Judgment date: 21 February 2011. Bowcliff Pty Ltd v QBE Insurance (Australia) Ltd  NSWCA 18. NSW Court of Appeal1
- Section 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (LRMPA) makes a final judgment in favour of a defendant against the plaintiff binding on other tortfeasors liable for the same damage although they were not parties to the judgment.
- The damage referred to in s 5(1)(c) of the LRMPA is that of the plaintiff. Accordingly, the liability of "any other tort-feasor" contained in s 5(1)(c) is a liability to the plaintiff and the hypothetical suit envisaged by the section is one brought by the plaintiff. Accordingly, a cross-defendant which obtains a verdict in its favour by consent on a cross-claim does not attract the bar from suit contained in s 5(1)(c).
- Section 22(3) of the Civil Procedure Act 2005 (CPA) makes a judgment between a plaintiff and a defendant binding on cross-defendants, but does not operate in the reverse by making a judgment on a cross-claim binding on the plaintiff.
On 25 October 2007 John Orcher (plaintiff) was injured in an assault which occurred outside the licensed premises of the first defendant (Bowcliff). Bowcliff cross claimed against its security contractor, Australian Corporate Protection Pty Ltd (ACP), which in turn cross claimed against a security subcontractor, DSSS Cousins Pty Ltd (DSSS). DSSS went into liquidation and ACP amended its cross-claim to substitute the liability insurer of DSSS, QBE Insurance Ltd (QBE), pursuant to s 6 of the LRMPA.
Following a mediation, on 24 September 2010 consent judgments were entered in both cross-claims. The consent judgments provided for a verdict in favour of each crossdefendant with no order as to costs in respect of each cross-claim. The consent judgments were signed by the parties to the cross-claims, but not the plaintiff.
Supreme Court Decision
During the course of the trial evidence emerged which caused the plaintiff to apply to join QBE as a defendant, and Bowcliff to join QBE as a cross-defendant in a claim for contribution or indemnity under s 5(1)(c) of the LRMPA.
QBE argued that the plaintiff and Bowcliff were restricted from bringing a claim against it as each were bound by the operation of s 5(1)(c) on the consent judgment. Section 5(1)(c) of the LRMPA relevantly provides:
Thus, s 5(1)(c) of the LRMPA essentially provides that where damage is suffered by a person as a result of a tort, any tortfeasor liable in respect of that damage can recover contribution from any other tortfeasor "who is, or would if sued have been, liable in respect of the same damage".
The plaintiff and Bowcliff argued that the consent judgment did not engage the bar in s 5(1)(c) of the LRMPA which protects parties sued as tortfeasors who have not been found liable.
Alternatively, QBE relied on s 22 of the CPA to argue that as the plaintiff and Bowcliff were parties to the proceedings, they were bound by the consent judgment in favour of QBE in respect of ACP's amended cross-claim. Section 22(3) of the CPA relevantly provides:
(a) ..., and
(b) if not already a party to the first proceedings:
(i) becomes a party to the first proceedings, and
(ii) unless the Court otherwise orders, is bound by any judgment (including a judgment by consent or by default) or decision (including a decision by consent) on any claim for relief in the proceedings (including a claim for relief in any cross claim in the proceedings)."
Harrison J dismissed the applications and held that QBE could no longer be sued for damages by the plaintiff, or by Bowcliff for contribution, because it had been sued in ACP's amended cross-claim and the consent judgment entered held that it was not liable. The plaintiff and Bowcliff appealed.
Court of Appeal Decision
Handley AJA delivered the majority judgment and held that the hypothetical suit envisaged by s 5(1)(c) of the LRMPA ("would if sued have been, liable") is one brought by the plaintiff. Accordingly, the liability of "any other tort-feasor" is a liability to the plaintiff.
Citing James Hardie and Co Pty Ltd v Seltsam Pty Ltd2, his Honour held that the consent judgment in favour of QBE on the cross-claim by ACP did not bring QBE within the category of persons who have relevantly been sued and held not liable.
In James Hardie and Co Pty Ltd v Seltsam Pty Ltd, the plaintiff sued three defendants as joint tortfeasors, including Hardie and Seltsam, and separately settled with each. Hardie then sought contribution from Seltsam even though a consent judgment had been entered in Seltsam's favour against the plaintiff with the knowledge of Hardie and with no objection being raised. Gaudron and Gummow JJ held that the words "tort-feasor who is, or would if sued have been, liable in respect of the same damage" contemplates two classes of person: a tortfeasor who has been sued by the injured party and who is liable, and a tortfeasor who has not been sued but who would, if sued at any time, be liable. Since Seltsam had been sued and held not liable by virtue of the consent order, it did not fall into either of these categories and therefore Hardie had no right to claim contribution.
In relation to the s 22 argument, his Honour held that the provision only operates to make a judgment between a plaintiff and a defendant binding on cross-defendants. Accordingly, issue estoppels based on such a judgment are also binding between the plaintiff and crossdefendant, and between cross-defendants. However, a judgment on a cross-claim is not binding on a plaintiff because it only operates downwards for and against the plaintiff and cross-defendants, and sideways between cross defendants, not upwards against the plaintiff.
A cross-defendant which obtains a judgment in its favour on a cross-claim is not immune from suit by a plaintiff or from any other tortfeasor in a claim for contribution under s 5(1)(c) of the LRMPA. When settling a cross-claim on the basis of a verdict for the cross-defendant, it is recommended that the cross-defendant also obtain the consent of the plaintiff and any other defendant in order to obtain protection from further suit in respect of the same damage.
However, it must also be recalled that s 5(1)(c) of the LRMPA only relates to claims for contribution in tort, and does not apply to claims in contract.
1. Allsop P, Tobias JA, Handley AJA
2.  HCA 78
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