The Supreme Court of Tasmania (Full Court) recently handed down a judgment which provides some clear guidance as to what is required to contract out of the Civil Liability Act 2002 (TAS), the relevant provisions of which are almost identical to the provisions of the Civil Liability Act 2002 (NSW).
The case involved an appeal from an order staying court proceedings pursuant to the Commercial Arbitration Act 1986 (s.53(1)). The action arose from a contract between Break O’Day Council and Aquagenics for the design and construction of a waste water treatment plant. A dispute arose between the parties as to the quality of the work. The contract provided that disputes were to be referred to arbitration. Aquagenics, the contractor, commenced proceedings and the Council sought a stay of the action pursuant to the Commercial Arbitration Act 1986. S 53(1) which provides that if a party to an arbitration agreement commences proceedings, the other party may apply to the court to stay those proceedings where, inter alia, there is no sufficient reason why the matter should not be referred to arbitration in accordance with the agreement.
Blow J at first instance, concluded that there was no sufficient reason why the matter should not be referred to arbitration and exercised his discretion in favour of granting the Council’s application for a stay. Aquagenics appealed, arguing that a good reason not to refer the dispute to arbitration was the proposition that the dispute was likely to involve novel and difficult questions concerning the proportionate liability provisions in Pt9A of the Civil Liability Act 2002 (Tas) (“Act”).
Prior to the introduction of those provisions in 2005, when a number of wrongdoers were liable in respect of the same damage, a claimant was entitled to recover the whole of the claimant’s damage from only one of those wrongdoers. That was on the basis that wrongdoers are jointly and severally liable to a claimant for the whole of the claimant’s damage. The introduction of Pt9A, however, means that where proportionate liability provisions apply, each wrongdoer responsible for the damage is held to be liable to the claimant for that proportion of the damage that is attributed to that wrongdoer alone, and not for the whole of the damage or loss suffered by the claimant. Similar proportionate liability provisions have been introduced in every Australian jurisdiction, with some differences (which are referred to below).
The Act applies to “apportionable claims” being:
“(a) a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care (but not including any claim arising out of personal injury);
(b) a claim for economic loss or damage to property in an action for damages under the Fair Trading Act 1990 for a contravention of section 14 of that Act”.
On appeal, Evans J noted that where proportionate liability legislation applies, in order for a claimant to recover 100 per cent of its loss, it must sue each and every wrongdoer who contributed to that loss. No wrongdoer is liable to the claimant for more than that wrongdoer’s share of responsibility for the loss. This is a fundamental change from the pre-existing position at law and results in a claimant bearing the risk of the insolvency of any concurrent wrongdoer.
Evans J recognised the significance of these changes noting that the legislation had a “startling impact” and noted that in Tasmania, NSW and WA the legislation includes a contracting out provision. There is no express provision as to contracting out in the legislation in the ACT, the Northern Territory, South Australia or Victoria, nor in respect of the Commonwealth provisions contained in the Trade Practices Act 1974. In the Queensland legislation, contracting out is prohibited.
The contracting out provisions in the Act are as follows:
“This Act, other than Part 7, does not prevent the parties to the contract from making express provision for their rights, obligations and liabilities under the contract in relation to any matter to which this Act applies and does not limit or otherwise affect the operation of such an express provision”.
Counsel for Aquagenics argued that an express provision between the parties to the contract to abandon a right under the Act would at the very least have had to include a reference to the Act. Evans J rejected this submission. He noted that it does not reflect the terms of s.3A(3) and noted similar words in the Insurance Contracts Act 1984 (Cth) s.8(2) which refers to “an express provision to the contrary included… in the contract”. He noted that in Akai Pty Ltd v Peoples Insurance Company Limited  HCA 39 that the High Court found that the “words express provision” in that phrase referred to those provisions of the contract from which it would be determined that the parties had selected or chosen a proper law which was not the law of a state or territory.
Evans J noted that although the context of the words in the Insurance Contracts Act is different than those in the Act nevertheless he was satisfied “that it is appropriate to consider those provisions of the contract from which, or by resort to which, it may be determined that the parties made provisions for their rights, obligations and liabilities under the contract in relation to any matter to which the Civil Liability Act applies”.
Accordingly, it is not necessary to use express words referring to the Act, in order to contract out of it. It is sufficient that the parties in their contract make provision for their rights, obligations and liabilities in relation to any matter to which the Act applies. If so, then they will be taken to have contracted out of the Act. This decision is wide ranging given that the contracting out provisions in NSW are almost exactly identical to those in Tasmania and are therefore likely to be interpreted in the same way. For practical purposes it means that parties may be contracting out of the proportionate liability legislation without knowingly doing so. It also means that for existing contracts to which legislation applies, parties will be able to successfully argue that the legislation does not apply if the contract contains the appropriate provisions.
Evans J undertook a detailed review of the provisions of the contract and listed out those which were significant in deciding whether the rights and liabilities in relation to the Act were dealt with. A large number of clauses were found to deal with such rights including warranties by Aquagenics to perform the work and furnish it with personnel, a prohibition on assignment without consent, the requirement for Aquagenics to effect insurance and in particular, the express provision that subcontracting part of the work did not relieve Aquagenics of its responsibility for the whole of the works.
It is interesting to note that the contract was a form of Australian Standard Design and Construct AS4300-1995 (subject to certain amendments). Many construction projects are undertaken via this or similar standard forms and therefore likely to have the effect of contracting out.
Having held that the parties had provided for their rights, obligations and liabilities in relation to matters to which the Act applies, Evans J concluded that the parties had contracted out of the Act. Accordingly, he upheld the stay to arbitration.
A second issue discussed in the case was whether the Act applied to arbitrations. This question was not necessary to be determined and so the Court’s views in this regard are somewhat obiter.
Evans J found that a number of the aspects of Pt9A suggest that its application is confined to proceedings in a court or tribunal rather than arbitration proceedings. His Honour noted the difference between the definition of “court” in the Act and that in the Wrongs Act 1954 (Tas) where there is a specific reference to hearings before an arbitrator. He noted the Wrongs Act was in effect the predecessor of the Act and noted that if “court” was intended to include arbitration, the definition would have expected to have been similar. Although careful not to express a final view, Evans J said “I lean to the view that the proportionate liability provisions of the Civil Liability Act are not, by force of those provisions, applicable to arbitration proceedings”.
Similarly, Tennent J found that he was not persuaded that “in all the circumstances parliament intended when it enacted Part 9A that the Part would apply to proceedings before an arbitrator”
Wood J gave a consenting judgment only but addressed both key issues by concluding “the proportionate liability provisions contained in the Civil Liability Act 2002 Pt9A do not apply to the action or the arbitration between the parties as they wholly contracted out of those provisions”. Although there is no reasoning for his conclusion it seems Wood J makes a distinction between whether proportionate liability legislation applies at all to arbitration proceedings or whether it simply did not apply in this case because the parties had contracted out.
Accordingly, the question of whether proportionate liability legislation applies to arbitrations is not settled