SANCTION IN COSTS
5.1 Section 5(1)(b) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) operates to discourage plaintiffs from bringing successive actions by limiting the costs they can recover. It is generally presumed that the courts have an inherent power to make such costs orders in any case. However, notwithstanding this, most law reform agencies have recommended the retention of the sanction in costs rule.1 Its continued presence in contribution legislation appears uncontroversial.2
5.2 The Law Reform Commission considers that the sanction in costs rule should be retained and extended to cover not only all plaintiffs injured by multiple tortfeasors, but also plaintiffs injured by multiple wrongdoers. This recommendation represents merely an adaptation of current provisions to fit the expanded rights to contribution envisaged by the Commission.
SANCTION IN DAMAGES
5.3 Even though s 5(1)(a) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) has abolished the judgment bar rule for joint tortfeasors3 which prevented plaintiffs taking successive actions against joint tortfeasors, s 5(1)(b) continues to apply a sanction in damages to all successive actions whether the liability of tortfeasors is joint or several. This sanction in damages prevents plaintiffs from recovering any more in subsequent actions than that which they obtained in their first action. The rationale of this provision was to discourage plaintiffs from bringing multiple actions and from “forum shopping” for increased awards of damages.4
5.4 In more recent times, there has been a move in some quarters to abolish the sanction in damages rule. One reason for this has been that there is no longer so great a concern about “forum shopping” for increased awards of damages. This is because the decline in the use of civil juries has meant that the possibility of inconsistencies between jury verdicts is no longer a relevant consideration for most plaintiffs.5 Another reason for the move against the sanction in damages rule is that it is too onerous on plaintiffs and this unfairness would be heightened if rights to contribution were extended to all concurrent wrongdoers.6 This could be the case, for example, where a plaintiff takes action against one wrongdoer liable under a contract which contains some form of limitation before proceeding against a tortfeasor liable for the same damage.
5.5 The complexity arising from the introduction of a right to contribution for wrongdoers liable in contract, where liability may be limited, is certainly a reason to abolish the sanction in damages rule. This has been the course adopted in England7 and recommended in Ontario.8 However this may be seen as going too far. One way around the problem caused by the limitation of liability in some cases would be to allow the sanction in damages rule to apply only to cases where the judgment in the first action was not subject to a limitation of liability.9 This would eliminate the unfairness to those plaintiffs who were subject to some limitation in their first action, while continuing to discourage those who had obtained, but were dissatisfied with, a judgment for full compensation.
5.6 In DP 38, the Commission proposed that the sanction in damages rule should be abolished for all concurrent wrongdoers.10 Submissions on DP 38 raised a number of concerns with this proposal. Several concerns related to the expectation that the abolition of the sanction in damages rule might lead to a proliferation of litigation, either because the abolition in New South Wales alone might encourage plaintiffs from other States to pursue claims in New South Wales,11 or because there was still a degree of inconsistency between civil judgments in New South Wales courts.12 One submission drew attention to the fact that there were sufficient tactical advantages to encourage plaintiffs to run a second action once the sanction in damages rule had been removed. An example given was that plaintiffs would be able to tailor evidence in their second action according to weaknesses revealed in the first.13 It was also noted that the problem would be eliminated in any case, even in situations where liability was limited, if other measures were successful in encouraging joint actions.14
5.7 The Commission is not entirely persuaded that other measures will be successful in completely eliminating multiple proceedings so that plaintiffs will receive judgment against wrongdoers liable under different heads of liability at the same time. However, the concerns raised about the proposal to abolish the sanction in damages rule have made that course of action undesirable. The Commission has therefore decided that, in order to prevent a feared proliferation of litigation and to ensure that plaintiffs subject to a limitation under one head of liability only are not disadvantaged, the sanction in damages rule should continue to apply to plaintiffs who have received judgment for the whole of their damages. This will mean that the sanction in damages rule will not apply to plaintiffs in cases where the liability of a wrongdoer in the first action has been limited in some way.
THE DISTINCTION BETWEEN JOINT WRONGDOERS AND SEVERAL WRONGDOERS
5.8 Concurrent wrongdoers may be either joint or several. However, this distinction has become difficult to justify, especially since the passing of contribution legislation has rendered the distinctions between joint tortfeasors and several tortfeasors irrelevant. When the right to claim contribution is extended to wrongdoers other than tortfeasors, such differences as remain with respect to wrongdoers generally may adversely affect a concurrent wrongdoer’s right to claim contribution. The following paragraphs contain recommendations to remove the legal distinction between joint wrongdoers and several wrongdoers.
Judgment bar rule
5.9 The judgment bar rule, which provides that judgment against one joint wrongdoer bars actions against other joint wrongdoers, is one of the important points of distinction between cases involving joint wrongdoers and those involving several concurrent wrongdoers. The operation of this rule was removed, with respect to joint tortfeasors, by s 5(1)(a) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW), thereby placing joint tortfeasors in the same position as several tortfeasors. The sanction in damages15 and sanction in costs provisions operate to discourage successive actions by plaintiffs against joint tortfeasors.
5.10 Since s 5(1)(a) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) refers only to joint tortfeasors, the extension of rights of contribution to other wrongdoers will make it necessary to extend the abolition of the judgment bar rule to include other wrongdoers who are jointly liable to the plaintiff, including co-sureties.
5.11 Section 97 of the Supreme Court Act 1970 (NSW), which prevents the operation of the judgment bar rule except where s 5(1)(a) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) applies, will need to be amended to confirm the abolition of the judgment bar rule for all joint wrongdoers. Other provisions which will also need to be amended include the relevant parts of the District Court Rules 1973 (NSW)16 and s 29 of the Local Court (Civil Claims) Act 1970 (NSW), which allows a plaintiff, who has obtained judgment against one or more of several defendants, to proceed to judgment and enforce it against any other defendant or defendants.
Settlement bar rule
5.12 At common law, release or release by accord and satisfaction by a plaintiff with a joint wrongdoer discharges the liability of all other joint wrongdoers.17 This was the case even where the amount for which the plaintiff settled with a wrongdoer was less than the amount of the judgment in favour of the plaintiff. This rule was ameliorated by the effect of the distinction between a “release” and a “covenant not to sue”. The latter, but not the former, preserved the plaintiff’s rights against the other parties who were liable to the plaintiff. However, a plaintiff had to state specifically that the agreement with the joint tortfeasor was a covenant not to sue.
5.13 Section 5(1)(a) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW), by effectively severing the unity of a cause of action against joint tortfeasors, has implicitly abrogated the basis for the settlement bar rule.18 An extension of rights of contribution to all wrongdoers should, therefore, have the effect of implicitly abrogating the basis for the settlement bar rule with respect to all joint wrongdoers. There is, therefore, on the face of it, no need to abolish the rule expressly.
5.14 In DP 38 the Commission proposed that the settlement bar rule should be abolished for all joint wrongdoers on the grounds that the effect of the rule was pernicious in any case and generally against the policy of the law to encourage settlements.19 Instead the effect of a settlement between a plaintiff and one of a number of joint wrongdoers should depend on the intention of the plaintiff.20 The settlement bar rule has recently been expressly abolished in proceedings before the New South Wales Dust Diseases Tribunal.21 Ontario had also expressly abolished the rule.22 However, in light of the recent decision of the High Court in Thompson v Australian Capital Television Pty Ltd23 the Commission is not entirely convinced that there is a good reason for expressly abolishing the rule.
5.15 Although the Commission does not consider that there will be any need to abolish the settlement bar rule expressly since the extension of rights of contribution to all wrongdoers will impliedly abolish it, in order to avoid any doubt, and given recent legislative developments in New South Wales, we recommend that the abolition of the settlement bar rule be expressly stated in legislation.
Single judgment rule
5.16 The single judgment rule provides that when joint wrongdoers are sued together only one judgment can be given against them, and damages cannot be severed. One consequence of this rule at common law was that it was impossible for a court to apportion damages between joint tortfeasors, or to award exemplary damages against any one of them. The High Court has held that s 5(1)(a) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) abolished the common law rule that only one judgment could be awarded in an action for damages against joint tortfeasors and in that case, the Court confirmed an award of exemplary damages against one of the joint tortfeasors who was a party to that action.24
5.17 In DP 38 the Commission recognised that, if s 5(1)(a) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) were recast to include all joint wrongdoers, it would follow that the single judgment rule would be abrogated for all joint wrongdoers.25 However, out of an abundance of caution, we recommend that there should be explicit statutory recognition that an extension of s 5(1)(a) to include other wrongdoers would have the effect of abolishing the single judgment rule.
LIMITATION OF ACTIONS
5.18 There are two situations in which limitation periods may affect a claim for contribution made by D1 against D2. The first is where P proceeds against D1 at a time when P’s primary cause of action against D2 is statute barred. The second is concerned with the limitation period within which D1 is allowed to initiate a claim for compensation against D2.
Limitation period relevant to the primary cause of action
5.19 When P proceeds against D1 at a time when P’s primary cause of action against D2 is statute barred, the current position is that D1 will not be prevented from claiming contribution from D2. This is because of the interpretation placed on s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) by the High Court in Brambles Constructions Pty Ltd v Helmers.26 The phrase “or would if sued have been, liable” has been held to mean “if sued at any time” (whether or not the claim against D2 is statute barred).
5.20 When rights of contribution are extended to mixed concurrent wrongdoers the limitation periods for the primary causes of action may differ with the result that P may bring an action against D1 at a time when P’s action against D2 is statute barred. Varying limitation periods are likely to occur in cases involving damages for personal injury,27 damage in the form of economic loss,28 or where statutes define specific limitation periods.29 The particular problem in the case of rights of contribution is that the later limitation period for D1 to initiate a claim for contribution does not begin to run until D1’s liability to P is determined.30
5.21 Alternative approaches to the current position include denying D1 a right of contribution from D2 when P’s action against D2 is statute barred31 or reducing P’s right to damages in the action against D1 on the grounds that P should bear the losses flowing from a failure to sue D2 within the limitation period.32 However, the Ontario Law Reform Commission,33 the New Zealand Law Commission,34 and the Civil Liability (Contribution) Act 1978 (Eng)35 have confirmed the position reached by the High Court in Brambles Construction Pty Ltd v Helmers36 so that D2 will not be able to rely on the passing of the limitation period as a defence against D1’s claim for contribution.
5.22 There are two reasons for retaining the rule in Brambles Construction Pty Ltd v Helmers. The first, consistent with the doctrine of solidary liability, is that P should not bear the burden of having failed to bring an action against D1 within the limitation period applicable to D2.37 The second is that allowing D1 to claim contribution from D2, at a time when P’s action against D2 is statute barred, effectively removes P’s power to decide whether D1 will be able to claim contribution from D2.38 Concerns raised by some law reform agencies that the possibility of D1 settling with P long after the expiration of the primary limitation periods for all defendants could result in the indefinite extension of the time during which D2 could be called on to contribute do not apply in New South Wales. Section 26(1)(b) of the Limitation Act 1969 (NSW) provides that an action for contribution cannot be pursued beyond the prescribed period, currently four years, from the expiry of the limitation period of the principal cause of action. The Commission, therefore, sees no reason to alter the law as it currently exists so long as the phrase in s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) is retained in any reformulation to include mixed concurrent wrongdoers.
Limitation period for contribution actions
5.23 In New South Wales a claim for contribution is a separate cause of action and hence has its own limitation period. Section 26(1) of the Limitation Act 1969 (NSW) provides that a claim for contribution is not maintainable if brought after the first to expire of:
The date on which the cause of action first accrues is defined in s 26(2) as the date on which judgment is given in the action of P against D1, or the date on which P and D1 reach a settlement to the action of P against D1.39
Length of limitation period
5.24 In most cases the overall effect of the operation of s 26 is that a defendant seeking contribution has two years from the date of judgment in the principal action in which to initiate a claim for contribution.40 This is generally in line with the limitation period for claims for contribution established by the Civil Liability (Contribution) Act 1978 (Eng)41 and with recommendations of other law reform bodies,42 although some have opted for longer periods.43 By contrast, s 24(4) of the Wrongs Act 1958 (Vic) provides for a shorter limitation period so that the action for contribution must commence either within the period of limitation relevant to P’s action against D1, or within twelve months after the writ in the action against D1 was served on D1. The University of Alberta Institute of Law Research and Reform has taken a different approach and recommended that the limitation period for a contribution claim should be the limitation period for the original wrong.44
5.25 In DP 38 the Commission made no proposal to alter the limitation period for contribution claims as they currently stand, observing that the Victorian position could result in D1 losing the right to claim contribution before the cause of action to claim contribution first accrued.45
5.26 One submission drew attention to the fact that considerable periods of time could pass before a defendant need claim against another under the available extensions and that this could be unfair to defendants who were joined close to the end of the limitation period and could then not join other defendants in time. It was suggested that a more appropriate limitation period for the addition of a joint wrongdoer would be “two years from the service of the process on the party who wishes to claim contribution”.46 It was argued that this would give a reasonable amount of time for a defendant to act while also serving as an effective time constraint. Allowing time to run from the time the defendant first became aware of the cause of action against him or her could be considered analogous to time running from the time that a plaintiff first becomes aware that a cause of action is available. The chief advantage of this proposal is that it would encourage joinder of all parties in the one action. However, it may also be unfair in that D1, while he or she may well have been made aware of P’s action, may not be aware of D2’s involvement until some time during the course of the trial, which may still be more than two years beyond the date at which D1 was first served. The Commission has therefore, on balance, decided not to recommend that the current limitation period for contribution claims be altered.
Extension to rights of contribution between all concurrent wrongdoers
5.27 This is a consequential amendment necessitated by the extension of rights of contribution to mixed concurrent wrongdoers.
1. Ontario Law Reform Commission, Report on Contribution Among Wrongdoers and Contributory Negligence (1988) at 28; England and Wales, Law Commission, Law of Contract: Report on Contribution (Law Com 79, 1977) at para 37-39; Law Reform Commission of Saskatchewan, Proposals Relating to Joint Obligations (Report to the Minister of Justice, 1985) at 12; Law Reform Commission of Hong Kong, Report on the Law Relating to Contribution Between Wrongdoers (Topic 5, 1984) at para 9.1; and University of Alberta, Institute of Law Research and Reform, Contributory Negligence and Concurrent Wrongdoers (Report 31, 1979) at 29-30. See also J R Morris, Apportionment of Civil Liability (Legal Research Foundation Inc, Publication No 28, 1987) at 24-25. But see Law Reform Commission of British Columbia, Report on Shared Liability (LRC 88, 1986) at 17; and New Zealand, Law Commission, Apportionment of Civil Liability: A Discussion Paper (PP 19, 1992) at para 263.
2. The matter was not raised in either submissions or consultations conducted by the Commission.
3. See below at para 5.9.
4. See eg, England and Wales, Law Commission, Law of Contract: Report on Contribution (Law Com 79, 1977) at para 40-41.
5. Law Reform Commission of Hong Kong, Report on the Law Relating to Contribution Between Wrongdoers (Topic 5, 1984) at para 9.1; New Zealand, Law Commission, Apportionment of Civil Liability: A Discussion Paper (PP 19, 1992) at para 259.
6. Ontario Law Reform Commission, Report on Contribution Among Wrongdoers and Contributory Negligence (1988) at 20-21.
7. Civil Liability (Contribution) Act 1978 (Eng) s 9(2), repealing s 6(1)(b) of the Law Reform (Married Women and Tortfeasors) Act 1935 (Eng).
8. Ontario Law Reform Commission, Report on Contribution Among Wrongdoers and Contributory Negligence (1988) at 20-21.
9. This was the approach adopted by the Law Reform Commission of British Columbia, based on a Uniform Contributory Fault Act proposed by the Uniform Law Conference of Canada in 1984: Law Reform Commission of British Columbia, Report on Shared Liability (LRC 88, 1986) at 16-17.
10. DP 38, Proposal 14.
11. Insurance Council of Australia Ltd, Submission.
12. A D M Hewitt, Submission.
13. A D M Hewitt, Submission.
14. NSW Bar Association, Consultation.
15. But see the recommendation to alter the sanction in damages above, Recommendation 12, para 5.3-5.7.
16. For example, Part 20 r 9.
17. See Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574 at 581-582.
18. Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574 at 584-585 per Brennan CJ, Dawson and Toohey JJ, at 591 per Gaudron J, and at 613-614 per Gummow J.
19. See J G Fleming, The Law of Torts (9th edition, LBC Information Services, Sydney, 1998) at 292.
20. Proposal 16, para 7.23-7.29. The question of the intention of a plaintiff in settling with one of a number of joint wrongdoers will be one for the courts to decide. Justice Gummow in Thompson noted that the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) “establishes a regime creating and regulating a right of contribution between joint tortfeasors where contribution is sought consequent upon a release of the claimant for contribution”: Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574 at 617.
21. Dust Diseases Tribunal Act 1989 (NSW) s 12C, inserted by Sch 1[5] of the Workers Compensation Legislation Amendment (Dust Diseases and Other Matters) Act 1998 (NSW) and the Explanatory Note to Sch 1[5] of the Bill as introduced to Parliament. The amendment commenced on 1 December 1998: New South Wales, Government Gazette No 165 of 27 November 1998 at 9016.
22. Courts of Justice Act SO 1984, c 11 s 149(1).
23. (1996) 186 CLR 574.
24. XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448; J G Fleming, The Law of Torts, (9th edition, LBC Information Services, Sydney, 1998) at 291.
25. DP 38, Proposal 17, para 7.30-7.31.
26. (1966) 114 CLR 213.
27. See Limitation Act 1969 (NSW) Pt 3 Div 3 (amended in 1990) which provides for a three year limitation period (with various provisions for extension of time) with respect to actions for damages for personal injury “founded on negligence, nuisance or breach of duty”; cf the limitation period generally for tort, breach of statutory duty or breach of contract which remains six years: s 14(1).
28. See Pullen v Gutteridge Haskins & Davey Pty Ltd [1993] 1 VR 27 at 65-71. In this case the plaintiff’s contractual claim was statute barred but the negligence action was within time because the economic loss was sustained when the plaintiffs became aware of the defect, that is, the point of time when the building sustained the diminution in value which amounted to the economic loss.
29. Trade Practices Act 1974 (Cth) s 75A (three year period runs from when the person becomes aware of the loss). See para 3.32 and 3.33 for discussion of whether there is any right to contribution arising out of breach of the Trade Practices Act 1974 (Cth).
30. Limitation Act 1969 (NSW) s 26.
31. This would conform to the decision in George Wimpey & Co Ltd v British Overseas Airways Corporation [1955] AC 169.
32. G L Williams, Joint Torts and Contributory Negligence (Stevens & Sons, London, 1951) at 444-446.
33. Ontario Law Reform Commission, Report on Contribution Among Wrongdoers and Contributory Negligence (1988) at 157-158.
34. New Zealand, Law Commission, Apportionment of Civil Liability: A Discussion Paper (PP 19, 1992) at para 240-249.
35. Civil Liability (Contribution) Act 1978 (Eng) s 1(3).
36. (1966) 114 CLR 213.
37. This involves a rejection of the solution proposed by Williams (1951) at 444-446, and adopted by the Civil Liability Act 1961 (Ireland) s 35(1)(i).
38. See also the discussion at para 4.74-4.76.
39. Limitation Act 1969 (NSW) s 14(2)(b).
40. The effect of s 26(1)(b) is to provide an outer limit to the right to contribution where no judgment is given, or settlement reached, four years after the expiration of the original cause of action.
41. Section 47 of which provides a general limitation period of two years for all causes of action.
42. Ontario Law Reform Commission, Report on Contribution Among Wrongdoers and Contributory Negligence (1988) at 222-223; Scottish Law Commission, Report on Civil Liability: Contribution (Scot Law Com No 115, 1988) at para 3.94-3.95; Law Reform Commission of Hong Kong, Report on the Law Relating to Contribution Between Wrongdoers (Topic 5, 1984) at para 5.17-5.19. See also J R Morris, Apportionment of Civil Liability (Legal Research Foundation Inc, Publication No 28, 1987) at 51-60.
43. Three years: New Zealand, Law Commission, Apportionment of Civil Liability (Report 47, 1998) at para C39.
44. University of Alberta, Institute of Law Research and Reform, Contributory Negligence and Concurrent Wrongdoers (Report 31, 1979) at 76.
45. See eg, Van Win Pty Ltd v Eleventh Mirontron Pty Ltd [1986] VR 484.
46. A D M Hewitt, Submission.
