• Kevin Gibbons

Landpower Australia v Penske Power Systems

[2019] NSWCA 161

Proportionate Liability, Contractual Liability, Assumed liability under contract

This case explored for the first time in an appellate Court, the operation of the proportionate liability provisions of the Civil Liability Act on contracts between alleged concurrent wrongdoers where the pursuing wrongdoer seeks to pass, by contractual indemnity to the other wrongdoer, the first person’s proportion of liability to the plaintiff.

The plaintiffs, Northcott had a poorly performing harvester and sued Landpower with whom they had a contract covering the machines performance.

Landpower subcontracted its services to Penske Power.

Landpower’s defence included the proportionate liability of various people including Penske on the basis of its negligent performance of its services. Landpower concurrently alleged that if Penske had been negligent in breach of contract but not liable to Northcott, it, Penske would still be liable to Landpower for breach of contract and also liable to indemnify for the whole of its, Landpower’s, liability to Northcott.

Landpower’s cross claim also included a claim for concurrent tort liability pursuant to the provisions of the Law Reform (Miscellaneous Provisions) Act 1946.

Northcott did not join any of the alleged concurrent wrongdoers as defendants.

Penske applied to have the cross claim against it dismissed on the basis that the whole of its content was inconsistent with the proportionate liability provisions under the Civil Liability Act.

The matter came to the Court of Appeal following a successful interlocutory application by Penske that the cross claim be struck out.

At the interlocutory hearing. Landpower conceded that its cross claim under the 1946 legislation was futile.

The Court of Appeal found it was wrongful to strike out the cross claim in so far as it related to the right of Landpower to pursue the contractual indemnity.

The matter will be returned to the lower Court.

If the matter progresses to trial and Landpower is liable to Northcott the lower Court will have to determine if Penske and Landpower are concurrent wrongdoers and if so whether Landpower’s cross claim based on the contractual indemnity is successful.

In granting Landpower’s appeal against the summary dismissal of the Cross Claim the Court of Appeal was unanimous. It considered the Civil Liability Act, as a whole, particularly section 3A, not merely the provisions covering proportionate liability.

Section 3A preserves the right of contractual parties to make express provision in relation to their rights obligations and liabilities including the ousting under the contract between Landpower and Penske of the provisions of proportionate liability.

If it was ultimately found that Penske was not a wrongdoer to Northcott but still in breach of its contract with Landpower, the proportionate liability provisions would not be relevant and the matter between Landpower and Penske would be decided solely by reference to the contract between them.

What the case did not include was whether there may be insurance implications for insureds in the position of Penske who may not be a concurrent wrongdoer to Northcott but contractually liable to indemnify Landpower if it was liable to Northcott.

While some liability policies, particularly PI policies, override the common assumed liability exclusion where an insured has contracted out of the operation of proportionate liability, where a liability policy has no express provision to that effect an insured may be exposed to a Penske-type risk that may not be insured due to a contractual indemnity exclusion.

However, if while Penske may not be a concurrent wrongdoer to Northcott, but in negligent breach of contract to Landpower, the assumed liability exclusion would be unlikely to be in play.

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