Australia: Apportionable Claims And Terms Of Settlement – Are Terms Of Settlement Discoverable?

McAskell & Anor v Cavendish Properties Limited & Ors [2008] VSC 328

Introduction

The Supreme Court of Victoria has dismissed an application by one party to proceedings to have access to terms of settlement agreed between other parties to the same claim.

The plaintiffs sued a number of parties in relation to losses suffered in relation to a property. The plaintiffs settled with some defendants, and apparently obtained partial damages, but maintained the claim against other defendants, the builders.

The builders sought discovery of the terms of settlement between the plaintiffs' and the other defendants. Whilst the terms were confidential, the builders argued that as the plaintiffs' claim was an apportionable claim, they as remaining defendants should be entitled to know the amount already recovered by the plaintiffs.

The Supreme Court ultimately dismissed the builders' application as premature. It held that there was no question of double recovery because it had yet to be determined whether the builders were liable for the plaintiffs' alleged loss or damage. The Court's decision includes useful comments on the Victorian proportionate liability scheme.

Background

The plaintiffs, subsequent purchasers of a property, commenced proceedings against seven defendants. They claimed that the first five defendants were negligent in designing and constructing a circulation drain system at the property. They claimed that the builders, who were the sixth and seventh defendants, failed to properly carry out site inspections and failed to carry out the works in accordance with statutory warranties.

Claims for contribution and indemnity were made between the first five defendants.

The plaintiffs alleged that the proceeding involved an apportionable claim within the meaning of the proportionate liability provisions of the Wrongs Act.

The plaintiffs and the first to fifth defendants entered into the terms in respect of all claims between each other. The first to fifth defendants remained parties to the proceeding for the purposes of any apportionment of the plaintiffs' claims against the builders.

Subsequent to entering into the terms, the builders asked to be provided with a copy of the terms. The plaintiffs refused to provide them with the terms on the basis that it was a confidential document. The builders subsequently made their discovery application.

The builders' arguments

The builders asserted that the plaintiffs' claims against each of the seven defendants were 'one and the same' in that the same relief was sought against each defendant. As such, they submitted that in an apportionable claim pursuant to the relevant provisions of the Wrong Act, the terms were relevant to the issue of 'double recovery' in the sense that the builders needed to know the amount already recovered by the plaintiffs from the other five defendants, because that amount, when added to whatever amount was recovered from the builders, would determine whether or not the plaintiffs would recover more than their proved loss and damage.

Plaintiffs' response

The plaintiffs contended that the terms were irrelevant to the issue of the builders' proportionate responsibility to them. They referred to the observations of Byrne J in Gunston in respect of the difference between 'solidary' liability and proportionate liability.

They contended that in solidary liability, a settlement by one defendant reduced the liability of the other defendants and as such, those terms would be relevant. However, under the proportionate liability regime, a settlement by one defendant does not alter the liability of another defendant because each defendant is only liable for its respective proportionate responsibility for the claimed loss and damage.

In the alternative, the plaintiffs submitted that even if the terms were relevant, they would only become so after the issues of damages and proportionate liability had been determined. If the builders were not found liable or if the amount the plaintiffs were awarded was less than the total amount of proved loss and damage, no question of double recovery would arise and hence the terms would not be relevant.

The plaintiffs further submitted that it would be undesirable to discover the terms from a public policy perspective. They contended that if courts were to hold that confidential terms were discoverable simply because a double recovery issue might arise at some point in the proceeding, then litigants may be dissuaded from settling cases or a defendant may use the discovery process for tactical purposes.

Supreme Court of Victoria decision

The Court dismissed the builders' application, on the basis that it was prematurely made. It held that there was no question of double recovery because the builders had yet to be held liable for the plaintiffs' alleged loss or damage.

The Court did not accept the builders' submission that their liability depended on the amount recovered or recoverable under the terms. The Court held that section 24AK of the Wrongs Act was not applicable given that the plaintiffs had not 'recovered judgment' from any of the concurrent wrongdoers. The plaintiffs had merely settled with the first to fifth defendants and the Court had yet to make a determination in relation to each of the respective defendants' liability.

The Court noted that section 24AK does no more than make clear that where a plaintiff has previously recovered judgment against a concurrent wrongdoer, that judgment does not prevent the plaintiff from bringing another action against any other concurrent wrongdoer, provided that the amount recovered in the later proceeding (when combined with any recovery under the earlier judgment and any settlement) does not exceed the plaintiff's claimed loss or damage.

Conclusion

Terms of settlement entered into with concurrent wrongdoers may be relevant and discoverable in circumstances where the issue of (proportionate) liability with all the concurrent wrongdoers has been determined and an issue of double recovery arises.

However this decision demonstrates that the Court will not consider issues of double recovery in apportionable claims until it has made determinations in relation to each of the respective defendants' liability.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.