6.1 The Law Reform (Miscellaneous Provisions) Act 1946 (NSW) provides that rights to contribution are available only between wrongdoers who are tortfeasors. This chapter, therefore, considers an issue which has been central to all recent proposals to reform the law of contribution, namely the extension of rights of contribution to mixed concurrent wrongdoers. The essence of these proposals has been that all wrongdoers liable for the same damage should have the same rights of contribution as those currently enjoyed only by tortfeasors.

6.2 The extension of rights of contribution to mixed concurrent wrongdoers will add a further degree of complexity to the law as it will require courts to apportion responsibility between wrongdoers whose liability to a plaintiff differs, with the only common feature being that each caused the same loss. Difficulties arise particularly where one defendant is liable to the plaintiff as a tortfeasor and another for breach of contract. The primary aim of this chapter will be to evaluate the various arguments for and against extending rights of contribution in this context in order to assess whether or not rights to contribution should be extended generally to include all mixed concurrent wrongdoers.

DIFFICULTIES IN EXTENDING THE RIGHT TO CONTRIBUTION

6.3 There are a number of arguments against extending rights of contribution to mixed concurrent wrongdoers:

1. The on-going development of the common law has made reform unnecessary. The recognition of a wider range of circumstances where there are concurrent tortious and contractual duties has already extended rights of contribution between wrongdoers. This is, however, subject to the possibility that the plaintiff may be able to choose the head of liability he or she may proceed under, to the exclusion of all others.

2. Liability arising under different sources of obligation, in particular tort and contract, is fundamentally different in kind. This gives rise to the following concerns:

• Whereas liability in tort is imposed by operation of law, liability in contract arises immediately out of agreements which have been entered into voluntarily. While it is right for the State to determine rights and liabilities of tortfeasors, it is not right for the State to use the law of contribution to alter the terms of private agreements.
• The underlying principle of contribution is that each defendant is responsible for the same loss, and that each defendant has the same kind of liability to the plaintiff. The requirement that each defendant be liable to the plaintiff in the same way is the basis on which a court is able to apportion responsibility between the defendants.

The effect of concurrent liability on rights to claim contribution

6.4 The widening range of circumstances in which courts find that wrongdoers have a concurrent liability under different heads of liability, may have the effect of extending wrongdoers’ rights to contribution beyond situations involving only tort. The full extent of rights of contribution in such circumstances depends upon two separate issues:

• the extent to which courts will find that liability in tort may be concurrent with liability for breach of contract or for liability arising out of the operation of a statute; and
• whether or not the plaintiff to the primary cause of action can prevent D1 claiming contribution by suing D1 only for breach of contract.

Expansion of the tort of negligence

6.5 The expansion of the tort of negligence has potentially widened the circumstances in which one tortfeasor may claim contribution from another tortfeasor, under the Law Reform (Miscellaneous Provisions) Act 1946 (NSW).

6.6 Concurrent duties in statute, common law and equity. Situations can now be envisaged where claims arising from damage can be founded on tort as well as other bases of liability. An example may be found in the Western Australian case of Biala Pty Ltd v Mallina Holdings Ltd¹ where the plaintiffs claimed equitable compensation for breach of fiduciary duty, damages under s 574(8) of the Companies (Western Australia) Code and damages in negligence.²

6.7 Concurrent duties in tort and in contract. In recent years there has been some judicial consideration of the existence of concurrent duties in tort and contract. The case of Hawkins v Clayton³ which involved the relationship between a solicitor and that solicitor’s client, contains some statements which go against the traditional view that the relationship between a solicitor and that solicitor’s client is a contractual one, regulated by the contract alone.⁴ Justice Deane held that there was no need to imply a contractual duty of care in the circumstances of the case where there was a co-extensive duty of care in tort.⁵ He also held that the tortious duty of care could go beyond the terms of the contract.⁶ Chief Justice Mason and Justice Wilson, in a dissenting judgment, agreed in substance with Justice Deane’s statements but, unlike Justice Deane, who was in the majority in finding that some form of liability existed, found that there was no implied term in contract and no liability in tort in the instant case.

6.8 More recently, in Bryan v Maloney,⁷ the High Court considered the question of whether a negligent builder could owe a subsequent purchaser of a property a relevant duty of care. Chief Justice Mason and Justices Deane and Gaudron observed that the builder and the original owner of the property were parties to a contract in relation to the house:

Whatever may have been the position in earlier times, the existence of such a contractual relationship between builder and client did not preclude the existence either of a relationship of proximity between them in relation to that work or of a consequent duty of care under the ordinary law of negligence.⁸

6.9 The above decisions do not stand for the proposition that all duties arising out of the operation of contract law are concurrent with duties imposed by operation of the law of tort.⁹ There are duties imposed by operation of the law of contract which will not be concurrent with any duty imposed by the law of tort. Obligations arising out of terms dealing with fitness for purpose or merchantibility are perhaps examples of obligations in contract which would not be concurrent with duties imposed by operation of tort.

The plaintiff’s choice of action

6.10 The second issue of equal significance arises where a plaintiff brings an action in contract and the defendant wishes to assert his or her liability in tort so as to form the basis of a right of contribution.¹⁰ In Brown v Sevrup Fisheries Pty Ltd,¹¹ the Tasmanian Supreme Court found that there was no right to contribution between joint wrongdoers in these circumstances. Traditionally the view of the courts has been that the existence of liability in contract meant that a plaintiff’s claim lay in contract only.¹² More recently there has been a tendency to allow a plaintiff the choice of the head of liability under which he or she wishes to proceed.¹³ Some more recent decisions in New South Wales have not limited the right to contribution in such situations. In Rap Industries Pty Ltd v Royal Insurance Australia Ltd Justice Brownie stated that:

... there are many cases where defendants exchange cross-claims amongst themselves but where one defendant is liable in contract as well as in tort, for example, as the employer of the plaintiff or as the proprietor of an omnibus upon which a fare-paying passenger is riding when in a collision with another motor vehicle ... where appellate courts have not discerned any such limitation on the function of sec 5(1)(c) [Law Reform (Miscellaneous Provisions) Act 1946] ... It seems to me, for example, that the reasoning of the High Court in Mahony v J Kruschich (Demolitions) Pty Ltd (1985) 156 CLR 522 is inconsistent with [such a principle].¹⁴ ... The better view it seems to me is the view of Professor Glanville Williams ... which Sheppard J, sitting as a Judge of this Court, thought sound in Employers Corporate Investment Pty Ltd v Cameron (1977) CLC 40-365.

... it seems to me to be entirely consistent with the provisions of the legislation that a defendant sued in contract [may demonstrate] by evidence and submission at the trial that he is liable in tort and is therefore a tortfeasor liable in respect of the plaintiff’s damage within the meaning of the statute. I see no reason why he should not be then regarded as other than a person whose liability as a tortfeasor has been ascertained by judgment.¹⁵

6.11 In AWA Ltd v Daniels, Justice Rogers referred to this passage and followed the approach adopted by Justice Brownie.¹⁶ In any case, where a wrongdoer is liable in both tort and contract or, in tort and for breach of a statute, a concurrent wrongdoer may, on this interpretation, be able to maintain a claim for contribution on the basis that both are tortfeasors.

6.12 However, in Bryan v Maloney,¹⁷ Chief Justice Mason and Justices Deane and Gaudron stated that some aspects of the relationship between duties in tort and contract were “helpfully and correctly explained” by Justice Le Dain of the Supreme Court of Canada in Central Trust Co v Rafuse.¹⁸ One of the explanations referred to was as follows:

A concurrent or alternative liability in tort will not be admitted if its effect would be to permit the plaintiff to circumvent or escape a contractual exclusion or limitation of liability for the act or omission that would constitute the tort. Subject to this qualification, where concurrent liability in tort and contract exists the plaintiff has the right to assert the cause of action that appears to be most advantageous to him in respect of any particular legal consequence.¹⁹

This suggests that there is support in the High Court for the possibility that a plaintiff may choose the basis of liability under which he or she may proceed against a defendant where liability in tort and contract are concurrent. This would have the effect of allowing the plaintiff to decide, in some cases, on whom the financial burden of the plaintiff’s damage will ultimately fall.

Different nature of liability in tort and in contract

6.13 Another argument against the extension of rights of contribution to mixed concurrent wrongdoers is that the liability imposed by the law of tort is of a fundamentally different nature from the liability arising out of the law of contract.

Intrusion of tortfeasors into private contractual arrangements

6.14 The overall effect of the proposed reform to extend rights of contribution will be to alter existing private contractual arrangements by giving a tortfeasor a right of contribution against a defendant whose breach of contract has caused the same damage to the plaintiff.²⁰ There are several specific ways in which an extension of rights of contribution can be seen to intrude illegitimately into existing private arrangements. These are:

• If D2 has entered into a contract limiting or exempting D2’s liability to P, D2 ought not to be made liable to D1 through a claim for contribution.²¹ A successful claim for contribution by D1 will effectively penalise D2 who has already borne the cost of entering into the contract with P.
• P might wish to recover damages from D1 (a tortfeasor) but might not wish to sue D2 (a contractual obligor), for legitimate commercial reasons. For example, P may have an interest in D2’s financial well-being. In deciding whether to sue D1, P would then have to decide whether to run the risk of exposing D2 to a claim for contribution. This is, however, not a strong argument.
• When P enters into a contract with D2, P is required to pay, in some way, for the contractual obligations owed by D2 to P. A successful claim for contribution by D1 (a tortfeasor) against D2 will provide D1 with a benefit arising from the contractual relationship for which P has in effect paid.

Apportionment of liability

6.15 There is also a possibility that the difference in the source of liability of mixed concurrent wrongdoers, D1 and D2, will make it difficult for courts to decide how to apportion liability between D1 and D2.

6.16 An assumption underlying existing rights of contribution is that the liability of both wrongdoers to the plaintiff is the same. In the case of equitable rights of contribution, this assumption is an explicit part of the doctrine. We have already noted that, in order to seek contribution in equity, defendants need to be under a co-ordinate liability to make good the one loss.²² The underlying principle of contribution is the requirement that each of the defendants be “equally bound” which is the basis for the right to be “equally relieved”. A right of contribution is, in this sense, a simple and unproblematic apportionment of responsibility between defendants who share the same kind of liability to the plaintiff. The law providing for rights of contribution between tortfeasors is supported by the same rationale. Each defendant is liable to the plaintiff for the same kind of liability, and apportionment between the defendants is simply required to be “just and equitable”.²³

6.17 Where the liability of the defendants is different, as in the case of one defendant being liable to the plaintiff for breach of contract and the other defendant being a tortfeasor, the underlying rationale for the apportionment of responsibility disappears. The liability of the defendant (D1), who is liable to P in tort, arises because D1 breached a duty imposed on D1 by operation of the law. The liability of D2 in contract arises because D2 has breached a term of the contract with which D2 had promised to comply. The only common element between D1 and D2 is that breach of their separate and independent obligations to P caused the harm sustained by P. In this context it may be argued that a just and equitable apportionment of responsibility, between D1 and D2, is not possible, because each of the defendants is exposed to an independent liability imposed for different reasons.

6.18 This approach to analysing rights of contribution places a high degree of importance on maintaining distinct boundaries between the primary categories of legal rights, for example between rights and duties imposed by the law of contract on the one hand and by the law of tort on the other. However, the simple answer must be that the courts will do the best they can, just as they do in apportioning liability in cases of contributory negligence, which involve the apportionment of damages between tortfeasors and plaintiffs, using concepts like “responsibility” and “causation”.²⁴ The Alberta Institute of Law Research and Reform, for example, while recognising that the rules relating to remoteness of damage and the measure of damages are not precisely the same in tort as in contract, observed that the claims for contribution would only be available in respect of the same “overlapping damage, flowing from the overlap in liability, whether it arises in tort or in contract” and concluded that there would not be any serious problems with the proposed reform.²⁵

Adding to the complexity of the law

6.19 The extension of rights of contribution to mixed concurrent wrongdoers will give rise to some added complexity for the law in this area. An example of such an instance is the need to distinguish carefully between the doctrines of subrogation and contribution. The following example shows the way in which the two principles operate. P sustains damage as a result of D’s negligence. P has a contract of insurance with A (the insurer) which covers the same loss. P, if fully insured, recovers the loss from A.²⁶ A then succeeds, by operation of the doctrine of subrogation, to all of P’s rights against D.²⁷ It would not be possible, even with the introduction of rights of contribution between mixed concurrent wrongdoers, for D to entertain any right of contribution against A in these circumstances. A simple variation on these facts would be that P successfully recovers from D without claiming under the contract of insurance with A. In this case D cannot claim contribution (even if a right of contribution arose between mixed concurrent wrongdoers) from A (the insurer) for two reasons. The first is that at the time of D claiming contribution A has no legal liability to P. The second is that at the time when D claims contribution A is not responsible, by breach of contract, for causing P the same loss for which D is responsible. The result would be unchanged even if at the time of P suing D for P’s original loss P had a parallel action against A disputing the terms of the contract of insurance.

6.20 Another area of complexity may arise in the assessment of compensation in contract and tort. The object of damages in contract is to put P in the position which P would have been in if the contract had been performed,²⁸ which leads to the award of expectation damages,²⁹ whereas, in tort, the object of damages is to put P in the position he or she would have been in if there had been no tort. Expectation damages are, therefore, not available in tort. While the protection of P’s expectation may, in particular cases, yield a tortious result, this is just a coincidence.

6.21 The extension of rights of contribution to cases involving other than liability in tort will also lead to more cases in which multiple actions will be possible,³⁰ especially in light of the Commission’s tentative intention not to propose the introduction of a rule requiring that all claims for contribution be heard as part of the one action.³¹

ARGUMENTS IN FAVOUR OF EXTENSION

6.22 The case for extending the right to claim contribution to mixed concurrent wrongdoers is essentially a repetition of arguments in favour of having rights of contribution between concurrent tortfeasors:³²

• the unfairness in giving a plaintiff the right to determine which wrongdoer must ultimately pay for the loss;
• the unfairness of denying D1 a right to contribution so that D2, who would also be liable, is unjustly enriched at D1’s expense;
• the inappropriateness of relying on the development of concurrent liability as the basis for defining the extent of rights of contribution; and
• the appropriateness of the principle that, as far as possible, there should be a rational connection between a wrongdoer’s liability for the harm caused and the wrongdoer’s responsibility for that harm.

6.23 The case for expanding rights of contribution therefore focuses on the responsibility of D1 and D2 for causing the same harm to the plaintiff. If both the defendants cause the same harm to the plaintiff, the ultimate conclusion is that it is unjust for one of the defendants to be wholly responsible for compensating the plaintiff and the other not responsible at all.

Where D2 and P have contracted to limit liability

6.24 It is helpful to apply these general arguments to a particular situation which will arise when there are rights of contribution between mixed concurrent wrongdoers. Consider a situation where D1 and D2 have caused the same harm to P. D1 is a tortfeasor and D2 has breached a term of D2’s contract with P. The contract between D2 and P, which was concluded before P sustained the harm, includes a term which either limits or excludes D2’s liability to P.³³ A satisfactory resolution of this issue is necessary to the success of any proposal to extend rights of contribution to mixed concurrent wrongdoers. It also requires that a fundamental choice be made about the way in which the proposed scheme of contribution should operate.

6.25 There are three basic responses to the situation where D1 is liable to P in tort and D2 is liable to P for breach of contract:

• D1 should have a full right of contribution against D2. This means that D2 would not have the benefit of the contractual exclusion or limitation of liability in the contribution proceedings instituted by D1, but would have the benefit of the contractual term if directly sued by P. This option has not been proposed by any law reform agency.³⁴
• To allow P to recover in full against D1 (the tortfeasor) and limit, according to the contract, D1’s right to claim contribution from D2.
• To provide that when P brings an action, P is identified with, and is responsible for, that proportion of the loss for which D2 is responsible. The overall result is that D2 obtains the benefit of the contractual exemption, D1 is responsible for the relevant proportion of the loss caused to P and the burden of the exemption clause is borne by P.³⁵ This option embodies a principle of proportionate liability in that, by requiring that the total amount of P’s damages be reduced in accordance with a contractual limitation, it leaves the tortfeasor, D1, liable only for that portion of the loss which can be attributed to D1’s negligence.

P bears D2’s liability

6.26 It appears to the Commission that the limited exception to the principle of solidary liability of making P bear that part of D2’s liability which is excepted by contract should be rejected. The arguments which led the Commission to recommend that the principle of solidary liability be retained, and that the principle of proportionate liability be rejected, apply equally to this situation.

D1’s right to contribution limited by contract between D2 and P

6.27 The preferred option is to allow P to recover in full against the tortfeasor, D1, and to limit D1’s right to claim contribution from D2 according to the contractual limitation or exclusion agreed between D2 and P. In relation to contractual exemptions only, the Ontario Law Reform Commission considered various alternatives for reform, including that there be no change in the law which denies D1 the right to claim contribution in such circumstances:

One possibility is to regard the present law as satisfactory and not in need of reform. Some of its strengths have already been indicated. The first is that it is consistent with the notion that the law of contribution is restitutionary in nature, and that rights of restitution are generally granted only for the purpose of preventing one person from retaining, without payment, a benefit conferred upon her by another in circumstances where the recipient of the benefit would thereby be unjustly enriched at the expense of the person who conferred it. Since D1’s payment to P did not discharge a liability owed by D2 to P, D2 received no benefit from P’s payment, and should therefore not be required to pay contribution. The fact that D1’s payment to P may have persuaded P not to launch proceedings against D2 - which, in any event, could not have resulted in a judgment against D2 in P’s favour - does not constitute a “benefit” the conferral of which could support a restitutionary claim for contribution.³⁶

6.28 The result of this argument is that D1 is denied a right of contribution from D2 where the contract excludes all of D2’s liability to P for the harm caused by D2’s breach of contract.³⁷ The application of the principle of unjust enrichment in these circumstances is, therefore, supportive of this approach. The principle adopted by the Ontario Law Reform Commission to resolve this problem applies equally to cases in which D2 merely limits, rather than excludes, liability in contract to P.

6.29 The second arm of the Ontario Law Reform Commission’s argument in favour of this option is based on the nature of P’s claim to compensation from both D1 and D2. The Commission argued that:

[T]o prevent D1 from passing on to D2 any of the liability for the payment made to satisfy P’s claim is not necessarily unjust to D1: for one thing, D1 would have been liable in the same amount if she alone had caused P’s loss, and for another, there is no reason why D1 should benefit from the existence of a stipulation in the contract between P and D2 for which D2 bargained with P. The price of the exemption clause may well be reflected elsewhere in the terms of the contract between P and D2; to allow D1 to claim contribution from D2 would be to give D1 a benefit for which she has paid nothing.³⁸

6.30 The core principle adopted by the Ontario Law Reform Commission is that, even where the plaintiff has dealt with D2 in a way that affects D1’s claim for contribution, the principle that the plaintiff is entitled to full compensation because he or she has sustained a single, indivisible loss prevails over D1’s claim for contribution from D2. Other law reform agencies have supported this conclusion, choosing to respect the contractual arrangements agreed upon before liability was incurred.³⁹ This approach has been adopted in England, following recommendations of the Law Commission,⁴⁰ by s 2(3) of the Civil Liability (Contribution) Act 1978 (Eng)⁴¹ which provides as follows:

(3) Where the amount of the damages which have or might have been awarded in respect of the damage in question in any action brought in England and Wales by or on behalf of the person who suffered it against the person from whom the contribution is sought was or would have been subject to-

(a) any limit imposed by or under any enactment or by any agreement made before the damage occurred; ...

the person from whom the contribution is sought shall not by virtue of any contribution awarded under section 1 above be required to pay in respect of the damage a greater amount than the amount of those damages as so limited or reduced.

Determining the contributable sum

6.31 There are a number of options for determining the contributable sum between D1 and D2 in these circumstances. The solution adopted by the Ontario Commission is:

that the fact that a wrongdoer’s liability to the injured person is limited should be ignored for the purpose of calculating the amount that she is liable to pay by way of contribution, except for the purpose of ensuring that her liability to contribute does not exceed the amount in which her liability to the injured person was limited.⁴²

The English Law Commission recommended that this was the preferred method for calculating rights of contribution in these circumstances.⁴³

VIEWS OF OTHER LAW REFORM AGENCIES

6.32 Several law reform agencies have considered the reform of rights of contribution between concurrent wrongdoers. One of the central issues discussed in their reports is whether rights of contribution should be extended to mixed concurrent wrongdoers and each has recommended that they should be.⁴⁴ In a number of cases, these recommendations have been adopted in the form of new legislation defining rights of contribution between wrongdoers.⁴⁵

THE COMMISSION’S PROVISIONAL VIEW

6.33 The Commission’s provisional view is that rights of contribution should be extended to mixed concurrent wrongdoers. The Commission is also of the opinion that, if rights of contribution are extended to mixed concurrent wrongdoers, new legislation should clearly indicate that D2 should retain the benefit of a contractual term limiting or excluding D2’s liability to P in any contribution proceedings.

Balancing the rights of the parties

6.34 In proposing that rights of contribution be extended to mixed concurrent wrongdoers the Commission bears in mind the arguments against such an extension of rights of contribution. The Commission notes that there are important differences between obligations which are voluntarily adopted and rendered enforceable by the law of contract, and obligations which are imposed by operation of the law of tort and also that the law of contribution will intrude into some private contractual arrangements. If a person breaches a contract so as to cause harm to the plaintiff, and a tortfeasor causes the same harm to the plaintiff, it seems to the Commission that exposing the contractual obligor to a claim for contribution is not unduly intrusive. The law provides that both defendants are subject to civil obligations for breach of which the plaintiff may seek a legal remedy. Basic principles of fairness would suggest that in these circumstances it is unfair to allow the plaintiff to choose the wrongdoer from whom to recover the loss.

6.35 Where the contractual obligor has limited or excluded liability for the harm caused by the breach of contract different principles apply. In this instance, the option of protecting D2 from a claim by D1 where D2 has the benefit of a limitation or exclusion in the contract with P ensures that a fair balance is maintained between the rights of all of the parties to a claim for contribution. P retains the right to obtain full compensation for the damage from the tortfeasor D1 and D2, whose breach of contract has caused the same harm to P, retains the benefit of any clause limiting or excluding D2’s liability to P. The tortfeasor (D1) remains liable for the full extent of the loss caused to P as provided for by the doctrine of solidary liability.

Breaches of trust and other fiduciary duties

6.36 In reaching its conclusion, the Commission has concentrated on instances where mixed concurrent wrongdoers are liable in tort and contract. Although special considerations would apply where the mixed concurrent wrongdoers were liable in tort or contract and for breach of fiduciary duty, there seems to be no reason in principle why this would present any difficulties greater than, or substantially different from, the position where mixed concurrent wrongdoers are liable only in tort and contract. To some extent, equitable principles have invaded contracts and it is not uncommon for the parties’ contractual relationship to have an equitable overlay.⁴⁶ In principle there should not be a problem, even where a remedy in equity, such as equitable compensation, is competent rather than damages, since there will be no practical difference. It is conceivable, but unlikely, that the intrusion of equity would, in some cases, result in the denial of compensation as a matter of discretion. But, generally, rights to contribution should only be affected where they are excluded in the contract.

6.37 In any case, others have warned against taking too limited an approach to the extension of rights of contribution, lest the omission of categories of wrongdoers other than those liable in contract will lead to further claims of injustice as has already been the case with respect to contribution between tortfeasors and wrongdoers who are liable in contract.⁴⁷

Proposal 11

Rights of contribution should be extended to include mixed concurrent wrongdoers. Rights of contribution to mixed concurrent wrongdoers liable in tort and contract should explicitly provide that a plaintiff’s right to full compensation be protected and that any defendant whose liability to the plaintiff in contract is limited by a clause limiting or exempting liability to the plaintiff should have the full benefit of those contractual terms.

Legislative provisions

6.38 The Law Reform (Miscellaneous Provisions) Act 1946 (NSW) provides rights of contribution for tortfeasors who are responsible for a single loss sustained by the plaintiff. The various proposals to extend rights of contribution to mixed concurrent wrongdoers aim to give all wrongdoers who have caused the same loss to a plaintiff the same rights and obligations.

6.39 An example of a legislative implementation of the extension of rights of contribution to mixed concurrent wrongdoers may be found in the Civil Liability (Contribution) Act 1978 (Eng). Section 1(1) of that Act provides:

Subject to the following provisions of this section, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise).⁴⁸

Further, s 6(1) provides:

A person is liable in respect of any damage for the purposes of this Act if the person who suffered it (or anyone representing his estate or dependants) is entitled to recover compensation from him in respect of that damage (whatever the legal basis of his liability, whether tort, breach of contract, breach of trust or otherwise).⁴⁹

6.40 The formulation for the extension of rights of contribution proposed by the New Zealand Law Commission is a different example of such a legislative provision:⁵⁰

This Act applies to loss or damage

(a) which arises wholly or partly from an act or omission of a person, whether intentional or not, including an act or omission that is


(i) a tort, or

(ii) a breach of statutory duty, or

(iii) a breach of contract, or

(iv) a breach of trust or other fiduciary duty

whether or not the act or omission is also a crime, and


(b) for which that person has a civil liability to pay damages.

but does not apply to loss or damage arising wholly or partly from a failure to pay a debt or from the fault of two or more ships within the meaning of Part XIV of the Shipping and Seamen Act 1952.⁵¹

Application of the legislative scheme

6.41 If legislation extends rights of contribution to mixed concurrent wrongdoers it will be necessary to determine whether the legislation will override existing contractual and equitable rights of contribution. Subject to certain limited exceptions, the Ontario Law Reform Commission recommended that the proposed rights of contribution should supersede any other right of contribution:⁵²

The Commission believes that, as a general principle, the proposed new Act represents an equitable and workable statutory scheme of contribution that ought to be made applicable to all cases of concurrent wrongdoing. However ... we do appreciate that certain exceptions should be made to the otherwise universal scope of our Act.⁵³

One exception identified by the Ontario Law Reform Commission was the Ontario Workers Compensation Act.⁵⁴ A New South Wales equivalent would be the Workers Compensation Act 1987 (NSW) or any other statutes amended to include similar contribution provisions.⁵⁵

6.42 Similarly, s 7 of the Civil Liability (Contribution) Act 1978 (Eng) provides that:

(3) The right to recover contribution in accordance with section 1 above supersedes any right, other than an express contractual right, to recover contribution (as distinct from indemnity) otherwise than under this Act in corresponding circumstances; but nothing in this Act shall affect -

(a) any express or implied contractual or other right to indemnity; or

(b) any express contractual provision regulating or excluding contribution;

which would be enforceable apart from this Act (or render enforceable any agreement for indemnity or contribution which would not be enforceable apart from this Act).

6.43 The Commission regards it as obvious that, where statute establishes a general regime, that regime takes precedence only over general schemes.⁵⁶ Express contractual provisions, where made, should also be allowed to take effect. However, out of an abundance of caution, the effect of express contractual provisions should be stated in legislation. The Commission considers that the relationship between statutory provision and normal equitable rights of contribution could, in light of the development of equitable principles,⁵⁷ become complex. The Commission is provisionally of the view that the equitable regime should continue to operate without any restraint from the statutory regime. We are mindful of the fact that equitable rights of apportionment, with an emphasis on the maxim “equality is equity”,⁵⁸ may turn out to be more rigid than the statutory regime. We invite submissions on this issue.

Proposal 12

The proposed legislation defining rights of contribution should supersede all other rights of contribution except equitable rights of contribution. There should also be a provision allowing that statutory rights of contribution may be modified by express contractual terms.

QUESTIONS ARISING IN CHAPTER 6

6.1 Should rights of contribution be extended to mixed concurrent wrongdoers?

6.2 Where D1 is liable to P in tort and D2 is liable to P for breach of contract, should P be made to bear that part of D2’s liability which may be excepted by contract?

6.3 Where D1 is liable to P in tort and D2 is liable to P for breach of contract, should P be allowed to recover in full against D1, and should D2 be allowed to retain the benefit of any contractual term limiting or excluding D2’s liability to P?

6.4 Where D1 is liable to P in tort and D2 is liable to P for breach of contract, should a plaintiff’s right to full compensation prevail over a defendant’s right to seek contribution in all cases?

6.5 Should other rights of contribution, including equitable rights of contribution, be excluded from proposed legislation defining rights of contribution?

6.6 Should statutory rights of contribution be modified by express contractual terms?

1. (1994) 13 WAR 11.

2. In the circumstances, however, the claim in negligence was dismissed: Biala Pty Ltd v Mallina Holdings Ltd (1994) 13 WAR 11 at 83.

3. (1988) 164 CLR 539.

4. See Groom v Crocker [1939] 1 KB 194.

5. (1988) 164 CLR 539 at 585.

6. (1988) 164 CLR 539 at 579.

7. (1995) 182 CLR 609.

8. (1995) 182 CLR 609 at 619. References have been omitted.

9. Hawkins v Clayton (1988) 164 CLR 539 at 582-584 per Deane J.

10. See M J Tilbury, Civil Remedies Volume 2: Remedies in Particular Contexts (Butterworths, Sydney, 1993) at 278-279.

11. [1970] Tas SR 1.

12. Groom v Crocker [1939] 1 KB 194.

13. See M J Tilbury, Civil Remedies Volume 2: Remedies in Particular Contexts (Butterworths, Sydney, 1993) at 278 and the cases there cited.

14. In that case, the High Court held that a negligent tortfeasor could avoid liability for the consequences of a plaintiff’s subsequent injury (whether negligently caused or not) depending on “whether the subsequent tort and its consequences are themselves properly to be regarded as foreseeable consequences of the first tortfeasor’s negligence”: Mahony v J Kruschich (Demolitions) Pty Ltd (1985) 156 CLR 522 at 528. See para 4.71.

15. Rap Industries Ltd v Royal Insurance Australia Pty Ltd (1988) 5 ANZ Ins Cas 60-876 at 75,519-75,520.

16. AWA Ltd v Daniels (1992) 7 ACSR 759 at 856-857 (affirmed in part as Daniels v Anderson (1995) 37 NSWLR 438).

17. (1995) 182 CLR 609.

18. [1986] 2 SCR 204-205; 31 DLR (4th) at 521-522.

19. See Bryan v Maloney (1995) 182 CLR 609 at 622.

20. A similar argument applies to the extension of rights of contribution between tortfeasors and persons in breach of equitable obligations to P.

21. The Scottish Law Commission drew a distinction between contractual arrangements entered into before the loss, injury or damage was sustained and those entered into afterwards. Their conclusion was that the former was acceptable, on the basis that interference with freedom of contract in such instances was not warranted and that D2 would have received no benefit from D1’s payment, while the latter was not acceptable being open to the real possibility of collusion between D2 and P to the detriment of D1: Report on Civil Liability: Contribution (Scot Law Com No 115, 1988) at 18-19.

22. See para 5.11; and also para 3.6.

23. Section 5(2) Law Reform (Miscellaneous Provisions) Act 1946 (NSW).

24. See Pennington v Norris (1956) 96 CLR 10; Podrebersek v Australian Iron and Steel Pty Ltd (1985) 59 ALJR 492.

25. University of Alberta, Institute for Law Research and Reform, Contributory Negligence and Concurrent Wrongdoers (Report 31, 1979) at 50. See also England and Wales, Law Commission, Contribution (Working Paper 59, 1975) at para 47; and J R Morris, Apportionment of Civil Liability (Legal Research Foundation Inc, Publication No 28, 1987) at 9-11.

26. This payment will not reduce the liability of D to pay damages to P. See J G Fleming, The Law of Torts (8th ed, Law Book Company, Sydney, 1992) at 244, for a discussion of the principles applicable in the law of tort concerning collateral payments.

27. See Castellain v Preston (1883) 11 QBD 380.

28. Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64.

29. See generally M J Tilbury, Civil Remedies Volume 2: Remedies in Particular Contexts (Butterworths, Sydney, 1993) at 267-269 and 283-284.

30. See para 4.61.

31. See paras 7.7-7.11.

32. See paras 3.6-3.13.

33. In the case of a contract involving the exclusion of D2’s liability to P, consideration of the issues raised in this problem requires the relaxation of the rule in George Wimpey & Co Ltd v British Overseas Airways Corporation [1955] AC 169. In this case it was held that D1’s right of contribution from D2 was dependent upon D2 also being liable to P. In the case of a contract excluding liability, D2 would not be liable to P and hence D1 would not be able to claim contribution from D2. Relaxation of the rule in George Wimpey & Co Ltd v British Overseas Airways Corporation allows for a principled consideration of the various ways of dealing with rights of contribution between mixed concurrent wrongdoers.

34. See esp Scottish Law Commission, Report on Civil Liability: Contribution (Scot Law Com No 115, 1988) at para 3.37.

35. An example of this option is where an exemption clause relieves D2 of all liability to P. P only recovers from D1 the proportion of the loss for which D1 is actually responsible. Although the position is more complex, the same principle applies where D2 limits his or her liability to P rather than excluding it altogether. In this latter case P will have to bear the amount of the loss caused by D2 for which D2 is not responsible because of the clause limiting liability.

36. Ontario Law Reform Commission, Report on Contribution Among Wrongdoers and Contributory Negligence (1988) at 124.

37. The same conclusion, based on similar grounds, was reached by the Scottish Law Commission, Report on Civil Liability: Contribution (Scot Law Com No 115, 1988) at paras 3.33-3.37.

38. Ontario Law Reform Commission, Report on Contribution Among Wrongdoers and Contributory Negligence (1988) at 124.

39. Law Reform Committee of South Australia, Forty-second Report of the Law Reform Committee of South Australia to the Attorney-General, Relating to Proceedings Against and Contributions Between Tortfeasors and Other Defendants (1977) at 11-12; Law Reform Commission of Hong Kong, Report on the Law Relating to Contribution Between Wrongdoers (Topic 5, 1984) at paras 8.2-8.6. See also New Zealand Law Commission, Apportionment of Civil Liability: A Discussion Paper (PP 19, 1992) at 105.

40. England and Wales, Law Commission, Law of Contract: Report on Contribution (Law Com 79, 1977) at paras 71-74.

41. See also s 24(2A) of the Wrongs Act 1958 (Vic).

42. Ontario Law Reform Commission, Report on Contribution Among Wrongdoers and Contributory Negligence (1988) at 135.

43. England and Wales, Law Commission, Law of Contract: Report on Contribution (Law Com 79, 1977) at paras 76-77.

44. England and Wales, Law Commission, Law of Contract: Report on Contribution (Law Com 79, 1977) at para 81; Victoria, Chief Justice’s Law Reform Committee, Report on Contribution (1979); Scottish Law Commission, Report on Civil Liability: Contribution (Scot Law Com No 15, 1988) at para 3.5; Ontario Law Reform Commission, Report on Contribution Among Wrongdoers and Contributory Negligence (1988) at 73-75; New Zealand Law Commission, Apportionment of Civil Liability (PP 19, 1992) at paras 99-104 and 175; Manitoba Law Reform Commission, Scope of Apportionment under the Tortfeasors and Contributory Negligence Act (Informal Report 22A, 1992); Law Reform Committee of South Australia, Forty-second Report of the Law Reform Committee of South Australia to the Attorney-General Relating to Proceedings Against and Contributions Between Tortfeasors and Other Defendants (1977) at 10-11; Law Reform Commission of Hong Kong, Report on the Law Relating to Contribution Between Wrongdoers (Topic 5, 1984) at paras 5.2-5.3; University of Alberta, Institute of Law Research and Reform, Contributory Negligence and Concurrent Wrongdoers (Report 31, 1979) at 40-52. See also G L Williams, Joint Torts and Contributory Negligence: A Study of Concurrent Fault (Stevens & Sons, London, 1951) at 506-507; and J R Morris, Apportionment of Civil Liability (Legal Research Foundation Inc, Publication No 28, 1987) at 11.

45. See Civil Liability (Contribution) Act 1978 (Eng); Wrongs Act 1958 (Vic) Pt 4; Civil Liability Act 1961 (Ireland). The Irish Act was based almost entirely on recommendations for reform of the law of contribution made by Williams (1951).

46. P D Finn, “Equity and Contract” in P D Finn (ed), Essays on Contract (Law Book Company, Sydney, 1987) at 104.

47. See J R Morris, Apportionment of Civil Liability (Legal Research Foundation Inc, Publication No 28, 1987) at 11. See also the conclusions of the Alberta Institute of Law Research and Reform who, after an initial rejection of an extension of contribution to breaches of trust, tentatively concluded that contribution should apply to such breaches, but that provision should be made in the relevant trustee legislation: University of Alberta, Institute of Law Research and Reform, Contributory Negligence and Concurrent Wrongdoers (Report 31, 1979) at 52. The Ontario Law Reform Commission also supported separate legislation to deal with breaches of trust: Ontario Law Reform Commission, Report on Contribution Among Wrongdoers and Contributory Negligence (1988) at 77-79.

48. Similar provision is made in s 23B(1) of the Wrongs Act 1958 (Vic).

49. Similar provision is made in s 23A(1) of the Wrongs Act 1958 (Vic).

50. New Zealand Law Commission, Apportionment of Civil Liability (PP 19, 1992) at para 50.

51. The Wrongs Act 1958 (Vic) provides in generally similar terms in s 23B(1) that:

a person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage ... .

a person is liable in respect of any damage if the person who suffered that damage ... is entitled to recover compensation from the first-mentioned person in respect of that damage whatever the legal basis of liability, whether tort, breach of contract, breach of trust or otherwise.

53. Ontario Law Reform Commission, Report on Contribution Among Wrongdoers and Contributory Negligence (1988) at 78.

54. RSO 1980, c 539.

55. As proposed by the Commission: see paras 5.8-5.9.

56. Generalia specialibus non derogant.

57. See Walsh v Permanent Trustee Australia Ltd (NSW, Supreme Court, ED 2210/94, Hodgson J, 21 February 1997, unreported) at 5; Leigh-Mardon Pty Ltd v Wawn (1995) 17 ACSR 741 (NSW SC) at 751-753.

58. Aequitas est aequalitas: see R P Meagher, W M C Gummow and J R F Lehane, Equity: Doctrines and Remedies (3rd ed, Butterworths, Sydney, 1992) at paras 329-330.