by Website Administrator

In Tanah Merah Vic Pty Ltd v Owners’ Corporation No 1 of PS631436T [2021] VSCA 72 (‘Tanah Merah’), the Court of Appeal sought to clarify how and when apportionable claims could be raised, with reference to cases including its earlier decision in Godfrey Spowers (Vic) Pty Ltd v Lincolne Scott Australia Pty Ltd (2008) 21 VR 84; [2008] VSCA 208 (‘Godfrey Spowers’). But two recent decisions suggest the Court was unsuccessful: Gerrard Toltz Pty Ltd v City Garden Australia Pty Ltd (in liq) (No 2) [2024] NSWCA 232, Basten AJA’s reasons in particular, and Judge Kirton’s decision in Owners Corporation 1 PS721535N v Team Building (Vic) Pty Ltd & Ors [2024] VCC 1633 (‘OC1 v Team Building’). 

In Tanah Merah, the Court made the following observations (footnotes omitted): 

[120] Having considered the statutory text, in context, and having had regard to its purpose, we have concluded that the terms in which a claim is framed against a concurrent wrongdoer are an essential determinant of whether the claim can be said to arise from a failure to take reasonable care…

[122] The same may be said [that the passages concerned are obiter dicta] in relation to aspects of the decision in Godfrey Spowers… Godrey Spowers was concerned with the consequences of a settled claim in which the plaintiff had alleged breaches of duty falling within the description of ‘arising from a failure to take reasonable care’. The Court held that the key to the operation of pt IVAA of the Wrongs Act was the finding of relevant facts and the entry of judgment.

[123] In the course of his reasons for judgment, Ashley JA expressed his agreement with Barrett J’s conclusion in Reinhold v NSW Lotteries Corporation [No 2] (2008) 82 NSWLR 762 ([2008] NSWSC 187), that a claim may properly be regarded as one ‘arising from a failure to take reasonable care’ if at the end of the trial the evidence warrants a finding to that effect, and regardless of the absence of ‘any plea of negligence or a failure to take reasonable care’.

[124] In the course of his reasons for judgment, Ashley JA expressed his agreement with Barrett J’s conclusion in Reinhold v NSW Lotteries Corporation [No 2] (2008) 82 NSWLR 762, that a claim may properly be regarded as one ‘arising from a failure to take reasonable care’ if at the end of the trial the evidence warrants a finding to that effect, and regardless of the absence of ‘any plea of negligence or a failure to take reasonable care’. 

In earlier passages (starting at paragraph 118), the Court identified that failing to consider how a claim is pleaded, in determining if an apportionable claim can be raised, would lead to five ‘anomalous’ consequences, including that a strictly liable party could plead its own negligence as a partial defence, and that it would ‘substantially deprive s 24AI(2) of operative effect.’

That sub-section provides as follows:  

(2)    If the proceeding involves both an apportionable claim and a claim that is not an apportionable claim—

(a)     liability for the apportionable claim is to be determined in accordance with this Part; and
(b)     liability for the other claim is to be determined in accordance with the legal rules, if any, that (apart from this Part) are relevant.

An immediate consequence of Tanah Merah is that many practitioners began to avoid pleading claims that might be said to be apportionable, or to delete such a claim once an apportionment defence was raised (as if to stuff the cat back into the bag). In the domestic building space, this includes limiting reference to the warranties in section 8 of the Domestic Building Contracts Act 1995.  

Basten AJA in Gerrard Toltz took issue with Tanah Merah, in particular, its focus on the pleadings as an ‘essential determinant’ of apportionability:  

[235] The phrase, “an essential determinant” is ambiguous; in the following paragraph [ie. paragraph 121] the Court took issue with the view that “the nature of the claim itself is irrelevant to the question whether the claim is one ‘arising from a failure to take reasonable care’” and has a number of anomalous consequences. With respect, there would appear to be an alternative reading (that adopted by Barrett JA in Perpetual Trustee Company Ltd v CTC Group Pty Ltd (No 2) [2013] NSWCA 58) which permits both the pleading of the claim and the findings made by the trial court, to be given weight in determining the issue.

[236] One of the anomalous results of treating “the nature of the claim itself [as] irrelevant” was said to be that it would “enable a party strictly liable in contract to plead its own negligence as a partial defence to the claim”. Ironically, that would only arise if the claim were defined by the other party’s pleading and if the pleadings were given determinative force. A second anomalous result was that it would “substantially deprive s 24AI(2) [of the Wrongs Act 1958] of operative effect”, though how it would do that was not discussed. Thirdly, it was said to “enable to the primacy of contract in determining the allocation and extent of risk at common law in certain situations to be displaced”. Supposed anomalies in terms of construing other statutory provisions were also identified.

[237] This is not the place to explore construction by anomaly, but the straw man (treating the nature of the claim as “irrelevant”) and the lack of persuasive force of the anomalies, casts doubt on the conclusion. The Victorian Court’s own reasoning in Godfrey Spowers was dismissed as “merely obiter dicta”.

While not detracting from his Honour’s comments, it is important to recall that the apportionment regime under the NSW Civil Liability Act 2002 is not exactly the same as under the Wrongs Act 1958: in particular, sub-s 34(1A) of the Civil Liability Act 2002 provides that ‘there is a single apportionable claim in proceedings in respect of the same loss or damage even if the claim for the loss or damage is based on more than one cause of action (whether or not of the same or a different kind).’  

In contrast, the Wrongs Act 1958 contains no such “merger” provision: under sub-s 24AF(2), only ‘2 or more apportionable claims arising out of different causes of actions’ are to be determined as if they were a single claim. An apportionable claim, and a non-apportionable claim, even if they cover the same loss and damage, are to be determined ‘in accordance with the legal rules, if any, that (apart from [Part IVAA] are relevant’ (see sub-s 24AI(2) above, and also sub-s 35(2) of the Civil Liability Act 2002). This has not stopped VCAT concluding that, where an apportionable claim and non-apportionable claim are for the same loss and damage, the non-apportionable claim is apportionable (see for example, paragraph 62 of Mazzeo v Camilleri (Building and Property) [2021] VCAT 150 and paragraph 154 of Owners Corporation PS623721 v Shangri-La Construction Pty Ltd (Building and Property) [2022] VCAT 1499).

Basten AJA’s observations (delivered on 30 September 2024) were noted by Judge Kirton in OC1 v Team Building (delivered on 22 October 2024).

OC1 v Team Building concerned an application by a builder, in a claim against it from the owners of an apartment building, to plead apportionment based on misleading and deceptive conduct by a car stacker installed by a company named Hercules (which entered into liquidation after the proceeding commenced).  

After Hercules entered into liquidation, the owners deleted reference in their Statement of Claim to the so-called “apportionable warranties.”  

Despite no apportionable claim being pleaded by the owners, her Honour nevertheless allowed the builder to plead an apportionable defence, noting at paragraph 62 of her judgment that in Tanah Merah:  

[62] … the Court did not actually reject as incorrect all of the previous jurisprudence which came before it. Its statement quoted in the preceding paragraph (from paragraph 124 of the decision) does not expressly deny a place for the findings of fact made by the trial court in determining if a claim is apportionable.

The Court accordingly felt that it was ‘not appropriate to determine these questions on an interlocutory application’ (paragraph 74).

In my view, a curious aspect of this reasoning is that, in a court of pleadings, it is difficult to see how a plaintiff’s loss and damage can be limited due to their claim being apportionable, despite the plaintiff not having actually claimed loss and damage on that basis: that is, if a plaintiff chooses to limit (perhaps unwisely) the breadth of their claim, on what basis can it be widened?  

What is to be made of all this?  

Until such time as Tanah Merah is revisited, it seems that plaintiffs are, once again, no longer in control of when a defendant can plead an apportionment defence (at least provided the defendant does so on proper material).  

In my view, it is difficult to see why that should matter.  

Without a rule such as sub-s 34(1A) of the Civil Liability Act 2002, pleading an apportionable claim should be inconsequential, other than for the practitioners and judicial officers involved, who will need to spend additional time and effort identifying, in a defects case for example, which sums of the loss and damage arise from an apportionable claim, which arise from a non-apportionable claim, and which arise from both, as opposed to simply deciding what defects are proven, and the value of the loss and damage. If one defect is said to breach 6 warranties, findings should be made for each, with the consequence that some defects may prove both an apportionable and a non-apportionable claim for the same loss and damage.

Joel Silver

Liability limited by a scheme approved under professional standards legislation