Joinder applications and proportionate liability

Fabfloor (Vic) Pty Ltd & Danfoss (Australia) Pty Ltd v BNY Trust Company [2015] VSC 434Introduction A recent decision of the Victorian Supreme Court in Fabfloor (Vic) Pty Ltd & Danfoss (Australia) Pty Ltd v BNY Trust Company [2015] VSC 434 confirms the significant difficulty facing defendants to Victorian proceedings wishing to join other parties as concurrent wrongdoers, so as apportion their liability to the plaintiff pursuant to the proportionate liability regime. The Court held that defendants must satisfy potentially onerous requirements before joinder can occur. Background Various parties, including Fabfloor (Vic) Pty Ltd (collectively the plaintiffs), stored goods in a warehouse in Dandenong, Victoria. In January 2007, a fire at the warehouse destroyed those goods. Each of the plaintiffs claimed under their respective insurance policies for the damage to the goods and/or neighbouring property. The insured losses were in the amount of several million dollars. The plaintiffs, on behalf of the insurer, issued recovery proceedings against various parties alleged to be responsible for the losses caused by the fire. Danfoss (Australia) Pty Ltd issued separate proceedings against the same defendant parties for damage to its goods stored in the warehouse. Application to join concurrent wrongdoers DTM Logistics (DTM) was the tenant of the warehouse and is the second defendant to both proceedings. In both proceedings, DTM issued interlocutory applications seeking leave to join the same five additional parties (the proposed defendants) on the stated basis that they are concurrent wrongdoers for the purposes of the proportionate liability regime found in Part IVAA of the Wrongs Act 1958 (Vic). The applications were heard together. Proportionate liability under the Wrongs Act Section 24AL of the Wrongs Act permits a Court to grant leave to join as defendants to a proceeding any persons who are concurrent wrongdoers in relation to an “apportionable claim” in a proceeding. An “apportionable claim” is a claim for economic loss or damage to property in an action for damages, arising from an alleged failure to take reasonable care. A “concurrent wrongdoer” is a person whose acts or omissions caused, independently of each other or jointly, the loss or damage that is the subject of the claim. In Victoria, unlike in other jurisdictions, a concurrent wrongdoer must be a party to a proceeding for proportionate liability to apply. In essence, this means a defendant raising a proportionate liability defence must seek to join a concurrent wrongdoer to the proceeding. However, the Court will only grant leave to join parties under the Wrongs Act if the party seeking leave can establish its proportionate liability defence has a real prospect of success. The Court’s decision The critical issues for the Court were:

• whether evidence was necessary to establish an arguable case that a proportionate liability defence has a real prospect of success; and
• what degree of evidence was required to substantiate an arguable case.

DTM argued that, to establish an arguable case, it need only demonstrate that its pleadings contained factual allegations that, if established at trial, could arguably found one or more of the causes of action alleged. To support its position, it read a brief affidavit based entirely upon “information and belief” that contained only one paragraph that arguably bore upon the relevant claim. The plaintiffs argued, and the Court agreed, that, where a defendant applies to join new parties as concurrent wrongdoers, the defendant must lead evidence that shows there is substance to the claims proposed. The claims must not appear to be hopeless. The Court found that DTM did not lead sufficient evidence to establish an arguable case against two of the five proposed defendants and no evidence whatsoever against the other three. As a consequence, the Court held that DTM fell well short of establishing any basis for the joinder of further defendants. As it currently stands, DTM is free to continue to pursue the proposed defendants directly for contribution by way of downstream third party claims. Analysis Insurers of defendants to Victorian proceedings should carefully consider the evidence available to them before applying to join parties as concurrent wrongdoers and must ensure such evidence meets the threshold confirmed by the Court in this case. It is not enough to simply allege facts contained in pleadings that, if established at trial, would found one or more the asserted causes of action. Instead, there must be some evidentiary basis demonstrated at the time of any joinder application that reveals an arguable foundation for the claim against a proposed concurrent wrongdoer. A defendant in such proceedings bears a significant burden. It will often be difficult and/or costly for a defendant/insurer to obtain and lead the necessary evidence at the time of any joinder application. Otherwise, insurers exercising their subrogated recovery rights should assess a defendant’s proportionate liability joinder application and, where possible, attack the quantity and quality of the defendant’s evidence supporting the application. Gilchrist Connell acted for the plaintiffs on instructions from the insurer. Date: 8 October 2015