CSR Limited v Amaca Pty Limited [2008] NSWCA 329 (3 December 2008)

Last Updated: 22 December 2008

NEW SOUTH WALES COURT OF APPEAL

CITATION:
CSR Limited v Amaca Pty Limited [2008] NSWCA 329
This decision has been amended. Please see the end of the judgment for a list of the amendments.

FILE NUMBER(S):
40832/07
40664/07

HEARING DATE(S):
8 September 2008

JUDGMENT DATE:
3 December 2008

PARTIES:
CSR Limited (Appellant)
Amaca Pty Limited (Respondent)

JUDGMENT OF:
Beazley JA Giles JA Young CJ in Eq

LOWER COURT JURISDICTION:
Dust Diseases Tribunal of New South Wales

LOWER COURT FILE NUMBER(S):
35/1997/4, 85/1991/1 and 90/1991/1

LOWER COURT JUDICIAL OFFICER:
O'Meally P

LOWER COURT DATE OF DECISION:
8 August 2007; 14 September 2007; 11 December 2007

LOWER COURT MEDIUM NEUTRAL CITATION:
(Re Jones-Mashman) Amaca PL v CSR Ltd [2007] NSWDDT 17; (Re McDonald) Amaca Pty Ltd v CSR Ltd [2007] NSWDDT 25; (re McDonald) Amaca Pty Ltd v CSR Ltd (No 2) [2007] NSWDDT 31

COUNSEL:
F Corsaro SC ; B Bradley (Appellant in both matters)
GM Watson SC; JC Sheller (Respondent in both matters)

SOLICITORS:
Toomey Pegg Drevikovsky (Appellant 40832/07)
Holman Webb (Respondent 40832/07)
Leigh Virtue & Associates (Appellant 40664/07)
DLA Phillips Fox (Respondent 40664/07)

CATCHWORDS:
PARTNERSHIP- construction of partnership agreement – where partner makes a cross-claim for contribution from other partner under indemnity clause – indemnity clause operates in relation to claims that extended beyond the partnership period
PARTNERSHIP – construction of deed of dissolution - release held to protect the parties from any claim, past, present or future that one partner might have had under its right of indemnity
DUST DISEASES – causation – party is liable if its negligence was a cause of, or contributed to the harm suffered
DUST DISEASES – Dust Diseases Tribunal – jurisdiction to hear claims and cross-claims made in respect of allegations of a dust-related condition

LEGISLATION CITED:
Dust Diseases Tribunal Act 1989, ss 11, 32
Law Reform (Miscellaneous Provisions) Act 1946, s 5(1)(c)

CATEGORY:
Principal judgment

CASES CITED:
Amaca Pty Ltd formerly known as James Hardie & Coy Pty Ltd v CSR Ltd [2001] NSWSC 324
Andar Transport Ltd v Brambles Ltd [2004] HCA 28; (2004) 217 CLR 424
Anderson v Kaufman (1991) 7 NSWCCR 198
Bank of Credit and Commerce International SA (in liquidation) v Ali [2001] UKHL 8; [2002] 1 AC 251; [2001] 1 All ER 961; [2001] 2 WLR 735
Bonnington Castings Ltd v Wardlaw [1956] UKHL 1; [1956] AC 613; [1956] 1 All ER 615; [1956] 2 WLR 707
CSR Limited v Amaca Pty Limited [2007] NSWCA 107
Davis v Commissioner for Main Roads [1968] HCA 10; (1967) 117 CLR 529
Erect Safe Scaffolding (Australia) Pty Limited v Sutton [2008] NSWCA 114; 173 IR 412
F & D Normoyle Pty Ltd v Transfield Pty Ltd [2005] NSWCA 193; (2005) 63 NSWLR 502
Goodyear Tyre & Rubber Co (Australia) Limited v James Hardie & Coy Pty Limited [1992] NSWDDT 2; (1992) 8 NSWCCR 148
Grant v John Grant & Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112
Leighton Contractors Pty Limited v Smith [2000] NSWCA 55
Mangion v James Hardie & Coy Pty Limited (1990) 20 NSWLR 100
March v Stramare (E & MH) Pty Ltd [1991] HCA 12; (1991) 171 CLR 506
(Re Jones-Mashman) Amaca PL v CSR Ltd [2007] NSWDDT 17
(Re McDonald) Amaca Pty Limited v CSR Limited [2007] NSWDDT 25
Seltsam Pty Limited v Energy Australia [1999] NSWCA 89; (1999) 17 NSWCCR 720

TEXTS CITED:


DECISION:
CA 40832/07: the McDonald matter:
1. Appeal allowed;
2. Judgment and orders of O’Meally P in the Dust Diseases Tribunal made 14 September 2007 set aside;
3. Judgment for the appellant, CSR Limited, against the respondent, Amaca Pty Limited, on the cross-claim;
4. The respondent is to pay the appellant’s costs of the appeal and at first instance.
CA 40664/07: the Jones-Mashman matter:
1. Appeal allowed;
2. Judgment and orders of O’Meally P in the Dust Diseases Tribunal made 30 August 2007 set aside;
3. Remit the matter to the Dust Diseases Tribunal for determination of any outstanding issues between the parties;
4. The respondent is to pay the appellant’s costs of the appeal and to date at first instance.



JUDGMENT:

- 28 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40832/07

CA 40664/07

BEAZLEY JA

GILES JA

YOUNG CJ in EQ

3 December 2008

CSR Limited v Amaca Pty Limited

Headnote

CSR Ltd and Amaca Pty Limited (formerly James Hardie & Coy Pty Limited) entered into a Deed of Partnership in 1964 for the purposes of manufacturing, distributing and selling various products, including asbestos. The deed included an indemnity clause, Div 6, cl 4, whereby CSR agreed to indemnify James Hardie against all actions made by any third party in respect of, or arising out of, any act by James Hardie as managing agent under the deed. In 1974, the parties entered into a Deed of Dissolution of the partnership. The Deed of Dissolution, in cl 8, provided that as and from the date of dissolution, all rights, duties and obligations under the principal deed shall cease and that the parties jointly and severally release each other from all actions and claims which but for the deed each had or might have had against the other.

Two claims were brought against James Hardie by persons who had been exposed to asbestos supplied by James Hardie during the partnership period as well as in periods outside the partnership period.

Cross-claims were subsequently brought by Amaca against CSR, claiming indemnity under the Deed of Partnership for costs incurred and part of the judgment sum awarded, respectively. O’Meally P held that Amaca was entitled to indemnity pursuant to Div 6, cl 4 of the Deed of Partnership, and that cl 8 of the Deed of Dissolution did not operate to release CSR from liability to indemnify Amaca: see (Re McDonald) Amaca Pty Limited v CSR Limited [2007] NSWDDT 25; and (Re Jones-Mashman) Amaca PL v CSR Ltd [2007] NSWDDT 17.

CSR appealed, contending that O’Meally P erred in law in determining that Amaca was entitled to an indemnity. CSR contended that the indemnity clause in the Deed of Partnership did not apply in circumstances where the plaintiff’s exposure commenced prior to the entry into the Deed, continued for its duration and also occurred after the partnership was dissolved.

CSR also contended that if the indemnity was otherwise available under Div 6, cl 4, it was precluded by cl 8 of the Deed of Dissolution. Thirdly, CSR contended that there was an ongoing duty of a fiduciary nature between CSR and Amaca, which required it to inform CSR and involve it in the decisions being made in respect of the litigation. Finally, CSR raised the issue of whether the DDT has jurisdiction to determine a cross-claim, in circumstances where it had not been established that Mr McDonald suffered from an asbestos-caused disease.

Held per Beazley JA (Giles JA and Young CJ in Eq agreeing)

Did the indemnity clause of the Deed of Partnership operate? (CA 40832/07; CA 40664/07)

1. A party is liable if its negligence was a cause of, or contributed to the harm. A defendant’s wrongful act need not be the sole cause of the harm. In the case of exposure before and after the partnership period to asbestos manufactured or supplied by a third party, as well as to asbestos manufactured by the partnership, each wrongdoer would have been liable for the whole of the damage, and had rights of contribution against the other. This, of itself, would not have affected the right to indemnity under Div 6, cl 4. It made no difference that the party responsible for exposure outside the partnership is James Hardie as a manufacturer of asbestos in its own right, rather than a third party: [39]-[41], [83], [84].

Bonnington Castings Ltd v Wardlaw [1956] UKHL 1; [1956] AC 613; [1956] 1 All ER 615; [1956] 2 WLR 707; March v Stramare (E & MH) Pty Ltd [1991] HCA 12; (1991) 171 CLR 506 (applied)

2. Accordingly, subject to the application of cl 8 of the Deed of Dissolution, the indemnity clause in the Deed of Partnership operated in relation to claims that extended beyond the partnership period: [39], [43], [83], [84].

3. The indemnity extends to costs incurred in proceedings brought after the dissolution of the partnership: [42]-[43], [83], [84].

4. (Obiter) It would be open to CSR, if it was also sued, to bring a cross-claim against James Hardie claiming contribution under s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 in respect of such portion of liability attributable to non-partnership acts of James Hardie: [41], [83], [84].

Was the indemnity clause precluded by cl 8 of the Deed of Dissolution? (CA 40832/07; CA 40664/07)

5. The right to indemnity provided for by Div 6, cl 4 was terminated upon dissolution of the partnership by cl 8 of the Deed of Dissolution. The release protected the parties from any claim, past, present or future that James Hardie might have had under its right of indemnity in Div 6, cl 4: [63]-[64], [83], [84].

Amaca Pty Ltd formerly known as James Hardie & Coy Pty Ltd v CSR Ltd [2001] NSWSC 324 (distinguished).

Did Amaca owe CSR a fiduciary duty? (CA 40832/07)

6. The trial judge’s determination that James Hardie acted in good faith and that the steps it took defending the case were reasonable, were findings of fact in respect of which no appeal lies: [73]-[74], [83], [84].

Dust Diseases Tribunal Act 1989, s 32.

Did the DDT have jurisdiction? (CA 40832/07)

7. Pursuant to s 11 of the Dust Diseases Tribunal Act 1989, the DDT has jurisdiction to hear both claims and cross-claims made in respect of allegations of a dust-related condition: [76]-[78], [83], [84].

Dust Diseases Tribunal Act Anderson v Kaufman (1991) 7 NSWCCR 198; Goodyear Tyre & Rubber Co (Australia) Limited v James Hardie & Coy Pty Limited [1992] NSWDDT 2; (1992) 8 NSWCCR 148; Seltsam Pty Limited v Energy Australia [1999] NSWCA 89; (1999) 17 NSWCCR 720; Mangion v James Hardie & Coy Pty Limited (1990) 20 NSWLR 100 (referred to).


IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40832/07

CA 40664/07

BEAZLEY JA

GILES JA

YOUNG CJ in EQ

3 December 2008

CSR Limited v Amaca Pty Limited

Judgment

1 BEAZLEY JA: On 24 September 1964 Amaca Pty Limited (Amaca) (then known as James Hardie & Coy Pty Limited (James Hardie)) and CSR Ltd (then known as The Colonial Sugar Refining Company Limited (CSR)) entered into a Deed of Partnership for the purposes of manufacturing, distributing and selling in Australia various products, including asbestos. I will refer to the respondent variously as Amaca or James Hardie as the context requires, but for convenience will universally refer to CSR. Bradford Insulation Industries Pty Limited (Bradford) was appointed under Div 7, cl 1 of the Deed of Partnership to act as the sole selling and distributing agent of the products.

2 On 26 June 1974, James Hardie and CSR entered into a Deed of Dissolution of the partnership. As will become apparent, the terms of Div 6, cl 4 of the Deed of Partnership and cl 8 of the Deed of Dissolution are central to the ultimate determination of this matter.

The McDonald proceedings: CA 40832/07

3 Mr Tony McDonald was exposed to asbestos dust and fibre in various employments between 1960 and 1977. He developed a large cell carcinoma, and on 2 July 1991 he commenced proceedings in the Dust Diseases Tribunal of New South Wales (the DDT) against three of his former employers, as well as against James Hardie and two other companies, whom he alleged manufactured insulation materials containing asbestos and supplied those materials to industry, including to the three employers. A seventh defendant was sued as an occupier of premises in which Mr McDonald worked and in which asbestos was used. Mr McDonald died shortly after the commencement of his proceedings and his wife was later substituted as the plaintiff in the claim that was continued by his estate. Mrs McDonald also brought a claim under the Compensation to Relatives Act 1897 for the benefit of herself and her two children.

4 In 1998 all of the defendants, other than James Hardie, withdrew from the proceedings, having entered into terms of settlement with Mrs McDonald. James Hardie continued the proceedings as a ‘test case’. The matter was heard by O’Meally P, who gave judgment in favour of James Hardie on 18 September 1998. In the proceedings against James Hardie Mrs McDonald established, as a matter of general causation, that carcinoma could be attributed to asbestos exposure, notwithstanding that the victim did not have asbestosis, provided the exposure was sufficient to cause asbestosis. However, she did not succeed in proving that Mr McDonald had been exposed to sufficient asbestos to cause asbestosis: primary judgment at [11]. On 28 October 1998 his Honour ordered that the plaintiffs pay James Hardie’s costs of the action, save and except for those costs incurred in relation to the issue of general causation.

5 On 10 June 1997 James Hardie brought a cross-claim against CSR claiming contribution from CSR under s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 and indemnity under the Deed of Partnership. As James Hardie succeeded in the action brought by Mrs McDonald, its claim on the cross-claim was eventually confined to the recovery of costs pursuant to its alleged right to indemnity under Div 6, cl 4 of the Deed of Partnership. There is no issue on the appeal that if Amaca is indemnified under the Deed of Partnership, the indemnity extends to costs that James Hardie incurred in defending the McDonald proceedings.

6 O’Meally P held that the respondent was entitled to indemnity from the appellant in both matters, pursuant to the indemnity clause in the Deed of Partnership: (Re McDonald) Amaca Pty Limited v CSR Limited [2007] NSWDDT 25.

The Jones-Mashman proceedings: CA 40664/07

7 Mr Jones-Mashman contracted mesothelioma due to his exposure as a child to workplace asbestos on his father’s clothing and in domestic insulation using asbestos waste, which his father obtained from his place of work. Mr Jones-Mashman’s father (Mr Mashman) was employed by International Combustion Australia Ltd (ICAL) and worked at a number of power stations owned and operated by the Electricity Commission of New South Wales between 1955 and 1970.

8 Mr Jones-Mashman brought proceedings against Pacific Power and Delta Electricity (being successors in title to the Electricity Commission) in the DDT, alleging his mesothelioma had been caused by their negligence. His claim was settled on 29 May 1997, and verdict and judgment were entered in his favour in the sum of $770,000, inclusive of costs. Those defendants subsequently issued cross-claims against ten cross-defendants, one of which was James Hardie. The cross-claim against James Hardie alleged that Mr Mashman was exposed to asbestos in the course of his employment with ICAL, and that asbestos was contained in the insulation material supplied by James Hardie. The cross-claim was brought in negligence, and under s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946. The cross-claim was settled on 16 May 2005, with Amaca consenting to judgment for $270,000, which represented 30 per cent of the damages and costs payable to the plaintiff.

9 Amaca filed a cross-claim against CSR on 14 June 2005, seeking the sum of $135,000 (being one half of the judgment sum of $270,000) together with interest from 16 May 2005. In the cross-claim, Amaca claimed that it was entitled to this amount by way of indemnity under Div 6, cl 4 of the Deed of Partnership, or pursuant to its right to contribution as a partner. O’Meally P held that cl 8 of the Deed of Dissolution did not operate to release CSR from liability to indemnify Amaca, and gave judgment in favour of Amaca on 8 August 2007, on the basis that Amaca was entitled to indemnity under Div 6, cl 4: (Re Jones-Mashman) Amaca PL v CSR Ltd [2007] NSWDDT 17.

Issues on the appeal in the McDonald matter

10 CSR contended that O’Meally P erred in law in determining that Amaca was entitled to an indemnity for the costs it incurred in defending each of the proceedings. Three broad issues arise on the appeal.

11 First, whether the indemnity clause (Div 6, cl 4) in the Deed of Partnership applies in circumstances where the plaintiff’s exposure commenced prior to the entry into the Deed of Partnership, continued for its duration and also occurred after the partnership was dissolved.

12 Secondly, whether, if indemnity was otherwise available under Div 6, cl 4, it was precluded by cl 8 of the Deed of Dissolution. This issue raised the question of the proper construction and scope of cl 8 and whether Amaca’s claim fell within it.

13 Thirdly, whether there was an ongoing duty of a fiduciary nature between CSR and Amaca, that required Amaca to inform CSR and involve it in the decisions being made in respect of the litigation. This issue will only arise if CSR is unsuccessful on the first or second issue.

14 CSR also raised an issue in relation to the jurisdiction of the DDT to determine a cross-claim brought against it in circumstances where it had not been established that Mr McDonald suffered from an asbestos-caused disease. There was also an issue in relation to the DDT’s jurisdiction to deal with equitable rights of contribution.

Issues on the appeal in the Jones-Mashman matter

15 In this appeal, CSR raised the first and second issues identified above in respect of the McDonald appeal in relation to the cross-claim for half of the judgment sum awarded.

Appeal on a question of law

16 The appeals are on a question of law only: s 32 of the Dust Diseases Tribunal Act 1989.

17 It was common ground between the parties that the determination of the issues in appeal CA 40832/07 in the McDonald matter will determine the issues in both appeals.

The Deed of Partnership

18 The Deed of Partnership was made on 24 September 1964 between James Hardie (now Amaca) and CSR. Bradford was a party to the Deed (see below), but was not a member of the partnership created by the Deed. The partnership was to operate on and from 28 September 1964, subject to the completion of the sale of certain assets to the partnership: Div 1, cl 1.

19 Division 4 dealt with the nature of the business. Division 4, cl 1 specified that:

“The business of the partnership shall be to manufacture in Australia and to distribute and sell in Australia and elsewhere the following products ...

85% Magnesia Sections, Blocks and Plastic ...

K-lite ...

Asbestos Millboard ...”

K-lite is an asbestos product.

20 Division 5 dealt with management. Division 5, Pt I provided for “Management generally”. Pursuant to cl 1, the partners were to “mutually determine the conduct of the partnership business and the policy, management and control thereof”. Pursuant to cl 2, in broad terms, the “general management control of the partnership business” was vested in a “Partnership Committee”. Pursuant to cl 3, subject to cls 1 and 2, the day to day management of the partnership business was conducted by James Hardie, as provided for by Div 6, but such management was subject at all times and in all respects to the joint directions of the partners and the directions of the Partnership Committee.

21 Division 5, Pt II dealt with the Partnership Committee. It provided, in cl 6(a), for the powers of the Partnership Committee as follows:

“Subject always to any mutual determination or direction of the partners the Partnership Committee shall have full power and authority to do and authorise to be done all such acts matters or things as might be done by the partners either jointly or severally in connection with the partnership business unless otherwise provided by this Deed.”

22 The general management of the partnership was governed by the provisions of Div 6. Clause 1 provided that subject to the control of the partners and Partnership Committee, James Hardie (Amaca) had the “manage[ment] and control of the partnership business as managing agent” (emphasis added). Under that clause, its rights, obligations and powers were specified, including to “manage the business generally and in particular to manage the factory and manufacturing activities and the distribution of the products subject always to the provisions of [the Deed of Partnership]”: Div 6, cl 1(1). It also had the obligation and power to “supervise control of quality of raw materials and finished products and to assist in carrying out product research and development”: Div 6, cl 1(7).

23 The indemnity clause, Div 6, cl 4, which is relevant to the first issue on the appeal, was in the following terms:

“Subject to the covenant and warranty given by James Hardie in Clause 5 of this Division the partners jointly hereby indemnify and agree to keep James Hardie indemnified from and against all actions suits proceedings claims and demands whatsoever made or brought against James Hardie by any third party in respect of or arising out of any act by James Hardie as managing agent.”

The warranty referred to in cl 5 is not presently relevant.

First Issue: Construction of Div 6, cl 4 of the Deed of Partnership: grounds 1, 1A, 2, 5 and 6

24 CSR contended that Amaca is not entitled to indemnity under Div 6, cl 4. Its argument did not rest upon James Hardie’s position as managing agent – it accepted that James Hardie’s acts as managing agent included its acts as manufacturer of asbestos product by the partnership. The argument was that Div 6, cl 4 does not operate in relation to claims that extended beyond the partnership period, albeit that the claims included exposure to product manufactured and supplied during the partnership period.

25 It followed, on this argument, that James Hardie’s actions in defending the McDonald claims should have been viewed by the trial judge as defending the entirety of its position as manufacturer and supplier of asbestos products to which Mr McDonald was exposed. It was not defending a claim “arising out of any act by James Hardie as managing agent” of the partnership within Div 6, cl 4.

26 Amaca submitted that his Honour’s factual finding at [27], that James Hardie incurred costs in respect of a claim brought in connection with partnership products, made that submission untenable. I do not think, however, that his Honour’s characterisation of the costs can resolve the issue. Amaca further pointed out that CSR made an identical submission in CSR Limited v Amaca Pty Limited [2007] NSWCA 107, especially at [21]-[26], and that argument had been rejected. It was submitted that there are also three decisions in the DDT in which that same argument has been rejected. However, CSR sought to distinguish the decision of this Court in CSR Limited v Amaca Pty Limited [2007] NSWCA 107, as the question whether the indemnity clause operated in circumstances where there had been exposure outside, as well as within, the period of the partnership was not in issue in that case. Nor is this Court bound by the decisions of the DDT.

27 It is convenient to first deal with the previous decision of this Court in CSR Limited v Amaca Pty Limited [2007] NSWCA 107.

28 In CSR Limited v Amaca Pty Limited [2007] NSWCA 107 James Hardie had settled a claim (including the payment of costs) brought by a Mr Doughan, who had contracted mesothelioma following exposure to asbestos. James Hardie then claimed from CSR half of the settlement figure and costs paid to Mr Doughan, as well as half of its own costs it had occurred in the action. Its claim was based, inter alia, on Div 6, cl 4 of the Deed of Partnership. The appeal was determined by Mason P, Hodgson JA and Young CJ in Eq. Young CJ in Eq gave the leading judgment. The Deed of Dissolution was not in evidence before the trial judge, who determined this aspect of the matter solely on the terms of Div 6, cl 4. The matter then proceeded in the Court of Appeal on the same basis, so far as the rights of the parties under the Deed of Partnership were concerned. This is relevant, as it is one of the bases upon which CSR seeks to distinguish that case.

29 The question in issue in that case was, relevantly, whether the claim brought against James Hardie was brought against it as “managing agent”. Young CJ in Eq stated, at [24], that “the Deed as a whole shows that everything except sales and distribution was under the control of [James Hardie]”. Whilst the partnership undertook the manufacturing, it was being managed by James Hardie as the partnership’s agent. His Honour thus rejected the distinction that CSR attempted to make to limit the reach of the indemnity provision: at [23]-[26].

30 As I have already explained, that question is not in issue in this case, as CSR accepts that manufacturing fell within James Hardie’s role as managing agent. CSR contended, therefore, that the decision in CSR Limited v Amaca Pty Limited [2007] NSWCA 107 does not bind the Court having regard to the matter in issue in this case.

31 Senior counsel for CSR relied upon the decision of this Court in Erect Safe Scaffolding (Australia) Pty Limited v Sutton [2008] NSWCA 114; 173 IR 412 (Giles and Basten JJA and McClellan CJ at CL) in support of its submission that Div 6, cl 4 does not operate on the facts here. In Erect Safe Scaffolding, a plaintiff had sustained injury at work on a building site. The injured worker’s employer was a formwork company that had a subcontract with the head contractor. The head contractor also had a contract with Erect Safe Scaffolding in respect of scaffolding services to be provided on the site. The worker sustained injuries on the scaffolding. The subcontract between Erect Safe Scaffolding and the head contractor contained an indemnity provision in the following terms:

“Clause 11:

INDEMNITY

The Subcontractor [Erect Safe Scaffolding] must indemnify Australand Constructions [the head contractor] against all damage, expense ... loss ... or liability of any nature suffered or incurred by Australand Constructions arising out of the performance of the Subcontract Works and its other obligations under the Subcontract.”

32 The injured worker succeeded at trial against the head contractor and Erect Safe Scaffolding, but not against the employer: see at [107]. The trial judge apportioned responsibility for creating the hazard which caused the plaintiff’s injury, and in failing to remove it, as to two-thirds to Erect Safe Scaffolding, and as to one-third to the head contractor as the principal contractor and supervisor of the site. Giles JA, at [10] and [11], focussed upon the meaning of the words “arising out of” in the indemnity provision. Those words also appear in Div 6, cl 4 of the Deed of Partnership in this case.

33 Giles JA noted there was no easy test for the nature and extent of the causal or consequential relationship involved in those words. His Honour observed, as is well-accepted, that the words are wide and considered that the words were contained in an indemnity clause and, therefore, to the extent the words were ambiguous, the clause should be construed in favour of Erect Safe Scaffolding, that is, the party providing the indemnity: see Andar Transport Ltd v Brambles Ltd [2004] HCA 28; (2004) 217 CLR 424 at [17]- [23] per Gleeson CJ and McHugh, Gummow, Hayne and Heydon JJ; F & D Normoyle Pty Ltd v Transfield Pty Ltd [2005] NSWCA 193; (2005) 63 NSWLR 502 at [47] per Ipp JA, McColl JA agreeing.

34 Giles JA concluded, at [11]. that:

“The relationship should not be remote, but one of substance albeit less than that required by words such as ‘caused by’ or ‘as a result of ’...”

Beyond that, his Honour stated that was a question of judgment on the particular facts as to whether the liability that the head contractor had incurred to the plaintiff fell within the indemnity provision.

35 The same approach to the construction of the phrase “arising out of” was taken by Basten JA. His Honour, adopting the approach in Davis v Commissioner for Main Roads [1968] HCA 10; (1967) 117 CLR 529 and Leighton Contractors Pty Limited v Smith [2000] NSWCA 55, said at [97] that:

“... the two identified elements conditioning the operation of the indemnity being linked by the connecting phrase ‘arising out of’, that phrase connotes a weak causal relationship which will be satisfied when the activity of the sub-contractor in the performance of the contract contributes in a material way to the breach of duty by the contractor ... the negligent erection of scaffolding in the present case materially contributed to the liability imposed on Australand.”

36 Senior Counsel for CSR submitted, therefore, that the words “arising out of” in Div 6, cl 4 suggested that some sort of causal link between the indemnity provided and the acts of James Hardie as managing agent were required for the clause to operate. It was submitted that the clause did not operate where the causal exposure alleged was for periods extending beyond the partnership period. In other words, Mrs McDonald’s claim in this case did not arise out of James Hardie’s acts as manufacturer within its acts as managing agent, but out of the whole period of James Hardie’s manufacturing, including the periods before and after the partnership. CSR argued, therefore, that there was not the “necessary causal relationship” between the claim and the acts of James Hardie during the partnership period, so as to attract the indemnity under the clause.

37 Amaca submitted that this argument was not maintainable. It said that the operation of Div 6, cl 4 has to be considered in the light of two factual circumstances. First, on his Honour’s finding, the manufacture of asbestos products was done by James Hardie as the managing agent of the partnership (a point conceded by CSR). Secondly, Mr McDonald was exposed to asbestos products not only during the period of the partnership, but for periods before and after. Amaca pointed out that his Honour found that lung cancer was an indivisible injury and likewise, in the Jones-Mashman matter, that mesothelioma was an indivisible injury. Amaca submitted that the in solidum rule therefore applied. Accordingly, had Mrs McDonald been able to prove that Mr McDonald’s exposure to asbestos products during the partnership period had caused or contributed to his lung cancer, James Hardie would have been liable on the basis that its negligence was a cause of the injury, that is, the contraction of the disease. The fact that exposure before or after the partnership period was also a cause was irrelevant: see March v Stramare (E & MH) Pty Ltd [1991] HCA 12; (1991) 171 CLR 506.

38 CSR responded that James Hardie’s actions in defending Mrs McDonald’s claims was a defence to the overall claim against it as manufacturer and supplier of asbestos products to which Mr McDonald was exposed, not as defending a claim against the partnership or “arising out of any act by James Hardie as managing agent” of the partnership within Div 6, cl 4 of the Deed of Partnership. It was submitted that there is nothing within Div 6, cl 4 of the Deed of Partnership that extended the indemnity to include James Hardie’s potential liability as a manufacturer and supplier of asbestos products in circumstances where James Hardie was also manufacturing and supplying in its own right asbestos products to which Mr McDonald had been exposed.

39 In my opinion, on its proper construction, Div 6, cl 4 indemnified James Hardie in the McDonald matter. Had causation been established, James Hardie would have been liable to Mrs McDonald for the whole of the damages payable, as on the principles of causation which applied in this case, a party is liable if its negligence was a cause of, or contributed to the harm. Put another way, a defendant’s wrongful act need not be the sole cause of the harm: Bonnington Castings Ltd v Wardlaw [1956] UKHL 1; [1956] AC 613; [1956] 1 All ER 615; [1956] 2 WLR 707; March v Stramare.

40 In this case, had there been exposure before and after the partnership period to asbestos manufactured or supplied by a third party, as well as to asbestos manufactured by the James Hardie/CSR partnership, each wrongdoer would have been liable for the whole of the damage. Each would have had rights of contribution against the other, but that would not have affected James Hardie’s rights under Div 6, cl 4.

41 In my opinion, it makes no difference that the party responsible for exposure outside the partnership is James Hardie as a manufacturer of asbestos in its own right, rather than a third party. It was liable for harm Mr McDonald suffered during the partnership period, regardless whether liability resided in any other party or entity, including itself in another capacity. In such circumstances, it would be open to CSR, if it was also sued, to bring a cross-claim against James Hardie claiming contribution under s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 in respect of such portion of liability attributable to non-partnership acts of James Hardie. It is true that if, as in the McDonald proceedings, the plaintiff’s claim failed, such a claim for contribution would not avail CSR. That does not detract from the fact that James Hardie had a liability in proceedings brought “in respect of or arising out of any act by it as managing agent”.

42 CSR further contended that James Hardie incurred costs after the dissolution of the partnership and in respect of litigation instituted after the dissolution of the partnership. It submitted that the costs could not have been incurred as managing agent of the partnership, because the partnership no longer existed at the time the costs were incurred. It submitted that such costs were not accommodated by the language of Div 6, cl 4.

43 Subject to the application of cl 8, I do not agree that Div 6, cl 4 does not operate in such circumstances. The promise in Div 6, cl 4 was to indemnify against proceedings brought in respect of or arising out of James Hardie’s acts as managing agent, and if costs were incurred in proceedings so brought, it did not matter that they were incurred after the termination of the partnership.

Second issue: the Deed of Dissolution: grounds 1B, 1C, 3 and 4

44 CSR contended that even if Div 6, cl 4 operated to indemnify James Hardie in circumstances such as occurred in the McDonald matter, cl 8 of the Deed of Dissolution operated as a complete release of any such claim and thus barred Amaca’s claim in this case.

45 The Deed of Dissolution was made on 26 June 1974. It contained a number of recitals that referred to the Deed of Partnership and the decision to cease manufacture of the products manufactured under the Deed of Partnership. By cl 2, James Hardie (Amaca) and CSR agreed that the partnership would cease manufacturing activities on or before 30 June 1974 and that the partnership would be dissolved as soon as possible thereafter, being upon the distribution to each of the net amount arising from the sale of all partnership assets and the collection of all moneys due to the partnership. Clause 7 specified that the date of dissolution would be the date of the payment of the net proceeds referred to in cl 2.

46 Clause 8, upon which CSR relied, provided:

“As and from the date of dissolution James Hardie, CSR and Bradford Insulation, by their execution hereof agree that the Partnership will be at an end, that all rights, duties and obligations of all the parties under the Principal Deed or any of them shall then cease and further that subject to Clause 9 hereof James Hardie, CSR and Bradford Insulation jointly and severally release the other parties and either of them from all such actions, causes of action, demands or claims which any of them has had or but for this Deed might have had against the others or either of the others. By way of clarification to this clause and not otherwise, James Hardie, CSR and Bradford Insulation shall as from the date of dissolution not be bound by Clause 2 of the Division 4 of the Principal Deed.”

47 Clause 9 provided for a mutual indemnity whereby James Hardie (Amaca) and CSR agreed to indemnify Bradford from claims brought by third parties. It provided:

“Notwithstanding clause 8 hereof, James Hardie and CSR as and from the date of dissolution will jointly hereby indemnify and agree to keep Bradford Insulation indemnified from and against all actions suits proceedings claims and demands whatsoever made or brought against Bradford Insulation by any third party whether before or after the date of dissolution in respect of or arising out of the use of the products acquired from the partnership and sold by Bradford Insulation provided that:

(i) the use of the products out of which any such claim may have arisen has been strictly in accordance with any written technical recommendations made previously by the partnership in that regard; and

(ii) Bradford Insulation has on or before the 30th June 1975 given written notice to James Hardie and CSR of any such claim.”

48 Clause 10 provided:

“James Hardie, CSR and Bradford Insulation, hereby agree that the provisions of this Deed shall apply to the dissolution of the Partnership and all other matters referred to herein. Where there is any conflict between this Deed and the Principal Deed, this Deed shall prevail.”

The effect of cl 8 of the Deed of Dissolution

49 CSR submitted that even if Div 6, cl 4 of the Deed of Partnership would otherwise have operated to provide indemnity to James Hardie in the McDonald matter, any rights that Amaca had thereunder came to an end by the operation of cl 8 of the Deed of Dissolution. It was submitted that cl 8 had the effect of releasing both CSR and James Hardie from all claims they may otherwise have had against each other under the Deed of Partnership.

50 CSR pointed out that the language of Div 6, cl 4 dealt with the relationship of the parties generally and not in any specific manner. The clause provided that “all rights, duties and obligations of all the parties under [the Deed of Partnership] ... shall then cease ...”. It submitted that the language of cl 8 was wide enough, and was without limitation or exclusion, to demonstrate an intention of the parties to bring the partnership to an end and release each other from all rights and obligations under the Deed of Partnership. The right to indemnity under Div 6, cl 4 was such a right and was released by the terms of cl 8 of the Deed of Dissolution.

51 Clause 8 also provided that each of the parties released the other from all claims, et cetera, that they had had, or might have had, against the other. CSR submitted that the words “might have had” in the clause, properly construed, contemplated the parties would release each other from future claims which they otherwise might have had under the Deed of Partnership.

52 The trial judge rejected CSR’s case based on cl 8, having regard to the reasoning of Bergin J in Amaca Pty Ltd formerly known as James Hardie & Coy Pty Ltd v CSR Ltd [2001] NSWSC 324 and the decision of this Court in CSR Ltd v Amaca Pty Ltd [2007] NSWCA 107.

53 CSR submitted that neither Bergin J, nor this Court in CSR Ltd v Amaca Pty Ltd [2007] NSWCA 107, dealt with the question whether claims that might have been made under Div 6, cl 4 were caught within the terms of the release in cl 8. Accordingly, it was contended, the trial judge’s reliance upon those decisions led him into error.

54 I have already discussed CSR Ltd v Amaca Pty Ltd [2007] NSWCA 107 (see [27]-[29] above) and noted that the operation of cl 8 in relation to Div 6, cl 4 was not considered in that case. Accordingly, I agree that it does not provide any assistance on the question presently in issue.

55 In Amaca v CSR [2001] NSWSC 324 Bergin J was concerned with the construction of cl 8 of the Deed of Dissolution in the context of claims made by James Hardie under the Partnership Act 1892 and s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act. Her Honour held as a matter of construction of the release, having regard to the context in which the words were used within the Deed and in the context of the parties’ relationship and having regard to all relevant facts surrounding the transaction so far as was known to the parties at the time the Deed was executed, that the claim for contribution made by James Hardie was not within the contemplation of the parties at the time they entered into the Deed: see Bank of Credit and Commerce International SA (in liquidation) v Ali [2001] UKHL 8; [2002] 1 AC 251; [2001] 1 All ER 961; [2001] 2 WLR 735; Grant v John Grant & Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112. Her Honour held, therefore, at [106], that cl 8 did not bar the claims brought by James Hardie under the Partnership Act and s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act.

56 In this case, there was no evidence of the background to, or the circumstances in which, the Deed of Dissolution was entered. Nor was there any agreement that the parties would be bound by or would proceed on the basis of the facts in the matter before Bergin J. Accordingly, that part of her Honour’s judgment dealing with the surrounding circumstances does not assist the construction process that this Court is required to resolve.

57 However, Bergin J did consider the construction of the phrase “might have had”: see at [57]. Her Honour noted that this phrase could equally refer to future claims, or to claims that were available to be made at the time the Deed of Dissolution was entered into, but which had not at that time been made: [92]-[93]. Her Honour then had regard to the different terms of cl 9 that provided an indemnity to Bradford for future claims up to a specified period. In particular, her Honour considered that the use of the word “whatsoever” in cl 9 was significant. Her Honour pointed out, at [82], that the word “whatsoever” appeared in cl 9, but not in cl 8. She considered that this tended to suggest that the claims released as between James Hardie and CSR were more limited than those for which the indemnity was given to Bradford in cl 9.

58 Her Honour returned to this issue at [95], where she said:

“As I have said earlier the use of the term ‘whatsoever’ in clause 9 and its absence in clause 8 may tend to suggest a more limited intention in respect of the release. There is also the absence in clause 8 of the words ‘whether before or after the date of dissolution’ which are found in clause 9 that tend to support a more limited intention.”

59 Her Honour, at [96] ff, returned to the proper construction of the Deed, having regard to the surrounding circumstances. It is apparent from her reasons that she did not find the terminology of the different provisions conclusive and her decision as to the scope of cl 8 was essentially based upon her understanding of the surrounding circumstances. As I have explained, that approach is not available to this Court, there being no evidence of the surrounding circumstances in this case.

60 CSR argued that the release in cl 8 of the Deed of Dissolution did not expressly reserve any claims for indemnity under Div 6, cl 4 of the Deed of Partnership, which would have been a relatively simple drafting task. It was submitted that the clear language of the release was such that its provisions ought to operate according to its terms. It was also submitted that the language of cl 9 supported this construction, having regard to the express extended indemnity provided to Bradford under that clause. It was submitted that having chosen not expressly to reserve the indemnity in Div 6, cl 4, there was no occasion to construe cl 8 as containing an implied reservation to that effect.

61 The consequence of this construction was, on CSR’s submission, a realistic commercial one, in the sense that CSR and James Hardie intended to finalise their partnership rights under the terms of the Deed of Dissolution. Each recognised that they would continue to sell their respective products and any liability of one to the other would be based on justice and equity by reference to the concept of relative culpability in accordance with the provisions of s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act. The construction for which CSR contended did not embrace Bergin J’s indication as to the likely construction of the words “might have had” in cl 8.

62 Clause 8 made two provisions in relation to the position of the parties upon dissolution. First, it provided that as from the date of dissolution, James Hardie and CSR (and Bradford) agreed that the partnership “will be at an end and all rights, duties and obligations of all the parties [under the Deed of Partnership] ... shall then cease”. Secondly, it provided for a mutual release “from all such actions ... or claims which any of them has had or but for this Deed might have had against the others ...” (emphases added). These two provisions must be seen as complementary.

63 One of the “rights” that James Hardie had under the Deed of Partnership was the right to indemnity provided for by Div 6, cl 4. The first part of cl 8 of the Deed of Dissolution made it clear that upon dissolution that right ceased. The second part, that is, the release, protected (in the sense that it mutually released) the parties from any claim, past, present or future that James Hardie might have had under its right of indemnity in Div 6, cl 4. Read as a whole, the effect of cl 8, relevantly for the question before this Court, is that Div 6, cl 4 of the Deed of Partnership had no operation after the dissolution date and cannot be sued upon. In this regard, it is to be noted that the dissolution of the partnership is after the sale of assets and satisfaction of all liabilities: see cl 2. Accordingly, there would be no assets of the partnership out of which any such indemnity could be provided. In addition, cl 9 specifically preserved indemnity in favour of Bradford for a specified period. This suggests that except for that indemnity, there was not to be any contractual indemnity between the parties.

64 I should also add that in my opinion, the phrase within cl 8 that the release is in respect of actions, claims et cetera “which any of them has had or but for this Deed might have had against the others or either of the others” (emphasis added) relates to past, present and future. This construction itself derives from the terms of cl 8 as a whole. If, relevantly, all rights under the Deed of Partnership cease upon dissolution, it must follow that the complementary release provisions relate to past actions, claims etcetera, (that is, actions, claims et cetera, that each party “has had” against the others); as well as any subsisting or future actions, claims et cetera (that is, such actions, claims et cetera that the parties but for the Deed of Dissolution “might have had against the others”). This construction is different from the construction of those words preferred by Bergin J.

65 It is not necessary to determine whether the decision of Bergin J in Amaca Pty Ltd formerly known as James Hardie & Coy Pty Ltd [2001] NSWSC 324 was otherwise correct. As already indicated, the question with which her Honour was dealing was whether cl 8 operated to bar claims between James Hardie and CSR for contribution under the Partnership Act or under s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act. The question with which this Court is concerned is the operation of cl 8 in circumstances where a claim is made under Div 6, cl 4 of the Deed of Partnership. There is a further point of distinction in this case, in that the recitals do not indicate that the release should be limited in any particular claim or class of claims, disputes, or litigation and there was no evidence of the surrounding circumstances. This is to be contrasted with the position in Grant v John Grant & Sons Pty Ltd, where the recitals referred to litigation and other disputes between the parties and of the intention to settle them in the terms embodied in the deed. The Court in that case concluded that the release was based upon the particular considerations of the situation in which the parties stood to one another at the time of entry into the release and was to be construed in that context.

66 Senior counsel for Amaca asserted that he would demonstrate that the partnership had not come to an end. This asserted position was not developed, and neither party placed any argument before the Court or any authorities relating to the continuing rights and obligations of partners under the terms of a partnership agreement notwithstanding that the partnership had been terminated. The point was probably abandoned during the course of argument and in any event had not been raised at the trial. Given those matters, I do not propose to deal with this issue further.

67 It follows, in my opinion, that Amaca’s claim for indemnity under Div 6, cl 4 fails.

Third issue: was there a breach of a continuing duty of good faith?: grounds 7-9

68 Having regard to the conclusion to which I have come in respect of the operation of cl 8, this question does not strictly arise. However, I will deal with it briefly.

69 CSR contended that it had agreed upon a protocol with James Hardie as to the manner in which proceedings brought by a plaintiff alleging exposure to asbestos from partnership products were to be conducted. CSR alleged that the protocol arose out of correspondence between the parties from 1983 to 1987. The trial judge reproduced this correspondence in his judgment. It is sufficient for present purposes to set out the final portion of the last letter, which explains what the protocol was said to entail.

70 The letter was dated 11 February 1987, and was from CSR to James Hardie. After specifying the basis upon which the parties should bear any award of damages made against one or either of them in respect of asbestos related claims, the letter continued:

“We also propose that where the action is initiated against James Hardie but involves products of both our companies (or their subsidiaries) James Hardie shall conduct the cases but will consult with CSR on the conduct of the cases and will provide sufficient information to CSR to satisfy CSR’s management and CSR’s insurers that both the claims against CSR (or its subsidiaries) and the proposed apportionment is fair and reasonable.”

71 CSR’s submissions were imprecise upon whether the duty of good faith, which it gave content by the indication that James Hardie would consult with CSR, rested in contractual implication, fiduciary duty or some other equitable principle between partners. It is not necessary to consider this.

72 It was common ground between the parties that James Hardie did not consult CSR in respect of the actions brought in the McDonald matter. As I have already indicated, James Hardie treated that claim as a test case.

73 It appears that O’Meally P accepted there was in fact a protocol. However, his Honour considered that the protocol had been abrogated or terminated by CSR in filing its defence to James Hardie’s cross-claim in this matter. In that cross-claim, CSR denied it had any obligation to contribute to any amount that James Hardie might be required to pay the plaintiff. His Honour found that in any event, James Hardie’s conduct in the steps it took defending the case were reasonable. His Honour found that he was not satisfied James Hardie acted otherwise than in good faith.

74 Amaca contends that the findings in the last two sentences of the preceding paragraph are findings of fact in respect of which no appeal lies. I agree. On the assumption that there is a continuing duty of good faith, this is sufficient to dispose of this ground of appeal.

Jurisdictional issue: ground 10

75 Finally, CSR raised a jurisdictional issue. It contended that the trial judge erred in finding that the DDT had jurisdiction to entertain James Hardie’s cross-claims against it. It submitted that his Honour should have found that Mr McDonald did not suffer from an asbestos related condition and that the DDT therefore did not have jurisdiction to entertain James Hardie’s cross-claim against CSR.

76 In my opinion, this submission should be rejected. The DDT had jurisdiction to hear Mrs McDonald’s claims. They were made in respect of allegations that her husband suffered from a dust-related condition. Section 11 of the Dust Diseases Tribunal Act provides, relevantly:

“11 Claims for damages for dust diseases etc to be brought under this Act

(1) If:

(a) a person is suffering, or has suffered, from a dust-related condition or a person who has died was, immediately before death, suffering from a dust-related condition, and

(b) it is alleged that the dust-related condition was attributable or partly attributable to a breach of a duty owed to the person by another person, and

(c) the person who is or was suffering from the dust-related condition or a person claiming through that person would, but for this Act, have been entitled to bring an action for the recovery of damages in respect of that dust-related condition or death,

proceedings for damages in respect of that dust-related condition or death may be brought before the Tribunal and may not be brought or entertained before any other court or tribunal.

(1A) Proceedings by any tort-feasor liable in respect of damages referred to in subsection (1) to recover contribution from any other tort-feasor liable in respect of that damage may be brought before the Tribunal.

...

(4) Any matter that is ancillary or related to a matter that is the subject of proceedings to be brought under subsection (1) or (1A) may also be included in those proceedings.

(5) In subsection (1) (c), the reference to a person claiming through a person who is or was suffering from a dust-related condition includes a reference to a relative for whose benefit an action may be brought under the Compensation to Relatives Act 1897.”

77 It has been long accepted that the jurisdiction of the DDT is engaged under s 11 in such circumstances: see Anderson v Kaufman (1991) 7 NSWCCR 198 at 203; Goodyear Tyre & Rubber Co (Australia) Limited v James Hardie & Coy Pty Limited [1992] NSWDDT 2; (1992) 8 NSWCCR 148 at 152.

78 The DDT’s jurisdiction having been properly engaged in respect of the McDonald matter, it extended to hearing the cross-claims: see ss 11(1A) and 11(4). See also Seltsam Pty Limited v Energy Australia [1999] NSWCA 89; (1999) 17 NSWCCR 720 at 733; Mangion v James Hardie & Coy Pty Limited (1990) 20 NSWLR 100 at 105.

Award of interest on the judgment sum: grounds 11-12

79 The appellant raised two grounds in relation to the award of interest on the judgment sum, having regard to the delay in prosecuting the cross-claims against CSR. However, as Amaca’s claim for indemnity under the Deed of Partnership fails by reason of the Deed of Dissolution, it is not necessary for the Court to resolve this question.

The result

80 It follows, in my opinion, that the appeal should be allowed in each matter.

81 In the Jones-Mashman matter Amaca asked, should the appeal be allowed, that the matter be remitted to the DDT to enable it to pursue other rights to contribution that it might have. CSR acknowledged that Amaca sought to reserve its rights to alternative relief in the DDT. However, in CSR’s submission, Amaca’s intention to seek such relief raised a question of the jurisdiction of the DDT to deal with equitable rights of contribution. It is not appropriate for this Court to deal with such a question, as it has not yet arisen as a real dispute in proceedings between the partners.

82 I would propose the following orders:

CA 40832/07: the McDonald matter:

1. Appeal allowed;

2. Judgment and orders of O’Meally P in the Dust Diseases Tribunal made 14 September 2007 set aside;

3. Judgment for the appellant, CSR Limited, against the respondent, Amaca Pty Limited, on the cross-claim;

4. The respondent is to pay the appellant’s costs of the appeal and at first instance.

CA 40664/07: the Jones-Mashman matter:

1. Appeal allowed;

2. Judgment and orders of O’Meally P in the Dust Diseases Tribunal made 30 August 2007 set aside;

3. Remit the matter to the Dust Diseases Tribunal for determination of any outstanding issues between the parties;

4. The respondent is to pay the appellant’s costs of the appeal and to date at first instance.

83 GILES JA: I agree with Beazley JA.

84 YOUNG CJ in Eq: I also agree with Beazley JA.

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AMENDMENTS:


19/12/2008 - Typo - Paragraph(s) [74]


LAST UPDATED:
19 December 2008