms Cole and in carrying out the work and supplying and installing parts as was reasonable having regard to gas operated appliances.